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Singaporean-German Chamber seeks speedy conclusion of EU-Asean free trade deal

Talks for an EU-Asean FTA started in 2007 but were paused in 2009. PHOTO: REUTERS

SINGAPORE – Most German companies operating in the region want the European Union to conclude a free-trade deal with Asean that has been on the table for 16 years in the hope that it will offset the challenging business barriers they face, noted a new survey.

It also found that 55 per cent of the 169 companies polled view a EU-Asean trade deal as being very important, while 30 per cent believe it would help boost competitiveness.

The Singaporean-German Chamber of Industry and Commerce (SGC), which commissioned the survey earlier this year, launched a position paper on Wednesday (Sept 27) in response to the findings.

Its suggestions include a proposal that the EU and Asean could engage in economic frameworks to establish standards before a trade deal is signed.

Alternatively, the EU could sign a less comprehensive agreement initially, the paper noted.

Such a deal could yield results faster, while upgrades toward a comprehensive free-trade agreement (FTA) could be made later once hurdles have been ironed out, said SGC executive director Tim Philippi at an event in Singapore to mark the launch of the position paper.

These hurdles include the political situation in Myanmar, disagreements over EU deforestation rules and access to government contracts.

Singapore Foreign Minister Vivian Balakrishnan told the event that while the FTA is much needed, it will take time to conclude: “The logic for it is obvious. But … because Asean is so diverse, I will not pretend that negotiations will be as straightforward as it was, say, between the EU and Singapore.”

However, Mr Balakrishnan backed the SGC position backing an initial, less comprehensive agreement, saying; “You don’t let perfection be the enemy of the good.”

Asean is the EU’s third-largest trading partner, after the United States and China. Trade with the EU accounts for more than 10 per cent of Asean’s total trade while the EU is the third-largest investor in Asean countries, following the US and Japan.

Although a more recent phenomenon, Asean investment in Europe has also been growing steadily to a total of around €172.4 billion in 2020.

Talks for an EU-Asean FTA started in 2007 but were paused in 2009. While both parties agreed to re-initiate formal talks in 2017, progress has been limited since then.

The EU-Asean Economic Ministers Consultations decided last September to shift the focus towards cooperating in the specific sectors of the digital economy, green technologies and services, and supply chain resilience.

But not much has developed on that front, although the EU did sign bilateral trade deals with two Asean member countries. The EU-Singapore FTA entered into force in November 2019 and one with Vietnam became operational in August 2020.

However, separate Investment Protection Agreements signed with both these nations are still awaiting ratification.

Negotiations with Indonesia are ongoing and talks with Thailand resumed recently, but discussions on trade deals with Malaysia and the Philippines are on hold.

Meanwhile, Asean has signed other trade deals – with China, South Korea, Japan, India, Australia and New Zealand (2011), and Hong Kong.

Asean, along with Australia, China, Japan, Republic of Korea and NZ, have also concluded the Regional Comprehensive Economic Partnership – the world’s largest trade agreement, comprising 30 per cent of global economic output and a third of the world’s population.

Some Asean states are also members of the Comprehensive and Progressive Agreement for Transpacific Partnership and the Indo-Pacific Economic Framework for Prosperity.

An EU-Asean FTA would create a large integrated market with about 21 per cent of global output and 1.1 billion people.

The SGC position paper cited several German companies on the importance of a trade and investment deal with the Asean.

Specialty chemicals giant Evonik said regional FTAs are a step towards international solidarity, supporting globalisation through openness and partnership based on trust.

“The EU-Asean FTA would greatly benefit both regions in terms of greater market access and economic efficiency. Globalisation is a key growth driver that adds value to businesses and individuals all along the value chain,” it noted.

Mr Ola Källenius, chairman of Mercedes-Benz Group, said: “A region-to-region agreement would be a great leap forward, fostering even more economic growth and exchange.”

Tech conglomerate Siemens said that existing trade deals in Asean are helping the company and its customers in the region to access markets and compete more easily through reduced tariffs and barriers of trade.

“A region-to-region agreement between the EU and Asean could further enhance behind-the-border barriers, promote investment and solidify legislation on issues such as digital trade, intellectual property and public procurement.”