EU looks to exchange of offers

The European Union expects to see an exchange of offers with Thailand, Singapore and Brunei before December as the latest step towards an Asean-EU free-trade agreement (FTA).

The exchange of offers involves crucial initial terms and conditions, including lists of products to be included in the FTA for tariff reduction.

The EU wants to forge ahead with negotiations with Thailand, Singapore and Brunei ahead of the remaining countries in the Asean grouping. However, the talks will still come under the umbrella of an Asean-EU FTA.

The US financial crisis - the effects of which have already spilled over into Europe - is a key catalyst for an increased pace in the region-to-region free-trade talks.

The present target for Thailand's export growth to European Union countries is 7 per cent, compared with targeted growth of 15 per cent for overall exports. However, many are predicting the US financial crisis will hit Thailand's exports next year rather than this year.

Thailand, Singapore and Brunei are the most advanced Asean countries in terms of FTA talks with the EU and are expected to join in further rounds of talks with EU officials in the coming three months, said Renate Nikolay, a member of European Trade Commissioner Peter Mandelson's cabinet.

She said an agreement on goods was expected to be completed this year, whereas the exchange of offers on other issues, including services, market access and investment, would be conducted before the end of Mandelson's term in office next October.

Asean leaders will hold bilateral talks with EU officials during an Asean Summit to be hosted by Thailand in Bangkok in December. The EU will also pursue negotiations with its three potential FTA partners at the same event.

Despite the bloc-to-bloc FTA framework, the different stages of development among Asean members has led the EU to push forward talks with individual countries that are better prepared to talk. It wants to fast-track bilateral deals with Thailand, Singapore and Brunei.

"Asean countries are not on the same level, so there must be flexibility," she said. "Asean is supposed to have solidarity, but in practice there is no solidarity. So, not all 10 members of Asean can be part of the deal."

Others can join later.

The latest approach follows five rounds of talks between the two regional blocs that started in April 2005 and have made little progress.

When asked what the EU expected from Thailand, Singapore, and Brunei in the near future, Nikolay said: "We would like to see the exchange of offers [within Mandelson's term], and we will work from there."

The most advanced free-trade talks between the EU and an Asian country involve South Korea. Progress has been slow with India, because of its political complication and lesser experience in bilateral dealings - even compared with Asean, Nikolay said.

Other Asean nations are lagging behind for different reasons. Vietnam, because it is busy with its own economic problems, particularly inflation, and also "digesting" its agreements with the World Trade Organisation. The Philippines still "needs some time" before entering further talks. Malaysia is facing a challenging political situation that needs to be managed. Indonesia is waiting for general election results. And Cambodia, despite its big potential, still has much to learn.

The EU expects its first bilateral negotiations with Thailand under the Asean-EU framework later this month. It began similar talks with Singapore a few weeks ago.

Regarding Thailand's political turmoil, Nikolay said despite a lot of "shaking up", Thailand's trade policy and senior trade officials had not changed much. She hopes the Thai government will soon stabilise.

As well as the challenges faced by other Asean countries, the regional grouping's diplomatic ties with the EU have long been strained by Burma's poor human-rights record, including the continued detention of democracy icon Aung San Suu Kyi.

Asked to make a "best bet" on how long she believed it would take all Asean countries to conclude a regionwide agreement, Nikolay said it could be achieved in five to seven years. This differs from an earlier view expressed by Gabriel Munuera Vinals, the head of economic, political and trade affairs for the delegation of the European Commission in the Philippines. In April, he said the EU "hoped to be able to conclude the agreement with Asean in 2009".