Trade is a positive sum game for all trading counties even for trading Bloc. Free trade is beneficial for any country. Trade openness positively affects employment in the long-run (Ben-Salha & Zmami, 2021).
The Gulf Cooperation Council is a regional intergovernmental organization that coordinates economic and political operations in the Gulf area. They are extremely intertwined, forming a single market, customs union, and currency (Fatma, 2019) . GCC nations are currently all members of the Greater Arab Free Trade Area (GAFTA) and the World Trade Organization (WTO). Gulf countries are known for their enrich oil reserves. GCC nations have proved crude oil reserves of 497 billion barrels in 2018. This is equivalent to around 34% of the world's estimated proven oil reserves (Al Suwailem & Aldayel, 2020). Importers in emerging economies typically invest their currency reserves in oil-exporting countries to keep the value of their currency stable. Increasing oil prices may lead to hopes that the value of reserves in oil-exporting economies will appreciate. In oil-exporting economies, the price of oil is a key determining factor. Oil prices may affect the balance of payments by altering trade patterns (Alkhateeb & Mahmood, 2020).
Except for the Bolivarian Republic of Venezuela and Suriname, South American countries are net exporters of agricultural products. The agricultural trade surplus in Latin America has steadily increased over the last two decades, growing from USD 26 billion in 2000 to approximately USD 138 billion in 2019. Brazil is the region's and the world's largest net exporter of agricultural products. Crops and livestock goods also contribute to LAC nations' trade surpluses; meat accounts for 15.8% of world exports. (Fao R Egional C Onference for Latin America and The Caribean, 2016)
Qatar, Saudi Arabia, and the United Arab Emirates have found major partners for their food import needs in the South American continent. Relations between the Gulf and Latin America have been in the news for a few years now. Trade has risen from $3 billion in 2003 to $17 billion in 2013, with GCC exports to Latin America experiencing the greatest increase of 32.7 percent globally (Pinto, 2016). Latin America's contribution to the GCC's objective of food security goes hand in hand with the Arab Gulf's developing foreign policy. With a total value of $15.9 billion, Brazil leads the list of countries exporting food to the Organization of Islamic Cooperation, which comprises 57 Muslim-majority countries. Although Brazil has the biggest Muslim population in Latin America, domestic halal food consumption is low. Nonetheless, being the world's leading exporter of beef, Islamic nations make up a sizable portion of Brazil's client base, necessitating additional measures to guarantee that goods are appropriate for Muslim consumers (O'Connor, 2018). So cultural affinity plays a vital role in trade volume.
Bilateral trade and investment in each area is remarkably low in comparison to total trade and investment. GCC exports made for only 1.3 percent of overall LAC exports in 2018. Imports of LAC from the Gulf Cooperation Council (GCC) made up only 0.5 percent of overall LAC imports (Francisco, 2019). Brazil, Argentina, and Mexico were recognized as the region's major trading partners for GCC markets, accounting for 76% of overall intra-regional trade between the two areas. Brazil had $9.1 billion in commerce with Gulf nations in 2018 (Rahman, 2019). GCC and Latin American countries can take efforts to strengthen commercial connections by signing new trade, investment, and double taxation agreements, as well as increasing diplomatic presence and facilitating more bilateral business interactions. Qatar Petroleum, the world's top LNG exporter, has investments in Argentina and is aiming to expand into Latin America. According to Reuters five offshore blocks in Argentina have been awarded to Qatar Petroleum for exploration. Qatar Petroleum wants to expand its business operations in Brazil and Argentina. According to the United Nations trade statistics on international trade, Qatar exported $312.35 million to Brazil in 2020.
The Panama Canal would be critical in boosting commerce between Qatar and its Latin American partners. For almost a century, the Panama Canal has increased global trade, transportation, and communication, connecting 144 nautical routes that connect to 160 nations. The Panama Canal earned $3.4 billion in income in the fiscal year 2020, up 7.2 percent from the previous year. Panama's direct contribution to national nominal GDP was 2.7 percent in 2020.
In conclusion, there is substantial progress can be made in the short and long run-in trade between two trading blocs. Trade agreement helps to increase trading volume between countries. Simply by signing additional trade and investment agreements and creating more diplomatic and trade promotion offices, commerce between Gulf nations and Latin America and the Caribbean could expand by $13 billion each year. Investment agencies can facilitate trade. GCC government should increase embassies in Latin American region. Exports are increased by 30% when an embassy is present. Differentiated products exports account for most of the rise in export volume, which is primarily explained by the volume (intensive margin) impact. The establishment of an embassy and consulate can boost bilateral commerce between the GCC and the LAC by 20%. It reduces the asymmetry of information. All sort of trade barriers must be minimized.
References
Rahman, F. (2019). Trade between GCC, Latin America hit $16.3b in 2018. Retrieved 27 August 2021, from https://gulfnews.com/business/trade-between-gcc-latin-america-hit-163b-in-2018-1.63224030
Al Suwailem, M., & Aldayel, A. (2020). Crude Oil Reserves Metrics of GCC Members. 2018–2020.
Alkhateeb, T. T. Y., & Mahmood, H. (2020). The oil price and trade nexus in the gulf co-operation council countries. Resources, 9(12), 1–19. https://doi.org/10.3390/resources9120139
Ben-Salha, O., & Zmami, M. (2021). The Effect of Economic Growth on Employment in GCC Countries. Scientific Annals of Economics and Business, 68(1), 25–41. https://doi.org/10.47743/saeb-2021-0004
Fao R Egional C Onference for Latin America and The Caribean. (2016). February, 1–9.
Fatma, Z. (2019). Effect of Oil Prices on GCC Counties : An Overview Research Methodology and data sources An Overview of GCC Economy. 7, 11–18.
Francisco, E. (2019). New Horizons for Trade and Investment.
Pinto, V. C. (2016). Latin America and the Gulf: Assessment of Current and Future Trend. Gulf Yearbook 2015 - 2016, 1–18.
Rahman, F. (2019). Trade between GCC, Latin America hit $16.3b in 2018. Retrieved 27 August 2021, from https://gulfnews.com/business/trade-between-gcc-latin-america-hit-163b-in-2018-1.63224030
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