Arabian Business – By Anup Oommen
While on one hand, a UK-GCC free trade deal could significantly aid British farmers and producers, on the other hand, it could also be extremely beneficial to the Middle East as the region is highly dependent on imported food.
Prices of cereals, biscuits, baking products, and smoked salmon, among other food and beverages in the GCC, have come under the scanner as the UK begins free trade negotiations with nations in the region, including Saudi Arabia, the UAE, Bahrain, Kuwait, Oman, and Qatar.
UK Trade Secretary Anne-Marie Trevelyan launched free trade negotiations on Wednesday, 22 June, in a move that could open the door to increased investment in the Gulf and the UK, and support and create jobs.
While on one hand, a UK-GCC free trade deal could significantly aid British farmers and producers, on the other hand, it could also be extremely beneficial to the Middle East as the region is highly dependent on imported food.
UK Trade Secretary Anne-Marie Trevelyan said: “Today marks the next significant milestone in our five-star year of trade as we step up the UK’s close relationship with the Gulf.
“Our current trading relationship was worth $40.44 billion (£33.1 billion) in the last year alone. From our fantastic British food and drink to our outstanding financial services, I’m excited to open up new markets for UK businesses large and small, and supporting the more than ten thousand SMEs already exporting to the region.”
Trevelyan added: “This trade deal has the potential to support jobs from Dover to Doha, growing our economy at home, building vital green industries and supplying innovative services to the Gulf.”
UK’s food and drink exports to GCC countries were worth $764.85 million (£625 million) in 2021. A free trade deal could significantly reduce or remove tariffs on UK food and drink exports.
Tariffs that could be slashed include:
- cereals, which currently face a tariff of up to 25 percent;
- chocolate, up to 15 percent;
- baking products, up to 12 percent;
- sweet biscuits, up to 10 percent; and
- smoked salmon, which has a 5 percent tariff at present
Tariffs outlined on foods are mostly 5 percent across the GCC, where in some cases individual countries charge higher tariffs on specific products.
With almost $36.65 billion (£30 billion) already invested in each other’s economies, this deal would also help unlock even more opportunities for investment between the UK and GCC countries.
Trade history between the UK and the GCC
The GCC is equivalent to the UK’s seventh-largest export market, and total trade was worth $40.44 billion (£33.1 billion) in 2021. Only the US and China buy more UK goods and services.
Government analysis shows that a deal with the GCC is expected to increase trade by at least 16 percent, add at least $1.95 billion (£1.6 billion) a year to the UK economy and contribute an additional $733.16 million (£600 million) or more to UK workers’ annual wages.
The UK is the second-largest services exporter in the world and services exports to the GCC were worth $14.78 billion (£12.1 billion) last year. UK firms have $16.37 billion (£13.4 billion) invested in GCC economies and GCC firms have $19.18 billion (£15.7 billion) invested in the UK as of 2020.
There were approximately 600 GCC-owned businesses in the UK in 2019, supporting over 25,000 jobs – a number that tripled over the previous decade.
Additionally, more than 85 percent of total UK goods exporters to Qatar, Saudi Arabia, and the UAE are SMEs.
In 2020, approximately 10,700 UK SMEs exported goods to the UAE; 5,500 exported to Saudi Arabia; and 4,100 exported to Qatar.
Consumers in the Gulf have significant purchasing power and huge appetite for UK products and services.
For example, Qatar is one of the richest economies in the world, ranking 9th globally with a GDP per capita of $53,804 (£41,912) in 2020.
Free trade deal: Spurring businesses, creating jobs, and boosting decarbonisation efforts
In a visit to Riyadh, the UK Secretary of State will meet the GCC Secretary General, Dr Nayef Falah M. Al-Hajraf, and her counterparts from all six GCC countries, to launch talks expected to culminate in a trade deal worth $1.95 billion (£1.6 billion) more a year to the UK economy.
It is the fourth major set of Free Trade Agreement (FTA) negotiations launched by the Trade Secretary this year, following visits to begin talks in India in January, Canada in March, and the launch of negotiations with Mexico last month.
Equivalent to the UK’s seventh-largest export market, the GCC bloc’s demand for international products and services is expected to grow rapidly to $977.54 billion (£800 billion) by 2035, a 35 percent increase – opening huge new opportunities for UK businesses.
Gulf investments supported over 25,000 UK jobs in 2019 – a number that tripled over the previous decade.
The CEO of Make UK, Stephen Phipson, said: “We welcome the launch of free trade negotiations with the Gulf Co-Operation Council, strengthening trade opportunities which will ensure that British manufacturing benefits from future positive flows of goods and services into the Gulf region.
“It is also extremely helpful that the UK and GCC are committed to work towards seeking the opportunities from ‘green innovation’, which will bring significant opportunities for Britain’s innovative renewable energy companies which are already leading the way in this area of global concern.”
Phipson added: “We look forward to working with government to make sure manufacturers large and small are able to benefit from the business possibilities this deal will open up.”
Around 10,700 small and medium-sized businesses from every UK nation and region exported goods to the GCC in 2020, with SMEs accounting for more than 85 percent of total UK goods exporters to Qatar, Saudi Arabia and the UAE.
The co-founder and director of Liverpool-based Spice Kitchen, Sanjay Aggarwal, said: “We went to Gulfood with DIT on a research mission and from this we know there is a massive market for our products, like our spice tins and single spice blends in the premium gifting space.
“It’s so important for our business to be linking with the GCC and enables us to grow rapidly in exciting ways we never thought possible. We are in the process of identifying retailers in the Gulf, including the UAE, Saudi Arabia and Qatar.”
A strong trading relationship would allow the UK to play to our strengths as a manufacturing powerhouse and a world leader in technology, cyber, life sciences, creative industries, education, AI, financial services, and renewable energy.
UK businesses in these industries will also play a role in supporting GCC countries as they diversify their economies to move away from a reliance on oil and towards other sectors.
The UAE, for example, has set a target of generating 50 percent of its electricity from renewable sources by 2050.?Exports of UK wind turbine parts currently face tariffs of up to 15 percent.
RenewableUK’s CEO Dan McGrail said: “The global transition to clean energy includes countries throughout the Middle East which are seeking to make the most of their excellent renewable resources such as solar and wind.
“As a global leader in wind, marine energy and green hydrogen, we’re perfectly placed to help other countries to accelerate their efforts to decarbonise their energy systems – and to boost our own economy by exporting around the world.”
