THE Association of Southeast Asian Nations (Asean) and the European Union (EU) are “one step closer” to a regional free trade agreement (FTA), thanks to efforts by the Singaporean-German Chamber of Industry and Commerce (SGC) to campaign for it, said Foreign Minister Vivian Balakrishnan on Wednesday (Sep 27).

Such an agreement will take time, he said at a dialogue organised by the chamber.

“The logic for it is obvious, but… because Asean is so diverse, I will not pretend that negotiations will be as straightforward as it was, say, between the EU and Singapore.”

Dr Balakrishnan was replying to a question by The Business Times on how close the region is to an EU-Asean FTA during a question-and-answer session moderated by the chamber’s president Shirley Qi.

At the event, SGC launched a position paper underlining the need to resume negotiations on an EU-Asean regional FTA.

The paper, titled Why German Businesses Support an EU-Asean FTA, was based on findings from a survey conducted in June with 169 member companies of German Chambers located across Asean.  

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Survey results

The survey found that 86 per cent of the German companies polled face barriers to trade when exporting goods and services to Asean, with the most pressing hurdles being custom duties, inconsistent tariff classification and customs valuation, as well as cumbersome customs procedures.

Investment barriers were reported by 78 per cent of respondents, most notably with licence requirements, local content requirements and measures that restrict or require specific types of legal entities or joint ventures. 

More than eight in 10 surveyed believe an EU-Asean FTA would increase their competitiveness in the market and make Asean a more attractive sourcing market.

Nearly two-thirds of respondents prefer a regional FTA over bilateral ones with Asean countries.

SGC’s executive director Tim Philippi said: “Harmonising trade rules and procedures with a region-to-region FTA will not only enhance efficiency, expand market access, and reduce major trade barriers for companies in EU and Asean, it could also support further economic integration within the Asean Economic Community.”

Current EU-Asean trade agreements

The EU has bilateral FTAs with Singapore and Vietnam, and is negotiating trade deals with Indonesia and Thailand. 

Trade negotiations have been paused with Malaysia and the Philippines. Negotiations for a regional FTA between both blocs had taken place in 2007, but were suspended in 2009 for a bilateral trade format.

In 2017, the EU and Asean set up a joint working group to develop a framework setting out the parameters of a future regional FTA. “Not much has developed on this front,” said the report.

Said Qi in her opening address: “Singapore serves as an important gateway for German businesses looking to access the whole South-east Asian market.”

Dr Balakrishnan added: “Much of what has been accomplished under the banner of German-Singapore relations, actually, in my view, is the template for what can be done to enhance the EU-Asean relations. FTAs are a key mechanism by which our partners can engage our region.”

Highlighting the EU’s FTA with New Zealand and the bloc’s negotiations with Australia, Indonesia and Thailand, Dr Balakrishnan urged the chamber’s members to “double down (and) accelerate all these efforts”.

“It is in our interest to work towards an Asean-EU FTA that will expand the reach of the EU-Singapore FTA. It will enhance the region-to-region connectivity, and also create new opportunities for trade and investment by drawing on the complementary strengths of our two regions,” he said.