Why pressure is growing to finalize UK-GCC free trade agreement

Analysis Why pressure is growing to finalize UK-GCC free trade agreement
The UK believes a GCC FTA would increase bilateral trade by 16 percent. (SPA/File)
Short Url
Updated 05 February 2025
Follow

Why pressure is growing to finalize UK-GCC free trade agreement

Why pressure is growing to finalize UK-GCC free trade agreement
  • Britain’s financial woes and US President Donald Trump’s trade wars loom over negotiators working to get deal over the line
  • The deal would eliminate tariffs, reduce trade barriers, and facilitate business cooperation in key sectors like AI and renewables

LONDON: The UK’s economic fragility and global turmoil from President Donald Trump’s trade wars have given increased impetus for Britain to reach a free trade agreement with the Gulf Cooperation Council.

Talks for a deal between the six-nation bloc and Britain are continuing apace after restarting in September and are said to be at an advanced stage.

Yet the agreement could not come soon enough for the UK government, which is struggling to breathe life into a stagnant economy.

Prime Minister Keir Starmer has prioritized growth, and a GCC FTA would bring a significant boost to the UK’s finances and the governing Labour Party’s political fortunes.

The benefits would also be plentiful for Gulf countries, many of which have embarked on extensive reforms to diversify their economies away from hydrocarbons and toward modern sectors.




Saudi Crown Prince Mohammed bin Salman receives British Prime Minister Keir Starmer in Riyadh. (SPA/File)

Details of the negotiations are closely guarded, but economists and experts told Arab News they believe a final deal is close and that there is will from both sides to get the agreement in place.

“The UK government has signaled that it wants to attract more investment into the economy, and its new drive for growth should certainly give momentum to the determination of UK negotiators to push forward the talks on the FTA toward a satisfactory conclusion,” said Bandar Reda, secretary-general and CEO of the Arab-British Chamber of Commerce.

“With a fair degree of optimism then we can probably look forward to a positive outcome being achieved a little sooner than previously expected.”

The UK believes a GCC FTA would increase bilateral trade by 16 percent and could add an extra £8.6 billion ($10.7 billion) a year to the existing £57.4 billion worth of annual trade between the two sides.

Officials say it could also boost UK annual workers’ wages by around £600 million to £1.1 billion every year and increase UK GDP by between £1.6 and £3.1 billion by 2035.

The UK has been looking to forge fresh trade deals since leaving the EU, its biggest trading partner, in 2020.

With already strong trade links and historic ties to Gulf countries, establishing an agreement with the GCC as a whole became a priority.

Consisting of Saudi Arabia, the UAE, Qatar, Bahrain, Oman and Kuwait, the GCC economic and political union is also seeking to make more trade agreements as a bloc.




Britain's Queen Camilla, Qatar's Emir Sheikh Tamim bin Hamad al-Thani, Britain's King Charles III and Sheikha Jawaher bint Hamad bin Suhaim al-Thani in London. (AFP/File)

A UK government report published in 2022 said an FTA with the GCC “is an opportunity to boost trade with an economically and strategically important group of countries, support jobs and advance our global interests.”

After the July election brought in his new UK government, Starmer prioritized relations with the Gulf, and a seventh round of trade negotiations got underway.

Jonathan Reynolds, the business and trade secretary, visited the region in September and delegations have traveled back and forth since.

The latest negotiation team from the GCC was in London last month, according to the Department for Business and Trade.

Starmer traveled to Saudi Arabia in December and met with Prime Minister and Crown Prince Mohammed bin Salman. He also visited the UAE and hosted the Qatari emir in London.

Several deals were announced during those meetings, as the new government made clear that attracting foreign investment from Gulf countries was key to its growth strategy.

Opinion

This section contains relevant reference points, placed in (Opinion field)

At the same time, the economic pressures on Starmer’s administration have increased. Despite a relatively strong start to 2024, the UK economy failed to grow in the second half of the year.

Chancellor Rachel Reeves came under fire for her first budget, which dented business confidence with a series of tax hikes.

