GCC’s 2021 chemical trade volumes may have grown by up to 10%: GPCA

GCC’s chemical industry is largely export oriented with a 4.3% share in global chemical exports and trades with more than 100 countries worldwide, exporting over 73mn tonnes of chemicals annually. The GCC is a major hub for the production and export of chemicals. In 2019, GCC chemical exports grew by 6.4% reaching 82.5mn tons. GPCA estimates a decline in GCC chemical export volumes of 15%-20% in 2020, dropping to 66-70mn tons due to significant demand disruptions in chemical supply markets caused by the Covid-19 pandemic. Although GCC export volumes grew by 6.4% in 2019, the region’s export revenue declined by 10.3% and it is estimated that it declined further by more than 20% in 2020. GCC chemical surplus continues to rise reaching a new high of 59mn tons in 2019, which represents about 70% of export volume. The current five-year forecast for GCC chemical trade is to grow by 3% – 5% per annum. The strongest contribution of GCC chemical exports over the past decade came from polymers and fertilizers with a 29.6% and a 27.9% contribution, respectively. However, under an appropriate international policy framework, there is a strong potential for the industry to further expand and cater to the constantly growing global population.While petrochemicals and polymers form the largest part in GCC chemical exports, GCC chemical imports are concentrated around inorganic chemicals representing 48.1% of total imports. With that, petrochemicals and fertilizers contribute the most to the GCC trade surplus, while inorganic chemicals contribute the most to trade deficit, GPCA noted in a report.GPCA has consistently supported and advocated for free trade with global economic blocks.The GCC is currently signatory to just two Free Trade Agreements (FTAs) – one with Singapore and another with the European Free Trade Area (EFTA), comprising Iceland, Lichtenstein, Norway, and Switzerland. It is crucial for GCC states to prioritise establishing FTAs, whether general or sectoral, with their key export partners to maximise potential economic and trade benefits to the GCC industry. A lack of such FTAs with key trade partners will see the regional industry lose its competitive advantages, and likely lose market shares to producers that enjoy preferential market access.While the GCC is still in the negotiation phase to establish FTAs with its top trading partners, chemical producers are required to pay an import duty of between 5.5-6.5%. This, GPCA noted represents a significant loss in revenue that could otherwise be invested in projects and human capital development.An FTA with the EU was first tabled in 1990 but after exhaustive and unproductive rounds of negotiations, the GCC pulled out, unilaterally, in 2008. In recent years, GCC chemical producers have focused on emerging markets in Asia, but as these countries seek to gain more self-sufficiency in the long run, especially China and India, the GCC producers are moving from trade-focused relations to one focused on investments.FTA negotiations with these key markets should not only focus on preferential access but also investment protection.Another country that is open for an FTA with the GCC is the United Kingdom. The UK ended its so-called Trade and Cooperation Agreement (TCA) with the EU in December 2020. This has hugely impacted the ongoing GCC-UK strategic partnership discussions, in favour of both parties. This collaboration marks a further strengthening of the trade and investment relationship between the GCC and the UK. The GCC is already one of the UK’s largest trading partners, with bilateral trade amounting to almost £45bn in 2019. The benefits that a potential deal with the UK could bring to the GCC region range from enhancing its competitiveness, to being part of important global value chains, and increasing the economic activity of the GCC’s chemical industry. GPCA is playing a role in the ongoing GCC-UK Strategic Partnership Initiative by sharing with the GCC Secretariat challenges faced by the regional chemical industry with respect to trade with the UK and recommendations for negotiations pertaining to the same, through the GPCA International Trade Committee (ITC).Ends