EU Commission: Indonesia Trade Talks Advance to Text-Based Phase

5 October 2017

Talks between the EU and Indonesia for a free trade accord have advanced to “text-based” negotiations in the majority of areas under consideration, according to a report published by the European Commission late last week.

The EU’s executive branch released an update on this third negotiating round on Friday 29 September, with the talks themselves taking place from 11-15 September in Brussels, Belgium. Negotiators are set to reconvene in Indonesia next year.

The two sides announced just over one year ago their plans to launch trade talks, and EU Trade Commissioner Cecilia Malmström said in March that the planned deal will play a key role in the future engagement between the regions. (See Bridges Weekly, 21 July 2016 and 2 February 2017)

According to EU statistics, the two trading partners currently exchange €25 billion in merchandise trade alone, and the 28-nation bloc is a major source of foreign investment in the Asian archipelago. A bilateral accord between them would cover a market of over 750 million people.

Text-based discussions, plans for market access offers

According to the European Commission, the latest negotiating round saw parties address a host of areas, including government procurement, investment, trade remedies, geographical indications, technical barriers to trade (TBT), and competition policy.

Under the customs and trade facilitation chapter, negotiators signed off on articles involving post-clearance audit and customs brokers, based on texts put forward by the EU and Indonesia over the past several months. Competition policy discussions are also very advanced, according to the EU’s executive branch.

Nevertheless, the EU’s report cited differences in areas such as export duties and remanufactured goods, both of which were raised in the discussions around the bloc’s proposed chapter on goods trade. Other topics requiring more work to reach common ground include energy and raw materials, along with how to address state-owned enterprises.

The EU’s proposal for an Investment Court System (ICS), which is a feature that the bloc has been advocating in its more recent trade deals as an alternative to the past investor-state dispute settlement mechanism, also came up in this month’s discussions. The report notes, however, that reaching agreement in this area will require more work in the coming rounds.

The planned TBT chapter is one of the various areas which saw detailed discussions at the latest round, with a focus on the proposed EU text and suggested alternative language put forward by Jakarta in some areas, such as on its goals for that chapter.

Both parties are also weighing the next steps for a chapter on trade and sustainable development, discussing which environmental and labour issues could form the basis of a final text. The EU tabled a proposed text on these issues in May.

Regarding market access, the two sides are aiming to exchange a first set of offers in goods at their next meeting, though offers in services, investment, and public procurement are not yet expected at this stage.

Region-to-region accord

Indonesia is one of the 10 members of the Association of Southeast Asian Nations (ASEAN), a coalition of countries that together comprise over 600 million people, along with covering a market of over US$6 trillion. The group has been progressively working to deepen the economic ties between them, including through the establishment of the ASEAN Economic Community, and through trade deals with various partners.

The EU and ASEAN have previously explored the option of negotiating a sweeping trade accord between the two respective regions. While the approach has since shifted to the negotiation of bilateral deals between the EU and individual ASEAN members, earlier this year the two sides indicated that they hope to resume the region-to-region trade talks. (See Bridges Weekly, 16 March 2017)

Officials say that the two regions have significant untapped potential when it comes to economic cooperation, with Violeta Bulc, the EU Commissioner for Transport, stating in a September op-ed in the Myanmar Times that connectivity, including through infrastructure, is one of the EU’s priorities in its ASEAN-related engagement.

Business leaders from both sides, under the EU-ASEAN Business Council (EU-ABC), also called for the acceleration of trade talks in a survey released last month, suggesting that failure to do so would create economic disadvantages.

“More than four-fifths (88 percent) of European companies believe the EU should pursue a region-to-region Free Trade Agreement (FTA) with ASEAN, a significant increase on the 66 percent surveyed in 2016, and more than half (55 percent) feel they are at a disadvantage in ASEAN without an EU-ASEAN FTA,” the survey said.

The EU has already negotiated trade agreements with Singapore and Vietnam, though these have yet to enter into force. The bloc has also launched negotiations with the Philippines, Thailand, and Malaysia. The other ASEAN members are Brunei, Cambodia, Laos, and Myanmar.

ICTSD reporting;  “ASEAN and EU must improve connectivity,” MYANMAR TIMES, 27 September 2017.

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