The strategic imperatives driving ASEAN-EU free trade talks: colliding values as an obstacle

Recently revived talks aimed at the conclusion of an inter-regional free trade agreement (FTA) between the Association of Southeast Asian Nations (ASEAN) and the European Union (EU) that was suspended in 2009, are driven by strategic imperatives of both regions. However, among the formidable obstacles facing an eventual ‘ASEU FTA’ is the key issue of the EU’s pursuit of a values-based diplomacy in all of its external relations, which contrasts with the vaunted ‘ASEAN way’ that engenders avoidance of human rights oriented commitments in its external relationships from fear of outside interference. (Suzuki, 2019) The EU’s insistence on incorporating fundamental human rights components into FTA discussions, as evidenced in its recent practice (European Parliament, 2019), will result in a lengthy negotiating process on this and additional complex, technical matters that characterize EU FTAs, such as on intellectual property and rules of origin.

Strategic Imperatives
The resumption of talks on a future ‘ASEU FTA’ betrays the complementary strategic imperatives of both regions. For ASEAN members, the EU is a counterweight to powerful economic heavyweights in the region – China, India, Japan and the United States. Moreover, in line with its traditional balance of power approach on security matters, a strong economic presence of the EU in the region engenders a strong appetite for ensuring peace and stability in Southeast Asia. For the EU, which has been a Dialogue Partner of ASEAN since 1977, it is keen to enmesh itself more deeply in the economic dynamism of the Indo-pacific area, in which Southeast Asia occupies a central position economically, geographically, and politically.

The Trade Relationship in Global and Regional Perspectives

The EU is a market of 500 million people, while ASEAN is a market of over 660 million. (ASEAN, Secretariat 2022a). ASEAN is the fifth largest economic bloc in the world with more than USD 3 trillion in GDP and 660 million potential customers (ASEAN Secretariat, 2021). The EU was ASEAN’s third largest trading partner in 2020, with total bi-lateral trade of US $226.6 billion or 8.5% of ASEAN’s total merchandise trade. Foreign Direct Investment from the EU to ASEAN stood at $10 billion in 2020, placing the EU as the third largest external source of FDI among ASEAN partners. (ASEAN Secretariat, 2022). Competing web of regional and bilateral FTAs in the region mirror the geopolitical dynamics of the Indo-pacific area:

● Regional Comprehensive Economic RCEP, the largest trade block inclusive of rivals China and Japan and the ASEAN 10, that entered into force on 1 January 2021 (Asian Development Bank, 2020);

● Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP), representing 13.5% of global GDP, which entered into force for 9 signatories by 2019, comprises, inter alia, China’s emerging geopolitical rivals, Australia, Canada and Japan and ASEAN members that are wary of China’s growing influence – Brunei, Malaysia, Singapore and Vietnam (Government of Canada, 2022). Before President Trump’s rash withdrawal in 2016, CPTPP was a Washington-led agreement that would have kept the United States (US) at the centre of regional and indeed global trade well into the 21 st century.

● A range of other agreements with ASEAN and its dialogue partners including FTAs with Australia-New Zealand, China, India, Japan, the EU and Singapore, the EU and Vietnam and South Korea, and the United States and Singapore. (ASEAN Secretariat, 2022b) Trade and geo-politics are intimately connected: the US-led General Agreement on Trade and Tariffs (GATT) created after World War II, now the WTO, was a key part of the Cold War competition between the United States and the Soviet Union. The rekindled interest in EU-ASEAN trade occurs as the EU seeks to expand its global influence. Southeast Asia is a key component of this strategy.

Peace and Security in the Indo-Pacific

In 2020, after years of lobbying, the EU became a strategic dialogue partner of ASEAN. The EU’s foreign policy chief, Josep Borell, noted at the end of 2021, that “We have put the emphasis on diversifying our partnerships across the Indo-Pacific … My visit to Jakarta in June consolidated our engagement with ASEAN” (Hutt, 2022)

