EU, GCC in final stages of FTA agreement talks on aluminium duty

The European Union and the Gulf Corporation Council are now in the final stages of the negotiation over the creation of a free trade agreement and a conclusion could be reached anytime between now and summer, a spokesman from the office of EU Commissioner for Trade, Peter Mandelson, told Platts Wednesday.

A portion of the FTA is expected to see the removal of a 6% import tariff on aluminium for the Gulf states.

"The EU has offered a number of key concessions including on aluminium – on the understanding that nothing is finally agreed until everything is agreed," said the spokesman, adding: "A realistic timeframe for completing the negotiation would be between now and the summer – but no final date has been set."

Aluminium is a key topic for the GCC since its aluminium exports to the EU are hit by a 6% import duty and the Gulf region is increasingly becoming a key producer of the metal.

On February 21, an EC trade spokesman told Platts that the elimination of duties on a number of aluminium tariff lines were part of the discussions for a FTA with the GCC, "which has specific interests in that sector."

He said as the negotiations were still ongoing, the EC could not provide specifics on which lines or aluminium products might be affected, but confirmed that both non-alloyed and alloyed aluminium products were on the list for discussion.

The spokesman said then that on May 8 there would be a joint EU-GCC council meeting at ministerial level in Riyadh. "This is a political event foreseen in the 1989 EU-GCC Cooperation Agreement that takes place every year," he said, adding however, that the FTA outcome was not directly related to this meeting. "The whole negotiating package (coverage) is still open and as a result, we cannot be too specific. What we can tell you is that both primary aluminium products, non-alloyed and alloys, are on the list," he said. Power said there were two lists, A and B. "List A will have reduced tariffs from the date of implementation, list B after four years," he said, adding that both alloy and non-alloy aluminium products were on list A.

The spokesman said once negotiations were concluded, the EC would propose a council decision to adopt the agreement. "Once adopted by the EU and GCC side, the agreement has to be implemented by both parties," he said, adding that on voting, the council decision accepting the agreement would either be majority vote or unanimity. "Whether unanimity is required will depend upon the precise content of the agreement," he said. Power added that the council decision would be for the whole agreement, so it would enter into force all at once. The GCC is a regional organization created in May 1981 by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.

Aluminium import duty a hot topic for Gulf states
There are two aluminium producers in the GCC-Aluminium Bahrain and Dubai Aluminium. Alba has a capacity of over 830,000 mt/year and aims to push capacity up to 1.2 million mt/year by 2010. In November 2006, Dubal launched two potlines which marked the completion of the group's $289 million smelter expansion program, bringing its annual production capacity to more than 861,000 mt/year. The expansion program has resulted in an increased capacity of 100,000 mt/year at the plant making the group one of the world's largest producers of premium aluminium, the group said in a statement then.

Earlier in February, Dubai Aluminium and investment firm Mubadala Development signed a joint venture agreement to develop Emirates Aluminium, a 1.4 million mt/year smelter at the Khalifa Port and Industrial Zone in Abu Dhabi. The joint venture agreement entails the construction and operation of the greenfield aluminium smelter complex, which will happen in two phases. The first phase, which is expected to be operational in 2010, will cost $5 billion, and the second phase will cost $3 billion.

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