KUALA LUMPUR: If trade is a powerful tool for economic growth drawing global economic giants – the US and China - to vibrant ASEAN to negotiate free trade deals, it has been all quiet on the Europe front in recent times despite it being the largest investor in the region.
But the European Union (EU) says it is determined to negotiate a region-to-region free trade agreement with ASEAN, building on the bilateral deals that it is currently putting in place with member countries including Malaysia.
EU Trade Commissioner Cecilia Malmström will be making her maiden visit to Kuala Lumpur since she took up the position in Brussels in November last year.
In an e-mail interview with Rupa Damodaran she shares her views about the region, issues which continue to grip Malaysian palm oil exports and how to strengthen trade and investment relations.
What is the EU’s current trade and investment vision for the ASEAN region? What is your government’s strategy with regards to the ASEAN Economic Community? And, your immediate priorities.
The ASEAN region has been and remains one of the top priorities of the EU. I have wanted to visit the region early in my mandate as EU Trade Commissioner to meet my ASEAN counterparts and convey personally my commitment and resolve to strengthen our already solid trade and investment ties.
We have recently concluded a very ambitious bilateral agreement with Singapore and will hopefully soon conclude negotiations for another ambitious deal with Vietnam. We will pursue our strategy to negotiate bilateral comprehensive and ambitious agreements with ASEAN countries that should be building blocks for a bigger, region-to-region agreement.
We will now need to discuss how to pave the way for an ambitious agreement between the EU and Asean. My discussions in Kuala Lumpur have been mostly about that, and I am confident that concrete steps will now be taken to make our trade and investment relations even stronger.
The impression out there is that the EU is not focused on the region. Its top leadership is not making the number of visits as desired, reflecting the lack of engagement.
I disagree with this assessment. The EU remains more than ever committed to enhancing its relations with ASEAN, including by moving towards an EU-ASEAN Strategic Partnership, as agreed by the Foreign Ministers' meeting in July 2014. An overall EU strategy on EU-ASEAN relations is currently under preparation and will be made public in the coming weeks.
Over the last couple of years there have been an unprecedented number of high-level visits by the EU to the region, including former President of the European Council Herman Van Rompuy, former EU High Representative and Vice-President of the European Commission Ashton and a number of EU Commissioners. I have also wanted to visit the region early in my mandate and the EU High Representative and Vice-President of the European Commission Federica Mogherini will do the same soon.
While European companies continue to have a strong presence in the region, government-to-government engagement is left to be desired leaving a large vacuum. Please comment.
Indeed, European businesses understood many years ago that Southeast Asia was the place to be and do business. It is true that our trade agenda has taken some time to pick up the glove, particularly because it was not that long ago that the EU, like many of our partners, started putting a greater focus on negotiating bilateral and plurilateral agreements. Today, the EU has a trade agenda of unprecedented ambition and is pursuing bilateral negotiations with partners around the four corners of the world. Our strong engagement with ASEAN is beyond doubt. As mentioned, we have concluded a free trade agreement with Singapore and negotiations are underway or being prepared with many other ASEAN countries. In addition, we have started negotiations for an investment protection agreement with Myanmar.
Regarding government-to-government engagement, we have a long standing practice of holding yearly Consultations between ASEAN Economic Ministers and the EU Trade Commissioner. It is certainly a tradition that I intend to continue, and I have also proposed that we step up our engagement at technical level. We have also regular bilateral contacts with ASEAN countries.
Do you not fear that the EU could be `displaced’ from this vibrant region which is projected to become the world’s fifth largest economy ahead of Germany by 2020?
When it comes to trade, geography is a factor that is always difficult to surmount. However, the EU is currently ASEAN's third trading partner and first non-Asian partner, well ahead of the US. Bilateral trade in goods and services have hit record values in the last years, reaching €180 billion and €55 billion respectively. Our trade relationship is immensely important.
Foreign Direct Investment is usually a good indicator of long-term commercial engagement. The EU is the largest foreign investor in ASEAN, accounting for roughly one fourth of total foreign investment in the region.
And we expect these indicators to continue improving in the coming years through bilateral free trade agreements that should be stepping stones towards a region-to-region agreement.
Countries in the region are already involved in the TPP and/or RCEP trade pact discussions but Europe is not in the picture. Your view please.
The big number of bilateral and plurilateral negotiations taking place in the region is proof of the attractiveness of ASEAN to partners in Asia and elsewhere.
We follow closely the developments in the region such as the TPP and the RCEP negotiations. The EU being an advocate of free trade, we welcome regional economic integration initiatives that contribute to removing trade barriers and improving the business environment around the world.
The ASEAN integration process has from the very beginning been an open and outward looking process and this is admirable.