With UK borrowing costs hitting their highest level for several years last month, boosting trade with a bloc like the GCC through an FTA would be a significant boon for Starmer.

But it is not just the UK’s domestic economic woes that are looming over negotiators. With the US administration’s threats to impose tariffs on both allies and adversaries causing global financial uncertainty, Gulf countries will also be keen to ease trade restrictions with a major partner like the UK.




British Prime Minister Keir Starmer meets UAE President Sheikh Mohamed bin Zayed Al Nahyan at the Shati Palace in Abu Dhabi. (AFP/File)

“One effect of the threat of tariffs might be to add urgency to the negotiations to conclude the UK-GCC FTA,” Reda, of the Arab-British Chamber of Commerce, told Arab News.

Primarily, the agreement would remove or reduce tariff barriers to trade between GCC countries and the UK, easing the flow of goods and services.

The average tariff applied to UK exports by the GCC is around 5.5 percent, whereas imports from the Gulf face a 5.8 percent levy. However, the UK places no tariffs on oil and gas bought from GCC countries, and this accounts for most of the import value.

Still, removing the tariffs would help businesses on both sides by reducing costs but would particularly benefit the UK given that its exports account for 60 percent of total trade.

Perhaps more important, according to Freddie Neve, lead Middle East associate at the London-based Asia House think tank, would be removing red tape faced by importers and exporters.




Primarily, the agreement would remove or reduce tariff barriers to trade between GCC countries and the UK, easing the flow of goods and services. (SPA)

“While reducing tariffs on these goods is an obvious target in the negotiations, arguably a larger opportunity relates to the reduction of non-tariff barriers,” Neve said. “These relate to regulations, standards, and procedures required of foreign firms to do business.

“A government analysis published before negotiations counted over 4,500 non-tariff measures applied by the GCC on the UK. Naturally, some of these will have been ameliorated by recent Gulf economic reforms, but an FTA that reduces these barriers would make it easier for UK companies to operate in and across the GCC.”

While the timing of the FTA would be good for the UK it also fits perfectly with the timetable of economic diversification underway in the GCC.




An FTA negotiation is a vast and complex process and there may well still be sticking points to be ironed out before a final deal is reached. (AFP/File)

Saudi Arabia and the UAE in particular are moving away from reliance on oil revenues to modern, technology-driven economies.

Investing in the UK means they are able to tap into services and expertise in sectors where Britain has a competitive advantage, such as technology, life sciences, creative industries, education and financial services.

In particular, the UK’s 2022 assessment predicted an FTA would allow for cooperation in “industries of the future” such as artificial intelligence and renewable energy, in which Gulf countries are investing heavily.

“Over the past three years, innovations in AI and related sectors to do with the digital economy, e-commerce, advanced data and computing have developed enormously,” Reda said. “The Gulf states have all been seeking to position themselves at the forefront of these developments that are reshaping how we do business.

“These areas open up major new areas for UK-GCC cooperation as we all seek to maximize the potential offered by AI and cutting-edge tech. The FTA should give a tremendous boost to cooperation in these industries of the future.”

INNUMBERS

• 16% Potential increase in bilateral trade resulting from UK-GCC free trade agreement.

• £8.6bn What the FTA could add to the existing £57.4bn worth of annual bilateral trade.

• £1.6-£3.1bn Possible boost to UK GDP by 2035, raising wages to £1.1bn per year.


An FTA negotiation is a vast and complex process and there may well still be sticking points to be ironed out before a final deal is reached.

Douglas Alexander, the UK’s minister of state for trade policy and economic security, said in December that negotiators on the GCC agreement continued to have “constructive discussions on areas of sustainable trade,” such as environment and labor.

MPs have raised questions over whether the UK should be focusing on a GCC-wide agreement rather than individual deals with Gulf countries, citing variations in policies and regulations across the bloc.

But the GCC countries have been developing their concerted approach to trade and are pursuing similar agreements with the EU, China, and Turkiye.




