Brexit: How Will It Af ect ASEAN？

By Dimitra Stefanidou

Brexit: How Will It Af ect ASEAN？

By Dimitra Stefanidou

Over the past decade， the European Union （EU）and ASEAN have considerably boosted their cooperation on trade and investment. The result is that ASEAN has been thrust into the position of being the third largest trading partner of EU， after the United States and China. Also， the EU is the second largest trade partner of ASEAN， after China.

More specifically， the value of bilateral goods and services traded between ASEAN and the EU reached the value of 238 billion euros （US$ 255 billion） in 2013. That same year the investment stock of EU on ASEAN reached the value of 156 billion euros （US$ 173 billion）.

However， there is signifi cant room for greater growth in trade relations between the EU and ASEAN， as well as more opportunities for the EU to expand its investments and exports. Impressively， ASEAN holds the promise of being a true single market， with over 600 million consumers， and a fl ourishing middle class.

In 2007， negotiations initiated， in order for a free trade agreement （FTA） between the EU and the regions of ASEAN. However， talks were suspended after about two years， on roadblocks such as the issue of human rights concerns in Myanmar back then.

The EU then initiated bilateral FTA negotiations with Singapore and Malaysia in 2010， with Vietnam in June 2012， and with Thailand in March 2013. However， these FTAs are considered by some to have the potential of posing complications for a future agreement within the regional framework， which is the ultimate target and desire， given the “spaghetti bowl effect” that could arise from overlapping FTA rules.

The EUSFTA （European Union-Singapore Free Trade Agreement） covers many important key area. Upon ratifi cation， would be the fi rst FTA between EU and an ASEAN country， and the second between the EU and an Asian country， following that with South Korea.

The EUSFTA is expected to come into force around 2018 or 2019， pending the ratifi cation procedures in theEuropean Parliament.

Given this framework， the consequences of Brexit have been extensively discussed， ever since the possibility of the UK leaving the EU was brought to the foreground hen British Prime Minister David Cameron promised a referendum for British voters as part of his 2015 reelection bid. Now that 51.9％ of Britons have voted for Leave， questions have now been raised about the future of trading relations between the UK and ASEAN.

Opinions on the impact of Brexit for ASEAN vary. Some believe Brexit will not have a significant impact on the ASEAN region. As Muhadi Sugiono， an expert on international relations at the Gadjah Mada University，said: “If Britons opt to leave the EU （Brexit）， there will be signifi cant changes within the supranational EU body，but the changes will not be immense enough to cast shadows over other regional entities like ASEAN.”

The reason is that the framework regulating the economic relationship between the EU and ASEAN already exists. Hence it cannot be influenced by the fact that UK is about to leave the EU. Additionally， the UK has acted autonomously in certain fi elds of trade， despite the fact that it has been one of the 28 members of the EU.

Additionally， and most importantly， the proponents of such a view suggest that the UK will be able to renegotiate， outside of the EU frame and rules， brand new agreements with ASEAN regarding trade and investments， that might be even more benefi cial than the EU ones. This is because it would then be unhindered by the constraints and barriers， otherwise imposed by its erstwhile EU partners.

These new agreements could present both parties with more lucrative business deals. It is believed that it was one of the reasons why David Cameron visited Southeast Asia in August 2015， including Vietnam and the ASEAN Secretariat in Jakarta， in order to enhance the bonds between the two parties. He is one of the rare British prime ministers to do so.

On the other hand， it is without doubt that global economic markets will be vastly impacted by the UK's impending departure from the EU. Already in the first eight hours after the UK referendum result of Brexit was announced， the UK businesses and assets were estimated to have lost US$ 350 billion， a bigger amount than what they have contributed to the EU budget over the last 15 years - taking into account even the rebate given by the EU to Britain.

As most countries of ASEAN， and especially Indonesia，have the UK as one of their primary export destinations in Europe， any negative impact on the UK economy after Brexit will certainly infl uence the economy of ASEAN countries exporting to the UK as well.

The negative economic impact of Brexit on the UK will be in trade and investments， as global business and investors would be less eager to spend or park their money in the UK.

Consequently， it will spark a chain reaction， affecting investments in ASEAN region as well， due to the uncertainty about the economic situation in the UK. The UK has so far been a critical trading partner for ASEAN states， and a committed proponent of trade liberalization. Indicatively， in 2015 alone， trade with Indonesia alone reached US$ 2.3 billion. This fact alone indicates the size of the interaction between the UK's economic situation after Brexit， and its economic relationships with ASEAN.

Whatever the implications may be， it is still early day. The road ahead is still ambiguous at best for the UK and the world. According to Article 50 of the Lisbon Treaty，negotiations on the withdrawal of the UK from the EU can take up to two years， albeit with the possibility of an extension.

During this period of negotiation， any agreement must be approved by all of the remaining 27 EU member states，and may require ratifi cation by their national parliaments.

Due to the complexity of the procedure， which is being activated for the fi rst time in the history of the EU， with all the lack of experience that comes with this， economic experts believe that it will take more than two years for the UK to offi cially leave the EU.

In the meantime， some things will still be the same for the UK. EU laws will continue to apply to the UK， and British ministers will still take part in most EU business. How their EU counterparts decide to deal with them， in terms of their demeanour， is not something circumscribed in any EU law book.

Source: www.aseantoday.com