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Business

EU, Saudis Strike Lucrative Trade Deal

A new trade deal between the European Union and Saudi Arabia should smooth the way for the oil-rich state to join the World Trade Oranization. The EU will get improved access to Gulf markets.

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The agreement was good news for the country's hopes of joining the WTO.

The Arab world's most powerful economy signed a trade agreement with its top trading partner on Sunday, smoothing its way to membership in the World Trade Organization.

Officials on both sides lauded the step, with EU Trade Commissioner Pascal Lamy saying it was a sign "that should be welcomed by the international community." As part of the agreement, the Middle East oil giant ended its practice of selling gas at cheaper rates to domestic companies and dismantled ownership restrictions for Europeans in Saudi Arabia.

The kingdom's trade minister, Hashim Yamani, told Reuters that Saudi Arabia wanted to begin accession negotiations with the WTO immediately and enter the trade organization at the beginning of next year.

"That is our target," Yamani said.

Saudi Arabia first applied to the WTO, then the General Agreement on Tariffs and Trade, in 1993. As part of entry negotiations, the country has had to close bilateral deals with other WTO nations as well as accept the organization's body of legislation. Saudi Arabia said it plans to open up trade agreement talks with the U.S. following the WTO ministerial meeting in Mexico on Sept. 10 - 14.

The EU deal has left Saudi businessmen optimistic that a WTO entry is possible in the near future. One told Reuters that the trade agreement showed the government's commitment to deregulation in a number of sectors, including services and banking.

EU hopes for more access to Gulf

For the European Union, the agreement means easier access to a lucrative market. The European bloc and Middle Eastern kingdom already do €27 billion ($30 billion) in trade annually.

The next step is a trade agreement with the Gulf Cooperation Council, of which Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates are members. The customs union currently places a 5 percent duty on imports. The EU is in negotiations with the council's members to set up a free trade agreement and avoid the duties.

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