In May 2015, the European Union (EU) High Representative for Foreign Affairs and Security Policy and the European Commission adopted a Joint Communication (JC) on ‘The EU and ASEAN: A partnership with a strategic purpose’.

This puts forward concrete ideas for taking relations between the Association of Southeast Asian Nations (ASEAN) and the EU to the next level by providing a more coherent framework for sectoral cooperation and by ensuring sharper political focus.

The JC highlights the opportunities available for the EU and ASEAN member-states, in particular Malaysia, to improve their trading relationship, as well as their positions in the global economy. This article addresses the JC and its effects on the sustainable production of key commodities through four questions.

1. What are the key sections of the JC that are relevant to Malaysia and its palm oil industry?

The JC is organised into five sections, some with sub-sections. The main sections are:

  1. Introduction
  2. Connectivity: Capturing the essence of regional integration
  3. A greener partnership for a sustainable future
  4. Cooperation on political and security issues
  5. Moving towards a partnership with a strategic purpose

For Malaysia and its palm oil industry, the most relevant sections are sub-section 2.1 (Boosting trade, investment and business) and Section 3.

Sub-section 2.1 emphasises the intensifying trade and investment flows between ASEAN and the EU over the past decade. The JC points out that ASEAN is the EU’s third-largest trade partner (after the US and China); and that the EU is ASEAN’s second-largest trade partner (after China) with bilateral trade in goods and services amounting to EUR 238 billion in 2013. By the end of 2013, ASEAN foreign direct investment in the EU had reached EUR 57 billion.

The JC recognises that ASEAN member-states and the EU have undertaken negotiations on free trade agreements (FTA). In 2007, ASEAN and the EU launched negotiations for a regional FTA. However, in May 2009, after eight rounds of negotiations, the two partners agreed to put the discussions on hold due to the complexity and sensitivity of regional (‘block-to-block’) trade negotiations.

Instead, the EU decided to pursue the conclusion of bilateral FTAs, with a view to using such agreements as ‘stepping stones’ for the regional FTA. Thus far, the EU has concluded FTAs with Singapore and Vietnam; is conducting negotiations with Malaysia and Thailand, although these have been de facto suspended; recently launched negotiations with the Philippines; and will next start with Indonesia.

Section 3 on a greener partnership focuses on bilateral efforts to protect the biological diversity found in ASEAN, which provides natural habits for over 20% of the world’s known plant and animal species.

The JC notes that, despite their significant differences in terms of economic development and the nature of their political systems, ASEAN and the EU share a strong commitment to, inter alia, regional integration and sustainable development. However, the JC notes that ASEAN faces a number of challenges derived from increased pressure on such resources.

The JC highlights a number of schemes adopted by the EU to promote sustainability in the ASEAN region, including the Forest Law Enforcement Governance and Trade Action Plan, aimed at improving forest governance and promoting trade in sustainably and legally harvested timber products; and efforts to fight illegal, unreported and unregulated fishing.

In addition, the JC puts forward specific initiatives to be jointly implemented by the EU and ASEAN in the area of sustainability, such as strengthening the collaboration on climate change; providing enhanced support to environment protection; and promoting sustainable production of key commodities, such as palm oil, rubber and coffee.

2. How can Malaysia and its palm oil industry boost trade, investment and business through the enhanced strategic partnership between ASEAN and the EU?

With respect to the EU-Malaysia FTA, negotiations were launched in October 2010. Following the seventh round of negotiations in April 2012, the two sides conducted meetings between technical working groups in September 2012.

Since those meetings, no additional negotiation round has occurred. Official documents from the European Commission’s Directorate-General for Trade imply that such de facto suspension is due to difficulty in agreeing on the level of ambition of the FTA.

Regardless of the actual reasons for the lack of progress, both sides must act to resume talks as soon as possible. The EU has concluded agreements with Singapore and Vietnam, as well as launched negotiations with the Philippines. It appears that negotiations between the EU and Indonesia are set to commence soon.

So, a critical mass of ASEAN member-states (most of which can be considered Malaysia’s competitors in the EU with respect to several products and commodities) are in the process of acquiring a comparative advantage in market access.

Importantly, negotiations on the Trans-Pacific Partnership Agreement (TPPA), to which Malaysia is a party, have concluded. This is relevant for two reasons: once operational, the 12-member trade bloc is estimated to displace up to 50% of EU trade with the Asia-Pacific; and it shows Malaysia’s willingness to take part in a modern, highly ambitious trade agreement.

To offset the effect, the EU must pursue additional favourable trade relationships – just as with the ASEAN region, and as it recently began with Australia and New Zealand. All interested Malaysian business stakeholders should advocate the urgent relaunch of FTA talks with the EU.


 

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