Europe mulls a pivot to ASEAN

Most of EU businesses are ready to increase trade and investment in the ASEAN space over the next five years, with Malaysia and Indonesia to emerge as the most attractive markets. European manufacturers are also pushing for the conclusion of a free trade agreement between the EU and ASEAN to eliminate structural disadvantagesThe EU views ASEAN as a viable alternative to China.

The decline in investments flowing from the European Union (EU) member states to the Association of Southeast Asian Nations (ASEAN) should not deceive. As witnessed by a recent survey, European companies look in prospect more favorably to the Southeast Asian market than to China’s.

Apart from the persistent problem of economic recovery in the Old Continent, the breadth and depth of Europe’s involvement in the region will largely depend on how ASEAN’s political and economic integration plays out in the mid-term and on whether the European bloc manages to transform relevant trade and investment ties into geopolitical interconnection.

Trade and investment connections

ASEAN is becoming an engaging consumer market for Europe, as well as a grouping with an increasingly efficient supply chain. The EU is ASEAN’s second-largest commercial partner, after China. Conversely, the Southeast Asian association is the EU’s third-largest trading market, after the US and the Chinese giant. Euro-ASEAN trade turnover in goods was at some $226 billion in 2015, Eurostat reports.

FTA dynamics

More importantly, European manufacturers are pushing for the conclusion of a free trade agreement (FTA) between the EU and ASEAN, so as to have structural disadvantages eliminated. Euro-ASEAN negotiations on a free trade arrangement have been stalled since 2009, after two years of talks. Meanwhile, the European Commission – the EU executive body – sealed a bilateral FTA with Singapore in October 2014 and with Vietnam in December 2015, which still need ratification. The European bloc is also negotiating free trade pacts with Malaysia, Thailand and Indonesia, in addition to an investment protection agreement with Myanmar.

The EU-ASEAN Business Council (EU-ABC) is lobbying to hasten the conclusion of an EU-ASEAN free trade deal, as well as the completion of the existing bilateral FTA consultations between the European institutions and single ASEAN member states. The EU-ABC – an independent advocacy group backed by the EU Commission and acknowledged by the Southeast Asian organization – calls for sustained progress on trade liberalization among ASEAN countries, too; a more advanced ASEAN common market would indeed favor European companies in the same way a more functioning EU single market would help ASEAN countries’ export to Europe.

An alternative to China

Full article: Europe mulls a pivot to ASEAN (Asia Times)

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