Can Burma Re-Open Asean Free Trade Talks with EU?

From pariah state to pivotal partner in the Association of Southeast Asian Nations (Asean)—that’s the emerging view among many members states who see a liberalizing Burma as holding the key to better access to markets outside the region.

The despotic Burma military regime, which has recently spirited itself away, was the chief reason why negotiations between Asean and the European Union (EU) on a free trade agreement soured several years ago and were eventually suspended.

The new liberalizing government in Burma, although still viewed with some suspicion both inside and outside the country, is now seen by many of the 10 Asean nations as a beacon for its European-style single market ambitions.

“There is cause for optimism, but is Myanmar ready for business and investment?” said Simon Tay, of the Singapore Institute for International Affairs, in a recent analysis paper.

“Can the country follow up on its current political reform with parallel reforms to the economy and boost the country’s development?”

Wandee Thanalertvisut, director of logistics at Thailand’s Department of International Trade Promotion, has no doubts that the changes in Burma will not only open the door to renewed talks with the EU on trade, but that the nation's resources will benefit the wider region.

“[Burma] is rich in raw materials of precious stones, gas resources and agricultural products that will help Asean become a major [provider] of products made of these materials,” she said during a trade fair in the Philippines last week.

“Asean countries should strongly link together to complement the needs of their respective economies and prepare for a single market economy by 2015,” said Wandee.

Just as Burma once halted Asean trade liberalization talks with the EU, so now it could bring the Europeans back, she told the Philippines’ Business Mirror newspaper.

But will the EU come back quickly to the free trade agreement (FTA) table?

An EU team was recently in Phnom Penh to promote trade policy training with a US $3 million grant and said that Brussels “still believes that a region-to-region FTA makes political and economic sense in the long term and the strategic objective of concluding an agreement with Asean as a region is retained.”

The EU is the largest destination of exports from Asean, with shipments valued at more than $113.8 billion in 2011.

“Asean’s engagement with both the EU and the United States has suffered over the issue of Burma,” wrote senior researcher Gareth Price in a recent report for the London think tank Chatham House.

“If Burma was to normalize, this would enhance Asean’s ability to engage more deeply with the West. Consequently, and unsurprisingly, Asean has been among the first to argue that the [Burmese] election and subsequent release of Aung San Suu Kyi demonstrates that Burma is making progress, and that sanctions should be lifted.”

Singapore-based trade lawyer Edmund Sim, a specialist in Asean affairs, writes in a current blog, “Asean does not consider EU-Asean free trade agreement talks to be ended, merely suspended.”

After halting FTA talks with Asean as a whole, Brussels set out to reach deals with individual member countries. First up for a one-to-one pact is Singapore, but “Asean members still want a broader agreement,” said Sim, a one-time adviser to the regional bloc.

Thailand’s desire to tap deeper into Burma’s riches—it has for years been the biggest buyer of Burmese gas—comes as the UN Development Program (UNDP) warns against the risks of corruptly obtained “sweetheart deals” by some foreign firms eager to do business in Burma.

“There are businesses and people coming in droves and the worry is that there will be these sweetheart deals,” said UNDP administrator Ajay Chibber after visiting Rangoon.

This is certainly a major problem facing Burma where the rule of law and financial transparency is rudimentary at best. It is not a problem that is confined to Burma, however.

“Despite the adoption of a charter by Asean, the rule of law in the grouping is still more aspiration and ideal than reality,” says Barry Wain, writer-in-residence at the Institute of Southeast Asian Studies in Singapore.

“Since its founding in 1967, Asean has preferred what has become known as the 'Asean way'—informality and loose arrangements rather than treaties and formal agreements, consensus and dependence on personal relations among leaders, ministers and officials.

“There is a disturbing lack of interest, or self-delusion, about the absence of the rule of law regionally,” said Wain in a paper.