The strategic imperatives are buttressed by existing formalized inter-institutional (ASEAN-EU) partnership and inter-regional dialogue (Asia-Europe Meetings or ASEM). In 1994, the EU, anxious not to be excluded from the economic dynamism of Asia amidst protectionist winds that surfaced in the region, announced its “New Asia Strategy” that led to an institutionalised process of Summit meetings since then between leaders of 51 countries and the two institutions. ASEM dialogues now centre around three pillars: politics, economics and finance. (Vannarith, 2020) Guided by the Nuremberg Declaration of 2007, the two regions pursued a long-term vision and commitment working together, notably on peace and security. (European Commission, 2007) The EU initiated formal diplomatic relations with ASEAN in March 2009, followed by the EU members. It became the first regional organisation to accede to ASEAN’s Treaty of Amity and Cooperation in Southeast Asia (TAC), thus boosting the EU’s political and security engagement with the region. The EU established a diplomatic Mission to ASEAN in August 2015 and appointed a dedicated Ambassador. On December 1st, 2020, the 23rd EU-ASEAN Ministerial Meeting elevated the EU-ASEAN Dialogue Partnership to a Strategic Partnership.

While the EU has not been perceived as a security player in the region in the classic military sense, the levers of power in contemporary international relations, as exhibited by the swift and concerted EU economic sanctions on Russia due to its invasion of Ukraine in February 2022, are multifaceted. Non-traditional power levers wielded by Brussels include: (1) its highly integrated trading bloc, (2) its initiatives to address the existential imperative of climate change (an initial €30 billion grant in the framework of EU-ASEAN cooperation on this threat) that will severely affect Southeast Asia, (3) assistance with digital governance and infrastructure in the Indo-Pacific, including on ASEAN’s with Digital Master Plan 2025, and (4) the Global Gateway Initiative, a €300 billion investment scheme that aspires to compete with China’s massive Belt and Road Initiative (BRI), which has already contributed over US$ 740 billion to Southeast Asia alone. (Hutt, 2021) With like-minded allies providing similar assistance, it may well contribute to weaning away the region from over-dependence on China.

These initiatives are in line with the Indo-Pacific strategies of the EU and its powerful member states. The European Commission notes that while Europe and the Indo-Pacific hold over 70% of the global trade in goods and services, as well as over 60% of foreign direct investment flows, “current dynamics in the Indo-Pacific have given rise to intense geopolitical competition adding to increasing tensions on trade and supply chains as well as in technological, political and security areas.” Therefore, it seeks to “maintaining a free and open Indo-Pacific for all while building strong and lasting partnerships” (European Commission, 2022). Among the priority areas for EU action are security and defence and human security. It will aim to encourage China “to play its part in a peaceful and thriving Indo-Pacific region”. To promote an open and rules-based regional security architecture, it will look to secure sea lines of communication and to assist with capacity-building and enhanced naval presence by EU Member States in the Indo-Pacific. It will also seek to conduct more joint exercises in regional efforts to fight piracy.

In relation to human security, aside from humanitarian assistance, the EU strategy aims to consistently defend human rights and democracy and continue “to use all tools at its disposal: political and human rights dialogues and consultations, trade preferences and the mainstreaming of human rights considerations in all EU policies and programmes” (European Commission, 2022).

Germany’s Guidelines on Policy Guidelines for the Indo-Pacific Region of September 2020, reflect these priorities. (Government of Germany, 2021) France’s Indo-Pacific strategy, framed in the context of its overseas territories in the region where it has 7000 troops, aims to contribute to “the security of regional areas by promoting military and security cooperation, to the security of regional areas by promoting military and security cooperation, to “reserving, alongside its partners, access to common areas in a context of strategic competition and increasingly restrictive military environments,” to continue participating in joint military exercises and to pursue “the deepening of interoperability with the armed forces of the major partners in the region, in particular India, Japan and Western countries” (Government of France, 2018: 54-56). It calls for “Promoting the rule of law, particularly when it comes to international human rights law” and it emphasizes promoting the EU’s Indo Pacific strategy, which places human rights front and centre in its engagement (Government of France, 2018: p.60)

Human Rights in EU Trade Arrangements versus the ASEAN Way

It is the emphasis on human rights commitments that makes ASEAN nervous and will likely necessitate a more flexible approach on the part of the EU.

