Credit: Original article can be found here
The British Foreign Secretary, Liz Truss has been on a visit to ASEAN as she tries to boost British trade relations with Southeast Asia. The UK has trade agreements already in place with Singapore and Vietnam and has been getting closer to Thailand and Indonesia.
What London is really after though is access to the 10 members of ASEAN in total, (Brunei, Cambodia, Indonesia, Laos, Myanmar, and Philippines, Singapore, Thailand, and Vietnam). Brunei, Malaysia, and Singapore are members of the Commonwealth.
Agendas differed slightly in the meetings. the meeting in Kuala Lumpur with Malaysia’s Foreign Secretary Saifuddin Abdullah, focusing on maritime security (read: warship sales) and free trade (read access to ASEAN). The UK’s current bilateral trade with Malaysia this year will reach about £5 billion (US$6.7 billion). To put that into context, British trade with Luxembourg and Finland is higher. Clearly, a lot of work needs to be done.
In Indonesia, Ms. Truss also met with Indonesia’s Foreign Minister, Retno Marsudi for trade and policy issues, including the situation in Myanmar, and curiously, considering it’s in a different part of Asia, Afghanistan. Although ASEAN as a bloc is an observer state to the Shanghai Cooperation Organization, now the de facto military cooperation trying to keep a lid on matters together with China, India, Russia, and Pakistan as well as the Central Asian nations of Iran, Turkmenistan, Kyrgyzstan, and Uzbekistan.
Counterterrorism and cybersecurity were also discussed along with ‘Build Back Better World’ – the British Foreign Ministry acting as marketeers for Joe Biden. British trade with Indonesia, a country with a population of 275 million, currently amounts to just £4 billion (US$5.3 billion). That is just slightly above the UK’s current trade with Cyprus.
Ms. Truss also visited Bangkok, where she met both Prime Minister Chan-o-cha and Foreign Minister Don Pramudwinai to discuss digital technology and tech investment. The UK’s current bilateral trade with Thailand is also about £5 billion (US$6.7 billion). Interestingly, this is roughly the same amount as the value of shares that Elon Musk has just sold in his Tesla EV company.
It remains true that EU membership deflected London from developing trade ties in ways perhaps it should have been doing was it to have remained out of the EU. However, progress will be difficult. The EU, with a collective consumer market of some 450 million is always going to be a larger and more attractive proposition than the UK’s 68 million. Nonetheless, the bilateral trade volumes between the UK and ASEAN, and especially with Commonwealth nations such as Malaysia, have been allowed to decline. The good news is that there is room for expansion.
The UK and the CPTPP
This brings us neatly onto a question apparently asked Liz Truss this week, where (courtesy of the Beijing to Britain blog).
Tory 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 those components instead from 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 comes down to existing trade influences and cost dynamics. The CPTPP comprises Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The UK has applied to join and may do so in late 2022, perhaps 2023. It also ought to be mentioned that just 8.7 percent of current total UK trade is conducted with CPTPP member states.
Firstly, the UK already has de facto free trade agreements in principle with Australia and is re-negotiating with Canada and New Zealand as priorities. These are the largest UK trade partners among the CPTPP nations. Negotiations are also in progress with Mexico.
The UK also has FTAs with Chile, Japan, Peru, Singapore, and Vietnam, meaning that only Malaysia is currently out of the loop, although Liz Truss’s visit last week may change that.
The CPTPP FTA differs from existing FTAs however, and especially in terms of certain quality standards.
When it comes to 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 the UK does not have an agreement with is Mexico.
There is then the issue of understanding ‘critical infrastructure’ which tends to mean increasingly high-tech infrastructure but could also be extended to roads, rail, and ports. In the high-tech arenas, Japan would be an obvious partner however it needs to be stressed that production costs are considerably higher than purchasing Chinese equipment.
Japan is also about to enter the ‘Regional Comprehensive Economic Partnership (RCEP) agreement with China, as are Australia, Brunei, Indonesia, Malaysia, New Zealand, Singapore, and Vietnam. So, to escape Chinese influence in manufacturing, an option would be Mexico as a CPTPP member.
But negotiations between China and Mexico, however, are also underway and began in 2017. Should Mr. Kawczynski continue to wish to explore a non-China component to the UK’s critical infrastructure build, the answer does not lie in Asia – it lies with making suitable British investments into Africa through the Commonwealth of Nations and training African businesses to build what the country needs. Which is exactly what China is pursuing to service its own markets.
The UK remains caught between a rock and a hard place when it comes to Southeast Asia. Of the ASEAN nations it so many wishes to develop trade ties with, two are Communist nations, two are elective monarchies, one an absolute monarchy, one a military dictatorship, and just four apparent democracies. Of those, the ruling parties have been the sole party since 1959 (Singapore) with Thailand subject to regular military coups (two since 2006) and only the Philippines with an apparently functional, if noisy, politically functioning democracy. While collectively they operate as ASEAN, individually they are very different. Yet London has apparently cut funding to the UK-ASEAN Business Council.
Ties to ASEAN on the ground remain strong in terms of British businesses on the ground in the region. To shortcut and get to where Liz Truss would apparently like British businesses to be within ASEAN should involve some sort of strategy to utilize existing British investments as a conduit to partner with both local and other UK companies to help boost UK plc in the region. Only then can what amount to relatively small amounts of existing bilateral trade be motivated to expand. The British Government should ‘buy’ into what is already on the ground and instigate British development strategies via British business interests in ASEAN, small and large. Then progress might be made.
ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in 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@example.com or visit our website at www.dezshira.com.