Prospects and Challenges of Free Trade Agreements: Unlocking Business Opportunities in Gulf Cooperation Council (GCC) Markets

This chapter provides the necessary background and context for the study. Australia and the Gulf Cooperation Council (GCC) states have a long history of trade and investment activities between them. Trade and investment have evolved gradually over the years. However, the acceleration of globalisation and the resulting changes taking place in the structure of the world economy have led many small economies such as Australia and the GCC states to engage strategically with their trading partners in order to remain an integral part of the global economy. Australia and GCC started to negotiate a free trade agreement (FTA) in 200J with negotiations slowing down for a number of years. Recently, Australia has shown a strong determination to conclude a successful FTA with the GCC. Such a prospect raises a number of interesting questions regarding the potential benefits of a successful Australia-GCC FTA which is the subject of this research.

This chapter has two goals. The first is to review the theoretical arguments why free trade can be beneficial for a country from both an economics and institutional perspectives. The second goal is to explain how, despite the potential benefits associated with free trade, countries still have a number of policies in place which restrict the freeflow of goods, services and capital. We review a number of these restrictive policies and show the extent of the benefits which are likely to arise as a result of their elimination through a free trade agreement (FTA). Lastly, the chapter concludes with a discussion of some of the limitations associated with bilateral and plurilateral (FTAs) in realising the full benefits of such agreements.

This chapter provides an overview of the recent trends and emerging patterns in Gulf Cooperation Council (GCC) consumer market and business environment. The chapter starts by assessing the potential consumer market size of the GCC by analysing emerging demographic trends. Then, the chapter provides an overview of emerging economic sectors with future growth opportunities. This is followed by an analysis of the international competitiveness of the GCC and its member states.

This chapter provides an overview of the recent trends and developments in Gulf Cooperation Council (GCC)-Australian trade and investment. GCC-Australian trade and investment has increased significantly over the last two decades. However, a closer look at the recent trends shows that so far Australian-GCC trade and investment remain highly concentrated in a few countries and in a narrow range of sectors. Opportunities therefore exist for Australian businesses to expand and diversify more broadly across all GCC states in more sectors of the economy.

This chapter reports the results of a survey of Australian businesses currently doing business in the Gulf Cooperation Council (GCC). The main purpose of the survey was to gain a better understanding of the challenges which Australian businesses face when engaged in international business activities such as exporting, importing and investing in GCC countries. The research assesses how the removal of internal and external trade barriers would likely benefit businesses. The findings suggest that the main benefits are likely to accrue to export businesses while the effects on import and investment are likely to be minimal. Export revenues are likely to increase by an estimated 20% under the scenario where there is a free trade agreement (FTA) between Australia and GCC.

This chapter summarises the main findings of the study and provides a number of recommendations to both businesses and policy makers so that the likely benefits of an eventual Australian-Gulf Cooperation Council (GCC) free trade agreement (FTA) can be optimised. The most common difficulties faced by Australian businesses are in the form of non-tariff barriers and local business practices which are deeply rooted in institutions, culture and history. For this reason, the study argues that in order for Australian businesses to fully realise the potential benefits of an eventual FTA, special considerations should be given to institutional reforms in the GCC as an integral part of the FTA framework. A FTA can serve as an effective mechanism for addressing institutional voids in smoothing the conduct of businesses between the two regions. The study also offers some practical recommendations to businesses in expanding into some of the growth sectors in the GCC in a post FTA era.