The inclusion of human rights clauses in the EU, and other western FTAs, is well known. The EU has done so since the early 1990s. Typically, the clauses start with a requirement to comply with human rights, “which is set out in an ‘essential elements’ clause, typically located as one of the first articles of the agreement. This obligation is then enforced by a ‘non-execution’ (or ‘non-fulfilment’) clause permitting one party to take ‘appropriate measures’ if the other party violates the essential elements clause” (EU Parliament, 2014). In a recent statement the EU Commission President, Ursula von der Leyen noted: "We will support smart investments in quality infrastructure, respecting the highest social and environmental standards, in line with the EU’s democratic values" (Hutt, 2022).

The EU’s responses to democracy and human rights challenges in Southeast Asia are well known. The EU has responded over the past two decades to internal civil war in Myanmar by opposing too rapid membership in ASEAN, to human trafficking in Thailand fisheries sector by applying sanctions and to the damaging climate change impacts in the palm oil sector of Indonesia and Malaysia, to name a few. On the latter the EU is particularly committed to addressing climate change and will be mindful of the UN General Assembly Resolution of 28 July 2022, on the right to a healthy environment (United Nations 2022). The EU even partially removed Cambodia’s trade privileges in 2020 in protest over the deterioration of Cambodia’s freedoms (Hutt, 2022). The current chair of the ASEAN bloc is Cambodia, which has seen major democratic backsliding since 2017.

ASEAN, and indeed many developing countries, have been wary of the insertion of human rights clauses in FTAs. The EU’s own analysis has pointed to the fact that “Developing countries…see them as a form of potential interference in their internal affairs and fear that higher human rights standards (particularly labour rights) are not only difficult to implement but also risk undermining their competitiveness in international trade” (European Parliament, 2019).

Despite these rights and democracy issues, the EU and ASEAN will need to find a strategically beneficial compromise given the evolving geopolitical aims of both the EU and ASEAN.

The Way Forward: Incrementalism

The disagreements and sore points over human rights matters will likely, and fortunately, not be fatal obstacles to an ‘ASEU FTA’. They are likely to smooth over their differences and to adopt an incremental approach. As suggested by former Prime Minister of Thailand Abhisit Vejjajiva at an ASEAN-EU conference organized by Asia Centre in June 2022, a minimalist agreement with in-built follow-on dialogues on contentious issues is a plausible outcome.

This is mindful of the different models of integration and the ASEAN sensitivities over such issues as climate change and labour rights. Hsieh (2022), argues that Brussels’ “building-block approach envisions pathfinder agreements with individual ASEAN states as the basis for the ASEAN-EU FTA,” which will help realize the EU’s Indo-Pacific strategy and the ASEAN-EU Strategic Partnership. Hsieh notes the EU’s trade and investment agreements with Singapore and Vietnam as critical building blocks in the EU strategy, which bear lessons over complex issues such as cumulative rules of origin, trade in services and non-tariff barriers in key industries.

One compromise might be to include a human rights clause with no reference to international or European standards, versus clauses which refer to either one or both (European Parliament, 2019). ASEAN has its own regional rights declaration on which the EU could draw upon. Such a compromise might serve well the advancement of rights and democracy in Southeast Asia in the long run. This would also help to overcome a critique of the EU’s approach prior to 2009, when International Idea’s analysis pointed to the EU’s too narrow focus on technical trade issues and far less on democracy and rights (International Idea, 2009).

Conclusion

The deep differences over values-based trade and investment agreements will likely be overcome by the new geopolitical environment that sees both ASEAN and the EU countering the rise of China. An incremental approach to an ASEU FTA will serve both parties’ interests as well as the goal of advancing democracy and rights in Southeast Asia.

Robin Ramcharan Dr. Robin Ramcharan is the Executive Director at Asia Centre. He is a highly qualified and committed human rights and international relations expert with over 20 years of experience leading evidence-based policy research within the ASEAN region. Dr. Robin accumulated his expertise in traditional, non-traditional and transnational security issues. He is professional with subject matter expertise of human rights issues, including approaches and techniques to address and advise on highly sensitive and complex problems. Dr. Robin  also has the ability to evaluate and integrate information from a variety of sources and assess impact on the human rights situation in specific regions and countries, including the political environment and legal statutes pertaining to human rights. He develops diplomatic communication and interpersonal skills to successfully present at internationally-recognised events and conferences, as well as to establish strong working engagements with donors and funding authorities