India-GCC FTA hangs fire as UAE, S Arabia oppose petro products in negative list

Despite India's reservations, Saudi Arabia is optimistic about Arab-India trade relations and India-GCC ( Gulf Cooperation Council) Free trade agreement in particular.

Talking to FE, the new ambassador of Saudi Arabia in New Delhi, Faisal bin Hassan Trad said, "Relations between the two countries are positive, particularly after the visit paid to India in 2006 by King Abdullah. And to further strengthen the relations between the two, several meetings are scheduled in the months ahead.

According to the new envoy, "perhaps in November, meetings with the Indian delegates are slated to take place with the Chamber of Commerce of Jeddah and the India-Saudi Arabia joint committee will meet in Riyadh."

The Saudi Ambassador noted that India ranked sixth on the list of top ten countries exporting to Saudi Arabia and fifth on the list of states importing from Saudi Arabia in 2008. Adding that, the volume of trade exchange between the two countries increased from $4.25 billion to $27.5 billion, about 600%, during the period from 2000 to 2008.

When asked about the status of the stalled negotiations on India-GCC FTA, Trad said that, "there may be difference of opinion on certain issues, however we are open and positive about the next round of negotiations between both the sides later in the year. "

"Both sides are investing a considerable amount of energies into the talks on the FTA and we expect the talks to chalk out whatever issues and strengthen relations."

However, senior government officials talking to FE on grounds of anonymity have pointed out that the India-GCC FTA is beyond the realm of possibility. "There is no way that the India-GCC FTA negotiations will make a headway, simply because of petroleum and petroleum products. The UAE as well as Saudi government is not ready to include these two commodities in the negative list." Also, due to the global financial meltdown, nothing will work out, until the crisis is over, officials said.

According to highly placed sources, "Two countries from the GCC Saudi Arabia and UAE opposed the Indian demands, and that caused the talks to fail."

The talks for the India-GCC FTA going on since 2005, came to a virtual standstill late last year, as the Indian government did not seem comfortable going ahead.

At the end of three rounds of talks, due to the absence of customs union and disagreement among the GCC countries, talks of an FTA with India started getting stuck.

Each GCC country has a protective duty items list that specifies certain items upon which a higher rate of duty will be charged. The aim of this list is to protect the national industry from imports other countries.

In the proposed FTA, India was also seeking greater safeguards for its chemicals and petrochemical industry. This was being done with a view to protect domestic players who would find it difficult to handle competition, as the cost of crude oil is extremely low in GCC.

According to MEA officials, even though India and the GCC countries had decided to finalise the FTA by early 2007, however, during all the meetings both sides merely reviewed the issues that need to be addressed by India and the member countries.

Arab-Indian trade stands at nearly 20% of the total volume of India's trade exchange with other countries. "The Gulf Cooperation Council (GCC) states account for about 16% of the total trade."said Trad.

In the proposed FTA, India was also seeking greater safeguards for its petroleum and petroleum products. This was being done with a view to protect domestic players who would find it difficult to handle competition, as the cost of crude oil is extremely low in GCC.

In fact, GCC countries have huge investment interest in India, as their economies are driven by exports of petroleum, and are net buyers with huge dependence on the West for most of the commodities. The GCC is also entering into bilateral trade agreements with China, EU, Pakistan, Australia and other countries too. The strategic relevance of Gulf region for India is to interact with investors and entrepreneurs in the region for availing new opportunities in India through joint ventures and collaborations in various sectors.