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Sat 30 May 2009 01:28 PM

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Gulf looks East for stronger trade links

GCC to sign trade pacts with China, Soth Korea, Australia starting this year, rather than EU - Omani official.

Gulf Arab oil producers are expected to sign trade pacts with China, South Korea, Australia and New Zealand starting this year after talks with the European Union for a similar deal hit a wall, an Omani official said.

The GCC suspended talks with the EU late in 2008 after a disagreement on human rights and democracy derailed two decades of negotiations.

The alliance that includes world top oil exporter Saudi Arabia, the largest Arab economy and a member of the G20, is now looking at EU's rivals in the east, said Abdulmalik Al-Hinai, undersecretary for economic affairs at Oman's Ministry of National Economy.

"This week or next week we will start a new round of negotiations with China," Hinai said on the sidelines of a meeting of GCC finance ministers.

"We have already finished the fifth round of talks with New Zealand and we are at a very advanced stage ... After one more round before the end of the year we should be ready to sign."

Oman is chairing the GCC this year.

The bloc signed a free trade agreement with Singapore in 2008.

Australian and Gulf negotiators will also be at a meeting in the Omani capital Muscat on Sunday, Hinai said, adding that he expects progress in the talks.

"These two countries as well as (South) Korea, I am expecting we will be finished in the near future," Hinai said, referring to Australia and New Zealand.

One hurdle facing agreements with Australia and South Korea is that their key exports to the GCC are cars, subject to import levies of five percent in GCC countries that exporters from countries including Australia and South Korea want abolished.

"There is one issue hindering the agreement, that is liberalisation of imports of automobiles. Some countries in the GCC say we need some time to liberalise this sector."

The GCC plans to sign a free trade agreement with the European Free Trade Association, which includes Iceland, Liechtenstein, Norway and Switzerland, Hinai said without giving further details.

Trade talks with the EU became difficult to resolve as the EU shifted gear in recent years to demand political reform from the mostly autocratic GCC countries before a deal could be forged.

Four of the GCC countries do not have parliaments.

Sone have cone under attack over the poor conditions of foreign labourers, the backbone of economic development and hydrocarbons industries in the region.

EU fears over the strength of the Gulf petrochemicals sector have also been behind the stagnation of the talks.

EU countries have also placed heavy taxes on imports of Gulf fertilisers and other petrochemicals that hinder trade flows from countries like Saudi Arabia and Qatar. (Reuters)