Home European Union Trade as a means to bolster the EU’s influence in the Indo-Pacific

Trade as a means to bolster the EU’s influence in the Indo-Pacific

By
Pieter Cleppe
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Copyright: Cacahuate, amendments by Peter Fitzgerald, Globe-trotter, Joelf, and Texugo, see page for license, via Wikimedia Commons

Last year, the EU agreed its “Strategy for cooperation in the Indo-Pacific”, with the intention to “contribute to the region’s stability, security, prosperity and sustainable development, in line with the principles of democracy, rule of law, human rights and international law.” Observers however do not think that this will hand the EU a lot of influence in the region, which is becoming ever more important. This is especially the case after the creation of AUKUS, a new Indo-Pacific alliance between the United States, the United Kingdom and Australia, which saw Australia scuppering a multibillion-dollar submarine deal with France, pursuing closer military cooperation with the U.S instead.

Also economically, however, a lot has happened during the last decade. In 2017, U.S. President Donald Trump withdrew the United States from the so-called “Trans-Pacific Partnership” (TPP) trade deal, intended as a means to foster closer economic cooperation between the U.S. and Asian partners, clearly in a bid to strengthen them against China. This followed the demise of its Trans-Atlantic counterpart, TTIP, which failed due to excessive protectionist sentiments both in the U.S. and in Europe. At least TPP survived without the U.S., as the remaining countries agreed on a new trade deal, called Comprehensive and Progressive Agreement for Trans-Pacific Partnership, incorporating most of the provisions of the TPP, entering into force in 2018. The United Kingdom is currently negotiating to join the agreement.

Biden’s IPEF

Meanwhile, with the election of a new American President, new U.S. initiatives have been taken, following calls by countries across the Indo-Pacific upon U.S. President Joe Biden to develop an economic strategy to help counter China, with critics accusing the U.S. of having an “all guns and no butter” strategy, whereas China is exploiting its economic clout to exert influence in the region.

Last month, the so-called Indo-Pacific Economic Framework (IPEF) was launched in Tokyo, during Biden’s first official trip to Asia. The U.S. are struggling to convince countries to join, with some of them, particularly India, suggesting that there isn’t much value for them in it, given how IPEF will not include access to the US market. Apparently, such market access may come up for negotiation, however.

IPEF’s four pillars revolve around “Fair and resilient trade”, “Supply chain resilience”, “Infrastructure, clean energy, and decarbonization” as well as “Tax and anti-corruption” issues. The idea is also to conduct discussions on creating a digital trade agreement, which is something particularly important to Japan.

The latest development is that India is now looking again at joining IPEF after all. Notably, India decided to stay out of a China-led initiative, the Regional Comprehensive Economic Partnership (RCEP), which entered into force on January 1st 2022 and includes Japan, South Korea, Australia, New Zealand and the 10 Southeast Asian nations, which makes it the world’s largest free trade pact. Arvind Virmani, the former chief economic advisor to the Indian government has explained that India refused to join because “China agrees to everything on paper, but has no compunctions about evading rules in practice.”

The EU’s actions

Interestingly, meanwhile, the EU is stepping up its engagement in the region, not only coming out with a joint EU-Japan stance on a territorial dispute between China and Japan but also agreeing to launch a joint EU-India “Trade and Technology Council”, which will focus on topics like 5G and artificial intelligence, as well as deepening cooperation in trade and security.

Trade negotiations between EU and India have been effectively suspended since 2013 after a disagreement over market access, with the EU particularly complaining about India’s 125 percent car tariffs. The new initiative should refuel relations, while behind the scenes, despite the bluster, India is also slowly shifting away from Russia.

One country in the region which is particularly engaged in a balancing act between China and the West are the Philippines, where Bongbong Marcos has just been elected as the country’s new President. The EU’s ambassador to Manila, Luc Véron, has stated that he is confident that the EU-Philippines relations “will deepen” under the Marcos administration, announcing that Marcos will be invited to attend the 45th anniversary of EU-Asean (Association of Southeast Asian Nations) relations in Brussels in December. President-elect Bongbong has made a clear effort to court the international community in the month following his election, to reassure foreign policy analysts and markets alike that the Philippines are on the right trajectory.

According to experts like Andrew Yeo, a senior fellow at the Brookings Institution, “fears of a Marcos government courting China are overblown”, noting that “unlike [former President] Duterte, who openly expressed his personal disdain for the United States and admiration for Xi Jinping early on during the 2016 campaign, Marcos has simply acknowledged, albeit in very few instances, the importance of the Philippine-U.S. alliance and the country’s renewed partnership with China.”

In this respect, it is also important to mention that in the end, Duterte realigned Manila with the United States, also because of China becoming ever more assertive in the South China Sea. Bonbong has said he will uphold an international ruling against Beijing in order to protect the maritime rights of his country.

Three years ago, the EU managed to secure a free trade agreement with Vietnam, that other regional player which is annoyed about China’s territorial claims in the South China Sea. Perhaps the next move could be for the European Union to reinvigorate negotiations on an EU trade deal with the Philippines. These were launched in 2015, but they have unfortunately stalled. It is a country composed of 111 million people, which witnessed a solid annual economic growth rate of around 5 percent during the last two decades. For the EU, trade really should be the chosen means to bolster its influence in the Indo-Pacific. Ultimately, whoever is in charge in the Philippines or any other country in the region, will always side with close trade partners, when having to choose.

 

 

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