Prime Minister Keir Starmer has prioritized growth, and a GCC FTA would bring a significant boost to the UK finances. (SPA/File)

“Negotiations with a bloc are always more challenging than bilateral deals,” Justin Alexander, a director at US consultancy Khalij Economics, told Arab News. “However, the GCC is functioning in the most joined-up way I have seen in my career, and all the GCC members are important partners for the UK, so it is highly motivated to make this work.”

He said he was not aware of any significant obstacles remaining in the talks and believed the deal is very near completion.

“The most significant element of the UK-GCC FTA for both sides will be the fact that it has been done, setting a precedent for further trade deals for both parties,” Alexander said. “Both sides are open, globally integrated economies and would benefit from modern trade deals.”

The Department for Business and Trade said trade deals played a “vital role” in the government’s mission for economic growth.

“We’re seeking a modern trade deal with the Gulf as a priority, and our focus is securing a deal that delivers real value to businesses on both sides, rather than getting it done by a specific date,” the department said.

 


King of Jordan discusses Gaza, regional development with Italian president

King of Jordan discusses Gaza, regional development with Italian president
Updated 6 sec ago
Follow

King of Jordan discusses Gaza, regional development with Italian president

King of Jordan discusses Gaza, regional development with Italian president
  • King Abdullah highlighted Italy’s vital role in Gaza’s humanitarian assistance and airlift efforts
  • He warned about escalating tensions in the occupied West Bank and violations of holy sites in Jerusalem

LONDON: King Abdullah II of Jordan met with Italian President Sergio Mattarella at the Quirinal Palace in Rome on Monday to discuss regional developments.

King Abdullah stressed the need for a ceasefire in the Gaza Strip and highlighted Italy’s vital role in humanitarian assistance and airlift efforts carried out by Jordan, Petra reported.

He affirmed that Jordan supports the reconstruction of Gaza without the displacement of its residents and warned about the escalating tensions in the occupied West Bank and violations of holy sites in Jerusalem.

During the meeting attended by Qais Abu Daieh, the Jordanian ambassador to Rome, and Alaa Batayneh, the director of King Abdullah’s office, Mattarella and the Jordanian monarch reviewed their countries’ friendly relations.


Israeli airstrike kills three in Gaza, medics say

Israeli airstrike kills three in Gaza, medics say
Updated 17 March 2025
Follow

Israeli airstrike kills three in Gaza, medics say

Israeli airstrike kills three in Gaza, medics say
  • Israel military says Gaza air strikes hit militants trying to plant explosives

CAIRO: An Israeli airstrike killed three Palestinian men in the Gaza Strip, medics said on Monday, and there was no sign of progress at renewed ceasefire talks.
Medics said the three men were killed near Bureij camp in the center of the devastated Palestinian enclave by a missile fired from a drone. Israel’s military said one strike hit three militants in central Gaza as they were planting explosives, while another targeted several militants in Rafah.
In Rafah, in the southern Gaza Strip, medics said three people were wounded in another airstrike. Rafah residents have reported frequent fire by Israeli forces deployed in areas adjacent to the border inside the city boundaries.

The persistent bloodshed underscores the fragility of a three-stage ceasefire agreement between Israel and the Palestinian militant group Hamas mediated by Qatar, Egypt, and the United States.
Israel wants to extend the ceasefire’s first phase, a proposal backed by US envoy Steve Witkoff. Hamas says it will resume freeing hostages only under the second phase that was due to begin on March 2.
“Hamas has complied fully with the agreement, while the occupation (Israel) didn’t comply with some clauses. It (Israel) seeks to foil the agreement and impose new conditions,” Hamas spokesperson Abdel-Latif Al-Qanoua said in Monday.
Israeli Prime Minister Benjamin Netanyahu’s office said on Saturday negotiators had been instructed to be ready to continue talks based on the mediators’ response to a US proposal for the release of 11 living hostages and half of the dead captives.
Hamas said on Friday it had agreed to release American-Israeli soldier Edan Alexander and four bodies of the hostages if Israel agreed to begin talks immediately on implementing the second phase of the agreement. Israel accused Hamas of waging “psychological warfare” on the families of hostages.
The war began when Hamas led a cross-border raid into southern Israel on October 7, 2023, killing 1,200 people and capturing 251 hostages, according to Israeli tallies.
Israel’s subsequent assault on Gaza has killed more than 48,000 Palestinians, according to Gaza health officials, displaced most of the population and reduced much of the territory to rubble. 


