EU – ASEAN : Prospects for a Free Trade Agreement

In the wake of the financial crisis of 1997-98 there has been a clear shift in a number of Southeast Asian countries towards the development of Free Trade Agreements (FTAs). ASEAN as a group has concluded FTAs with China and Korea, and it is still negotiating with Japan and India. In addition individual countries (Singapore, Malaysia, the Philippines and Thailand) have begun bilateral FTA negotiations with Japan as well as with other non –Asian partners. At the same time, major changes have affected the EU’s external economic strategy. First, the EU is getting increasingly aware of the need to revamp its economic strategy towards East Asia. Moreover, it is now widely accepted that Europe may enhance its bilateral economic arrangements in parallel to interregional as well as wider multilateral endeavors. The combination of these two moves has led to the definition of a new European trade strategy focusing on priority trading partners, with ASEAN as a potential candidate. The objective of the paper is to assess the chances for the achievement of a FTA between ASEAN and the EU. The paper starts with a brief overview of the bilateral trade and investment relations. As a next step it examines the scope for a further expansion of trade and investment relations and the potential impacts of a FTA, using the results of quantitative assessments conducted so far. A final section takes stock of existing FTAs negotiated on both sides and examines the feasibility of a bilateral FTA based on an assessment of the consistency of the two parties’ policies.