EU Striving For ASEAN Trade Deal

by Mary Swire, Tax-News.com, Hong Kong
Friday, May 06, 2011

Karel De Gucht, the European Commissioner for Trade, in his closing remarks to the first ever Association of Southeast Asian Nations (ASEAN) - European Union (EU) Business Summit, has said that the European Commission’s ultimate goal is a free trade agreement (FTA) with the region.

ASEAN, including Brunei Darussalam, Myanmar, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam, as a whole represents the EU's 7th largest trading partner with EUR175bn (USD260bn) of trade in goods and services. The EU is also ASEAN's 2nd largest trading partner after China, accounting for around 10.9% of ASEAN trade, and the EU is by far the largest investor in ASEAN countries.

The EU had, until they were suspended in 2009, pursued talks on a region-to-region FTA with ASEAN. The EU member states then decided to pursue negotiations towards FTAs with the individual ten countries within ASEAN, and such talks were opened with Singapore and Malaysia, the EU’s two largest trading partners in ASEAN during 2010.

Those negotiations are said to be proceeding at a good pace, while the prospective signing of a Partnership and Cooperation Agreement (PCA) between the EU and Vietnam is expected to open the door for FTA negotiations to begin later this year.

The completion of the text of a PCA between the EU and the Philippines in mid-2010 had also been seen as the forerunner of FTA discussions, but it has yet to be signed and the Philippine government has stated that it will not be ready for FTA negotiations until domestic consultations are concluded in three months’ time. It is now hoped that preliminary talks will begin in the last quarter of 2011.

Indonesia has had a PCA with the EU since 2009, but discussions on an FTA have yet to begin. A joint "vision group", set up by business, government and academics in late 2010, is to present concrete recommendations on ways to enhance EU-Indonesia trade and investment ties, but the latter’s Trade Minister Mari Pangestu has recently been reported as saying that Indonesia may need another one to two years to collect input from domestic businesses before it can start negotiating FTA talks with the EU.

At the ASEAN-EU Business Sumit, De Gucht pointed out that the EU is “committed to deepening (the ASEAN-EU) relationship through the gradual network of bilateral trade agreements we are seeking together”. However, he also confirmed that the EU understood the need for a degree of differentiation. "There can be no one size fits all for these agreements. … I fully accept that each agreement is different and must be tailored to the needs, sensitivities and level of development of specific partners,” he said.

He did, however, stress that, while the door remains open to start negotiations with other partners in the region on FTAs, the EU’s “ultimate goal of a regional EU-ASEAN trade agreement remains valid”.