Breakout Group on Trade – Summary of Findings

1. Breakout Group on Trade – Summary of Findings 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue Group Members: Dr. ImkePente (Facilitator), Veena Cute-Ngarmpring, DominikaKaczkowska, Lukas Maximilian Müller, Nguyen Viet ThuyTrang, Dr. Anna Stahl

2. Presentation overview I. The EU’s and China’s Trade with ASEAN: Two Competing Models? • The EU’s Trade Model • China’s Trade Model II. Relations between the EU and individual ASEAN states – Threats and Opportunities • The case of Thailand • The case of Indonesia III. Implications and Policy Recommendations 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

3. Research Questions • How do the EU and Chinese Strategy on Trade and political conditionality differ? • How does this affect the EU trade relationship with ASEAN? • How receptive are ASEAN states of politically conditional trade policies? • What are the strategic implications for the EU to play a strong role regarding ASEAN? 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

4. I. The competing trade models of the EU and China 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

5. A. The EU’s Trade Model • In 2011, ASEAN ranked as the EU's third largest trading partner outside Europe (after the US and China) • EU-ASEAN trade grew on average by 7% annually in the period 1993-2013 • The EU is the biggest provider of Foreign Direct Investments (FDIs) into ASEAN • EU-ASEAN trade grew on average by 7% annually in the period 1993-2013 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

6. A. The EU’s Trade Model • The EU is the biggest provider of Foreign Direct Investments (FDIs) into ASEAN • The EU's main exports to ASEAN: chemical products, machinery and transport equipment • The main imports from ASEAN to the EU: machinery and transport equipment, agricultural products, textiles and clothing • Asymetrical relationship: While EU makes for 10% of total ASEAN trade, ASEAN only contributes about 2% of total EU trade 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

7. EU-ASEAN Tradeannualdata 2004-2013 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade Source: Eurostat

8. A. The EU’s Trade Model:Characteristics of the EU’s Model • Political Conditionality • Since 1990s, the “human rights clause” in EU trade agreements • Instruments granting trade preferences as part of the EU’s external human rights conditionality policy: The EU’s Generalised System of Preferences (GSP) • Environmentally Conditionality: • EU's 2020 strategy: the EU’s FTAs should contain “green” provisions on renewable energy, environmental services and technologies, green tendering and illegal fishing and timber • Examples of recent EU practice: EU FTAs with South Korea and Singapore 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

9. B. China’s Trade Model ASEAN-China FTA • Phasing out of tariffs until 2010 • Both service and investment liberalization not particularly fleshed out • Moratorium for Cambodia, Laos, Myanmar, Vietnam (2015) • No real social chapter plus unclear enforcement mechanism • Non-tariff barriers used heavily for protectionism • Dispute Settlement is unclear and ASEAN has a weak track record of active dispute settlement in the WTO • Labor standards: Commitment to the 1998 ILO Declaration; beyond that bilateral MOU 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

10. FDI and trading partners for ASEAN 2011-2013 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

11. B. ASEAN-China Imports and Exports Source: Frederick Choo and David A. Anderson,, with data from Asian Development Bank, Key Indicators for Asia and the Pacific 2010 (Manila: Asian Development Bank, 2010), Country Table for China. 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

12. I. EU’s and China’s Trade with ASEAN: Two Competing Models? • Lack of implementation of the EU’s political conditionality, double standards • The EU does not necessarily follow its proclaimed “model” e.g. FTA with Singapore • Beyond general institutional framework, difficult to emulate due to the difference in economic relationship between EU-ASEAN/China-ASEAN • Still, EU advantage in area of FDI, trade not far behind China. • Strong public criticism of role of China in Southeast Asia, fear of economic domination. ASEAN interest in balancing of trade partners  Not necessarily two competing “models” 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

13. II. Relations between the EU and individual ASEAN states 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

14. State of affairs – Current and proposed agreements between the EU and ASEAN member states 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

15. B. The Case of Thailand • Military coup in 2006 and democratic elections late 2007 • New government stopped all ongoing FTA negotiations • After 2006, EU was seeking to increase political dialogue and cooperation with Thailand: PCA negotiations started in 2010 • Thailand expressed preference for regional FTA with EU within ASEAN framework, Thailand took over the chair of ASEAN in July 2008 • Military coup on 22 May 2014 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

16. B. The Case of Thailand Opportunities • Environment cooperation: Thailand is one of the largest Southeast Asian exporters of wood and wood articles, e.g. EU FLEGT Initiative to promote sustainable forest management • Natural disaster cooperation: Thailand was one of the countries hardest hit by the Tsunami, e.g. EU and member states post-tsunami reconstruction programs 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

17. C. The Case of Thailand Threats • Since military coup in 2006, the domestic political situation has prevented Thailand from engaging fully in FTA discussions and political dialogue with the EU • After 2014 military coup, EU decision to delay the signing of the PCA to pressure the military junta to restore electoral democracy 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

18. C. The Case of Indonesia • Most suitable political conditions on paper: Scores high on Freedom House and Transformation Index • Relatively highly developed political institutions, consolidated democratic system, low risk of breakdown • Fourth largest EU trading partner inside ASEAN (10,5%, behind Singapore, Malaysia, Thailand) • High potential for growth, large domestic market 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

19. C. The Case of Indonesia • Regional FTA negotiations with strong Indonesian involvement • After breakdown, first ASEAN state to negotiate PCA with EU • Contains human rights, democratic commitment, proliferation of WMD and terrorism • Sectoral cooperation on tourism, environment appears to address Indonesian development priorities • Precursor to eventual FTA 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

20. C. The Case of Indonesia Opportunities • Indonesian focus on becoming a regional power makes EU-Indonesia relationship particularly important • Growth of domestic market makes Indonesia an attractive FDI destination • Indonesia together with Malaysia belong in the moderate camp inside the WTO regarding the Singapore issues. On paper would be a useful ally towards multilateral commitment 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

21. C. The Case of Indonesia Threats • Shift of political priorities from SBY To Jokowi– apparently more domestic rather than external • More hawkish foreign policy and internal affairs since new government, less conducive to EU preferences • Lack of reforms, risk of economic sluggishness 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

22. III. Implications/Policy Recommendations General • Hard to engage ASEAN on the regional level. Lack of economic integration, lack of political cohesion, lack of actorness • Necessity to keep up with other powers engaged in the region, ‘Competitive ascription” with ASEAN by all states with strong economic interdependence 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

23. III. Implications/Policy Recommendations Individual country level • Political disparities inside ASEAN make some partners more suitable than others. • Apparent double-standard in EU political conditionality on trade calls credibility into question • Should the EU be able to pushasideitsvalues to trade with ASEAN? 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade

24. III. Implications/Policy Recommendations • The EU shouldremainpresent in ASEAN trade given the trade opportunities of manyraisingpowers in ASEAN • The EU and ASEAN at the trade crossroads, with the EU – US Transatlantic Trade & Investment Partnership (TTIP) and ASEAN countriesengagedin Regional Comprehensive EconomicPartnership(RCEP) and Trans-Pacific Partnership (TPP). In a sense, ASEAN has a leverage of optionsto makeitseconomicfuture the wayitwants. 2nd IFAIR Interregional EU-ASEAN Perspectives Dialogue - BOG Trade