China and the Gulf Cooperation Council (GCC) are set to negotiate the establishment of a free trade agreement (FTA) soon.

"The first round of the FTA talks will start in January, most probably in Riad, Saudi Arabia, the headquarters of the GCC Secretariat," Faisal Al-Ghais, Kuwait's ambassador to China and current chairman of the Council of GCC Ambassadors in Beijing, told China Daily.

Kuwait currently chairs the GCC, which is a regional economic organization established in 1981 and comprises the six Gulf states: the United Arab Emirates, Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.

The FTA will maximize the complementarities of the two economies and boost two-way trade and investment in the future, said Al-Ghais.

The pact is expected to be "as comprehensive as possible" to include tariff reductions and a simplification of the flow of goods and facilitation of mutual investments.

For the 23-year-old GCC, China is a market of vast potential for their energy goods such as crude oil and petrochemicals.

The GCC possesses 45 percent of world oil reserves and accounts for 20 percent of world oil production.

Also, the FTA aims to facilitate investment to make it easier for strong-economy GCC nations to invest in an increasingly open China, for China to invest in GCC countries and for both sides to undertake joint investments in third parties.

For Chinese commodity manufacturers, the tariff-cutting FTA will make them more competitive in GCC countries, which are home to 20 million consumers.

"Chinese goods such as textiles, machinery, electrical appliances and electronics sell well in the GCC with their competitive prices and improving quality," the ambassador said.

China is now the GCC's third largest trading partner, behind the United States and Japan.

The bilateral trade volume is estimated to exceed US$20 billion in 2004, jumping from last year's US$16.9 billion.

The progress of the FTA is in line with the efforts of both sides to promote regional economic cooperation with trading partners and neighbors.

China will officially launch a FTA with the Association of Southeast Asian Nations at the start of next year. It is also active in talks with close trading partners such as New Zealand, Australia and Chile.

The GCC has already formed an FTA with Lebanon. It is also negotiating with the EU, Morocco, and ASEAN.

Significant achievements were made during the GCC chief negotiator Yusef Al-Sadoon's visit to China on November 23, when he met Fu Ziying, assistant minister of commerce of China, and discussed negotiation mechanisms, FTA coverage, and a rough timetable.

Fu will head the negotiating team representing China, according to Al-Ghais.

China and the GCC also reached a consensus on some principles of FTA negotiations during Al-Sadoon's visit.

According to Al-Ghais, the two sides will pursue a gradual and practical approach following the China-ASEAN FTA model.

"We will sign an agreement after we finish negotiating each sector," he said.

China and the GCC will begin talks about the trade in goods, where Al-Ghais believes an agreement can be reached "without too much difficulty."

The two sides will then work on more complex issues, such as the settlement of disputes, investment and services.

The ambassador said the agreement on services could be the most difficult part, as both sides should spend time studying each other's laws and commercial circumstances.

(China Daily December 8, 2004)