Breakout Group on Trade – Summary of Findings 2 nd IFAIR Interregional EU-ASEAN Perspectives Dialogue Group Members: Dr. Imke Pente (Facilitator), Veena

Breakout Group on Trade – Summary of

Findings2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue

Group Members: Dr. Imke Pente (Facilitator), Veena Cute-Ngarmpring, Dominika Kaczkowska, Lukas

Maximilian Müller, Nguyen Viet Thuy Trang, Dr. Anna Stahl

Presentation overview

I. The EU’s and China’s Trade with ASEAN: Two Competing Models?

A. The EU’s Trade Model

B. China’s Trade Model

II. Relations between the EU and individual ASEAN states – Threats and Opportunities

C. The case of Thailand

D. The case of Indonesia

III. Implications and Policy Recommendations

2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

Research Questions

• How do the EU and Chinese Strategy on Trade and political conditionality differ?

• How does this affect the EU trade relationship with ASEAN?

• How receptive are ASEAN states of politically conditional trade policies?

• What are the strategic implications for the EU to play a strong role regarding ASEAN?


I. The competing trade models of the EU and China



• In 2011, ASEAN ranked as the EU's third largest trading partner outside Europe (after the US and China)

• EU-ASEAN trade grew on average by 7% annually in the period 1993-2013

• The EU is the biggest provider of Foreign Direct Investments (FDIs) into ASEAN

• EU-ASEAN trade grew on average by 7% annually in the period 1993-2013



• The EU is the biggest provider of Foreign Direct Investments (FDIs) into ASEAN

• The EU's main exports to ASEAN: chemical products, machinery and transport equipment

• The main imports from ASEAN to the EU: machinery and transport equipment, agricultural products, textiles and clothing

• Asymetrical relationship: While EU makes for 10% of total ASEAN trade, ASEAN only contributes about 2% of total EU trade


EU-ASEAN Trade annual data 2004-2013

Source: Eurostat


A. The EU’s Trade Model:Characteristics of the EU’s Model

• Political Conditionality

- Since 1990s, the “human rights clause” in EU trade agreements

- Instruments granting trade preferences as part of the EU’s external human rights conditionality policy: The EU’s Generalised System of Preferences (GSP)

• Environmentally Conditionality:

- EU's 2020 strategy: the EU’s FTAs should contain “green” provisions on renewable energy, environmental services and technologies, green tendering and illegal fishing and timber

- Examples of recent EU practice: EU FTAs with South Korea and Singapore


B. China’s Trade Model

ASEAN-China FTA

- Phasing out of tariffs until 2010

- Both service and investment liberalization not particularly fleshed out

- Moratorium for Cambodia, Laos, Myanmar, Vietnam (2015)

- No real social chapter plus unclear enforcement mechanism

- Non-tariff barriers used heavily for protectionism

- Dispute Settlement is unclear and ASEAN has a weak track record of active dispute settlement in the WTO

- Labor standards: Commitment to the 1998 ILO Declaration; beyond that bilateral MOU


FDI and trading partners for ASEAN 2011-2013


B. ASEAN-China Imports and Exports

Source: Frederick Choo and David A. Anderson,, with data from Asian Development Bank, Key Indicators for Asia and the Pacific 2010 (Manila: Asian Development Bank, 2010), Country Table for China.


I. EU’s and China’s Trade with ASEAN: Two Competing Models?

• Lack of implementation of the EU’s political conditionality, double standards

• The EU does not necessarily follow its proclaimed “model” e.g. FTA with Singapore

• Beyond general institutional framework, difficult to emulate due to the difference in economic relationship between EU-ASEAN/China-ASEAN

• Still, EU advantage in area of FDI, trade not far behind China.

• Strong public criticism of role of China in Southeast Asia, fear of economic domination. ASEAN interest in balancing of trade partners

Not necessarily two competing “models”


II. Relations between the EU and individual ASEAN states


State of affairs – Current and proposed agreements

between the EU and ASEAN member states


B. The Case of Thailand

• Military coup in 2006 and democratic elections late 2007

• New government stopped all ongoing FTA negotiations

• After 2006, EU was seeking to increase political dialogue and cooperation with Thailand: PCA negotiations started in 2010

• Thailand expressed preference for regional FTA with EU within ASEAN framework, Thailand took over the chair of ASEAN in July 2008

• Military coup on 22 May 2014


B. The Case of Thailand

Opportunities

• Environment cooperation: Thailand is one of the largest Southeast Asian exporters of wood and wood articles, e.g. EU FLEGT Initiative to promote sustainable forest management

• Natural disaster cooperation: Thailand was one of the countries hardest hit by the Tsunami, e.g. EU and member states post-tsunami reconstruction programs


C. The Case of Thailand

Threats

• Since military coup in 2006, the domestic political situation has prevented Thailand from engaging fully in FTA discussions and political dialogue with the EU

• After 2014 military coup, EU decision to delay the signing of the PCA to pressure the military junta to restore electoral democracy


• Most suitable political conditions on paper: Scores high on Freedom House and Transformation Index

• Relatively highly developed political institutions, consolidated democratic system, low risk of breakdown

• Fourth largest EU trading partner inside ASEAN (10,5%, behind Singapore, Malaysia, Thailand)

• High potential for growth, large domestic market


C. The Case of Indonesia


• Regional FTA negotiations with strong Indonesian involvement

• After breakdown, first ASEAN state to negotiate PCA with EU• Contains human rights, democratic

commitment, proliferation of WMD and terrorism

• Sectoral cooperation on tourism, environment appears to address Indonesian development priorities

• Precursor to eventual FTA2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade


Opportunities

• Indonesian focus on becoming a regional power makes EU-Indonesia relationship particularly important

• Growth of domestic market makes Indonesia an attractive FDI destination

• Indonesia together with Malaysia belong in the moderate camp inside the WTO regarding the Singapore issues. On paper would be a useful ally towards multilateral commitment



Threats

• Shift of political priorities from SBY To Jokowi – apparently more domestic rather than external

• More hawkish foreign policy and internal affairs since new government, less conducive to EU preferences

• Lack of reforms, risk of economic sluggishness


III. Implications/Policy Recommendations

General

• Hard to engage ASEAN on the regional level. Lack of economic integration, lack of political cohesion, lack of actorness

• Necessity to keep up with other powers engaged in the region, ‘Competitive ascription” with ASEAN by all states with strong economic interdependence



Individual country level

• Political disparities inside ASEAN make some partners more suitable than others.

• Apparent double-standard in EU political conditionality on trade calls credibility into question

• Should the EU be able to push aside its values to trade with ASEAN?



• The EU should remain present in ASEAN trade given the trade opportunities of many raising powers in ASEAN

• The EU and ASEAN at the trade crossroads, with the EU – US Transatlantic Trade & Investment Partnership (TTIP) and ASEAN countries engaged in Regional Comprehensive Economic Partnership (RCEP) and Trans-Pacific Partnership (TPP). In a sense, ASEAN has a leverage of options to make its economic future the way it wants.


Documents

Breakout Group on Trade – Summary of Findings 2 nd IFAIR Interregional EU-ASEAN Perspectives Dialogue Group Members: Dr. Imke Pente (Facilitator), Veena