British Foreign Secretary visits ASEAN to seek trade deals

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British Foreign Secretary Liz Truss is on a visit to ASEAN as she tries to strengthen British trade ties with South East Asia. The UK has already concluded trade deals with Singapore and Vietnam and is getting closer to Thailand and Indonesia.

What London is really looking for is access to the 10 ASEAN members in total (Brunei, Cambodia, Indonesia, Laos, Myanmar and Philippines, Singapore, Thailand and Vietnam). Brunei, Malaysia and Singapore are members of the Commonwealth.

The agendas differed slightly during the meetings. the meeting in Kuala Lumpur with Malaysian Foreign Minister Saifuddin Abdullah, on maritime security (read: sales of warships) and free trade (read access to ASEAN). The UK’s current bilateral trade with Malaysia will reach around £ 5 billion ($ 6.7 billion) this year. To put this in context, UK trade with Luxembourg and Finland is higher. Obviously, a lot of work needs to be done.

In Indonesia, Ms Truss also met with Indonesian Foreign Minister Retno Marsudi on trade and political issues, including the situation in Myanmar, and oddly, given that it is in another part of Asia, Afghanistan. Although ASEAN, as a bloc, is an observer state to the Shanghai Cooperation Organization, de facto military cooperation is now trying to keep a lid on issues with China, India, Russia and Pakistan as well as the Central Asian countries of Iran, Turkmenistan, Kyrgyzstan and Uzbekistan.

Counterterrorism and cybersecurity were also discussed with ‘Build Back Better World’ – the UK Foreign Office acting as marketing specialist for Joe Biden. Britain’s trade with Indonesia, a country of 275 million people, currently stands at just £ 4 billion (US $ 5.3 billion). This is just slightly above the UK’s current trade with Cyprus.

Ms Truss also traveled to Bangkok, where she met Prime Minister Chan-o-cha and Foreign Minister Don Pramudwinai to discuss digital technology and technology investments. The UK’s current bilateral trade with Thailand is also around £ 5 billion (US $ 6.7 billion). Interestingly, this is roughly the same amount as the value of the shares Elon Musk just sold in his Tesla EV company.

It remains true that EU membership has diverted London from developing its trade relations in a way that it perhaps should have done had it remained outside the EU. However, progress will be difficult. The EU, with a collective consumer market of around 450 million, will always be a bigger and more attractive proposition than the UK’s 68 million. Nonetheless, bilateral trade volumes between the UK and ASEAN, and in particular with Commonwealth countries like Malaysia, have been allowed to decline. The good news is that there is room for expansion.

UK and CPTPP

That brings us neatly to a question apparently posed to Liz Truss this week, where (courtesy of the Beijing to Britain blog).

Conservative politician Daniel Kawczynski asked, “What steps are being taken to (a) reduce reliance on China for the manufacture of system critical components for UK national infrastructure projects and (b) source components instead of members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership? ”(CPTPP).

We can answer that for the member of Shrewsbury & Atcham. It all really boils down to existing business influences and cost dynamics. The CPTPP includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The UK has applied for membership and could do so at the end of 2022, possibly 2023. It is also worth mentioning that only 8.7% of the UK’s current total trade is conducted with CPTPP member states.

First, the UK already has de facto free trade agreements in principle with Australia and is renegotiating as a priority with Canada and New Zealand. They are the UK’s largest trading partners among CPTPP countries. Negotiations are also underway with Mexico.

The UK has also concluded FTAs ​​with Chile, Japan, Peru, Singapore and Vietnam, meaning only Malaysia is currently out of the loop, although Liz Truss’ visit last week may change. that.

The CPTPP FTA differs from existing FTAs, however, especially with regard to certain quality standards.

As for China (which has also applied to join the CPTPP), it has an FTA with Australia, Brunei, Chile, Indonesia, Japan (part of January 1, 2022, RCEP FTA) Malaysia, New Zealand, Peru , Singapore, and Vietnam. The only CPTPP member that the UK does not have an agreement with is Mexico.

Then there is the question of understanding “critical infrastructures” which tend to mean increasingly high-tech infrastructures but which could also be extended to roads, railways and ports. In the fields of high technology, Japan would be an obvious partner but it should be noted that the production costs are considerably higher than the purchase of Chinese equipment.

Japan is also on the verge of concluding the Comprehensive Regional Economic Partnership (RCEP) agreement with China, as are Australia, Brunei, Indonesia, Malaysia, New Zealand, Singapore and Vietnam. So, to escape Chinese influence in the manufacturing sector, one option would be Mexico as a member of the CPTPP.

But negotiations between China and Mexico, however, are also ongoing and started in 2017. While Mr. Kawczynski continues to wish to explore a non-Chinese component of critical infrastructure construction in the UK, the answer is not. not found in Asia – it lies in making the right British investments in Africa through the Commonwealth of Nations and forming African companies to build what the country needs. This is exactly what China pursues to serve its own markets.

Summary

The UK remains stuck between a rock and a hard place when it comes to South East Asia. Among the ASEAN nations with which it is so keen to develop trade relations, two are communist nations, two are elective monarchies, one an absolute monarchy, one a military dictatorship, and only four apparent democracies. Of these, the ruling parties are the only party since 1959 (Singapore) with Thailand subject to regular military coups (two since 2006) and only the Philippines with a seemingly functional, albeit noisy, politically functioning democracy. . While collectively they function like ASEAN, individually they are very different. Yet London has apparently cut funding for the UK-ASEAN Business Council.

Ties with ASEAN on the ground remain strong in terms of UK companies on the ground in the region. Shortening and getting to where Liz Truss apparently would like UK businesses to be in ASEAN would have to involve some sort of strategy to use existing UK investments as a way of partnering with local businesses and other UK businesses to help. to stimulate British society in the region. Only then can relatively small amounts of existing bilateral trade be motivated to expand. The UK government should ‘buy’ into what is already on the ground and launch UK development strategies through UK business interests in ASEAN, big and small. Progress could then be made.


About Us

ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and has offices throughout ASEAN including Singapore, Hanoi, Ho Chi Minh City and Da Nang in Vietnam, Munich and Esen in Germany, Boston and Salt Lake City in the United States, Milan, Conegliano and Udine in Italy, in addition to Jakarta, and Batam in Indonesia. We also have partner firms in Malaysia, Bangladesh, the Philippines and Thailand as well as our practices in China and India. Please contact us at [email protected] or visit our website at www.dezshira.com.


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