EU, ASEAN view FTA to boost trade

Riyadi Suparno, The Jakarta Post, Kuala Lumpur

Owing to slow multilateral trade negotiations, the European Union and the Association of Southeast Asian Nations (ASEAN) -- two of the world's most important trading blocs -- are moving toward a free trade agreement as a means of boosting two-way trade.

According to Thierry Rommel, head of the EU Commission delegation to Malaysia, work is underway within the framework of the Trans-Regional EU-ASEAN Trade Initiative, which is seen by many as a precursor to the establishment of a free trade agreement (FTA).

To that end, senior officials from both regions will meet for the first time in Hanoi next week to study alternative means to boost trade, one of which would be through an FTA.

"An FTA would be an interesting option for both parties. If the result of that preliminary discussion says, 'Yes, we go for an FTA', then, we will start the process (of negotiations), but that would happen only in 2006," Rommel told The Jakarta Post on the sidelines of the Euro Conference here on Thursday.

The conference is sponsored by the European Commission and Bank Negara Malaysia, the central bank.

Speaking at the opening of the conference, Bank Negara Malaysia governor Zeti Akhtar Aziz noted that the two regions needed to focus on what she called "the areas of complementarities" to make their cooperation effective and sustainable.

"New areas in specific sectors of mutual interest that would complement the path to greater growth for both regions need to be explored," she said.

"This would contribute toward reinforcing the sustainability and effectiveness of the ASEAN-EU partnership and, thereby, increase the potential to contribute to global economic stability," she added.

Europe has been traditionally important for ASEAN in trade and investment as it has become ASEAN's third-largest trading partner.

Of the total, the trade of ASEAN's five core members -- Indonesia, Malaysia, Singapore, the Philippines and Thailand -- with EU accounted for 12.4 percent in 2004.

Meanwhile, the EU's trade with the five ASEAN members accounts for 4.5 percent of the EU's total trade.

In addition to ASEAN, Rommel said, the EU is now in the process of negotiating an FTA with MERCURSOR -- a Latin American trading bloc grouping Argentina, Brazil, Uruguay and Paraguay.

He noted the EU was now pursing bilateral FTAs that paralleled multilateral trade negotiations under the World Trade Organization, because the latter were proceeding quite slowly.

"The EU surely strengthens the multilateral trading system, but at the same time, we will not put all our eggs in the same basket," he said.

In addition, Rommel said, the EU did not want to be left in the cold by other developed countries, particularly the United States and Japan, which have actively been pursuing bilateral FTAs with a number of countries, including those in ASEAN.

"It has not escaped our attention that in ASEAN, there has been a flurry of activity in relation to bilateral trade negotiations. Therefore, the EU cannot just sit on the sidelines and let all these things happen and go by," he said.

Unlike the prevailing FTAs signed by Japan and the United States with individual ASEAN countries, Rommel said the EU would like to have "deeper" FTAs, which would cover not only the reduction of tariffs but also the removal of non-tariff barriers such as standards and norms. If possible, he said, the EU would also expand the FTAs to include investment.