Responsabilidad social empresarial y filantropía

Introduction

European Union (EU) and Gulf Cooperation Council (GCC) relations have always been mainly focused on economy. The EU is the GCC's biggest trading partner and importer of goods in the region and GCC markets have been important for the EU especially since bi-regional trade has been asymmetrical in its nature, in favour of Europe. More recently, flows of investments from the Gulf to Europe verified the interdependency of the two regions327. Biregional trade between the EU and the GCC was treated under the Most Favoured Nation (MFN) regulations and under the Generalised System of Preferences (GSP) the EU granted to all developing countries328. Since 1990 bi-regional trade has been constantly growing. In 1989, when the Euro-Arab Dialogue was collapsing, the EU and the GCC states signed a Cooperation Agreement, according to which the two parties agreed to negotiate a trade agreement overcoming MFN and GSP status, eventually leading to a Free Trade Agreement (FTA). During the first decade of the talks the progress of the official negotiations was minimal, but there were some encouraging signs for the overall relationship because of the work of the business communities. In the 21st century, because of the new political environment and the economic development of the Gulf region, both at a local as well as at regional level (with the integration process of the GCC states), a new momentum for the economic relations of the two regions emerged. New opportunities were raised for the EU to become a significant player in the area and a strategic partner in the GCC’s efforts for economic diversification and further economic development.

This chapter will analyse the case study of economic relations between the EU and the GCC states within the framework of a strategic partnership. It will use

327 _{Hollis, Rosemary, Europe and the Middle East: Power by Stealth?, Rosemary Hollis, International Affairs(Royal}

Institute of International Affairs 1944-), Vol. 73, No. 1, Jan., 1997, pp. 15-29.

328 _{Escribano-Francés, Gonzalo, “An International Political Economy View of EU-GCC Partnership”, Paper presented}

at the “International Conference on Challenges of Economic Development for the GCC Countries”, Kuwait City, 29-31 January 2005, p. 7

the methodological framework presented in the previous chapter in order to explore the history and the development of the FTA negotiations and the relationship of the business communities of the two regions. It aims at identifying the common interests and challenges of the two regional blocs and at examining whether interests and the subsequent cooperation go beyond purely economic gains, tackling the effect of values and the role of perceptions in this cooperation. It will also address the elements of competition and the level to which these have hindered closer cooperation between the parties.

The power balance and the interdependency component will be central in exploring the shaping and the development of this relationship. This thesis will address how this interdependency factor has evolved during the last two decades and examine the added value the parties bring to the partnership. In a related matter, the chapter will then address the question of the long-term approach of this relationship and the flexibility that the two partners have shown in order to tackle the new developments in the fields of economy and politics, at national, regional and international levels, in order to overcome problems or to add impetus to their partnership.

Furthermore, the chapter will investigate the role of the different actors, coming from different levels of the hierarchy of various fields of political institutions and socio-economic groups in order to examine if this relationship has been multidimensional, multilayered and multileveled, as a ‘strategic partnership’ should be, according to the suggested definition of this notion. It will also assess the broader range of the EU-GCC partnership, beyond the bi-regional level, having in mind on one hand the EU eagerness to promote multilateralism and on the other hand the GCC perceptions of autonomy in their internal but more importantly in their external environments. The extent to which the EU and the GCC have agreed on joint actions and have provided concrete results will also be examined, alongside internal cohesiveness as well as how the latter obstructs or promotes the shaping of an EU-GCC strategic partnership.

A special focus will be dedicated to the way the EU has promoted its values and norms in the Gulf region, as this is a central aspect of EFP and ‘strategic partnerships’, according to the EU’s self-image. This is becoming even more important in light of the different structures and values of the societies and of the political systems in the GCC states as well as the fact that the Gulf leaders have their own perceptions about sovereignty accompanied by their ability to resist EFP. The extent to which the EU and the GCC states negotiate and reach understanding regarding values, norms and perceptions affects accordingly the shaping of a ‘strategic partnership’, either positively or negatively. It is expected that it will also influence the way that EFP is conducted, leading to re- assessment, both by EU policymakers as well as other observers, about the character of EFP.

The chapter will end with a presentation of the effects of the institutionalisation of the partnership as well as of the new opportunities arising from the regional and global environment may have on the development of the EU-GCC relationship. The aim of the current chapter is to project all the elements that form a strategic partnership on the specific case study in order to arrive at a conclusion as to what extent the EU-GCC relationship corresponds to this model of cooperation. The chapter will begin with a brief introduction to the ‘rentier state’ structure of the Gulf states which is vital for the understanding of the way the Gulf leaders conduct internal and external policies and for the opportunities as well as the challenges posed for the EU-GCC relationship. Then, a brief history of the FTA negotiations will be presented. Sections referring to the different elements of a strategic partnership will follow.

