Business Guide · May 6, 2011

EU expects to agree Singapore FTA this year, more in 2012

The European Union expects to finalise its first free trade agreement with a southeast Asian country this year — most probably a deal with Singapore — with more to follow in 2012, Trade Commissioner Karel De Gucht said on Friday.

Talks on a bloc-to-bloc trade deal between the EU and the 10-member Association of South East Asian Nations (Asean) were abandoned in 2009, and the EU instead began exploring pacts with individual countries in the region.

Negotiations with both Singapore and Malaysia are under way, and the EU hopes to start discussing free trade deals with Indonesia and Vietnam, De Gucht told a briefing for reporters, as well as Thailand after it holds an election this year.

Asked for a tentative timetable for deals to be agreed, De Gucht said: “We hope to finalise one this year, more next year and the rest in 2013.” Asked which country would agree an FTA this year, he said the “highest possibility” was Singapore, which opened free trade talks with the Europeans in 2010.

That would mean an agreement with Malaysia was expected in 2012, with possible deals with Indonesia, Vietnam, Thailand and the Philippines in 2012 or 2013.

The timetable was for deals to be agreed — ratification usually takes about another year.

On Wednesday, South Korea’s parliament approved a free trade agreement with the EU, clearing the last hurdle before it takes effect in July. Talks on the deal had begun in 2007, with the EU racing the United States to be the first to strike a deal with Seoul. The US FTA remains some way from completion, although both sides say they hope to conclude it by end-year.

The deal was the most ambitious bilateral FTA ever negotiated by the EU, according to De Gucht, and could provide an impetus for other Asian countries to seek an agreement.

De Gucht said there were two key reasons for the abandonment of efforts to strike a bloc-to-bloc deal between the EU and Asean — wide differences in the level of development of different Asean nations that made a single deal extremely difficult; and the issue of Myanmar’s membership.

The EU imposes economic sanctions on Myanmar because of the country’s failure to install a legitimate civilian government. Most sanctions have remained in place despite elections in Myanmar last year to select members of a parliament that has ostensibly taken over from the military in running the country.

The EU and other Western nations have said this process was a sham and the same people remain in charge, with real democracy still distant.

Myanmar, however, is by no means the only country in the region to have a deficit of democracy and an appalling human rights record. Laos and Vietnam are often criticised for rights violations, Thailand and Cambodia have been slipping towards greater authoritarianism, and Singapore, which holds an election on Saturday, is nevertheless effectively a one-party state.

De Gucht denied that the EU was singling out Myanmar in making that country a pariah when many of its neighbours were little better. He noted that before entering into FTA talks with any country, the EU first insisted on a Partnership and Cooperation Agreement (PCA) which sets out expected standards for human rights, labour conditions and political progress.

The Asean bloc says it aims to become a fully integrated economic region in 2015 — although many analysts regard this target as wildly optimistic given differing levels of development and multiple ongoing bilateral feuds, most seriously the border skirmishes between Thailand and Cambodia.

De Gucht said the EU would continue negotiating trade deals with the region on a bilateral basis, and if and when an integrated Asean economy comes into effect, this would be the time to resume bloc-to-bloc negotiations.