UK Nears Free Trade Agreement With Gulf Countries Including Saudi Arabia
(Bloomberg) —
The UK is in the final stages of negotiating a free trade agreement with a group of oil-rich Middle Eastern nations including Saudi Arabia, according to several people familiar with the matter.
A deal with the six-member Gulf Cooperation Council is a priority for the government of Prime Minister Keir Starmer as it looks to boost economic growth and attract foreign investment, and may be signed as early as this year, said UK and Gulf officials, who asked not to be identified as the information is private.
The UK’s trade with the bloc, which also comprises the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain, is worth $73 billion (£57 billion) annually, according to the UK government. It sees an FTA boosting trade by around 16% and the UK economy by $2.1 billion in the long term.
“Trade deals like this one play a vital role” in boosting the UK economy, the Department for Business and Trade said in a statement to Bloomberg. “We’re seeking a modern trade deal with the Gulf as a priority, and our focus is securing a deal that delivers real value to businesses on both sides, rather than getting it done by a specific date.”
If an agreement is concluded soon, it will give a political boost to the Labour government, which has yet to sign any FTAs since coming to power in July. Starmer promised, during his election campaign, to reset international relations and attract more money from abroad to get the economy firing. FTAs can boost business between countries by lowering tariffs and easing other trade barriers.
The UK has struggled to negotiate trade agreements since leaving the European Union in 2020. While it’s signed them with the likes of Australia and New Zealand, talks with the US and India have stalled. Other countries still in discussions with the UK include Switzerland and South Korea.
GCC countries have a gross domestic product of around $2.2 trillion, roughly the same as Brazil. Together, they were the UK’s seventh-largest export market last year, according to British government data. The GCC has FTAs with New Zealand, Singapore and some others. It’s in negotiations with the EU, India and China, though those talks have been going on for years.
While the GCC is still heavily dependent on oil and gas, Saudi Arabia, the UAE and Qatar are spending hundreds of billions of dollars to diversify their economies and develop sectors such as artificial intelligence, chips manufacturing and tourism. They see foreign investment as crucial to their transformations.
They also have some of the biggest sovereign wealth funds in the world. Saudi Arabia’s Public Investment Fund, Abu Dhabi’s Mubadala Investment Co. and the Qatar Investment Authority have been large sources of foreign investment in the UK over the past decade.
The UK and GCC have held seven rounds of trade negotiations since 2022. Business and Trade Secretary Jonathan Reynolds was in Dubai, the commercial capital of the UAE, this month as part of the UK’s efforts to finish the talks.
“We see a real opportunity here, a real partnership that is very strong,” he said to Bloomberg on Nov. 1. A trade deal can “substantially improve on that.”
The UK government has said it won’t compromise on its environmental, public health, animal welfare and food standards in the talks with the GCC. In addition, it’s said the National Health Service and the services it provides are not on the table.
The FTA will potentially be followed by some of the GCC countries pursuing individual trade pacts with the UK. The UAE has signed several bilateral deals called Comprehensive Economic Partnership Agreements in recent years. They often address areas of trade not covered by the GCC’s FTAs.
(Corrects units in second chart to pounds from dollars.)
©2024 Bloomberg L.P.
