Warwick ASEAN Conference

UK-ASEAN Trade: Which Way Forward?

Disclaimer: Warwick ASEAN Conference would like to clarify that all opinions expressed in this article are the authors’ and editors’ own.


At present, the UK negotiates trade terms with other parties through the European Union (EU). After its departure from the EU, however, it will have to begin negotiating deals independently, without the EU’s backing. In line with its “All of Asia” strategy, the UK will seek to further its relations with Asian states, including the ASEAN economies. Broadly speaking, it may choose to focus on either bilateral and/ or multilateral approaches. However, given the constraints on its resources, it may be necessary for the government to decide how it will prioritise its engagement efforts.

Multilateralism – the silver bullet?

Intuitively, multilateralism may appear to be a more convenient method of establishing a free trade agreement (FTA) with ASEAN members as it will represent an agreement by all parties on trading terms that can be mutually beneficial. Such an agreement would immediately provide Britain with access to Southeast Asia’s (SEA) market, which is set to become the fourth-largest economy in the world by 2050. Home to more than 600 million people, SEA is also the fourth-largest exporting region in the world, accounting for 7% of global exports. However, as it would take several rounds of negotiations before a consensus can be reached, the effects of a trade deal are not actually ‘immediate’. Beyond that, there is a major roadblock preventing the UK from negotiating with the ASEAN bloc — whether or not it can even be allowed to establish an FTA with ASEAN is contingent on it being able to secure Dialogue Partner status. However, ASEAN has had a moratorium on Dialogue Partners since 1999, and it would take plenty of convincing for it to make an exception for the UK. It is also worth keeping in mind that a previous attempt at establishing an ASEAN-EU FTA was paused due to the heterogeneity of ASEAN members, and getting past these differences would be key to making any progress on a bloc-level agreement with ASEAN.

On the other hand, pursuing bilateral ties with ASEAN states may prove to be a slightly less daunting task for the UK. One possible trade-off lies in that negotiating with individual countries may require greater resources, and raises questions such as whether the UK should appoint a dedicated Trade Commissioner to ASEAN. The other side of the coin includes flexibility for the UK to focus on countries it has greater interests in. It would be able to tailor terms to suit individual needs, potentially also leveraging on existing progress made by the EU with ASEAN members such as Singapore and Vietnam. Another important plus point is that engaging with states on a bilateral basis would not require it to overcome the policy obstacles associated with bloc-level talks, at least in the short-term. Furthermore, strengthening bilateral ties is also viewed as a starting point from which further developments can be made in its relations with the collective Southeast Asian body.

Reservations on Bilateralism

The argument in support of a focus on bilateralism is not one-dimensional, however, and considerations that must not be ignored include the fact that it would be presumptuous to assume ASEAN would be willing to negotiate with the UK at a level desired by the latter. Britain’s primary export to SEA is its financial services, but the Asian Financial Crisis has made it wary about allowing unbridled access to foreign players. Almost 60% of 1996 private capital flows to the Asian Five were from foreign commercial banks. Inflows of USD56 billion that year turned into outflows of USD27 billion in 1997 – flighty behaviour which, combined with collapses in Asian currencies and loss of confidence in the region, resulted in economic chaos. ASEAN members may hence prefer to retain policy and regulatory space in the financial sector, and reasonably so. Political issues could also limit the willingness of certain countries to participate in trade talks with the UK. An example of this is Myanmar, whose attitudes towards the Rohingya crisis has been openly criticised by the UK.

Clearly, there is no one option that proves to be overwhelmingly better than its alternative, and perhaps the best way forward for the UK would be a calculated balance between both bilateral and multilateral approaches. It would also be helpful to view its deepening of relations with ASEAN on a timescale, and demonstrating a genuine interest to be involved with the region would be to its benefit as well. After all, a large determinant of success would also rest on the quid pro quo — in other words, what the UK will be willing to offer in exchange for the benefits it will reap from a deal.

Cover Illustration by Cytonn Photography


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