Fighting erupts along Lebanon-Syria border after 3 Syrian soldiers killed in earlier clashes

Fighting erupts along Lebanon-Syria border after 3 Syrian soldiers killed in earlier clashes
Updated 17 March 2025
Follow

Fighting erupts along Lebanon-Syria border after 3 Syrian soldiers killed in earlier clashes

Fighting erupts along Lebanon-Syria border after 3 Syrian soldiers killed in earlier clashes
  • The Lebanese and Syrian armies said they are communicating with each other to ease tensions
  • Lebanese troops have been deployed in large numbers in the area

BEIRUT: Fighting erupted along the border between Lebanon and Syria overnight into Monday, Syrian state media reported, after three Syrian soldiers were killed in earlier clashes.
The violence came a month after dayslong fighting between the Syrian military and armed Lebanese Shia groups closely allied with the ousted Bashar Assad government in Syria’s Al-Qasr area.
Lebanon has been seeking international support to boost funding for its military as it gradually deploys troops along its porous northern and eastern borders with Syria and along its southern border with Israel.
The Lebanese and Syrian armies said they are communicating with each other to ease tensions. Lebanese troops have been deployed in large numbers in the area. Families in the border areas fled toward Hermel in Syria amid the overnight clashes and shelling.
Syria’s interim government accused militants from the Lebanese Hezbollah group of crossing northeastern Lebanon into Syria on Saturday, kidnapping three soldiers and killing them on Lebanese soil.
Hezbollah in a statement denied any involvement. The Syrian Observatory for Human Rights, a Britain-based war monitor, said the Shia groups were involved. The circumstances of the incident remain unclear.
Syrian state media, citing an unnamed Defense Ministry official, said the Syrian army shelled “Hezbollah gatherings that killed the Syrian soldiers” along the border.
Though the clashes largely calmed before sunrise, Lebanese media reported low-level fighting at dawn after an attack on a Syrian military vehicle.
The number of casualties remains unclear.
The Lebanese military said it delivered the bodies of the three killed soldiers to their Syrian counterparts.


UNRWA chief confident he is on ‘right side of history’

UNRWA chief confident he is on ‘right side of history’
Updated 17 March 2025
Follow

UNRWA chief confident he is on ‘right side of history’

UNRWA chief confident he is on ‘right side of history’
  • UNRWA chief Philippe Lazzarini acknowledges that it has been “stressful” leading the embattled UN agency for Palestinian refugees, but says he is confident he is “on the right side of history“

