With President Park Geun-hye visiting the Middle Eastern countries from March 1, it is said that Korea should resume FTA negotiations, which have been stopped, with the Gulf Cooperation Council (GCC) as soon as possible and target the markets in the Middle East.
A researcher in the international trade division at the Korea International Trade Association (KITA) said on March 1 that the GCC is currently pushing ahead with non-petroleum policies in order to lower the reliance on oil, and showing the signs to resume the FTA negotiations, which had been stopped. Also, this is the right time to establish a bridgehead aiming for the Middle Eastern markets through the FTA now.
The GCC is a regional intergovernmental political and economic union consisting of 6 countries such as Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, Oman, and Bahrain. It accounts for 33.6 percent of the world’s crude oil reserves.
It also accounts for 23.5 percent of the world’s oil production, ranking first. Based on oil money, the per capita GDPs of all 6 countries surpass US$40,000 (43.99 million won) as of 2013. Particularly, Qatar is the richest country in the world with a GDP per capita of more than US$140,000 (153.96 million).
As of last year, the GCC took up only 3.5 percent of Korea’s exports. However, it is the main export market, accounting for 11.5 percent of automobile exports, 39.1 percent of cigarettes, and 30.3 percent of air conditioners. It also has large portions, with 15.2 percent in the chemical machinery sector, 21 percent in valves, 39.6 percent in circuit breakers, and 21.8 percent in steel.
About 39.8 percent of the construction and plants projects from abroad that Korean companies have won are in the GCC. The GCC makes up 71.9 percent of oil imports and 49.3 percent of natural gas imports.
The GCC started FTA negotiations with the Korean government in July 2008, but all negotiations were stopped due to the financial crisis of 2009.
The researcher in the international trade division at KITA urged the government to resume the negotiations with the GCC as soon as possible, saying that the GCC is resuming the FTA policies that stopped for a while, as the FTAs with Singapore and the Europe Free Trade Association took effect in in Sept. 2013 and July 2014.
In the commodity market, the annual export duties of Korea to the GCC amounts to US$1.11 billion (1.22 trillion won). When most tariffs are removed through the FTA, the saving cost of the tariffs is estimated at US$930 million (1.02 trillion won), which is the level of the Korea-US FTA.