Political and Economic Integration Processes in The Gulf Cooperation Council - Essay Example

Awayed Almutairi POLS 671 Dr.Fritsch 17/8/08 Topic: Globalization for the Arab countries, also political and economic issues in Gulf Cooperation Council Introduction Globalization can be defined, according to Emmanuel Richter, as "a global networking that has welded together previously disparate and isolated communities on this planet into mutual dependence and unity of 'one world'" (Baylis & Smith 1997:15). The opposite would be a more skeptic and Marxist indicated definition, like Martin Khor's perspective that "globalization is what we in the Third World have for centuries called colonization" (ibid). One might even interpret globalism as a sugar-coated and less offensive term for imperialism, not well received by developing countries with aspirations of their own international successes. Globalism is promoted by advancing technologies. "In 1858, the first transatlantic telegraph is completed, and messages begin to flow between the shores of America and Europe." (Newton, p 45) Ominously enough, on the same page, 45, the author lists 1853 as the year an American Commodore dropped anchor in Tokyo Bay and essentially forced Japan to acknowledge the outside world. Then, in 1973, "King Faisal of Saudi Arabia cuts off his country's oil exports to the United States, triggering an oil crisis, long lines at the gas pumps and a recession." (Newton, p 53) Globalization is typically defined as a shift from localized human societies (including financial, political and religious systems) to linking distant communities of people and levels of industry, expanding them across regions and continents; in other words, removing boundaries from the world. Globalization in this sense can reduce the deficiencies of third world countries with technological advances and with equal allocation of resources. An advantage to globalization is the lowering of trade barriers such as export tariffs to the developing countries charged by industrialized nations. The lowering of the trade barriers then allows the developing countries to also move towards industrialization with the realized gains. Globalization is also said to liberalize countries with less than democratic political processes, for example, the member countries of the Gulf Cooperation Council. Organizational Structure The GCC Organizational structure looks like the EU structure with a Supreme Council made up of members from all countries in the GCC. From first appearances one might see a top down structure in the design. However, the top is shared by heads of the member states (based on the monarchic or emirate government). This makes the top divisional in its structure. The actual executive of the council is not by rank and size but rather rotated in alphabetical order of the member's names. Yet, despite the inherited leadership, it is somewhat democratic in its implementation: meetings of the supreme council are only valid if attended by at least two-thirds of the members. Under the Supreme Council there are several organizations designed as functional structure but arranged as matrix rather than a top down structure. Firstly, there is a Consultative Commission, formed of equal amounts of members from each state - its purpose is to study matters assigned by the Supreme Council. Along with that - there is the Commission for the Settlement of Disputes. Again, under the Supreme Council but is designed to allow for contingency factors and only used as needed. A Ministerial Council formed from the Ministers of Foreign Affairs - the head over this segment is the current head of the supreme council. This organization is in charge of policies, recommendations, and oversees other existing actions in all fields of specialty. Any ministerial subcommittee must first resolve and then refer the rulings to the Ministerial Council, who in turn, along with their recommendations on the rulings give to the Supreme Council for final approval. These rulings and recommendations must also be voted by two-thirds of the members to be counted as official. The Ministerial Council meets more often than the Supreme Council and also arranges the meetings and agendas of the Supreme Council Another separate functional body is the Secretariat-General - developed to undertake the administrative or bureaucratic business of the GCC. These administrative areas cover political affairs, economic affairs, security affairs, legal affairs, finance and human affairs and others. The Secretariat-General organization prepare studies and reports on all aspects of the joint work and are responsible for following up on approved resolutions. They also serve to organize meetings and set up agendas for the Ministerial Council. The head of the Secretariat-General is appointed by the Supreme Council for a non-renewable three year period. Under the head Secretariat there are assistant secretaries that serve by the functions: administrative, economic, environment, human, military, political and security affairs. The functionality probably allows for development of expertise and sets up clear career paths. ("The Organizational Structure"). One might argue that the GCC is a regional rather than a global organization, but they formed together because of globalization. They wish to found their common goal on the faith of Islam, believing they have a common destiny. However, it is notable that Yemen, Jordan, Iraq and Iran are not included in the regional organization. Saudi Arabia was