GENEVA: UNRWA chief Philippe Lazzarini acknowledges that it has been “stressful” leading the embattled UN agency for Palestinian refugees, but says he is confident he is “on the right side of history.”
The 61-year-old head of the United Nations Relief and Works Agency for Palestine Refugees has, along with his organization, withstood a barrage of criticism and accusations from Israel since Hamas’s deadly October 7, 2023 attack inside Israel and the devastating war in Gaza that followed.
“Of course it is stressful. No one could really be prepared for something like this,” Lazzarini told AFP in a recent interview.
It has been rough from the start.
The softly-spoken Swiss father of four began his tenure in 2020 under Covid lockdown, as UNRWA was reeling after the United States — traditionally its largest donor — dramatically slashed its contribution during President Donald Trump’s first term.
But that was nothing compared to what was to come.
“October 7 basically ... destroyed the last protection dikes that UNRWA might have had,” he said, lamenting the “arsenal” it unleashed “to try to discredit the agency, attack the agency, get rid of the agency.”
Relations between Israel and UNRWA, which supports nearly six million Palestinian refugees across Gaza, the West Bank, Jordan, Lebanon and Syria, have long been strained, but they have fallen off a cliff in the past year and a half.
Israel’s allegation that some UNRWA staff took part in the October 7 attack spurred a string of nations early last year to at least temporarily halt their backing for the already cash-strapped agency.
Lazzarini warned of “the real risk of the agency collapsing and imploding.”
Serving as the “backbone” of the aid operation in Gaza, UNRWA should have funding until June, he said.
“I have no visibility” beyond that, added Lazzarini, speaking to AFP on the sidelines of the FIFDH human rights film festival in Geneva where a film about UNRWA was featured.
Funding gaps are not the only problem the agency faces.
Amid accusations that UNRWA was “infested with Hamas terror activity,” Israel in January took the unprecedented step of severing ties with the UN agency and banning it from operating on Israeli soil.
While UNRWA can still operate in Gaza and the West Bank, it has been barred from contact with Israeli officials, making it difficult to coordinate the safe delivery of aid in the Palestinian territories.
No aid is meanwhile going into Gaza, since Israel halted deliveries to the Strip amid a deadlock over a fragile ceasefire.
“This decision threatens the life and survival of civilians in Gaza,” Lazzarini warned.


He also described the situation in the West Bank, where Israel has for weeks been carrying out a major offensive, “deeply, deeply troubling.”
While uncertain how things would evolve, he said the threat of an Israeli annexation of the West Bank was hanging like “a Damocles sword over the head of the Palestinians (and) the international community.”
Israel has said that UNRWA can be replaced by other UN agencies or NGOs.
But Lazzarini argued that while other organizations could handle distributing humanitarian aid, they could not replace UNRWA’s delivery of “government-like services” such as education and health care.
Without UNRWA, “we would definitely sacrifice a generation of kids, who would be deprived from proper education,” he warned.
Education should also be a top priority for Israel, he insisted.
“If you deprive 100,000 girls and boys in Gaza (of an) education, and if they have no future, and if their school is just despair and living in the rubble, I would say we are just sowing the seeds for more extremism.”
Israel has for years accused UNRWA schools teaching anti-Semitism and a hatred of Israel.
Lazzarini decried “an extraordinary war of disinformation” against the agency.
Lazzarini, who himself has been the target of virulent attacks, acknowledged that “certainly I don’t read everything and don’t listen to everything.”
“Otherwise you wouldn’t sleep anymore.”
He added: “If I didn’t feel that I am still on the right side of history, I don’t think I would continue to carry on.”
But, he said, “I have been given a voice, and obviously I need to use this voice.”
“That is the minimum we owe to the Palestinian refugees who are pretty voiceless.”


US vows to keep hitting Houthis until shipping attacks stop

US vows to keep hitting Houthis until shipping attacks stop
Updated 17 March 2025
Follow

US vows to keep hitting Houthis until shipping attacks stop

US vows to keep hitting Houthis until shipping attacks stop
  • US defense secretary’s statement comes a day after America’s air strikes against Yemen’s Houthis on Sunday 
  • Houthi leader Abdul Malik Al-Houthi vows to continue attacks against US ships “if they continue their aggression“

WASHINGTON/ADEN: The United States will keep attacking Yemen’s Houthis until they end attacks on shipping, the US defense secretary said on Sunday, as the Iran-aligned group signaled it could escalate in response to deadly US strikes the day before.
The airstrikes are the biggest US military operation in the Middle East since President Donald Trump took office in January. One US official told Reuters the campaign might continue for weeks.

A spokesperson for the Houthi-run health ministry said the death toll of the US attacks has risen to 53. Five children and two women were among the victims while the number of injuries rose to 98, Anees Alsbahi, the spokesperson, added on X.

