MOSCOW (MRC) -- A free trade agreement between the Cooperation Council for the Arab States of the Gulf (GCC) and China could be inked by end 2016, effectively removing tariffs imposed on Middle East petrochemical products to its biggest buyer, a source close the discussions told TPS.
The GCC comprises six members: Saudi Arabia, UAE, Kuwait, Oman, Qatar, and Bahrain. Negotiations for an FTA kicked off in July 2004, and five rounds of discussions have already taken place, according to China’s Ministry of Commerce website. Negotiations were suspended in 2009, and restarted in December 2015.
Tariffs on petrochemicals, which were supposed to be lifted within five years of the China-FTA, may be lifted almost immediately after the agreement is struck.
"Both sides are now discussing to move petrochemicals from category B, where tariffs are gradually lifted within five years, to category A, where tariffs are removed immediately," the source said.
Petrochemicals such as benzene, paraxylene, styrene monomer and monoethylene glycol are top export items to China. Removal of tariffs on these products would have a profound impact on trade flows, making GCC petrochemicals much more attractive to Chinese buyers.
Case in point is paraxylene, which has a 2% import duty except for cargoes exported from Asean and Taiwan. This has led to a preference for “Asia-origin” PX which excludes products from the Middle East and India.
If the GCC is able to finalize the FTA and move petrochemicals into category A, GCC products could pose a serious threat to South Korea and Japan, which are the top exporters to China.
The GCC bloc is China's largest source of oil imports, while China is the GCC's eighth largest trading partner, according to China’s Ministry of Commerce.
We remind that, as MRC reported earlier, in 2014Oman state refiner Oman Oil Refineries and Petroleum Industries Company (Orpic) selected LyondellBasell's Spheripol polypropylene process technology for a new 300,000 tpy polypropylene (PP) plant to be built in Sohar, Sultanate of Oman. Start-up of the Liwa plastics project is planned for 2018.