TRADE: Little Scope For Europe-Asia FTAs

By IPS Correspondents Reprint | | Print |

David Cronin

BRUSSELS, Oct 6 2008 (IPS) - Plans to conclude free trade agreements (FTAs) between the European Union and several Asian economies are unlikely to be realised in the near future, a senior Brussels official has conceded.

In April 2007, the EU’s 27 governments endorsed a blueprint for negotiating accords on opening up commerce with India, South Korea and the Association for South East Asian Nations (ASEAN). All of these accords are being pursued as part of a strategy known as Global Europe, which commits Brussels policy-makers to aggressively seek to remove all barriers that EU firms encounter when trying to do business abroad.

Yet of the three negotiations that have ensued, only the one with Korea appears to stand a chance of being concluded within the next few months.

Mauro Petriccione, a director in the European Commission’s trade division, said on Oct. 6 that the lack of progress made in discussions with ASEAN has meant that the idea of negotiating a deal with just a few of its 10 member countries is being explored. ASEAN groups Singapore, Malaysia, Thailand, Burma, Vietnam, Laos, Cambodia, the Philippines, Brunei and Indonesia.

And while the European Parliament, the EU’s only directly-elected institution, called last month for an FTA with India to be finalised by the end of 2008, Petriccione acknowledged that attaining such a deal will be very difficult.

One of the problems is that the EU had started the negotiations on the tail of a reform movement in India, he told a seminar organised by the European Policy Centre, a think tank in Brussels. ‘’If it (the movement) is not stopping, it is at least slowing down.’’”

Petriccione was alluding to an economic liberalisation process initiated by Manmohan Singh, now India’s prime minister, when he held the finance portfolio in the 1990s. Under this process, the country’s investment rules were relaxed in order to entice multinational firms into the country.

In recent times, however, the Indian government has adopted a more cautious approach towards international commerce. India’s demand that it be allowed to restrict food imports in order to protect its farmers was blamed by the United States for the failure of efforts to revive the Doha round of world trade talks in July.

India has also taken a tough line in its bilateral dealings with the EU. It has, for example, been urging that the liberalisation of trade in services should enable its skilled professionals to work freely in the EU, despite efforts by the Union to curb immigration.

A paper published by the European Commission last year predicted that securing trade deals with Asia would bring major benefits to both continents. The combined effect of agreements with India, South Korea and ASEAN should be worth an extra 40 billion euros (54 billion dollars) to EU exporters per annum, the paper predicted. The Asian economies, meanwhile, should see their exports to the Union grow by between 18 and 36 percent, according to the Commission.

But a new analysis by ‘Traidcraft’, a British organisation promoting fair trade, contends that a free trade deal with India could have harmful consequences for the country’s poor. Losses in government revenue due to a lowering in tariffs on imports could lead to cutbacks in spending on health and education, says the report, while the opening up of the economy to large retail chains could jeopardise up to 40 million small shopkeepers or hawkers.

Sophie Powell, a Traidcraft campaigner and author of the report, said that the EU is wrong to depict India as its economic equal. Even though it has more than double the EU’s population size, India’s gross domestic product is only about six percent of the Union’s. Powell noted, too, that the EU’s own assessments of the likely implications of a free trade deal forecast that millions of Indians will lose their jobs in sectors ranging from paper to car-making.

The EC’s gung-ho approach to trade negotiations with India present clear risks to millions of India’s most marginalised people, she said. A fundamental rethink of EU trade policy is needed.”

Razeen Sally, an academic working in the University of Hong Kong, said it was probably a mistake to launch free trade negotiations between the EU and India.

India is not serious about FTAs, he claimed. Its unilateral reforms have stalled under the present government since 2004. India has been very defensive in the WTO (World Trade Organisation) and its track record on existing FTAs, except for one with Singapore, has been very bad, he added. ”

Sally also argued that it was a mistake for the EU to try to negotiate on trade matters with ASEAN, given that it is not a country, nor a single economic entity.

Rather than reaching an agreement with all ASEAN countries, speculation is mounting that one could be pursued with four of them: Malaysia, Singapore, Thailand and Vietnam.

Sally drew a stark contrast between the EU and Asia’s economies. ‘’What regional economic integration we have seen in Asia has been very different to what we have seen in Europe,’’ he said. ‘’It is not policy-led. It is about national borders opening up to multinationals.’’”

Although China is by far the EU’s largest trading partner in Asia, he stated that a free trade agreement between the two sides is neither feasible nor arguably desirable. Forthcoming EU-China discussions on boosting political ties risk turning into another talking shop, he added.

Now worth 300 billion euros (406 billion dollars), the trade in goods between the EU and China has doubled in the past four years.