“Brexit Scuttles an ASEAN-EU FTA”, a Commentary by Sanchita Basu Das

Commentary 2016/28, 27 June 2016

Brexit dims chances for an ASEAN-EU FTA any time soon. The EU and ASEAN free trade talks first launched in 2007 was abandoned after two years and seven rounds. Differences over the scope and depth of the trade pact among 38 countries was compounded by the EU apprehensions about including Myanmar, an ASEAN member, then under five decades of military rule. Instead the EU chose to sign bilateral FTAs with individual ASEAN members, expecting them to play the role of ‘building blocks’ for an ASEAN-EU FTA. It signed trade accords with Singapore in 2012 and Vietnam in 2015 and was in the process to start negotiation with the Philippines, the rising star of Southeast Asia.

With Myanmar under a quasi-civilian government since 2011 and following the election of a civilian government in the 2015, the possibility of an ASEAN-EU FTA was back on track. In 2015, the EU adopted a Joint Communique of the EU and ASEAN: a partnership with a strategic purpose. The communique spoke about taking ‘trade relations with ASEAN to a different level and working towards an ambitious region-to-region FTA’.  On the sidelines of the 2015 26th ASEAN Summit in Malaysia, this renewed interest in an inter-regional FTA was announced. The ASEAN countries welcomed renewed EU interests which was in part inspired by the expectation that ASEAN-led negotiations for the Regional Comprehensive Economic Partnership (RCEP) agreement would be concluded soon. Now with Brexit, any form of negotiation between the EU and ASEAN is unlikely. The EU will be preoccupied with negotiating a deal with the UK and will instead consolidate its own regional integration process.

More so, without the UK which was a big proponent of ASEAN-EU FTA. During Prime Minister David Cameron’s five-day visit to Southeast Asia in 2015, he emphasized that boosting trade with the ASEAN countries had become an economic imperative for the crisis-prone EU. He sealed trade and investment deals worth around US$1 billion over the course of his trip, including investments in Indonesia’s public transport system and additional billions in regional infrastructure funding. Although UK’s trade with ASEAN was a small proportion of total EU’s trade with the region (US$246 billion in 2013 i.e. 10 per cent of ASEAN’s total trade), it was estimated that the UK economy would gain by US$4 billion per annum from an ASEAN-EU FTA. Now with the UK’s decision to leave the EU, it will soon look for opportunities to sign its own bilateral trade deals with individual ASEAN countries, rather than convince the EU to go for an inter-bloc arrangement. ASEAN has lost a strong supporter for free trade in the EU.

Sanchita Basu Das is Fellow at ISEAS – Yusof Ishak Institute

The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of ISEAS – Yusof Ishak Institute.  No part of this publication may be reproduced in any form without permission.