GCC agrees to decouple investment pact from FTA talks with India
The Gulf Cooperation Council (GCC) has agreed to separate Bilateral Investment Treaty (BIT) discussions from Free Trade Agreement (FTA) negotiations with India. This decision opens multiple pathways for India, including proceeding with full GCC FTA talks if BIT negotiations conclude quickly, or pursuing individual FTA talks with Qatar and Bahrain if BIT discussions are delayed. The move aims to overcome previous negotiation challenges, particularly with Saudi Arabia, and could expedite the trade talks. The GCC is a significant trading partner for India, with bilateral trade reaching $161.59 billion in FY 2023-24.
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The Gulf Cooperation Council (GCC) has agreed to decouple talks for a Bilateral Investment Treaty (BIT) from Free Trade Agreement (FTA) negotiations with India, sources told CNBC-TV18. This development represents a significant shift in the negotiation approach between the two sides and may potentially accelerate trade talks.
Key Changes in Negotiation Strategy
The GCC has agreed to separate discussions on a Bilateral Investment Treaty from the Terms of Reference for an FTA. The Terms of Reference serves as a precursor to an FTA, defining the scope, rules, and framework for the trade agreement, while a BIT determines rules for mutual investment promotion and protection for investors.
Sources indicated that India now has multiple pathways forward:
| Scenario | Approach |
|---|---|
| BIT talks conclude quickly | Proceed with full GCC FTA negotiations |
| BIT delays continue | Move forward with individual FTA talks with Qatar and Bahrain |
| Existing agreements | FTA already in place with UAE |
Background of the Negotiation Challenges
In December, government sources had revealed that Saudi Arabia wanted to sign a BIT with India before proceeding with an FTA. However, India was not keen to link an FTA with a BIT, which it was separately negotiating with Saudi Arabia. This difference in approach had led to delays in FTA negotiations.
The six-member GCC comprises Saudi Arabia, UAE, Kuwait, Qatar, Oman, and Bahrain. Saudi Arabia represents the largest GCC member in terms of economic size, with a population and land area larger than all other GCC members combined.
Trade Relationship and Economic Significance
India and the GCC announced resumption of negotiations in 2022 after a hiatus of several years for the potential FTA, whose concept was initially proposed in 2004. The GCC serves as an important trading partner for India, beyond being a region with historical ties and presence of nearly 1 crore Indian workers.
The bilateral trade relationship shows substantial economic engagement:
| Trade Component | FY 2023-24 Value |
|---|---|
| Total Bilateral Trade | $161.59 billion |
| India's Exports | $56.30 billion |
| India's Imports | $105.30 billion |
| Trade Balance | -$49.00 billion (deficit) |
India's economic linkages with the GCC have steadily risen due to growth in oil imports, making these trade negotiations particularly significant for both sides. The decoupling of BIT and FTA discussions may help accelerate progress on trade liberalization while allowing investment protection matters to be addressed separately.
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