An important step planned by the Gulf Cooperation Council countries by signing a multilateral free trade agreement with South Korea, which is hoped to play a decisive role in establishing sustainable economic relations.
The recently signed agreement is expected to establish deeper relations in the traditional energy sector, including the petroleum and nuclear industries, in addition to expanding their partnership to include emerging industries, including sustainable energy.
The Gulf Cooperation Council said in a statement, Wednesday (November 3, 2021), that it signed with South Korea, in the Saudi capital, Riyadh; Agreement of intent to resume the FTA between the two parties. It was signed by Secretary-General Nayef Al-Hajraf and South Korean Trade Minister Yu Han-koo.
According to the statement, Al-Hajraf stressed the importance of joint economic and trade relations between the GCC countries and the Republic of Korea, and the desire to strengthen them to serve common interests.
He stressed that the free trade agreement "will contribute to laying clear foundations for expanding the scope of trade and investment to achieve advanced cooperation between the two sides."
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He pointed out that the agreement "plays a decisive role in strengthening economic and investment relations in various fields to serve common interests."
- revitalize the economy
In early September, South Korea announced its intention to resume talks on a new free trade agreement with the Gulf Cooperation Council; After a hiatus of more than 10 years.
South Korea and the GCC agreed to start FTA negotiations in 2007, but related talks have been stalled since 2009.
In general, free trade agreements are important to revitalize the economy, in particular, and foreign trade, according to what economic researcher Wissam al-Kubaisi told Al-Khaleej Online.
Al-Kubaisi considered that "the preferential advantages offered by the agreements, or a reciprocal reduction of customs tariffs, encourages the trade exchange of the parties to the agreement and increases its pace."
- What is free trade?
Free trade is a policy to eliminate discrimination against imports and exports. Buyers and sellers from different economies may trade voluntarily without a government applying tariffs, quotas, subsidies, or bans on goods and services.
Free trade is the opposite of protectionism, protectionism, or economic isolationism.
Politically, free trade policy may simply be the absence of any trade policies. In which the government does not need to do anything to promote free trade, this is referred to as "laissez-faire trade", "trade liberalization", or "deregulation".
Governments that enjoy free trade agreements do not necessarily relinquish all control over import and export taxes. In modern international trade, a small number of free trade agreements leads to completely free trade.
- Mutual benefits
A report by the Emirates Diplomatic Academy states that Gulf-South Korean relations will witness a major development, based on South Korea's need for fuel and the Gulf countries' need for Korean expertise in various fields.
While energy is a major focus of the relationship between the Gulf states and South Korea, the two sides are looking to implement special initiatives in the clean energy sector and cooperation, beyond the oil sector, to strengthen their relations in the future.
The two parties are also discussing cooperation in innovation and "smart" investments in the development of space programs, information and communications technology, infrastructure development, security, infrastructure, health care, education, and others.
There is room to enter into joint projects in shipbuilding and multi-purpose logistics. Within the framework of plans to develop their economies in the future, the Gulf countries and South Korea are keen to enter into projects related to the Fourth Industrial Revolution, which are based on six axes: artificial intelligence, robot science, and the Internet. Objects, autonomous vehicles, 3D printing, quantum computing, and nanotechnology.
Returning to the agreement, Wissam al-Kubaisi believes that "the motive for renegotiating the agreement after a hiatus of more than a decade may be the reluctance in the volume of production and supply chains."
He explained: "The past decade witnessed a great trend from the Gulf market towards Chinese exports, but the repeated cases of closure within the Chinese market after the emergence of Covid-19 and the ensuing shortage of energy and power outages in several places, called on the Gulf countries to search for alternatives in case the shortage continues. Chinese production and the high prices of its products and shipping costs.
Over the past two decades, trade figures between the GCC and South Korea have grown to reach about $67.2 billion, according to 2019 statistics.
Oil and gas constitute the most important Korean imports from the GCC countries, while cars, electronic devices, machinery and construction equipment constitute the most important imports of the GCC countries from South Korea. Its imports from the GCC countries represent more than 80% of the intra-regional trade.
In 2019, its imports amounted to 57.8 billion US dollars, accounting for 11.5 percent of South Korea's total imports.
In comparison, the share of South Korean exports to the GCC countries was more than 18%, and amounted to $9.4 billion in 2019.
The free trade agreement between the Gulf states and South Korea is not without danger, according to what the researcher in economic affairs Wissam al-Kubaisi points out, as it is not excluded that “the agreement will harm the Gulf economy, as imports of Korean goods are increasing, and this is not paralleled by a rise in Gulf exports.” This makes the trade balance tilt in Korea's favour.
These risks are not difficult for the Gulf countries to put an end to - according to al-Kubaisi - who says: "This requires those in charge of Gulf economic affairs to search for ways to achieve a relative balance between exports and imports."
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