6 Multilateral v. bilateral
trade agreements
62. When we began this inquiry, the World Trade Organisation's
Ministerial Conference in Cancun had recently collapsed in some
acrimony, and subsequent efforts to revive the Doha Trade Round
appeared to be foundering. Partly as a result, a number of countries—in
this region, especially Singapore, but also Thailand—were
turning to the negotiation of bilateral trade agreements as a
way out of the impasse. At the time of our visit to South
East Asia, Singapore had already signed Free Trade Agreements
('FTAs') with Australia, EFTA,[111]
Japan, New Zealand and the USA, and was negotiating further FTAs
with Canada, India, Jordan, Mexico, South Korea and Sri Lanka.[112]
We wished to explore
whether the European Union—which has sole competence for
the negotiation of trade agreements for agricultural products
and manufactured goods, and which shares with the individual Member
States competence for the negotiation of agreements regarding
trade in services — should be seeking to negotiate an FTA
with either ASEAN as a bloc, or with individual countries in South
East Asia.
63. Both the European Union officials to whom we
spoke and UKTI pointed out that the EU had imposed a moratorium
on any new bilateral or regional agreements until the Doha Development
Round had been completed.[113]
(The negotiations with Mercosur[114]
and the African-Caribbean-Pacific countries under the Cotonou
Agreement had already started before the WTO's meeting at Doha.)
The British officials said that, given the strain of handling
several sets of negotiation simultaneously, it would anyway be
very difficult in practice to manage any further negotiations.[115]
64. The UK Government also had severe doubts about
the economic value of bilateral agreements: it was, officials
suggested, questionable whether there was any increase in trade
under agreements between countries at some distance from each
other (in contrast to agreements between neighbouring countries,
which do seem to lead to 'trade creation'). UKTI concluded that
the primary motive for FTAs was political rather than economic.[116]
This was confirmed for us by the Minister
and officials whom we met in Singapore.
65. None of the British or EU officials and none
of the businesspeople to whom we spoke believed it was yet possible
to negotiate a trade agreement with ASEAN. We were told that,
until ASEAN implemented a common external tariff for its members—and
this would not be until at least 2010—then negotiation with
ASEAN as a bloc was impractical. Our witnesses cited the difficulties
the EU was facing in negotiating with Mercosur as a warning.[117]
As a result, the EU had established the 'TREATI' process (Trans-Regional
EU-ASEAN Trade Initiative), which was designed to encourage the
members of ASEAN to suggest sectors for preparatory talks, with
the possibility of discussing an FTA after the Doha Round of negotiations
had finished. The timetable for opening FTA talks would then be
much closer to the date for the introduction of ASEAN's common
external tariff.[118]
One of our witnesses summed
up the present situation by suggesting that currently an FTA between
the EU and ASEAN would be impractical, a severe distraction from
other trade negotiations, and would provide little help to UK
exporters. [119]
We agree. However, we gained the impression while in South East
Asia that the lack of progress in the Doha round was being used
as an excuse for failure to prepare the ground for an EU-ASEAN
agreement. We were disappointed by this.
66. We asked British businesspeople whether they
were concerned that the FTAs already agreed or under negotiation
between Singapore or Thailand and other countries would damage
British business interests; and, if so, whether they wanted the
UK Government to urge the EU to enter into FTAs with individual
countries too. Although we detected some uneasiness in Singapore—based
not so much on experience of British companies losing business
as to on a fear that, for example, American companies might oust
some British firms from their markets[120]—most
businesspeople were of the view that bilateral agreements would
not offer them much, and that, if they detracted from the more
beneficial multilateral negotiations, they could actually be harmful.[121]
67. At present,
the economic gains from FTAs with the individual members of ASEAN
appear likely to be small. Even the most enthusiastic advocate
of FTAs, Singapore, acknowledges that their importance is largely
political rather than economic. Moreover, the WTO negotiations
are now, rather creakily, making progress again, and there is
a consensus that efforts should be focussed on these. However,
it is not yet clear whether the bilateral agreements already made
between South East Asian countries and the USA, Australia and
Japan may have some deleterious effect on the access of UK companies
to the South East Asian markets; so we recommend that the Government
keep a watch on the situation and that, if it appears that the
UK is losing business as a result of FTAs, it urge the EU to lift
its moratorium on further trade negotiations. The UK has historically
been a significant trading partner in the region, and we detected
a considerable amount of goodwill towards the UK and willingness
to continue that relationship. We should not lose this advantage
by default.
111 The European Free Trade Area, comprising Iceland,
Liechtenstein, Norway and Switzerland Back
112
UKTI Memo Back
113
UKTI Memo and Q 66 Back
114
The members of Mercosur are Argentina, Brazil, Paraguay and Uruguay;
Bolivia and Chile have association agreements with Mercosur. Mercosur
began to implement a common market, with a transition phase starting
in 1995 and due to end in 2006. Mercosur is developing a number
of common institutions, including a Dispute Settlement Court. Back
115
Q 66 Back
116
Q 69 and UKTI Memo Back
117
Qq 71 and 72 (UKTI) and 192 (Tesco) Back
118
Q 73 Back
119
Ibid. Back
120
See, for example, Rolls-Royce Supplementary Memorandum, Section
10 Back
121
Qq 191 (Tesco) and 244 (Dyson) Back
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