Last week the EU announced that it was on the
verge of concluding its free trade agreement with Singapore. I’ll have some comments
on the EU-Singapore FTA when the final text comes out.
This agreement is important because it will be
the first FTA concluded by the EU with an ASEAN country, following up on the
EU’s process of negotiating FTAs on a country by country basis rather than with
ASEAN as a whole. The EU’s attempt to
negotiate an EU-ASEAN FTA stalled several years ago due to the political
difficulties of negotiating an FTA that included Myanmar, and with
institutional issues in ASEAN (the EU thought that it could negotiate directly
with ASEAN, but the ASEAN FTAs are actually a collection of 10 bilateral FTAs
with the trading partner, with the 10 ASEAN members negotiating on a collective
basis).
The EU-Singapore FTA had been anticipated for
conclusion in October 2011, but has been delayed to the point that Malaysia
anticipated concluding its FTA talks with the EU before Singapore. Informed sources told me that the
EU-Singapore FTA had been largely completed last year. So why the delay?
There are several reasons often cited for this
delay, but the one most cited was the lack of an EU-Singapore tax cooperation
agreement. Several EU members have long
been concerned about its citizens using Singapore as a tax haven. Last month’s financial information
cooperation agreement between Germany and Singapore thus eliminated this major
hurdle, clearing the way for formal acceptance of the EU-Singapore FTA later
this year.
The EU is now in FTA talks or preparatory FTA
talks with several ASEAN members including Malaysia, Indonesia and
Vietnam. The EU-Singapore FTA will thus
provide a basic template for those EU FTAs, although perhaps not an exact
duplicate, due to agriculture being a less sensitive issue for trade between
the EU and Singapore. For the talks involving the other ASEAN members, raw
agricultural products exported from ASEAN will be an issue for the EU, and
processed agricultural products exported from the EU to ASEAN (e.g., those
subsidized by the EU’s Common Agricultural Program will be an issue for
ASEAN). Nevertheless, the major points
of the EU-Singapore FTA, particularly with regard to services and investment,
will be closely studied by the other ASEAN members.
For ASEAN’s other trading partners, the
EU-Singapore FTA is a reminder that ASEAN has a broad scope in its trade
policy, looking beyond its immediate region. Although the US has had an FTA with Singapore
for more than ten years now, it does not have an FTA with any other ASEAN
members. If and when the EU concludes its FTA talks with Malaysia or other
ASEAN members, it will represent a competitive advantage for the EU vis-à-vis
the US (one which it already has in Myanmar, as the US maintains many of its
Burma sanctions). That, combined with
the impending start of ASEAN’s Regional Economic Cooperation talks with its
trading partners, indicates that perhaps the United States needs to augment its
trade policy in the region beyond the Trans Pacific Partnership talks.