The ‘rentier state’ in the Gulf region

The Gulf economies have mainly been based on the ‘rentier state’329

model of economic and societal organisation. This model is characterised (i) by the dependence of the national economy on substantial external rents that can

support the state expenditures even if there is no or a limited domestic sector for economic development (ii) these revenues are controlled by a very small group of people, usually the royal families and a small state class (elite) around them (iii) by whom state wealth is distributed to society and (iv) by the fact that the latter has no involvement in any production process330. Therefore, the lack of reforming forces within the Gulf societies, due to the structural characteristics of the ‘rentier state’, the subsequent dependence of the private sector to the state and the non-existence of an indigenous workforce and middle class means that the state is the only driving force of the economy. The dominant role of the state economy influences the relevant development plans and productivity rates. The public sector does not pursue purely economic gains, which is the case with the private sector, but it has to accommodate also social and political objectives331. Since the 1970s oil money has granted the capability to the royal families of the Gulf states to buy loyalty through the expanded public sector. They channelled money to local societies through goods allocation (housing schemes, stipends) or services (infrastructures), instead of investing in the development of domestic economic activities, namely industries and services. This was the main pattern of public policies in the Persian Gulf, as the results of this approach were immediate and the political gains more obvious332. Even when the Gulf states put forward development plans and initiatives for reforms or for restructuring the local economies, the ruling families had to weight the political cost of their decisions. They had to overcome the obstacles of balancing between the various economic actors and bureaucracies in order to keep everyone satisfied and loyal333. Moreover, the interaction between the state and the few private companies through a system of royal favours and subsidisations blurred the line between the rulers and the businessmen. Therefore, the distinction between

330 _{Beblawi, Hazem, ‘The rentier state in the Arab world’, in Beblawi, Hazem and Luciani, Giacomo, eds., The Rentier}

State, London, Routledge Kegan & Paul, 1987, pp. 51-52

331 _{Ayubi, Nazih, ‘Etatisme versus privatization: The changing Economic Role of the State in Nine Arab countries’ in}

Handoussa, Heba ed., Economic Transition in the Middle East, Global Changes and Adjustment Strategies, Egypt: American University in Cairo Press, 1998, p. 125

332 _{Abdel-Fadil, Mahmoud, The Macro-behaviour of Oil-rentier states in the Arab region, in Beblawi, Hazem and}

Luciani, Giacomo, eds., The Rentier State, London, Routledge Kegan & Paul, 1987, p. 84

333 _{Youngs, Richard, Europe and the Middle East: in the shadow of September 11, Boulder, Colo. : Lynne Rienner}

private and public sectors were highly blurred and it should not surprise anyone that until very recently privatisation goals were merely a slogan by the Gulf leaders, rather than clearly defined goals pursued through concrete national policies and reforms334. On the contrary, the ruling families have used national wealth coming from oil revenues to boost the economic activities of the private economy, like the construction sector, through infrastructure projects and the welfare system with the housing schemes. This is, however, a mechanism of ‘internal recycling’ of the oil rent, without building on the capacities for a real development of the private economy to the extent that it could become independent from the oil rents335. The dependence of the national economy on the allocation system of rents developed a ‘rentier mentality’ within the Gulf societies, which still characterises a great majority of the local population. Because there is no linkage between production and gains the ‘work-reward causation’ is broken336

. Income has been isolated from any notion of work and business risk and it is rather perceived as a fact that is much more linked to the political context and the political behaviour of the citizens. As a result of this system of effortless income for the GCC nationals, the workforce in these countries consists of expatriates. What is more interesting is that a large number of companies in trade and development are run by foreigners. Keeping in mind though that foreign ownership has not been easy in the Gulf countries, GCC citizens become ‘sponsors’, (‘al kafil’). They register companies or apply for permissions for trade or closed professions under their names and in exchange they get a share from the profits of their sponsored partners. This is another layer of the recycled rentier system, which has also led to the ‘kafil mentality’, according to which income does not derive from work or risk but solely from GCC citizenship and sponsorship337. In this institutional and political context, it is

334 _{Ayubi, Nazih, ‘Etatisme versus privatization: The changing Economic Role of the State in Nine Arab countries’ in}

Handoussa, Heba ed., Economic Economic Transition in the Middle East, Global Changes and Adjustment

Strategies, American University in Cairo Press, 1998, p. 157

335 _{Abdel-Fadil, Mahmoud, “The Macro-behaviour of Oil-rentier states in the Arab region”, in Beblawi, Hazem and}

Luciani, Giacomo, eds., The Rentier State, London, Routledge Kegan & Paul, 1987, p. 86

336 _{Beblawi, Hazem, ‘The rentier state in the Arab world’, in Beblawi, Hazem and Luciani, Giacomo, eds., The Rentier}

State, London, Routledge Kegan & Paul, 1987, p. 52

no wonder the Gulf states could not attract direct foreign investments. Actually, during the 1990s, the average growth of FDI inflows had been -9%, whereas at the same time the global average growth was 19% and 30% for developing countries. Additionally, it should be noted that the FDI in the pre-2002 era was directed almost exclusively to the energy-related sector. It should also be pointed out that it was not simply a matter of no inflows of capital. By investing in other fields, foreign companies would have transferred technology and expertise that was greatly needed by the economies of the Gulf region338.

