(May 21): The UK signed a long-awaited trade deal with the Gulf Cooperation Council (GCC) on Thursday, deepening its ties with the oil-rich nations at a time of rising geopolitical tension and economic pressures.
The free trade agreement (FTA), signed on Wednesday, marks an end to four years of talks between the UK and the bloc, which includes Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain. UK ministers had hoped they could complete the deal before the end of last year, after Chancellor Rachel Reeves visited Saudi Arabia in October.
“The Gulf states are valued economic partners and this agreement deepens that relationship, building trust and unlocking new possibilities for trade and investment,” Prime Minister Keir Starmer said.
The development will be a reprieve for Starmer, who is keen to prove his government is getting on with day-to-day work, even as he faces a potential leadership challenge in the aftermath of a bruising round of local elections.
The UK government said the deal is estimated to add £3.7 billion (US$5 billion) to its economy annually in the long-term when compared to 2040 projections. It would also add £1.9 billion in real wages, the government said.
Across the GCC as a whole, the deal will boost bilateral trade by nearly 20%, adding £15.5 billion annually, the UK said. Some £580 million in duties a year will be removed once the deal is fully implemented.
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The FTA “exemplifies the GCC nations’ commitment to strengthening their strategic economic partnerships with global economies, particularly the UK,” said Abdulla bin Adel Fakhro, Bahrain’s minister of industry and commerce.
The negotiations have dragged because of the complexities in dealing with a six-nation group. Countries including the UAE held out on certain issues related to investment clauses, according to people close to the talks,. The US-Israeli war with Iran from late February, which saw the Islamic Republic retaliate by firing thousands of drones and missiles against the GCC states, also stalled discussions, the people said.
Britain’s carmakers and food and drink manufacturers stand to benefit from lower tariffs on their exports, as demand for UK goods tends to be strong in the GCC. Successive UK governments have also tried to pull in more investment from the GCC nations, whose sovereign wealth funds manage around US$5 trillion of assets.
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The FTA could boost the GCC economies in the long run. The war and Iran’s closure of the Strait of Hormuz have deterred tourists and business travellers, while forcing them to lower oil and natural gas production.
The six nations are trying to diversify from petroleum into areas such as artificial intelligence, financial services and logistics. Cheaper access to British agricultural exports may aid their efforts to improve food security.
UK businesses are likely to welcome the deal. Yet some trade unions and other non-governmental organisations have opposed it on the grounds of the human-rights records of countries such as Saudi Arabia and the UAE.
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