the primary in setting up the Gulf Cooperation Council in 1981. Other members are Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE). The Gulf Cooperation Council aims to coordinate resistance to outside intervention in the Gulf. Progress towards economic integration has been slow during the 1980s economic downturn in the region. The presidency of the Gulf Cooperation Council rotates yearly among members. Council headquarters are in Riyadh, Saudi Arabia. The Gulf Cooperation Council was initially formed in response to the outbreak of the Iran-Iraq war. ("Gulf Cooperation Council - GCC.") During that time and after the 1973 Oil Embargoes it has been estimated that the population of the GCC is about 35 percent expatriates from the surrounding countries. (IOM, LAS 2004). The practice of globalization theory will lead countries to gain knowledge even if the theory turns out wrong for them. It can also be used to rule out non-working solutions to diagnose and treat economic events. Global Liberalization Liberalism ('liberate') is opening up the local cultures, religions and languages (internal human societies) to become compatible with global cultures, religions and languages (distant across regions and even continents). In fact, one might say that liberalism attempts to synthesize all of the local areas of cultures, religions and languages into one big world agreement. Liberalism wants to share economy without the interference of the governing states; and with transparency. There is an association between economics and democracy: the more liberal the politics, the more effectively its economy responds to globalization. The current governments manifest in some form of emirate or monarchy styles and therefore not considered democratic by the global standards. The cooperation among these states in the GCC serves the goals of the Arab nations and helps deal with globalization. As they already have the common religion and cultures there is not much in the way of liberalizing their countries. The GCC was, after all, formed to protect the 6 countries collective political, religious and economic interests. Globalization also signifies that international organizations (such as the EU or the WTO) will guide the local organizations towards meeting a common goal. That means the involvement of the local government in restructuring local regulations to conform to the GCC's goals. Goals The GCC was formed to coordinate, integrate and interconnect between the six Arab states (Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and the United Arab Emirates) in all areas. The GCC goals are: to strengthen ties between their peoples, and to form similar regulations or laws for the economy, customs, tourism, and government. The GCC also advocates the advance of science and technical progress in industry, mining, agriculture, water and animal resources. They do this by establishing scientific research centers, setting up joint ventures, and encouraging cooperation of the private sector. ("Foundations and Objectives") In short, they wish to grow better together taking advantage of globalization. Economics In the Economic Agreement, the GCC created 33 separate articles to address policies about economics and finance, their commercial and industrial laws, as well as their customs regulations. The first two articles cover trade. They essentially did away with separate internal customs fees and tariffs (a single entry point for all importing and exporting) within the 6 states and agree upon one common external customs tariff (CET). To that goal, the GCC created a separate detailed agreement titled "The Customs Union of the GCC Member States (GCC Customs Union)". "The Customs Union is the territory wherein customs duties and trade restrictions among the constituent states are abolished, and where common customs duties and external trade regulations are implemented." ("The Customs Union of the GCC Member States (GCC Customs Union)") They believe this will increase trade between GCC States, increase competition, high production rates, and best possible uses of available resources. Additionally, the agreement reduces consumer prices, create a Common GCC Market, and enhance the collective negotiating position of the GCC States, which would bring in better conditions with their trading partners in the field of trade and investment. The third article covers the Common Market agreeing to the same treatment accorded to its own citizens, without differentiation or discrimination, in all economic activities. The fourth, fifth and sixth articles cover Economic and Monetary Union - agreeing to transparency in transactions and fiscal, monetary and banking legislation. The set criteria to approximate rates of economic performance related to fiscal and monetary stability, such as rates of budgetary deficit, indebtedness, and price levels. The next five articles (7-12) cover Development Integration. After that they cover expansion of human resources in 5 more articles (13-17), this includes education, manpower and training of nationals. Articles 18 through 25 cover Scientific and Technical Research Transportation, Communication, and Infrastructure. To complete the Economic Agreement, they allow for implementation, follow-up and provisions in the final 8 articles (26-33). ("The Economic Agreement Between the GCC States") Economic Situations The GCC member states have a lot to offer each other and the world with regards to increasing oil consumption rates. The GCC members have a limited amount of fossil fuels to offer, and will need to accommodate that and a hope that the world is learning to lessen its dependence on oil by observing energy conservations. With the excess oil export trade profits, they can fulfill their needs for capital and consumer goods. UAE - The UAE has a high per capita income, as well as yearly overage of profits. "Since the discovery of oil in the UAE more than 30 years ago, the UAE has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living." (CIA World Factbook) The GCC report a 44 percent increase in the Consumer Price Index (CPI) from the year 2001 to through the year 2007. The UAE began with the highest CPI of the six countries and was still the second highest in 2007. The economy in the UAE is largely free of trade restrictions. The GCC feel the CPI is an important indicator of economy temperature in the 6 countries. Bahrain - Bahrain has strong economic growth in recent years coupled with a lower Consumer Price Index rise, GCC report: 12 percent increase. Bahrain started with the lowest CPI of the 6 countries in 2001 and is still the second lowest in 2007. Bahrain has multinational firms sited there that have commerce in the Gulf. "Aluminum is Bahrain's second major export after oil. Other major segments of Bahrain's economy are the financial and construction sectors. Bahrain is focused on Islamic banking." (CIA World Factbook) Kuwait - Kuwait is a small country also largely free of trade restrictions in the economy. "High oil prices in recent years have helped build Kuwait's budget and trade surpluses and foreign reserves. As a result of this positive fiscal situation, the need for economic reforms is less urgent and the government has not earnestly pushed through new initiatives." (CIA World Factbook). The GCC report only a 14 percent rise in the Consumer Price Index over the 7 year period. The economy seems to stay fairly balanced over the years. Qatar - Qatar is having a successful rise in the economy. "Economic policy is focused on development of Qatar's nonassociated natural gas reserves and increasing private and foreign investment in non-energy sectors. Oil and gas have made Qatar the highest per-capita income country and one of the world's fastest growing." (CIA World Factbook). "Qatar has permitted substantial foreign investment in the development of its gas fields during the last decade and became the world's top liquefied natural gas (LNG) exporter in 2007." (CIA World Factbook). The Consumer Price Index for Qatar has risen considerably over the measured years, at 52 percent increase. The CPI started out as one of the higher indicators and is still the highest of the 6 countries in 2007. Saudi Arabia - Saudi Arabia's economy from oil is controlled by the government. "High oil prices have boosted growth, government revenues, and Saudi ownership of foreign assets, while enabling Riyadh to pay down domestic debt. The government is encouraging private sector growth - especially in power generation, telecommunications, natural gas exploration, and petrochemicals. Unemployment is high, and the large youth population generally lacks the education and technical skills the private sector needs." (CIA World Factbook) However, there are many expatriates to pick up the labor. "Riyadh has substantially boosted spending on job training and education, infrastructure development, and government salaries. The government has announced plans to establish six "economic cities" in different regions of the country to promote development and diversification." (CIA World Factbook). The GCC report the Consumer Price Index for Saudi Arabia is 8 percent coming in as the slowest rising CPI. Oman - "Oman is a middle-income economy that is heavily dependent on dwindling oil resources, but sustained high oil prices in recent years have helped build Oman's budget and trade surpluses and foreign reserves. Oman joined the World Trade Organization in November 2000 and continues to liberalize its markets." (CIA World Factbook) "Oman actively seeks private foreign investors, especially in the industrial, information technology, tourism, and higher education fields. Industrial development plans focus on gas resources, metal manufacturing, petrochemicals, and international transshipment ports." (CIA World Factbook). The Consumer Price Index reflects a 12 percent increase of the measured years which is consistent with the economy reports from the CIA World Factbook. Toward the goal of equality in economics - one has only to glance at the statistical report published by the GCC on their website. There the numbers show an increase of growth among the citizens owning real estate in the other participating states. Licenses to practice business in other member states, along with loans granted to GCC citizens for industrial projects, and banks branches in other member states consistently grow, as well. And finally, another area of interest that the European Union encourages is intra-country import and export trading; the member countries of the GCC saw an increase from 7,734 million dollars to 21,630 million dollars in 2007. One only has to Google 'economic status of the GCC' and the hits are proliferated with the words: impressive, growing and economic boom! A recent development is developing a single GCC currency. The GCC's economic situation is unique; no other region in the world has such a small population in possession of such large hydrocarbon reserves, a population that relies so heavily on non-national labor. Revenues derived from hydrocarbons have enabled the GCC to build a first class infrastructure, which provides an ideal base for both energy and non-energy related economic activities. To varying degrees all GCC nations are seeking to reduce their economic dependence away from oil and gas, having economic policies that create a climate conducive of attracting a greater range of businesses is seen as an imperative with regard to the implementation of the timetable for starting the Monetary Union of the GCC and the release of a common currency, the Supreme Council considered the report of the Secretariat-General on the steps that have been taken in this connection, and entrusted the Finance and Economics Committee, and the Committee of the Governors of the Monetary Agencies and Central Banks with the completion of research on how to calculate the standards for converging the economic performance and the percentages related to it. The Council authorized the Finance Ministers to reach an agreement on it, and directed the relevant committees to intensify efforts to complete the remaining steps and to reach an agreement on the regulations and documentation necessary for the establishment of the Monetary Union and the launch of the single GCC currency in accordance with the timetable referred to. ("The Closing Statement") There are not many local opportunities to absorb the entire investable (oil) surplus of the six countries. Toward that end, the GCC Developed the Unified GCC Trade Policy during the 26th GCC summit (King Fahd Summit) held in December 2005. "The Member States will interact with the external world, including the WTO and the regional & international organizations, as a single unit with a unified voice. The policy will stimulate commercial and investment exchange of the GCC with the external world. It is based on the principle that commercial exchange between the GCC and other countries and blocs will be carried out in accordance with the GCC Supreme Council resolutions, GCC Economic Agreement, and WTO regulations." ("Trade Cooperation") European Commission "Globalisation means that the flows of goods, services, capital, technologies and people are spreading worldwide, as countries everywhere open up to wider contact with each other. Globalisation can create more wealth for everybody, but it can also be disruptive and needs to be harnessed by international rules. When business goes global, the rules for fair play must also be set globally." "The European Union (EU) represents all its Member States on questions of trade policy and within the World Trade Organisation. The EU works for transparent and fair trade rules worldwide, and tries to mitigate the negative sides of globalisation by making sure that the developing countries benefit from free trade. The European Union involves citizens in trade policy and includes environmental and social rules in trade agreements." ("The EU & the Gulf Cooperation Council (GCC)"). The cooperation between the two countries was started in 1989. The EU is also negotiating the establishment of a free trade area with the six members of the Gulf Cooperation Council (GCC), which is the regional organization grouping Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the United Arab Emirates. Joint Council and Ministerial Meetings and the FTA, the EU and GCC meet annually to facilitate, summarize and project future cooperation between both organizations. The meetings, labeled GCC-EU Joint Council and Ministerial Meetings, take place in various locations around the world, such as Doha, Qatar and Brussels. At the meetings, such topics as Free Trade Agreements, political questions and regional issues with regards to instability from the surrounding countries like Iraq and Iran are discussed. They also discuss Global issues, defined as Terrorism, Human rights and Weapons of Mass Destruction (WMD). A free trade agreement can usually be defined as business in selling merchandise, or produce and services conducted across the borders, without tariffs or interference. A number of documents reviewed between May 2000 and May 2008 revealed that developing the FTA was a very slow moving process. In the 10th meeting document, "The Council agreed that the major conditions for negotiations were now established, and that the Parties could start to look closely at individual items of the respective lists of sensitive products in order to embark on negotiations of tariff dismantling." ("EU-GCC Ministerial Meeting and 10th Joint Council."). However, later documents indicated that the GCC needed to first work on their own internal Customs and Tariff regulations. The GCC have published a number of documents on their website regarding the implementation of the regionalized Customs and Tariff regulations mentioned previously in this document under the Economic Trade Agreement. The 13th meeting minutes indicated that additional intensively paced negotiations had been held over the course of a year. However, an agreement had not yet been solidified. Again, in the 13th document reference was made to the GCC progressing in their internal cooperation. They also laid out additional details not previously mentioned, regarding energy and investments. With the 18th document - it is apparent that an agreement has still not been made - however, it is not made clear why. "The Joint Council reviewed the progress made on the negotiations on a Free Trade Agreement and noted that the parties are getting closer. They encouraged negotiators from both sides to further intensify their efforts to reach a mutually agreed text before the end of July 2008 and undertake to prepare the agreement for initialing before the end of 2008." ("18th EU-GCC Joint Council And Ministerial Meeting"). Several commentators and authors have implied that the GCC is reluctant to cooperate in that particular area. As early as 2001, one author mentions in his book: Globalization and the Politics of Development in the Middle East how many Middle East and North Africa countries have already benefitted from the EU but not the GCC. "To date, results of the political dialogue have been disappointing." (Yacoubian 2008 p 6) However, there has been much progress with regards to energy initiatives, agreement of a need for peace in the regional areas, and agreement with regards to WMD. The GCC have open to other Free Trade Agreements with countries such as Singapore, China, India, Pakistan, Japan, Turkey, Australia and New Zealand. Moreover, talks are already in the works with Iran (despite their disapproval of Iran's continued processing of enriched uranium) and South Korea, while FTA talks with the EU waver. Conclusions The globalization of communications, financial transactions and international corporations has led many people to think that current civilizations are entering a liberated world with abolished borders and erased geopolitical lines. A belief that globalization creates world peace is supported by the GCC in their frequent discussions among their own foundations and objectives and in the joint council and ministerial meetings with the European Union. The security and stability of the Arab region is goal of both organizations. The completion of the Free Trade Agreement, started so long ago, would be a stronger indication of liberalization in the GCC. As a huge source of our world's oil resources, is the formulation of the GCC an inexorable move towards globalization, and the liberalization that it entails - or simply a means for the emirates and monarchies to consolidate and continue their rule As non-elected rulers (inherited through hierarchies of families) of countries with a coveted resource, perhaps they view globalism, in particular, the dominance of the USA, as imperialism. The willingness to team up with the European Union, a non-US entity, might just be a considered strategy to strengthen their unwillingness to embrace globalization. A report posted on the World Economic Forum web page, entitled "Gulf State Scenarios: GCC Countries and the World: Scenarios to 2025" proposes and theorizes outcomes for the Gulf Cooperation Council countries. The project is an 18 month research process consulting over 300 experts and discusses three scenarios for the development of the GCC region from 2007 to the year 2025. Oasis describes a scenario where regional stability continues to be a challenge for the GCC countries, which are nevertheless able to achieve substantial institutional reforms. The GCC countries develop strong identities and work together to coordinate diplomatic and economic policies through technocratic governance and a stronger internal market. Sandstorm describes a future where regional instability is the defining factor that affects the ability of GCC countries to effectively carry out necessary institutional reforms. This scenario sees a number of conflating factors that make the surround region significantly turbulent, including conflict between the US and Iran and spillover of violence from Iraq. The Fertile Gulf describes the rise of the GCC countries as innovation hubs in a global environment characterized by robust demand for energy and increasing globalization. Regional stability gives the GCC countries the opportunity to focus on enhancing their human capital at all levels, investing heavily in education while proceeding carefully with political and institutional reforms to support their growing economies and societies. ("Gulf State Scenarios: GCC Countries and the World: Scenarios to 2025") From the collected readings of this author, the conclusion seems evident that regionalism is far more embraced than globalism. The regionalism keeps out liberalism while designed to integrate community needs and internal goals with the economic needs and the completed encompassment of globalism. Therefore the "Oasis" theory seems to have the most likely case of reality. Individual humans like to have an identity. They create that identity by interacting and connecting and absorbing the local history with other local people like themselves. Globalization may be present in economies but in politics and religion - the identity of the culture defines the identity of the individuals - no one wants to lose their identity. References Cited "Gulf Cooperation Council - GCC." Arab German Consulting. 2008. Arab German Consulting. 24 Nov 2008 . "18th EU-GCC Joint Council And Ministerial Meeting" Brussels, 26 May 2008 Joint Communiqu. Council of the European Union. 29 Nov 2008 "Bahrain" (20 November 2008) CIA The World FactBook 26 Nov 2008 "EU-GCC Ministerial Meeting and 10th Joint Council." Brussels, 22 May 2000 Joint Communiqu Council of the European Union. 29 Nov 2008 "Foundations and Objectives" Gulf Cooperation Council 2008. GCC Web Site www.gcc-sg.org 25 Nov 2008 "GCC-EU 13th Joint Council and Ministerial Meeting". Doha, Qatar, 3 March 2003. Joint Communiqu. Council of the European Union. 29 Nov 2008 "Gulf State Scenarios: GCC Countries and the World: Scenarios to 2025" Scenario Planning. 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