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EU and Arabic countries take step towards free trade

After several years of deadlock, the six Arab countries of the GCC signed an agreement with BUSINESS EUROPE, thereby taking the first step towards a free trade agreement with the EU. Trade serves as an icebreaker in a difficult region, and Danish companies can profitably sell renewable energy.
HRH Prince Saud bin Khalid Al Faisal al Saud introduces Violeta Bulc, European Commissioner for Transport, to Ambassador Dr. Dhafer Ahmed Al Umran, MFA Bahrain. Photo: Mohamed Qatawi.

Publiceret: 01.02.2017
Af Felix Bekkersgaard Stark mail

At the request of the Confederation of Danish Industry, BUSINESS EUROPE and the business organisation Gulf Cooperation Council (GCC) met in Riyadh on 9 January 2017, and signed an agreement that will lead to a free trade agreement between Bahrain, Kuwait, Saudi Arabia, Oman, Qatar, the United Arab Emirates and the EU.

And although the agreement’s text is a bit vague, describing the start of an informal dialogue about the barriers that exist in relation to achieving the goal, it is, according to DI, quite a breakthrough that the meeting took place at all and that the agreement was signed.

Not least because it is 25 years ago since the EU and the GCC started political discussions about a free trade agreement.

“The cultural, religious and political conditions in the Gulf states have made in difficult to get the parties to move. In fact, it’s been several years since the EU and GCC countries last spoke together at this level, so it’s a bit of a breakthrough, and the hosts have been incredibly accommodating,” says Deputy Director Niels Kristensen Tanderup, DI International Business Development.

The meeting has led to negotiation of contracts

Among the participants at the meeting was Lene Grønning, director of Act NOW by Grundfos, a partnership between a number of Danish companies owned by Grundfos. The partnership promotes sustainable Danish solutions in the region. 

“Papers like the ones that were signed at the meeting in Saudi Arabia mean a lot in this region, and we experienced very strong interest and curiosity among the participants. Just how much it will mean is hard to say, but since the meeting, we’ve received two enquiries regarding delivery for specific projects. This naturally bodes well,” says Lene Grønning.

She says that the otherwise oil-rich countries around the Gulf are further ahead in terms of sustainable transition than many other countries - including Denmark.

“They know better than anyone else that renewable energy is a major threat to their wealth, which largely comes from oil.  They are therefore set on becoming front-runners in the development of alternatives, and Danish companies can help them with that,” says the director of Act NOW by Grundfos.

Comfortable experience as a woman among Arabs

Lene Grønning has generally experienced much interest in Danish solutions in the region, and she has been very positively surprised about how hospitable she and Act NOW by Grundfos have been received.

“I was warned that being a woman would be difficult - that I would have to wear a headscarf, that men wouldn’t shake my hand. And if you read the Danish Foreign Ministry’s website, you get the impression that it’s practically arduous to go. My impression is the complete opposite. I’ve been welcomed with open arms, and there are no special requirements for things I have to do because I’m a woman. But, then again, I wasn’t in charge of the event and didn’t obtain permits. I was just a guest,” says Lene Grønning.

It was not quite so easy, however, for Director of BUSINESS EUROPE Luisa Santos. She was a cosigner of the final agreement with the GCC countries.

“There’s a legislative challenge in terms of gender. There are rules for clothing, chairs just for men, gender-segregated meeting rooms, and special permission is required when both genders are to be present at a meeting. But that being said, the men aren’t allowed to shake our hands, and all of them did it anyway. Maybe it’s because we’re foreign women. There are conditions you need to be aware of, but they’re in no way insurmountable obstacles,” Luisa Santos says.

Trade promotes dialogue

Luisa Santos believes that the EU-GCC meeting is a good example of how trade is a good way to promote dialogue between countries and cultures. 

“Both regions can benefit from increased international trade. European companies become ambassadors and can show how Europe is able to contribute,” the director says.

She believes the meeting was a step in the right direction and that there will be more opportunities for increased trade in the future.

“The United States is also very eager to invest in the region, and when we have companies established there, we’ll have closer links and will be able to establish joint ventures. The possibilities are growing,” says Luisa Santos.

She admits, however, that there are obstacles ahead. 

“It’s a politically unstable area with a difficult political climate, which makes it risky for companies to invest. Small businesses in particular need to think very carefully before venturing into it. We therefore need the EU and national governments to back us up through guarantees and to show that the companies have their support,” says Luisa Santos.

Negotiations with the GCC continue

In addition to the conference that the Confederation of Danish Industry organised, where over 250 business people from the EU and GCC countries participated and the EU’s Commissioner of Transport attended, the European Commission’s Vice President Jyrki Katainen will visit Saudi Arabia this week and meet with Prince Saud bin Khalid Al Faisal al Saud, Governor of SAGIA (Saudi Arabian General Investment Authority).

In order to get the negotiations rolling, DI is also facilitating a meeting in Brussels in March between the chief negotiators for the free trade agreement from the GCC countries and the EU respectively.

DI has also been appointed by the European Commission to create an EU-GCC Investment Report for 2017, which will partly follow up on a similar one from 2013, and partly describe European investment in the GCC countries, barriers to investment, but also opportunities for establishment and exports, through interviews of nearly 100 companies.

The report will be published later this year. DI will also organise a series of round table meetings in the next six months in the GCC region with a focus on the plastics industry, the fashion industry and halal certification.

Trade between parties:
The GCC is the EU’s fourth largest export market
EU is the GCC’s main trading partner with a trade turnover of 152 billion euro. This corresponds to 13 per cent of the GCC’s global trade.
In 2015, the EU exported goods to the GCC worth DKK 111.6 billion and imported goods worth 44 billion euro.
Denmark’s goods exports to the GCC amounted to DKK 9.6 billion in 2015.
Denmark’s export of services amounted to DKK 11 billion. Overall, Denmark's trade with GCC countries makes up 3 per cent of Denmark’s total exports.  
About GCC:
The six countries in the GCC (Gulf Cooperation Council) are Bahrain, Kuwait, Saudi Arabia, Oman, Qatar and the United Arab Emirates.
The council’s goal is to coordinate cooperation between the six countries, and citizens in the countries can travel without passports between the states. All of the countries are dependent on oil exports but are increasingly investing in new industries to help diversify their economies.

Papers like the ones that were signed at the meeting in Saudi Arabia mean a lot in this region, and we experienced very strong interest and curiosity among the participants.
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PUBLISHED: 2/1/2017 LAST MODIFIED: 2/1/2017