Free-trade pact with EU faces delay

The conclusion of a free-trade agreement between the European Union and Asean could be delayed until 2010 due to the different stages of development among Asean members.

So far, the talk is moving slowly due to different interests of both sides. Some sensitive issues on protection of intellectual property have spawned a gap between the more developed countries that are ready to sign the trade deal and those who are not.

"The EU is trying to conclude the talks with Asean as a whole. However, the timeframe of the pact could slip to 2010 due to the slow progress of the talks with some individual Asean countries with different interests," said a senior official of the delegation of the European Commission to Indonesia and Brunei based in Jakarta.

The delay in the Free-Trade Agreement (FTA) negotiation with Asean would impact the EU's competitiveness as Asean is set to wrap up the comprehensive FTA covering trade in goods, service, and investment with China and Japan soon, which are the EU's major trade rivals with Asean.

Earlier, the EU had expected to conclude the agreement with Asean by next year at the latest. The EU is Asean's second largest trading partner, while Asean is the EU's fifth largest trading partner.

Based on total trade, 6 per cent of EU imports and 4 per cent of exports are with Asean. The EU is the largest source of foreign direct investment in Asean after Japan.

The EU has invited all individual Asean member states to further talk individually with it since the latest round of negotiation.

However, only three countries are ready to sign the FTA with the EU. These are Thailand, Singapore, and Brunei.

To ensure its competitiveness, the EU is moving forward talks with individual countries.

This would help ensure that the EU would be able to move forward the agreement and maintain its competitiveness, despite Asean concluding free-trade pacts with other trade rivals.

The talk with those three individual countries will still come under the umbrella of theAsean-EU FTA.

The seventh round of the Asean-EU negotiation will be held in Kuala Lumpur in March next year. The first six rounds of the talks moved slowly due to the protectionism of Asean individual countries as well as different economic conditions between the EU and Asean.

If the two regions can achieve the pact, it would help ensure a level playing field for EU as Asean has conducted many bilateral talks with other countries, said the source.

According to a feasibility study, the Asean-EU FTA will help increase by at least 2 per cent the GDP in 2020 of Asean countries under all scenarios , and three-fourths of the benefits from services will go to Asean countries.

Asean is expected to sign three free-trade pacts, with China, India, and Australia and New Zealand during the Asean Summit in Chiang Mai next month.

However, Thailand is considering postponing the summit due to the  domestic political unrest.