EU launches FTA negotiations with Singapore and Vietnam

The EU has launched and concluded FTA negotiations with Singapore (see legal texts here) and with Vietnam (see legal texts here) with the objective to create new opportunities for businesses from both sides including the building of economic foundations for further strengthening of trade ties. 

Currently the European Union is Singapore's largest trading partner and foreign investor and bilateral trade in goods and services exceeded €55 billion in 2008. Meanwhile, Singapore is the EU's foremost trading partner among the Southeast Asian countries and about one third of EU-ASEAN trade is with Singapore.

According to the new EU Trade Commissioner, Karel De Gucht besides trade, bilateral investment ties are robust and the investment relationship is two-way with Singaporeans working in the pharma business, maintaining aircraft or selling financial services benefit from the presence of European investors in Singapore, where some 3400 EU companies have set up subsidiaries. The EU Commissioner is also keen to further promote the EU to investorstof Singapore, including Sovereign Wealth Funds. For the EU, Singapore represents a growing market for exports and investments, as well as a crucial link to the wider ASEAN region.

EU-Vietnam annual bilateral trade in goods amounted to almost € 12 billion in 2008, and trade has increased 12% annually during 2004-2008. Within ASEAN, Vietnam is the EU’s fifth largest trading partner. Vietnam has seen rapid economic and social transformation over the past decade. Vietnam is a good example of an economy successfully opening up to trade and investment and lifting millions of people out of poverty. Vietnam is today one of the fastest growing and dynamic economies in ASEAN. GDP growth averaged almost 8% during 2003-2008. Even through the global economic downturn in 2009, Vietnam recorded a respectable growth rate of almost 5%.

EU’s total trade with Asia last year amounted to €730 billion, compared with €426 for the combined NAFTA countries. Notwithstanding Asia's growing economic success, today, Europe too has predominant role in the world economy. Out of a world GDP worth €41 trillion, the EU's €12.5 trillion economy (compared with China's €3 trillion) is the world's largest. The EU is also the largest importer and exporter, as well as the main source and destination of foreign direct investment. Over the last twenty years Europeans created a Single Market, a common currency and a border-free travelling area and integrated 12 mostly former communist economies, bringing the EU's total population to 500 million, a similar proportion to ASEAN. It is important to note that, last year, the EU initialed an ambitious free trade agreement with Korea.

The EU has also initialed EPAs with African and Caribbean countries. However the trade and investment flows between the EU and Africa, Caribbean and Pacific regions hardly matches those of the ASEAN- EU regions and importantly the investment flows are not necessarily two way. Furthermore Africa’s exports to Europe have been steadily declining over the past decades and it is not clear how the new agreements will stimulate increased exports from Africa. It is widely recognized that there have been many concerns about certain provisions in the EPAs and it remains to be seen if the full comprehensive agreements will substantially revise the areas of concern and hence reflect the severely asymmetric relationship.