The Association of South-East Asian Nations (ASEAN) and the European Union (EU) are building increasingly strong trade links, in pursuit of mutual economic benefit. On the back of these efforts, new figures show, ASEAN’s trade with the EU hit a historic high in 2016. Htet Tayza comments.
The EU is a global economic powerhouse. If we treated the EU as one country, the body would boast the second largest economy on earth, with an estimated combined gross domestic product (GDP) of US$16.5 trillion as of 2016. The body includes the world’s fourth, fifth and sixth largest national economies in Germany, the UK and France – all of which have booming consumer markets.
ASEAN is very much a rising global economic power. This bloc currently has a population of over 600 million people and a combined GDP of roughly US$3 trillion. Furthermore, experts believe that ASEAN will become our planet’s fourth largest economy by 2030. Therefore, there are plenty of opportunities to be found for the EU and ASEAN in others’ markets and they are definitely seizing them.
According to Inter Akyson, a news outlet, trade between the blocs broke records last year. This news was delivered at a press conference by EU Ambassador Franz Jessen, to launch this year’s ASEAN-EU Business Summit in the Philippine city of Makati, which marks the 40th year of ASEAN/EU relations. At the event, he outlined various reasons why the conference serves as a major milestone.
The primary reason, he said, is that the summit comes as trade and investment links between the two powers are growing. Two-way trade between ASEAN and the EU hit €298 billion in 2016 – a new high. Meanwhile in the decade to 2015, service trade between the two powers has tripled, reaching €76.9 billion. Furthermore with €23.3 billion registered in 2015 – a 57% rate of growth compared to the year before, the EU is now the biggest source of foreign direct investment (FDI) for ASEAN.
The ambassador noted that ASEAN and the EU hope to boost trade more, by promoting further engagement. Expanding, he said: “We do this mainly through negotiating Free Trade Agreements. We concluded agreements with Vietnam and Singapore that will be game-changers as the most ambitious agreements ASEAN members ever concluded… Establishing a region-to-region free trade area will act as a powerful catalyst for even closer mutually beneficial economic relationships.” The EU has already started these negotiation processes with nations such as the Philippines and Indonesia.
At the press conference, Jessen also argued that EU/ASEAN trade opportunities have already been bolstered by the former’s support for the latter’s integration efforts via various mechanisms. This includes the ASEAN Regional Integration Support from the EU (ARISE), the EU-ASEAN Project on Intellectual Property Rights (ECAP III), and the ASEAN Air Transport Integration Project (AATIP). These programmes deliver concrete outputs for ASEAN’s integration efforts, including the ASEAN Trade Repository (ATR), the ASEAN Solutions for Investments, Services and Trade (ASSIST) and ASEAN Stats.
Going further, Ambassador Jessen revealed: “The ASEAN-EU Business Summit is an important event for connecting businesses and promoting connectivity across the regions. Getting ASEAN and EU industry to meet and connect is the best way forward. Many good European companies have found their way to ASEAN, providing high quality jobs and supporting growth. The business summit should encourage and help companies – especially the small and medium sized – to invest and to form partnerships benefitting from the growing ASEAN economies.”
It is clear that the EU and ASEAN both have a vested interest in the other bloc’s future success, causing two-way trade to spike in 2016. This may be because ASEAN has a vast population and its economies are still developing, so it provides a considerable source of cheap labour for Europe. In turn, the EU boasts hungry consumer markets, providing an attractive destination for ASEAN-manufactured products. Through initiatives such as the ASEAN-EU Business Summit, the powers could forge closer ties in the coming days, facilitating further trade growth that could benefit both economies in future.
But the EU/ASEAN alliance faces challenges which could also impede two-way trade. The biggest issue the two bloc may currently have to contend with, is the rise of anti-globalist sentiments across many EU nations, as a response to the Middle Eastern migrant crisis. This became most apparent in June 2016, when the UK voted to leave the EU. The UK is a major investor in ASEAN, meaning that Brexit may hold consequences for ASEAN countries such as Myanmar, which it supplies significant financial aid to. The UK’s economic agreements with these nations may have to be re-negotiated, especially if it leaves the lucrative EU single market, possibly imposing extra trade burdens on ASEAN businesses.
Trade depends upon the easy flow of goods across international boundaries. If the UK imposes measures such as higher import tariffs, post-Brexit, on ASEAN countries, businesses could see higher operating costs, potentially damaging trade. With France, Germany and the Netherlands all set to hold elections which are widely seen as a referendum on the popularity of the EU this year, this anti-globalist tide may rise further in Europe, possibly compounding problems for ASEAN. It is crucial that ASEAN governments take the EU’s uncertain geopolitical climate into account, when developing trade policies going forward, to ensure trade volumes remain high and the bloc keeps prospering.