Tuesday, January 01, 2002
Gulf states for customs union, single currency
MUSCAT
THE SIX Gulf Arab states that own half the world's oil reserves agreed on Monday to set up a customs union and single currency, paving the way for a long-sought trade deal with the European Union.
Leaders of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates signed an agreement at the end of a two-day annual summit in Oman to move forward setting up a customs union to 2003 from 2005 and to establish a single currency by 2010 -- part of a planned joint trade zone.
"The leaders decided to advance the date for implementing the customs union to January 1, 2003...and lowered tariffs on foreign imports to five per cent," said a communique read by Jameel al-Hujailan, secretary-general of the Gulf Cooperation Council.
A previous agreement lowering customs from the present 4-15 per cent had set a start date of 2005.
The deal paves the way for a free trade pact with the European Union, the region's main trading partner.
Gulf officials have accused the Union of foot-dragging over free trade, saying the GCC had fulfilled its requirements to reach a deal streamlining trade worth about $46 billion.
They warned they may reconsider the pact if no progress is made in talks on the deal -- hampered by EU demands for GCC common tariffs and by protectionist EU policies.
"Now there are no more excuses for them to postpone signing the free trade zone (agreement) between the two blocs," the GCC envoy to the European Union, Najeeb al-Rawas, told reporters.
A main dispute is over a 6 per cent EU duty on primary aluminium Gulf exports. Two aluminium smelters in Bahrain and the UAE produce more than a million tonnes per year, about 5 per cent of the world's total.
MORE LEVERAGE Analysts said the customs union would also help the GCC attract foreign investors and speed up economic reforms to diversify its oil-dependent economies.
They said the five per cent levies deal was in line with World Trade Organisation requirements and would help Saudi Arabia, the Gulf's largest economy, to follow its GCC partners in joining the WTO.
Saudi Arabia's Crown Prince Abdullah criticised Gulf governments on Sunday, saying they had done little to achieve their long-sought aim of economic and military unity.
The prince, representing his country at the summit in the absence of ailing King Fahd, said, "We have not yet set up a unified military force that deters enemies and supports friends. We have not reached a common market, nor formulated a unified political position on political crises."
The GCC was set up in 1981 as a loose political and economic alliance. It started active steps towards military integration after failing to defend Kuwait when it was invaded by Iraq in 1990. A US-led coalition ousted Iraqi troops seven months later.
The GCC states, among the world's largest arms importers, last year approved a joint defence pact to pool resources, expand a joint defence force four- or five-fold to 25,000 and equip it with a modern early warning system.
They depend largely on the United States and Britain for protection against more powerful neighbours Iraq and Iran. ( REUTERS )
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