Encouragement of trade is one of the most important objectives of any economic grouping, be it in the form of a free trade area, a customs union or economic union. The increase of trade is a basic objective of establishing any customs union. As the customs union, according to the economic theory, increases trade among its members through eliminating or diminishing trade barriers. The increase of trade is the main influencing mechanism through which the other objectives, such as the customs union, increased specialization, reducing prices, increasing production efficiency and expanding market, can be achieved.

A number of studies indicate that the customs union of any economic grouping leads to increased trade rates; for example, trade between the countries of the EU Customs Union has increased by almost 600% during the first 12 years following its establishment.

Therefore, the GCC States started to make the legal and practical arrangements required for establishing the “GCC Free Trade Area” since the GCC was established in may 1981 by concluding the Economic Agreement that was signed in November 1981. That Agreement contained the main provisions of the GCC Free Trade Area.

The GCC Free Trade Area was mainly featured by exempting the industrial and agricultural goods and the natural resources of the GCC States from customs duties subject to presentation of a certificate of origin issued by the competent government authority in the exporting country, in addition to the following:

Allowing importation and exportation of national products throughout the GCC States without the requirement of a local agent or taking any other procedures except for the certificate of origin and the export manifest
In the event duties are levied on any originating goods due to a suspected origin considerations, those duties shall be reimbursed to the importer after ensuring their national origin
Adopting the immediate release system for finalization of the customs procedures relating to the goods accompanying the passengers at the borders of the Member States
Preparation of the export declarations of the originating goods at GCC border offices
Assigning special lanes at the Intra-GCC borders for the GCC nationals with signs bearing the expression “GCC Nationals”

The GCC Free Trade Area came into effect in March 1983, which was mainly featured by exempting the GCC industrial, agricultural and natural resources products from customs duties and other similar duties. The GCC Free Trade Area continued for almost twenty years until the end of 2002 when it was replaced by the GCC Customs Union. Throughout the FTA period (1983-2002), the volume of Intra-GCC trade increased from less than US$ 6 billion in 1983 to some US$ 20 billion in 2002.