Saudi Arabia's finance minister said on Monday his country would impose duties on foreign goods imported through Bahrain if the tiny Gulf kingdom put into effect a recently signed free trade agreement with the US.
The kingdom will return to imposing custom duties in trading with member states of the Gulf Cooperation Council (GCC) "which breach the bloc's common tariff," Ibrahim al-Assaf said, in reference to the agreement that would give US goods free access to Bahrain's market.
"Foreign [non-GCC] goods coming through these countries will be taxed," he warned, quoted by the daily Al-Iqtisadiah.
Bahrain's signing of a free trade deal with the US prompted accusations from Saudi Arabia that it was undermining the bloc's economic integration efforts.
Saudi Crown Prince and de facto ruler Abd Allah bin Abd al-Aziz stayed away from the 20-21 December GCC summit in Manama, delegating Defence Minister Prince Sultan bin Abd al-Aziz to lead the Saudi delegation, to underline Riyadh's displeasure at the Bahraini-US deal.
The summit failed to settle the dispute.
GCC members Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates launched a customs union in January 2003, through which non-GCC goods are taxed once upon their first entry into a member state.
Bahrain and the US signed a free trade agreement in September, which awaits ratification by the US Congress.
The recent GCC summit had failed
to settle the dispute
If the agreement goes into effect, it would result in an immediate lifting of duties on 100% of consumer and industrial products and 81% of US agricultural exports.
The oil-rich bloc plans to establish a monetary union in the current year, a common market in 2007 and a single currency at the start of 2010.