According to the Turkish trade minister, the new free trade agreement will create one of the world’s largest free trade areas.
Al-Monitor, March 22, 2024, by Jack Dutton
Turkey and the Gulf Cooperation Council have signed a deal to begin formal negotiations for a free trade agreement, Turkish Trade Minister Omer Bolat announced Thursday, as Ankara looks to boost economic ties in the Middle East.
The GCC is a bloc that includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
The pact to launch talks was signed in Ankara Thursday between Bolat and GCC Secretary General Jasem Mohamed Al Budaiwi.
Bolat wrote on the X platform that the agreement will create one of the world’s largest free trade areas, with a total value of $2.4 trillion, adding that he believed the negotiations will be “completed as soon as possible.”
Ankara has been revving up diplomacy with countries in the Gulf after years of antagonism due to Turkish President Recep Tayyip Erdogan’s support of the Muslim Brotherhood movement. Since Erdogan was reelected in May 2023, Turkey has been signing billions of dollars’ worth of business deals with Gulf countries as Ankara looks to deepen ties with the region.
The GCC signed free trade agreements with South Korea in December and Pakistan in September. The six-nation bloc is currently negotiating a trade deal with the United Kingdom.
EU obstacle
Sinan Ulgen, a former Turkish diplomat and a senior fellow at the Carnegie Endowment for International Peace think tank, pointed out that despite Thursday’s announcement, Turkey and the GCC cannot conclude and implement a free trade agreement unless the EU and the GCC have already concluded a similar pact, because Turkey is in the customs union with the EU and a condition of its membership is that it cannot have its own separate set of free trade agreements with third countries.
Negotiations between the EU and the GCC started in the 1990s but have been suspended for several political reasons.
Ulgen stressed that for a Turkey-GCC agreement to be concluded, there would need to be “a long period of political calm” and “that’s fundamentally the reason why the EU-GCC FTA faltered.”
Competitive exports, FDI protections
“The GCC market remains under relative high tariff barriers for a number of goods, particularly the agro-industrial products but also a range of industrial goods, and Turkey is the country in the region that has the most competitive economy in terms of export performance and a very well diversified industrial base,” Ulgen told Al-Monitor.
“So there’s quite a few sectors where if indeed this FTA is concluded, Turkish exports could become more competitive compared to exports of many other countries that will continue to face high tariff barriers.”
He said that GCC countries will be prioritizing investment protections, given that Turkey does export much more than raw materials from the region. Instead, being heavy investors in Turkey, GCC countries will look to establish the right framework for foreign direct investment.
A free trade agreement would also be an opportunity for some of the main Gulf banks to deepen their presence in a large and growing market like Turkey. GCC lenders such as Emirates NBD and QNB are relatively well placed in Turkey but they and other banks may want to address some of the regulatory obstacles they face.
Turkey and the United Kingdom announced on March 14 that they would begin official talks in June for a new free trade deal, following a meeting between the countries’ trade ministers in London.