Houthi leader Abdul Malik Al-Houthi said on Sunday that his militants would target US ships in the Red Sea as long as the US continues its attacks on Yemen. “If they continue their aggression, we will continue the escalation,” he said in a televised speech.
The Houthi movement’s political bureau described the attacks as a “war crime,” while Moscow urged Washington to cease the strikes.
The Houthis’ military spokesperson on Sunday said, without offering evidence, that the group had targeted US aircraft carrier USS Harry S. Truman and its warships in the Red Sea with ballistic missiles and drones in response to the US attacks.
A US defense official, speaking on condition of anonymity to Reuters, dismissed the claims, saying they were not aware of any Houthi attack on the Truman.
US Defense Secretary Pete Hegseth told Fox News’ “Sunday Morning Futures“: “The minute the Houthis say we’ll stop shooting at your ships, we’ll stop shooting at your drones. This campaign will end, but until then it will be unrelenting.”
“This is about stopping the shooting at assets ... in that critical waterway, to reopen freedom of navigation, which is a core national interest of the United States, and Iran has been enabling the Houthis for far too long,” he said. “They better back off.”

 

The Houthis, who have taken control of most of Yemen over the past decade, said last week they would resume attacks on Israeli ships passing through the Red Sea if Israel did not lift a block on aid entering Gaza.
They had launched scores of attacks on shipping after Israel’s war with Hamas began in late 2023, saying they were acting in solidarity with Gaza’s Palestinians.
Trump also told Iran, the Houthis’ main backer, to stop supporting the group immediately. He said if Iran threatened the United States, “America will hold you fully accountable and, we won’t be nice about it!“

Iran warns US not to escalate
In response, Hossein Salami, the top commander of Iran’s Revolutionary Guards, said the Houthis made their own decisions.
“We warn our enemies that Iran will respond decisively and destructively if they carry out their threats,” he told state media.
United Nations Secretary-General Antonio Guterres on Sunday called for “utmost restraint and a cessation of all military activities” in Yemen and warned new escalation could “fuel cycles of retaliation that may further destabilize Yemen and the region, and pose grave risks to the already dire humanitarian situation in the country,” his spokesperson said in a statement.
US Secretary of State Marco Rubio told CBS News’ “Face the Nation” program: “There’s no way the ... Houthis would have the ability to do this kind of thing unless they had support from Iran. And so this was a message to Iran: don’t keep supporting them, because then you will also be responsible for what they are doing in attacking Navy ships and attacking global shipping.”
Russian Foreign Minister Sergei Lavrov called Rubio to urge an “immediate cessation of the use of force and the importance for all sides to engage in political dialogue,” Moscow said.
Most of the 31 people confirmed killed in the US strikes were women and children, said Anees Al-Asbahi, spokesperson for the Houthi-run health ministry. More than 100 were injured.
The Pentagon did not immediately respond to a request for comment about the claims of civilian casualties. Reuters could not independently verify the claims.
Residents in Sanaa said the strikes hit a neighborhood known to host several members of the Houthi leadership.
“The explosions were violent and shook the neighborhood like an earthquake. They terrified our women and children,” said one of the residents, who gave his name as Abdullah Yahia.
In Sanaa, a crane and bulldozer were used to remove debris at one site and people used their bare hands to pick through the rubble. At a hospital, medics treated the injured, including children, and the bodies of several casualties were placed in a yard, wrapped in plastic sheets, Reuters footage showed.
Strikes also targeted Houthi military sites in the city of Taiz, two witnesses said on Sunday.

Houthis’ Red Sea attacks disrupt global trade route 
Another strike, on a power station in the town of Dahyan, led to a power cut, Al-Masirah TV reported early on Sunday. Dahyan is where Abdul Malik Al-Houthi, the enigmatic leader of the Houthis, often meets visitors.
The Houthi attacks on shipping have disrupted global commerce and set the US military off on a costly campaign to intercept missiles and drones.
The group suspended its campaign when Israel and Hamas agreed to a ceasefire in Gaza in January.
But on March 12, the Houthis said their threat to attack Israeli ships would remain in effect until Israel reapproved the delivery of aid and food into Gaza.