Supply and demand (page 1 of 3)

By Fiona Mackenzie-Bell in Jeddah

With Oman's recent accession to the World Trade Organization (WTO), the Gulf Cooperation Council (GCC) has moved yet one step further down the road towards global integration. Saudi Arabia is - officially at least - set to join the organization by the end of this year. Tunisia, Morocco, Egypt and Jordan are already members and even Palestine is thinking about joining. However, the nature of trade flows in the GCC - and to some extent in the rest of the Arab world - is monolithic and worryingly non-regional. The region still sits uneasily within the world trade system and the free-trade concept.

The Middle East and North Africa has a lower level of intra-regional trade than any other region in the world - something particularly disturbing given the homogenous nature of its markets in terms of language, culture and traditions. According to Palestinian economist Yousif Sayegh, interregional trade has remained stagnant at around seven percent of the total volume of trade for the past three decades.

The region has failed to wholeheartedly adopt the free-trade refrain either globally or internationally. Many of the GCC states that have joined the WTO have negotiated a "waiver" - which allows for delays in full-scale liberalization, notably in the financial sector - and thus have yet to face the true reality of entering a liberalized global system. Kuwait and Qatar are cases in point. Although they both became WTO members in the mid-1990s, they have yet to liberalize their financial sectors fully and allow equal treatment for foreign entities operating in the sector.

At a regional level, the GCC has been equally averse to free trade. At the last GCC summit, during negotiations on the establishment of a free-trade region, the only significant success was an agreement not to agree. Analysts had expected a timely schedule for the establishment of a regional customs union when in fact the six member states simply agreed to reconvene and discuss the issue in 2005.

Trading partners. And there seems to be growing disillusionment with the region's trading partners. Speaking at a recent conference on GCC-European Union (EU) cooperation, Abdullah al-Kuwaiz, the general manager of Bahrain-based Gulf International Bank, said the EU was "not serious" about forging a long-stalled free-trade pact with the GCC. "They want to keep restrictions on our exports, tax our products and be nice to European producers of petrochemicals," he said. He also claimed that progress is being hampered by the lack of a common GCC customs tariff structure - although the EU had not placed pressure on trading blocs to unify tariffs in eastern Europe and the Mediterranean before signing trade pacts.

Al-Kuwaiz also said that EU reluctance to move forward was reflected by the lack of an EU permanent commission in Saudi Arabia as a counterpart to the GCC's liaison office in Brussels.