In this brief description of the way the Gulf region is organised politically, economically and socially, it could be easily identified that the Gulf leaders have been the predominant actor in the all fields of activities and their actions were motivated by their aim to secure internal autonomy, through buying loyalty. As a result, none of the major values pursued by the EU as described in the previous chapter were met in this context. The role of the state and national sovereignty were still fundamental (as opposed to the supranational rule of law), social freedoms and rights had been linked to obedience to the existing ruling system (as opposed to social freedoms, consensual democracy and human rights). Sustainability of peace could also be questioned to the extent that the sustainability of the economic and political structure was also challenged. Minor values promoted by the EFP (social solidarity, anti-discrimination, sustainable development, good governance) were also very weak, if at all existent.

Brief history of the FTA negotiations

The FTA negotiations between the EU and the GCC are the cornerstone of their biregional relations, despite the slowdowns, the problems and even the suspension of the talks (2008) during the last twenty years. The EU-GCC FTA talks entered a phase of serious negotiations only after 2003, as the timing was just right then. The new political environment which was shaped by the

338 _{Baabood, Abdullah, EU-GCC Relations: A Study in Inter-Regional Cooperation, Dubai, Gulf Research Center,}

aftermath of the 9/11 attacks in GCC–US relations, the increased interest of the European Union in the region339 and the establishment of an EU Delegation Office in Riyadh provided new impetus to the EU-GCC relations. In the field of economy, the GCC introduced a Common Custom Union facilitating bloc-to-bloc negotiations, and economic relations between the two regions grew even further both because of the oil prices and the new Foreign Direct Investments (FDI) inflows to Europe from the Gulf states340. When the negotiations resumed in 2002, five rounds of talks took place within the first year, two more in 2003 and another three in 2004, proving the desire of the EU and the GCC states to build upon the new momentum. The negotiation rounds were followed by technical meetings341. In 2004, under the initiative of Chris Patten, Commissioner for External Relations at the time, the two parties agreed to concentrate their efforts on the economic sphere, namely on the negotiations for concluding the FTA, business relations, and energy cooperation. Human rights also became part of the talks342. However, in December 2008 the GCC states suspended the official negotiations, sending the message that they are running out of patience. By May 2009, the EU and the GCC had agreed on 99% of the issues.

Two obstacles remain: the inclusion of the human rights clauses; and the export duties in relation to Saudi rules and laws. The human rights clauses have became part of the negotiations mainly for two reasons; firstly because the EU always includes political clauses in the trade agreements and secondly due to the fact that the European Parliament has been active in raising human rights issue for the Gulf States. The GCC states agreed on the addition of this matter in what is nevertheless seen as a purely economic agreement, since they do understand that this is the way the EU conducts negotiations for external relations. However, even though they made the concession of including a

339 _{The “EU Strategic Partnership with the Mediterranean and the Middle East” document calls for intensification of}

dialogue under the relevant political instruments with GCC and consideration of a bilateral arm next to the biregional approach of the Commission in order to advance the EU - GCC relations

340 _{Annex 05}

341 _{Lore Genand,‘A view of the FTA from an EU perspective’, in GCC-EU Research Bulletin 2, June 2005, pp. 10-11} 342 _{EU/ GCC, ‘Joint Communiqué’, 14th EU GCC Joint Council and Ministerial Meeting, 17 May 2004}

discussion on human rights in this economic agreement, they are uncomfortable on how these clauses may be used in the future. On the export duties issue, even though the GCC and the EU had agreed on the terms about the prohibition of any export duties, at some point the GCC states (mainly, if not exclusively, because of the KSA) reverted to their previous position, so that they would be able to impose export duties on local products. Thus, the discussions reopened. The EU suggested time limitations, quantitative limitations or proportionate measures343 but the GCC states insisted that the matter should be left out of the FTA talks, or that prohibition of any export duties becomes an issue subjected only to bi-regional consultations. It should be noted that currently the KSA, and the rest of the GCC states, do not have export duties on petrochemical products, but the Gulf leaders do not want to relinquish their right to do so in the future in order to discourage export of raw materials and to encourage the development of their internal industrial production. The EU refuses to agree on further concessions on the matter because this would create a negative precedent for the rest of its negotiations for FTAs and it would also undermine the essence of the FTA agreement. Moreover, European diplomats have consistently argued that since the GCC states do not currently have export duties, they fail to see the rationale behind the stance of the GCC states. What is more, for European diplomats, this agreement is not expected to produce massive economic gains either to the EU or the GCC states, even though they could not be more specific on what the EU’s expectations and calculations are regarding the economic outcomes of the FTA agreement344. On their part, the GCC states have argued that their right to place export duties relates to their own internal development and stability and as such these priorities should be respected by the EU. In this sense the language used in the GCC arguments is one dressed with normative language in order to present an economic issue as

343 _{Letter sent to Dr. Hamad AL-Bazai, Deputy Finance Minister of the Kingdom of Saudi Arabia, by Joao Aguiar}

Marchado, Deputy Director General, DG Trade, European Commission, Brussels, 07 April 2010.

344 _{These arguments have been presented during interviews by various EU diplomats (working both for EU}