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Three fallacies surrounding Gulf union

Greater Gulf unity is a popular demand. But in order for a union to work, if one were ever to see the light of day, governments in the Gulf must learn to set their priorities straight.

The tsunami of political turmoil that hit the Arab world, whose waves soon reached the shores of Bahrain, Oman, Saudi Arabia and Kuwait in the Gulf, sparked talk of further consolidating the Gulf Cooperation Council (GCC) into a Gulf Union.

Much controversy and uncertainty surrounded the proposal put forward by King Abdulla of Saudi Arabia in December 2011, a natural result of the opaque nature of the GCC summit discussions that take place behind closed doors. Speculation was rife initially as to whether or not Morocco and Jordan would potentially sign up as member countries of the GCC, and as to the form – economic or political, federal or confederal – that the proposed union would later adopt.

Regardless of the exact modalities according to which the proposed union might be formed, officials and public figures in the Gulf sympathetic to the idea of a consolidated union have propagated three fallacies as part of an effort to promote the proposal’s public appeal.

Sovereignty

Most striking is the laughable notion that a Gulf union would lead to no loss of sovereignty on the part of its member states. This assertion negates the basic essence of any union or collectivity, which is the unavoidable tradeoff of some state sovereignty in exchange for greater collaboration, the effective collective action and lower transaction costs that result from a collective decision-making mechanism. In other words, a union that involves no loss of state sovereignty whatsoever is most likely to be purely ceremonial in nature, lacking the institutions and prerogatives to carry out its goals effectively. To illustrate, a common GCC foreign policy would in principle constrain the ability of member states to pursue goals independently of one another; while a common defense program might induce some discipline in spending and procurement patterns in order to guarantee complementarity, for instance.

The loss of sovereignty would probably, however, affect member states differently, depending on their ability to exert influence and the degree to which they are aligned with the rest of the group. Saudi Arabia would most likely emerge as the biggest winner thanks to its overwhelming size and resources. Its sheer size relative to the rest of the GCC would afford it undisputed structural dominance and place it at the union’s epicenter, and much of its work would consist of policing the group to ensure member states ‘toed the party line’. ‘Go it alone’ states like Qatar and to a lesser extent the UAE and Oman would shoulder the greatest burden of adjustment, while the remainder of the group – particularly Bahrain – that are already largely aligned with the regional heavyweight Saudi Arabia, might not experience much change.

Gulf single currency

Second, Gulf officials showcase at every turn the potential benefits of the stalled Gulf single currency project that has been the sole item on the Gulf’s economic integration agenda at least since the implementation of the GCC common market in 2008. True, the economies of the six GCC member states would indeed form an economic entity coherent enough to form a single currency area, particularly since they share an overwhelming dependence on oil and thus exhibit very similar cyclical patterns and exogenous shocks. But the single currency project remains somewhat meaningless since any trade facilitation effects and exchange rate risk reduction would most likely be minute. For all practical reasons and purposes, the six GCC currencies are largely interchangeable and are individually pegged to the US dollar, Kuwait being a slight exception.

Labour mobility

Less discussed is the more consequential issue of labour mobility across Gulf states. It has often been argued that unemployment in the GCC particularly amongst the youth is not a product of a lack of growth or the economy’s inability to generate jobs, as attested by the large numbers of expatriate and temporary migrant workers that match or even exceed national populations in all GCC states with the exception of Saudi Arabia. Rather, it is the result of the economy’s inability to generate the right kind of jobs. Intra-GCC labour mobility would likely play a considerable role in resolving part of the unemployment problem, particularly in the GCC’s less wealthy member states of Bahrain and Oman where workers are relatively qualified and often willing to work in relatively low-paying jobs as compared to their wealthier counterparts in Qatar and the UAE. Skilled job seekers from Bahrain and Oman could arguably fill some of the positions currently held by qualified expatriate workers usually recruited from the Indian Subcontinent.

Other equally pressing issues, such as the harmonization of beyond-the-border regulations, the ease of setting up business, or even ensuring actual de facto implementation of national treatment for GCC investors across member states appear to have been shelved for the time being at the GCC level, whereas the less impactful, more glittery proposed single currency currently monopolizes official rhetoric on Gulf economic integration.

The EU model

A final popular fallacy is that a Gulf union would, or even should for that matter, be modeled after the European Union. Historically, the EU and the GCC emerged for very different, if not opposite reasons: the EU (in the form of the 1951 European Coal and Steel Community) out of a desire to prevent a repeat of the Great Wars that European nations waged against one another, the GCC out of a need to coalesce in the face of an external threat, namely Iran.

Institutionally, the EU is endowed with a legislature – the European Parliament – whose members are directly elected by the peoples of the member states, a prospect inconceivable in the Gulf today. Economically, the Eurocrisis has demonstrated that monetary integration alone, unaccompanied by fiscal integration and budgetary discipline, is sure to be a recipe for disaster. Given the unprecedented scale of the expansionary spending packages approved by Gulf countries as a result of Arab Spring anxiety – US$ 160 billion in Saudi Arabia alone, bigger than its entire 2007 budget –, inducing budgetary discipline across the GCC particularly in times of political turbulence is not an entirely realistic prospect.

That said, I insist that I am not opposed to greater GCC integration or even a Gulf Union, quite the contrary. In the religious, linguistic, cultural, political and economic domains to name but a few, the Gulf is a fairly coherent zone compared to the outside world. Greater Gulf unity is also a largely popular demand. But in order for a union to work, if one were ever to see the light of day, governments in the Gulf must learn to set their priorities straight.

About the author

Hasan Tariq Al Hasan is a Bahrain-based economic and political analyst.

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