The Gulf Cooperation Council (GCC) recently made a significant advancement in its trade relations by finalizing a free trade agreement (FTA) with South Korea. This move is part of the GCC’s ongoing efforts to diversify its economy and enhance its global trade connections.
The agreement, which has been under negotiation since 2007, experienced a hiatus of nearly 13 years before being revived last year. The successful conclusion of these negotiations represents a historic step towards Gulf economic integration and is in line with the GCC’s broader strategy to expand its economic reach and foster stronger trade relations with key global partners.
Under the terms of the FTA, South Korea has agreed to eliminate tariffs on approximately 90% of all items. This includes key energy resources such as liquefied natural gas (LNG) and other petroleum products. In return, the Gulf states will abolish tariffs on 76.4% of traded products and 4% of traded goods. The scope of this agreement extends beyond just tariff elimination, covering trade in goods, services, government procurement, and cooperation among small and medium-sized enterprises (SMEs). It also addresses important aspects such as customs procedures and intellectual property.
The signing of this agreement by GCC Secretary-General Jasem AlBudaiwi and South Korean Trade Minister Ahn Duk-geun is a testament to both parties’ commitment to strengthening their strategic partnership and economic cooperation. The agreement comprises 18 chapters and covers various sectors, including digital trade and SME cooperation, thereby promising to increase the volume of bilateral trade and enhance economic diversification in both regions.
Furthermore, the GCC has been actively pursuing other free trade agreements as part of its global trade endeavors. Earlier in the year, the GCC signed an FTA with Pakistan, and negotiations with other countries like China, Japan, and Britain are underway or have been restarted. These efforts are indicative of the GCC’s intent to explore diverse markets and create a more robust economic landscape.
Additionally, individual GCC member states, like the United Arab Emirates (UAE), have been engaging in their own strategic bilateral trade pursuits. The UAE, for instance, concluded negotiations for a bilateral trade agreement with South Korea in October, reflecting its strategic approach to enhancing its regional position amid growing competition.
This series of agreements and negotiations underscore the GCC’s commitment to strengthening its economic ties globally and diversifying its economy beyond its traditional reliance on oil and gas revenue. The increase in trade between the Gulf and South Korea, which soared from $50 billion to $78 billion between 2021 and 2022, highlights the potential for significant economic growth and collaboration between these regions.