Conclude GCCLate last month, a free trade agreement was concluded with South Korea, in a move expected to enhance trade between the six Gulf states and South Korea.
The importance of signing a free trade agreement between the Gulf Cooperation Council and…South KoreaIn that it is a means to achieve major goals, it is a first step to be followed by other steps.
Contents of the agreement
The agreement includes 18 chapters, which will work to liberalize trade in goods and services by removing or reducing customs tariffs and limiting the application of non-customs measures, which contributes to increasing the degree of competition between the markets on both sides and consecrating the principles of open economies and economic blocs.
The Secretary-General of the Gulf Cooperation Council, Jassim Mohammed Al-Budaiwi, believes that the agreement is a historic step towards achieving Gulf economic integration and strengthening economic and trade relations with South Korea, as it will contribute to increasing the volume of bilateral trade and trade in goods and services and enhancing economic diversification plans between the two parties.
For its part, the South Korean Ministry of Trade, Industry and Energy expected that the agreement would contribute to the growth of Seoul’s exports of cars, auto parts, machinery and weapons to Arab countries, as well as enhancing the competitiveness of South Korean exporters thanks to energy imports from Arab countries.
Motivations and benefits
The most prominent benefits of the agreement are:
- Reducing customs duties.
- Increase the volume of investments.
- Protecting the investor and the service provider.
- Guaranteeing intellectual property rights.
- Benefiting companies, whether they are exporters or suppliers.
Economic analyst, Abdul Rahim Al-Hoor, considers that the remarkable development of trade relations between the Gulf Cooperation Council countries and South Korea, whether as a single unit or even within the framework of some bilateral understandings, comes as an important step on several levels, most notably the strengthening of the system of joint economic integration between the two sides on a mutual level of cooperation. By supplying Seoul with hydrocarbon energy at competitive prices, it gives it a price competitive advantage in its products at the international level, and at the same time lifts trade protectionism on its exports to the Gulf countries and on the Gulf’s imports to them, with exchange rates reaching 90% of these goods.
Al-Hoor told Al-Jazeera Net that the agreement will be strategic on two axes: The first: the formation of an international competitive system for the GCC countries, which will enhance the concept of international competitiveness and undermine the internationally prevailing monopolistic thinking that controls the movement of international trade and its values. The second axis is the quality and prices of industrial imports and production inputs to the Gulf countries.
Al-Hoor adds that the agreement may accelerate the pace of negotiations between the GCC countries and China, which has strong economic relations with the region, which needs to formulate advanced agreements that guarantee the maximum level of mutual benefit, especially in the technology, information and communications sectors.
According to Al-Hoor, South Korea is one of the few countries in the world that produces semiconductors, and therefore it is not only an industrial country, but one of the countries that drives industry in the world.
He points out that cooperation with South Korea does not only include the import and export of goods and services, but goes beyond that to the import of industrial production technology, transforming the Gulf market into a factory that re-exports to the world, especially at the level of weapons and accompanying technologies, which is considered one of the largest areas of spending in Gulf budgets, which It will have a significant impact on the balance of payments of these countries.
Under the agreement, South Korea will cancel customs tariffs on 89.9% of all items, including liquefied natural gas, liquefied petroleum gas, and other petroleum products, while the Gulf states will cancel customs duties on 76.4% of all products, and 4.1% of goods.
For his part, economic expert, Abdullah Al Khater, explains that the agreement represents an important turning point in cooperation between the GCC countries and South Korea, expecting that it will provide opportunities to create investments and develop relations and trade exchanges, especially since the countries of the region need to invest in Asia.
Al Khater told Al Jazeera Net that this agreement will achieve a kind of balance and not depend on Europe and the United States only, and will also make them more willing to conclude free trade agreements with the Gulf Cooperation Council countries, after more than two decades of negotiations during which the old continent imposed many obstacles and conditions.
It is considered that the agreement will reduce the prices of South Korean cars and goods in the GCC countries, as it will reduce costs, and thus reduce inflation rates and prices in general.
It is also expected that it will accelerate the pace of signing other agreements, especially with China and Japan, and form a large and integrated economic bloc in the Asian region.
The GCC and South Korea began negotiations on a bilateral free trade agreement in 2007, but were suspended in 2010. After a 13-year hiatus, the two sides resumed negotiations in 2022 and have since held 5 rounds of negotiations.
The trade volume between the Gulf countries and South Korea reached $102.6 billion in 2022, according to Yonhap Agency.
The free trade agreement with South Korea is the second for the Gulf Cooperation Council countries within 3 months, after signing a similar agreement with Pakistan.
The GCC countries signed free trade agreements with Singapore on December 15, 2008, the AFTA countries (Iceland, Liechtenstein, Norway, and Switzerland) on June 22, 2009, and New Zealand on October 31, 2009.
The GCC countries also approved on September 8, 2023, the extension of the joint action plan with Japan for the period 2024-2028.
During their current negotiations, the GCC countries aim to sign free trade agreements with the European Union, Turkey, and China, as well as Japan, India, and Australia, as well as Mercosur (Argentina, Brazil, Uruguay, and Paraguay).