European Union Free Trade Negotiations with Southeast Asia

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By Ian Bhullar

Jul. 3 – The announcement of negotiations on a Vietnam-European Union (EU) free trade agreement (FTA) this week is promising for business leaders with interests on the intersection of Europe and the whole of the Southeast Asian region.

EU Trade Commissioner Karel De Gucht and Vietnamese Minister for Industry and Trade Vu Huy Hoang launched negotiations covering tariffs, non-tariff barriers, procurement, regulatory issues, competition, and sustainable development on June 27.

This is important for businesses working in Vietnam given the dynamism of trade relations between the EU and Vietnam: the bloc is Vietnam’s third largest trading partner. Vietnamese exports to Europe totaled €12.8 billion in 2011, while imports from Europe were €5.2 billion.

Vietnam’s key exports include footwear, textiles and clothing, coffee, seafood and leather furniture. Meanwhile, EU exports are mainly high-tech products such as electrical machinery and pharmaceutical products.

The move is doubly important as an indication of the health of ongoing EU-Southeast Asian trade relations. Vietnam is the third Southeast Asian country with which the EU has launched FTA negotiations, after the beginning of discussions with Malaysia and Singapore in 2010. Marc Ungeheuer, head of the EU’s delegation to Singapore, suggested earlier in the month that negotiations with Singapore would be concluded by the end of July.

These negotiations are seen as “building blocks” for a proposed FTA between the EU and the Association of Southeast Asian Nations (ASEAN). Region-to-region negotiations were paused in spring 2009, largely because of significant differences in levels of liberalization and negotiation objectives among ASEAN member states. The EU is instead pursuing individual agreements with a view to reaching a “critical mass” that will result in a full regional partnership.

Negotiations are also planned to begin soon with Indonesia, the Philippines and Thailand. Merchandise trade between the EU and ASEAN increased by 9.2 percent in 2011, up to €161.7 billion (US$205 billion).

The EU-South Korea FTA, in provisional application since July 1, 2011, is held up as a model for the EU’s future FTAs. This includes:

  • The near abolition of tariffs
  • Securement of a safe and fair regulatory environment
  • Protection of intellectual property rights
  • Anti-trust, subsidy and transparency protections
  • The opening up of access to public procurements

Such ambitious provisions are also expected in the Southeast Asian agreements.

“Our door remains open. We are continuing our contacts with a number of other ASEAN member states… and Europe will be ready to move whenever they are,” De Gucht has encouragingly stated.