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Britain has a trade deal with oil-rich Gulf states in its sights, international trade secretary Liz Truss has said, as ministers close in on a £5bn investment tie-up with Abu Dhabi.
Officials are working on an approach to the six members of the Gulf Cooperation Council (GCC), including Saudi Arabia and the United Arab Emirates after making the oil-pumping bloc a “definite target” for a trade deal, Ms Truss told the Daily Telegraph.
She also called on G7 trade ministers last night to rally behind a push to overhaul the under-fire World Trade Organisation at a meeting on Thursday, warning the trade referee faces a “do or die moment”.
The Department for International Trade is turning its attention to more ambitious tie-ups with India and the GCC as it nears the end of “phase one” talks with Australia and New Zealand.
A deal with states in the Middle East is likely to be considerably more controversial given longstanding concerns about the countries’ human rights records.
Ms Truss said: “The Gulf is a definite target and we are working on the approach to [the] Gulf.
“We are in discussions with the GCC and I hope that we’ll be able to say more about that soon.”
The GCC talks come as sources said Ms Truss and fellow minister Lord Grimstone are closing in on a deal with Abu Dhabi-based sovereign wealth fund Mubadala. The tie-up will open the door to as much as £5bn of investment into the UK from the Middle East.
The chief executive of Mubadala, Khaldoon Al Mubarak, is understood to have been in London for talks over the investment, which could be sealed at the end of next month with a visit from Crown Prince Sheikh Mohamed Bin Zayed Al-Nahyan. The source said the deal is “getting some real traction now” following a “couple of very big meetings recently”.
British trade with GCC members was worth £45bn in 2019 – the fourth largest amount after the EU, US and China. The door to a GCC deal was opened last November by the launch of a joint review into economic ties that will conclude next month.
Mubadala is said to be targeting investment in health, clean energy, infrastructure and technology in what would be a major boost to the Prime Minister’s post-Brexit ambitions.
The Office for Investment and Mubadala did not respond to a request for comment.
“We don’t need to be defensive,” says international trade secretary Liz Truss as she hunkers down for a crucial few months of gruelling trade talks.
“Not only is free trade the right thing to do morally, but it’s also the right thing to do practically because we have great products to sell.”
Clad in a mint green trouser suit, Truss is in fighting spirit after emerging victorious from an internal party battle that threatened to scupper grand ambitions for ‘Global Britain’.
Of all the deals being targeted by her department as it spreads its post-Brexit wings, a free trade agreement (FTA) with Australia was supposed to be the easiest to seal.
But the generous tariff-free, quota-free tie-up offered to Canberra divided the Cabinet last week over fears it would hit British farmers.
Truss and the ardent free traders won out over colleagues’ protectionist instincts. But does it hint at much tougher decisions ahead for the South West Norfolk MP?
“The deal we strike with Australia will not set a precedent for any other deal. It is a bespoke deal with a very close partner,” she says in her Whitehall office.
“From my previous negotiations with Canada, they have been quite protectionist in some areas, namely in dairy.”
Australia is set to be the UK’s first tailor-made post-Brexit trade deal after rolling over a number of EU agreements.
The milestone deal could be wrapped up by the G7 summit in Cornwall next month, and officials expect an agreement with New Zealand to quickly follow on similar terms. Canada talks will also begin soon but could be more fraught, with Ottawa confirming today they plan to make inroads into UK agriculture.
With the relatively low-hanging fruit in train, Truss’ attention is beginning to turn to the more ambitious and potentially more lucrative “phase two” of Britain’s trade strategy as an independent power.
“We’ve made significant inroads into the phase two and we are now bringing forward new opportunities,” she says. “India, of course, is a massive priority for the UK. We are in discussions with the Gulf Cooperation Council and I hope that we’ll be able to say more about that soon.”
Beyond the packed pipeline of deals in the works, Truss adds that exploratory discussions with a number of other yet unannounced countries have begun as the first phase begins to deliver results.
Pulling off big deals with far-flung and fast-growing economies would burnish an already impressive Cabinet career for the 45-year-old.
She has taken on a number of ministerial posts since becoming an MP in 2010, heading departments for the environment, justice and, since 2019, international trade – gaining popularity in the Conservative Party in the process. Polls frequently name Truss as one of the best-liked Cabinet ministers among Tory members.
Deals with India and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a huge Pacific rim trading bloc, are the big prizes Truss has in her crosshairs.
Earlier this week the Department for International Trade launched a consultation seeking the views of businesses on India trade talks to begin in the autumn. It would be a landmark deal for Truss but the UK faces a serious challenge in seeking to open up a highly protectionist economy with an elusive FTA.
“Some people say it can’t be done but the fact is Japan has a free trade agreement with India that they struck in back in 2011… we want a deal that goes further than that,” Truss says.
India offers a huge opportunity, she says, with Asia set to be a key region for the department as its burgeoning middle class becomes more important.
Truss is also setting her sights on closer trade ties in the Middle East. The Gulf states – which include the UAE and Saudi Arabia – are now a “definite target” for a FTA after launching a review into economic ties last November, she reveals.
“We are working on the approach to [the] Gulf,” she says.
“We’ll be announcing a joint trade review that we’ve conducted with the Gulf this June.”
The UK’s bilateral trade with the six Gulf states was worth £45bn in 2019, the third-largest amount outside the EU, while crude oil is the country’s third-biggest import. However, striking a deal with the Gulf monarchies would not be without controversy given the region’s reputation for human rights abuses and draconian laws.
As if forging deals that will define Britain’s economic relationships for decades isn’t enough, Truss is also pushing for an overhaul of the battered global trade system.
On Thursday, she will meet virtually with fellow G7 trade ministers to help forge a joint strategy to overhaul the World Trade Organisation (WTO) as the global rule-setter is paralysed by US-China tensions.
Truss warns this is “a do or die moment” for the WTO, with failure threatening to splinter the international trade system.
The WTO rulebook has not been reformed in decades but the balance of power in the trade system has shifted to the east where China has been accused of unfair practices.
“Now is the time that we need to get the change to the way the WTO operates,” Truss says.
“Otherwise, I do fear that global trade will fragment and you’ll get alliances between like-minded partners, but you won’t have a fully functional global trading system.”
The under-fire trade referee is in crisis after the rise of protectionist policies and “de-globalisation” in recent years. The pandemic has seemingly deepened trade tensions between countries as exports of medical supplies and vaccine doses are blocked.
Truss is aiming to agree measures to fix the WTO’s broken dispute settlement system, tackle unfair industrial subsidies and modernise the rulebook. Removing export restrictions on pandemic supplies is also set to be on the agenda this week.
“People will only believe in free trade, if they know it’s fair,” says Truss.
“If we’re in a position of having to compete against products that are artificially subsidised [and] dumped on our market, then that will not give people faith in free trade.”
The long-standing tensions in global trade will come to a head at the WTO ministerial conference in late November, widely seen as a crucial moment for the Geneva-based organisation.
“It’s very important that we deal with those market-distorting practices,” says Truss.
“That will be the first trade ministers conference for three years. We really have to make sure things happen.”