UAE Says Gulf Customs Pact Won't Affect WTO Membership

by Lorys Charalambous, Tax-News.com, Cyprus

17 May 2002

In a memorandum released earlier this week, the UAE's Ministry of Economy and Commerce announced that the forthcoming customs union between the six GCC countries will not affect World Trade Organisation membership, or individual commitments made to the multilateral trade body.

As reported in the Gulf News on Tuesday, the UAE memorandom explains that: 'the aim of creating a GCC customs union is to faciliatate trade among member states rather than create barriers for trade with other countries outside the GCC.'

The customs union has been under discussion for several years, and is designed to faciliate free trade agreements with other economic blocs, such as the European Union. The six oil-rich nations (Kuwait, Qatar, Oman, Saudi Arabia, Bahrain, and the United Arab Emirates) are keen to address the high taxes imposed by the EU on Gulf petrochemical and aluminium products, but progress in negotiations has been stalled by the absence of a GCC customs accord, which the European Union has always insisted upon as a pre-condition to serious free trade agreement talks.

The WTO, of which all GCC states but Saudi Arabia are members, stipulates that the creation of any customs union should not result in an increase in customs tariffs. Although the 5% duty on foreign imports agreed upon by GCC members will be a slight increase on tariffs levied in the UAE, it represents a substantial reduction for countries such as Saudi Arabia and Bahrain, where such duties exceeded 20% on some products.

According to the Gulf News, most obstacles to the launch of the customs union in 2003 have been cleared. However, there are still disputed areas - such as tariff revenue distribution and the rights of exclusive trade agents - which have not yet been agreed upon.

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