Southeast Asia has been very high in EU's trade agenda for decades now. We are determined to negotiate a region-to-region free trade agreement with ASEAN, building on the bilateral deals that we are currently putting in place.
Please give your take on the EU-ASEAN FTA plan – is it still on the drawing board? The EU-Malaysia FTA has been on the back burner for quite a while after it was announced in 2010.
Our bilateral negotiation strategy has started to bear fruit with the agreement with Singapore and good progress is being made in other negotiations. With Malaysia, we started to negotiate a Free Trade Agreement in 2010 with the objective of tackling trade and investment barriers on a wide range of issues of importance to our economic relationship. Unfortunately negotiations were put on hold in mid-2012, due to difficulties in negotiations and the Malaysian elections. The EU shares Malaysia's wish to restart negotiations, but we need to do so on a basis that will allow to quickly conclude an ambitious and comprehensive agreement. This means Malaysia will need to respond to EU expectations in several important areas, including tariffs, services, public procurement, intellectual property rights and export taxes.
Then, as mentioned, we intend to use our bilateral FTAs as the building blocks necessary to work towards an ambitious region-to-region agreement.
Please give your views about China’s new Asian Infrastructure Investment Bank in which three European countries have already said they would join.
China has been very active recently with initiatives aiming at strengthening trade and investment between Asia and Europe. You mention the Asian Infrastructure Investment Bank but there is also the new Silk Road and projects on connectivity under the framework of ASEM (Asia-Europe Meeting).
We welcome the AIIB which responds to an important lack of infrastructure financing in Asia that is hindering its development. The EU expressed openness to work with China on Silk Road when President XI visited EU institutions in March 2014, highlighting that the EU naturally expects all these initiatives to abide by the highest international trade policy standards. Among the 57 prospective founding members of AIIB are 14 EU member states. We think it's important that the new institution follows international, and indeed EU, best practices in terms of governance, transparency and safeguards in areas such as environmental impact and procurement and the EIB is providing technical advice to the AIIB on these issues. We want to work with the AIIB to explore ways in which it can contribute to shared investment objectives in countries of common interest.
Palm oil exporters are crying foul about the defamatory campaign of `No Palm Oil’ or `Palm Oil Free’ on food labels (European Union Food Information for Consumers Regulation) which are hurting the livelihoods of the small and large growers in Malaysia.
The EU is an open and welcoming market for palm oil. EU is Malaysia's third export market for palm oil (after China and India), almost 30 per cent of the EU's palm oil imports come from Malaysia (€1,3 billion in 2014). Forty five per cent of Malaysia's palm oil enters the EU duty free.
The EU does not carry out any "anti-palm oil" campaigns. The "No Palm Oil" campaign is a private initiative and has nothing to do with the EU Regulation of food information to consumers, which aims at informing consumers about what they eat and treats all ingredients, including vegetable oils, in a non-discriminatory manner. This is about informing consumers not about singling out specific products.
Don’t you think they are unfair as they defame the palm oil industry?
The campaigns mentioned are private initiatives by some European brands and retailers. The reason behind this, I would suppose, is to respond to consumer demands and concerns as regards palm oil production. EU consumers are increasingly sensitive to the sustainability and health aspects of the products they buy, be it the cloth they wear or the food they eat. Such concerns are genuinely held, and they are market signals which producers need to respond to. I find it encouraging that a substantial part of Malaysian palm oil production is now certified as sustainable.
Again, on palm oil what are your views about the efforts of sustainable palm oil practices and the difficulties faced by the industry players in securing premiums for their oil exported to the EU.
The demand for sustainable palm oil is primarily driven by market demands and in this respect, different private initiatives (eg. RSPO or Roundtable for Sustainable Palm Oil) are welcome. Any premium paid on sustainable palm oil would of course be determined by market forces. Sustainable sources of energy are also part of the EU's Renewable Energy Directive. EU Member States can, but are not obliged to, promote the use of certified renewable energy sources in order to meet Greenhouse Gas emission targets.
I understand that around 40 per cent of Malaysian palm oil is already certified as sustainable and this is increasing rapidly. Malaysian palm oil producers should therefore be in a good position to benefit from increased demands for sustainable palm oil.
Bilateral trade between Malaysia and the EU is strong but could be better without trade barriers in the export of timber is one comment. What is your response please?
There are no non-tariff barriers to exports of Malaysian timber. However, illegally harvested timber or products derived from illegal logging cannot be imported or sold in the EU. This is part of the EU's commitment to combat illegal deforestation; a commitment I believe is strongly shared by Malaysia. Based on this shared commitment, Malaysia and EU have been negotiating a so-called FLEGT (Forest Law Enforcement, Governance and Trade) Voluntary Partnership Agreement. These negotiations are far advanced and I hope they can be concluded soon. Combating illegal deforestation is an urgent concern.