Doha must wait in wings as bilateral deals grab limelight

EU and Asian leaders meeting at the Asia Europe Meeting (ASEM) in Helsinki (10-11 September) are expected to join forces in calling for a revival of negotiations on a new trade round at the World Trade Organization (WTO). Notable though this show of support might be, however, the spirit of multilateralism is unlikely to prevail. Bilateral negotiations are back in vogue and the race is on to tie up those deals that had previously taken a back-seat to the Doha round.

The sense of urgency is particularly acute given speculation that the US may push for an Asia Pacific free trade area (FTA) including members of the Asia Pacific Economic Co-operation forum such as China, Singapore and Japan. "Clearly we know roughly what the Americans will do. The question is what the EU will do," says David Kernohan, head of the trade policy unit at the Centre for European Policy Studies, a Brussels-based think-tank.

The first deal in line for the EU could be with South Korea given the parlous state of its negotiations with the US. Last week (23 August), Minister of Commerce, Industry and Energy Chung Sye-kyun clearly indicated that South Korea could choose the EU as a primary negotiator for an FTA if talks with the US, launched last February, are subject to further delays. Up to now, closer co-operation on trade between the EU and South Korea has been hampered by regulatory and market access issues, but a deal would make sense. The EU is the second most important export market for South Korean goods after China and its largest investor representing 31% of foreign capital, while South Korea is the EU’s fourth largest trading partner. Leaders are to meet next week at the EU-Republic of Korea summit (9 September) which precedes ASEM.

Progress on bilateral talks with the Association of South East Asian Nations (ASEAN) is dependent on tighter integration within the region. Plans to create cross-border agencies are still at blueprint stage. Ambitious plans to accelerate the creation of a single market to attract more foreign investment into the region could be frustrated by the lack of institutional glue binding the economies, which include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Trade talks between the EU and ASEAN take place under the umbrella of the Trans-Regional EU-ASEAN Trade Initiative (TREATI), a programme launched in 2003 as a means of exchanging experience on integration and developing regulatory commitments. The framework could eventually pave the way for talks on an FTA depending on progress with integration. In 2003, EU-ASEAN trade represented 5.8% of total EU trade, while the EU accounted for 14% of ASEAN trade.

India, which proved to be a prickly negotiator during WTO talks, is a potentially important trading partner for the EU. Despite its burgeoning economy it still accounts for only 1.7% of total EU trade. Often overlooked in favour of the much-hyped Chinese economy, it also attracts a pitifully small proportion of EU investment. Although a so-called joint action plan to increase trade and bilateral co-operation was adopted by the EU and India last year, the European Parliament has been pushing the European Commission for more concerted efforts to strengthen ties between the two economies. MEPs are set to vote next month (28 September) on a draft report calling for closer co-operation with India. The Indian Prime Minister Manmohan Singh has indicated that he will call for talks on a FTA with the EU at the upcoming EU-India summit on 13 October.

The economy that the EU would be most keen to strike a deal with has been described by Trade Commissioner Peter Mandelson as "the biggest single challenge of globalisation in the trade field". China is the EU’s second biggest trading partner after the US. The EU, ahead of the US and Japan, is China’s first. "Everyone would like one [an FTA] with China, but can this be done quickly?" asks Kernohan.

"The strategic and political aspects are often more important than the economic aspects. Yes, we’d like an agreement with who we do most trade with, but that might not happen," he adds, recognising the massive pitfalls that lie ahead in terms of compliance with intellectual property standards and market access. The EU set up a public consultation on trade relations with China earlier this year aimed at addressing these issues of concern. The EU-China summit also takes place on the eve of ASEM (9 September).

In the run-up to ASEM 6, the key focus for Finland, holder of the presidency of the EU’s Council of Ministers, will remain multilateralism. The EU and the Asian countries will be encouraged to form a united front in voicing their support for the WTO talks that collapsed in a sorry heap of recriminations in July. "We’re talking 38 countries in the EU and Asia. If they could come out in strong support, that would be a significant step internationally. This is where ASEM can have added value," says Jyrki Kallio, a counsellor at the ASEM 6 secretariat of the Finnish ministry of foreign affairs.

But it appears unlikely that support for continuing the multilateral process will be seen as anything more than tokenistic.

EU and Asian leaders meeting at the Asia Europe Meeting (ASEM) in Helsinki (10-11 September) are expected to join forces in calling for a revival of negotiations on a new trade round at the World Trade Organization (WTO). Notable though this show of support might be, however, the spirit of multilateralism is unlikely to prevail. Bilateral negotiations are back in vogue and the race is on to tie up those deals that had previously taken a back-seat to the Doha round.