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UK-ASEAN Dialogue Partnership Paves Way to Potential Future Trade Accord

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UK-ASEAN Dialogue Partnership Paves Way to Potential Future Trade Accord

Since its exit from the European Union, London has moved swiftly to deepen its relationship with a fast-growing region.

UK-ASEAN Dialogue Partnership Paves Way to Potential Future Trade Accord

British Foreign Secretary Dominic Raab takes part in a virtual ceremony announcing the formation of the U.K.’s dialogue partnership with the Association of Southeast Asian Nations (ASEAN) on August 5, 2021.

Credit: Twitter/Dominic Raab

Since leaving the European Union, the government of the United Kingdom has pivoted toward Southeast Asia and its regional bloc, the Association of Southeast Asian Nations (ASEAN), recognizing it as one of the key dynamic economic regions of the world. The U.K.’s new partnership with ASEAN fosters an environment supportive of increased trade flows, secure supply chains, expanded cross-border investments, and generally sustainable development.

Other initiatives are also aimed at establishing a long term strategic program of mutual economic support across a wide range of important sectors. In light of this extensive cooperation, it raises the question over whether one of its principal objectives is in ultimately forging a U.K.-ASEAN free trade agreement – an accord which has eluded most major Western economies thus far.

Over the last couple of years, the U.K. has been engaged in a comprehensive and detailed plan of action in developing economic and political relations with ASEAN. This has been undertaken in multiple graduated stages, beginning with the negotiation of EU continuity agreements with Singapore and Vietnam, which have since evolved into new more advanced trade partnerships involving data and digital services and other aspects of greater trade facilitation. The U.K. is also carrying out trade reviews with Indonesia and Thailand to conclude potential bilateral agreements, while discussing market access to Malaysia.

As part of a broader regional trade initiative, the U.K. launched accession negotiations with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) trade pact, which brings together 11 Asia-Pacific nations, including the four ASEAN states of Singapore, Vietnam, Malaysia, and Brunei. These states could be key players in supporting Britain’s bid to become the first country to join the CPTPP since its founding in 2018.

Perhaps somewhat less prominent on the radar has been the U.K.’s success in establishing an economic and political partnership of dialogue with ASEAN, which was officially launched last month. The agreement was notable being the first such partnership ASEAN has concluded in a quarter century, following partnerships with China, India, and Russia, after which the bloc froze further discussions on similar arrangements.

The inaugural ASEAN Economic Ministers and U.K. Consultation was held on September 15, involving Liz Truss, the U.K.’s Secretary for Trade, and Amin Liew Abdullah, Brunei’s Minister for Finance and Economy. Various intergovernmental talks under the auspices of the partnership will focus on establishing close cooperation on issues such as securing mutual supply chains, investment protection and cooperation, the reform of international trade organizations, enhancing environmental protection, expanding cooperation in science and technology, and expanding educational opportunities.

“Along with CPTPP accession and deals with countries like Singapore and Vietnam, these ongoing discussions will help unlock opportunities for British businesses in a high-growth region of more than 650 million people,” Truss stated at the conclusion of the first dialogue.

The U.K. and ASEAN’s bilateral trade in goods and services amounted to over $52 billion in 2019, while the stock of U.K. foreign direct investment in the regional bloc totaled $36.5 billion in the same year. However, two-way trade fell to $46.1 billion in 2020, under the impact of the COVID-19 pandemic.

In response to what is likely to only be a temporary downtrend in bilateral trade, both sides affirmed their commitment to develop mutual trade relations in accordance with the principles of an open, free, inclusive, transparent, rules-based, and non-discriminatory multilateral trading system.

They also agreed to refrain from introducing any unnecessary measures which may adversely affect the exchange of goods, services and/or investment and in ensuring transparency of all trade related measures and that this was in line with their World Trade Organization (WTO) commitments.

Both sides recognized the importance of the multilateral trading system centered on the WTO in driving economic recovery in the post-pandemic period and agreed to work together for a stronger multilateral trading system. They also noted the challenges faced by the WTO to reform the organization ahead of the 12th WTO Ministerial Conference at the end of this year.

To address business issues, especially micro, small, and medium enterprises (MSMEs), a U.K.-funded OECD report was set into motion last year to address intellectual property concerns of individual inventors and investors in order to develop an inclusive and conducive environment in ASEAN for IP rights to be protected and effectively monetized.

The research would also help fulfil the competition related vision of the ASEAN Economic Community Blueprint 2025 and thereby contribute to the ASEAN Secretariat’s mission of attaining a level playing field for all firms through effective competition policy.

In recognition of the importance of investing in sustainable and resilient infrastructure to support post-pandemic recovery, both sides have also committed to deepening collaboration on sustainable infrastructure, innovation, research, and development of technologies under the Master Plan on ASEAN Connectivity (MPAC) 2025.

This will be particularly focused on cooperation over sustainable green infrastructure development constituting a key focus of the development of “smart cities” across the ASEAN region, a policy which the U.K. and Thai governments, along with the involvement of 100 UK businesses, have already activated in the form of building smart cities across Thailand.

The U.K. and ASEAN will share information on the development of financial technology, or FinTech,  in the ASEAN region, including the pursuit of capacity building initiatives in FinTech for ASEAN officials and stakeholders, particularly MSMEs, focusing on priority areas for ASEAN.

During the Economic Ministers and U.K. Consultation, both parties  affirmed the need to build a greener and more sustainable global economy, in line with the objectives of the Paris Agreement and leading up to, and beyond, COP26, which the UK will host in November 2021.

They also endorsed joint action to increase momentum toward a net-zero future. The U.K.-ASEAN Race to Zero Dialogue, which kicked off earlier this year, will focus on non-state actors becoming net zero by 2050; while both sides will commit to furthering engagement on sustainable infrastructure, particularly through support of the MPAC 2025.

Overall, both sides will engage in an acceleration of energy transition efforts towards ensuring sustainable and low carbon supply chains and mainstreaming nature, biodiversity, and climate into economic decision-making. In meeting these objectives they will explore opportunities for cooperation to further develop relevant international standards to facilitate these commitments.

One should bear in mind that the U.K.’s new partnership with ASEAN effectively replaced the dialogue status it had through the EU-ASEAN partnership. The speed with which the U.K. renewed its arrangements with ASEAN and the partnership’s process of extensive dialogue and promise of mutual support will support any British efforts to press for a free trade agreement with ASEAN, something the EU has not successfully managed since negotiations with the Southeast Asian bloc commenced in 2007. Certainly, the depth of detail and constructive intensity which the U.K. has engaged ASEAN in certain sectors establishes a solid platform from which to approach a modern trade agreement with ASEAN, beyond membership of the CPTPP and further possible bilateral accords with regional countries.

Guest Author

Andrew Hood

Andrew Hood is partner at Fieldfisher LLP specialising in EU trade, regulatory and public affairs. He was previously a lawyer and negotiator for the UK government including General Counsel in 10 Downing Street advising on a broad range of domestic and international policies.

Guest Author

Bob Savic

Bob Savic is partner at ApacEuroTrade LLP advising on Asia-Pacific trade strategies and customs regulations. He has worked and lived in Southeast Asia, China and Japan for over 25 years - a region he has also written extensively on, including his upcoming book "The Re-Emergence of China - the New Global Era.”