The “new chapter” approach by British Prime Minister Theresa May in her recent trip to the GCC Summit in Bahrain was admirable in many ways, but if she really wants to forge a new trading relationship with the Gulf — and make up for some of the business her country stands to lose from Brexit — it will require a whole new volume, even a new library, on UK-Arab relations.
The visit was a chance for a new leader to meet her counterparts in the region, to reassure them of Britain’s support in a changing geopolitical environment, especially when the human rights lobby at home is sniping against them at every opportunity.
But you don’t have to be a cynic to believe that a major part of her mission was business. She wants to tap new markets for trade in light of the impending exit from the European Union, which is expected to hit UK exports hard even in a “soft” Brexit scenario.
In this, she was following in the footsteps of her minister of international trade, Liam Fox, and her secretary for international development, Priti Patel, both of whom have been on new business drives in the region in recent weeks.
The UK Foreign Office briefed that it has identified £30 billion (SR141.5 billion, $37.7 billion) worth of opportunities for British business in the region over the next five years.
That sounds like a big amount, but really it is minuscule in the context of overall UK trade. So this is message number one for Mrs. May: new trade with the Gulf, on its own, can never hope to make up for the potential loss of EU trade when Brexit takes place.
In 2014 — the last year for which final figures are available — the value of UK trade with the Gulf totalled £22 billion, with the Arab countries running a sizeable deficit. The GCC countries exported some £8.5 billion of goods to Britain, while importing some £13.6 billion of goods and services.
In the same year, UK trade with the EU amounted to £514 billion, with the deficit on the other foot: Britain exported £223 billion, while importing £291 billion.
Of course, the efforts of Mrs. May and her team might pay off and the GCC element could increase significantly. The Gulf is an important trading partner for Britain, on an equal footing with China and India, and it seems certain this relationship will get stronger as Britain looks for new foreign markets and the economies of the Gulf continue to expand. But it cannot hope in the foreseeable future to fill the Brexit gap.
The second message for Mrs. May is this: if there is to be any hope GCC trade will make up for lost Brexit business, something fundamental in the relationship will have to change, as is apparent from an analysis of the two-way constituents of this commerce.
Around 70 percent of GCC exports to the UK are energy related: crude oil, liquefied natural gas, aviation fuel and other petroleum-based products. Britain, even in the post-imperial world, continues to see the region as a gigantic filling station.
The Gulf, on the other hand, sees the UK as a manufacturing workshop for sophisticated engineering products, some of them related to the arms industry: jet engines, cars, aircraft and aircraft parts form the bulk of the UK export list. The rest is made up predominantly of financial services.
This pattern of trade really is a throwback to the era when the sun never set on the global power of the UK’s oil and banking industries, and the inhabitants of the Gulf were keen to get their hands on guns and cars. This has to change.
Under current EU law, to which Britain is still subject, Mrs. May cannot begin to negotiate a free trade agreement (FTA) with the GCC bloc or with any of its individual states, but when it is free to do so it should write in a clear commitment to assisting the economic diversification plans of the region.
Defense sales are necessary of course, and visa-free travel to the UK is also an important requirement for GCC nationals. But a firm promise to direct UK trade and investment toward the GCC’s embryonic manufacturing sector is also required.
For their part, some GCC investors have shown that they are willing to take part in urban regeneration strategies in the UK, outside the real estate magnets of Knightsbridge and Kensington. This trend too should be encouraged in any new FTA.
The British cannot expect the GCC to take up the slack of Brexit, but if it really wants a “new chapter” it should begin by casting aside some old stereotypes.
•Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai
