- EU continues to monitor UAE
- Trade discussions are independent of current status
- Agreement anticipated in the next six months
The European Union has recommenced discussions regarding a free trade agreement with the UAE, while maintaining its scrutiny of the Gulf nation due to concerns about money laundering, which could present risks for investors.
In February of the previous year, the UAE was taken off the Financial Action Task Force (FATF) grey list following recognition for its efforts to combat illicit financial activities.
Nonetheless, the EU has kept the UAE on its own watchlist. Last year, lawmakers in Brussels blocked a motion to remove the country from the list, citing ongoing worries over money laundering and terrorism financing.
Maros Sefcovic, the EU trade commissioner, expressed that this designation would not impede the trade negotiations.
“We regard these processes as separate and not interlinked,” Sefcovic stated during a press conference in Dubai on Wednesday. “I commend the UAE for the significant advancements made in this regard. We are optimistic about the future.”
Philippe Richard, the executive director of international affairs at Abu Dhabi Global Market, mentioned last year that the EU’s grey list status had not adversely affected the UAE to date.
For the UAE, these discussions with the EU are particularly crucial since the 27-member bloc is its second-largest trading partner, accounting for 8% of the total non-oil trade, valued at nearly $68 billion last year, according to the state news agency Wam.
UAE Trade Minister Thani Al Zeyoudi noted that a deal could be reached within three to six months and would not disrupt wider relations between the EU and the GCC.
Negotiations have been at a standstill since 2008 due to disagreements over oil pricing and public bidding processes.
“Multilateral discussions take longer than bilateral ones. This is why we are starting here—to expedite the process,” Al Zeyoudi remarked. “We are eager to reach a conclusion promptly.”
The UAE is the second-largest economy in the Gulf Cooperation Council, which comprises six member states, with Saudi Arabia holding the top position. Kuwait, Qatar, Oman, and Bahrain are the other members of this economic and political grouping.
When asked about the potential implications of US President Donald Trump’s recent regional visit on competition for Gulf investments, Sefcovic confirmed that the EU’s involvement predated this visit.
“Our discussions with the UAE began long before President Trump’s recent trip,” he affirmed. “Our intent is clearly long-term.”
Al Zeyoudi highlighted the increasing Emirati investments across Europe, despite the lack of a formal trade agreement.
The UAE and France have plans to invest up to $50 billion in AI data centers, while the French government expressed willingness for Emirati investment in its nuclear energy sector. Additionally, the UAE has allocated $40 billion towards Italy’s key industries and both nations have agreed to set up an artificial intelligence center in Italy.
“The progress is tangible,” the minister stated. “The potential benefits remain substantial.”
Trade relations between the EU and UAE
The EU ranks as the premier export destination for the UAE and serves as its largest investment partner in the region. Annual bilateral trade in goods reaches nearly €56 billion, while services trade exceeds €39 billion.
According to EU data, the total investment stock amounts to approximately €328 billion.
UAE exports to the EU include oil, gas, and base metals, whereas the EU exports a variety of products, including vehicles, machinery, chemicals, food products, and an increasing array of green technologies. The highest tariffs imposed by the UAE are on tobacco, alcohol, and confectionery.
The negotiations will prioritize lowering tariffs, enhancing digital trade and investment, and strengthening cooperation in sectors like green hydrogen, essential raw materials, and renewable energy.
Since 2021, the UAE has signed 26 Comprehensive Economic Partnership Agreements (CEPA) with various countries, including India, Indonesia, and Australia, as a step towards diversifying away from oil reliance.