The Future of an EU-ASEAN Free Trade Agreement: Challenges and Opportunities
In recent years, ASEAN and the EU have become each other’s third largest trading partners (after China and the US) as their relationship has become increasingly tightened. As a result, many Free Trade Agreements have been negotiated, with examples being those involving Singapore and Malaysia in 2010, Vietnam in 2012, Thailand in 2013, Philippines in 2015 and Indonesia in 2016. There are two FTAs that have been ratified and are in effect, namely those with Singapore and Vietnam (in 2019 and 2020 respectively). However, considering the strategy of bilateral cooperation, the EU's ultimate objective was actually to achieve a more overarching region-to-region free trade agreement. Although negotiations for a region-to-region agreement were paused in 2009, ASEAN has now been developing plans for resuming it. If the bilateral agreement of the EU and ASEAN is ratified, it could prove to be an opportunity for a strengthened relationship between the two regions.
The Bilateral Relations Between EU and ASEAN
In 1973, an agreement between the then European Economic Community and the Association of Southeast Asian Nations was signed, marking the first interregional cooperation agreement signed by Western Europe as a whole with another regional body (Camroux, 2018). The EU has since identified ASEAN as a priority for further engagement as a part of its strategy (Apurado, 2009). On the other side, ASEAN has also perceived partnerships with the EU as one of the most important components of its strategy for further development, which commenced with their role as a dialogue partner from 1977 onward. Ever since partnership efforts were initiated, ASEAN has been trying to promote the partnership with the EU, especially with regard to “leveling up” the existing partnership to a more strategic level in 2020 after 44 years of formal partnership.
The strategic partnership between the EU and ASEAN could be regarded as a consolidation between the two regions, which has been considered to be broad and impressive in terms of scale compared to earlier phases of the relationship (Allison et al., 2021). The fields of cooperation have widened, from economic cooperation to other fields such as responses to COVID-19, climate change and green growth, sustainable development and connectivity, maritime cooperation, and cybersecurity. Among them, economics has been regarded as one of the most important fields of cooperation, not just because of its development benefits, but also because of the direction of the general strategy of cooperation between the two regions. The economic sphere has typically functioned as a vital factor in any strategy of cooperation, and the relation between ASEAN and the EU is no exception to this. Through many years of cooperation, the two regions have promoted cooperation in economic areas specifically in the form of agreements, Memorandums of Understanding (MoU), and so on. However, in the current context of international relations, there are more modes of cooperation beyond economics; even among those modes, the free trade agreements have been presented as a measure to tighten the relation between the two regions. A free trade agreement (FTA) is an agreement between two or more countries in which signatories agree on certain obligations that affect trade in goods and services, protections for investors, and intellectual property rights, among other topics (Free Trade Agreement Overview, n.d.). FTAs can lead to reduced or eliminated tariffs, which can take the economic relation between partner countries to a new level.
The Need for a Free Trade Agreement
As mentioned above, FTAs can be used to further develop EU-ASEAN relations, both in terms of trading and in terms of politics. The EU and ASEAN have a long-lasting economic relationship. In recent years, the EU has remained the most significant source of foreign direct investment (FDI) in the ASEAN region. In 2018, the EU accounted for 14.2 % of ASEAN FDI inflows, followed by Japan (13.7 %) and China (6.6 %). In 2017, the EU’s external FDI stock reached €337 billion in the region – nearly double the amount from 2013 (€170.6 billion). At the same time, ASEAN investment in Europe has also grown substantially to €141 billion in 2017 (Binder, 2020). Additionally, between 2009 and 2019, the total trade in goods more than doubled from €102 billion to €210.6 billion (Binder, 2020). Although this is just one facet in the complex trading system between the the two regions, it still shows signs of their strong bilateral economic relations. However, there are limits to the existing agreements, and a more substantial FTA could further improve this relation.
ASEAN contains ten countries with a variety of political institutions, from monarchies to federal republics. The diverse political climate can complicate processes of negotiations necessary for developing a substantial FTA. On a related note, the significant differences in the levels of development among ASEAN countries also poses a challenge for interregional cooperation. For example, Singapore, the country with highest level of development, had a per-capita GDP of $59,797.75 (Statista, 2020),nearly 41 times of the lowest, Myanmar with $1,467.6 (Statista, 2020). Besides, ASEAN not only possesses a variety of political systems, but it also has a wide range of cultural and social factors to consider. ASEAN also has to deal with internal challenges raised by individual members with different strategies. The biggest problem may be the fragmentation in the structure of ASEAN, especially in the relationships between countries. Some countries in ASEAN pursue largely internally drive policies that can easily leads to internal divergence when it comes to future cooperation.
All these challenges facing ASEAN will be obstacles for the cooperation between the two blocs, especially in negotiating a potential Free Trade Agreement, which requires a high level of commitment and an open economy. Historically, whenever negotiations about a free trade agreement between the two blocs were held, they often ended up being delayed and the EU instead pursuing agreements with each ASEAN country individually. However, the developments in the context of the Indo-Pacific region and the demand for economic cooperation currently may pave the way for resuming negotiations. Although the process of negotiation may take time, the potential benefits for both blocs are undeniable.
Allison, L., Murray, P., & Tiezzi, S. (2021, January 30). What Does the ASEAN-EU Strategic Partnership Mean? The Diplomat. https://thediplomat.com/2021/01/what-does-the-asean-eu-strategic-partnership-mean/
Apurado, D. S. (2009). The ASEAN-EU Free Trade Agreement: Implications for Democracy Promotion in the ASEAN Region. International IDEA. https://www.idea.int/sites/default/files/publications/chapters/the-role-of-the-european-union-in-democracy-building/eu-democracy-building-discussion-paper-28.pdf
Binder, K. (2020). Trade negotiations between the EU and ASEAN member states. European Parliament. https://www.europarl.europa.eu/RegData/etudes/BRIE/2020/659337/EPRS_BRI(2020)659337_EN.pdf
Camroux, D. (2018). The European Union and ASEAN: Two to Tango? Institut Jacques Delors. https://institutdelors.eu/wp-content/uploads/2018/01/eu-aseancamrouxnejune08.pdf
Free Trade Agreement Overview. (n.d.). International Trade Administration. Retrieved May 7, 2022, from https://www.trade.gov/free-trade-agreement-overview
Statista (2020, April). Gross domestic product (GDP) of the ASEAN countries from 2017 to 2027. Retrieved May 7, 2022, from https://www.statista.com/statistics/796245/gdp-of-the-asean-countries/