EU-ASEAN FTA - EC negotiating mandate (draft, 2007)
EU DRAFT MANDATE FOR ASEAN
PART 1 - RECOMMENDATION FROM THE COMMISSION TO THE COUNCIL
authorising the Commission to negotiate a free trade agreement with countries of the Association of South East Asian Nations (ASEAN)  on behalf of the European Community and its Member States
1. EXPLANATORY MEMORANDUM
1.1 EU policy on Free Trade Agreements
The Commission’s Communication “Global Europe: competing in the world”  reviewed the contribution of EU trade policy to the European Growth and Jobs Strategy. It confirmed the EU’s commitment to the World Trade Organisation (WTO) as the single most effective means of expanding and managing trade for the benefit of all. It stressed that the Doha Development Agenda (DDA) remains the EU’s first priority and that we will work hard to resume negotiations. The Communication also argued that the EU should build on the platform created by the WTO to generate new opportunities for growth by opening markets further to trade and investment. The Communication set out a series of linked trade policy initiatives complementing efforts to resume negotiations in the WTO. As part of these initiatives, it proposed to negotiate carefully chosen comprehensive Free Trade Agreements (FTAs).
FTAs, if approached with care, can go further and faster in promoting openness and integration, by tackling issues which are not ready for multilateral discussion. The Communication stressed that we should continue to factor in other issues and the wider role of trade policy in EU external relations into bilateral trade developments. But in order for trade policy to help create jobs and drive growth, economic factors must play a primary role in the choice of future FTAs. The key economic criteria for new FTA partners should be market potential (economic size and growth) and the level of protection against EU export interests (tariffs and non-tariff barriers), while taking account of our potential partners’ negotiations with EU competitors.
In terms of content, new competitiveness-driven FTAs would need to be comprehensive and ambitious in coverage, aiming at the highest possible degree of trade liberalisation, including far-reaching liberalisation of services and investment. Future FTAs would also need new ways of addressing non-tariff barriers and incorporating provisions on trade-related aspects of sustainable development.
The Communication stresses the need to ensure that we share similar ambitions with our prospective partners at the outset in order to avoid negotiations later stalling due to a mismatch of expectations. On 13 November 2006, the Council of the European Union concluded that it supports the early launch of negotiations with countries of the Association of South East Asian Nations (ASEAN), India, and the Republic of Korea (hereafter referred to as Korea), and invited the Commission to submit proposals for the negotiating directives without delay.
1.2. EU-ASEAN Relations
The relationship between the European Union and the member countries of ASEAN is an important and longstanding one, with the existing Co-operation Agreement between the EC and certain member countries of ASEAN dating from 1980. In July 2003, the European Commission adopted a Communication on a “New Partnership with South East Asia”, setting out a comprehensive strategy for future BIJ relations with the countries of the region and, in particular, recognising the need to initiate a new dynamism into trade and investment relations on a regional basis.
A key initiative was proposed within this strategy, the ongoing trade action plan, known as the Trans-Regional EU-ASEAN Trade Initiative (TREATI), which reflects the desire of all partners to expand trade and investment ties and has provided a framework for dialogue and regulatory co-operation on various trade facilitation, market access, and investment issues between the two regions, and increasingly also acting as a forum for the exchange of experience on regional economic integration.
On the bilateral level, negotiations for bilateral Partnership and Co-operation agreements are well underway with Thailand and Singapore, and have started with Indonesia. Malaysia, the Philippines, and Brunei have also shown an interest. Vietnam is keen to upgrade its existing agreement into a more comprehensive political framework. The intention is to establish such agreements with all of the interested countries in the region as soon as possible.
While these are important and significant steps, it is dear that recent rapid developments in the Asian region as a whole notably the progress of ASEAN’s own economic integration and the establishment of a vast network of new free trade agreements with ASEAN at its hub, demand a strong response from the EU. This response must demonstrate our desire for a much more substantive and comprehensive economic engagement with ASEAN, providing a vehicle to increase our market access to a rapidly expanding and developing region, commensurate with the EU’s position as ASEAN’s third largest trading partner.
The thrust of the existing agreements and ongoing negotiations is rather on the political side and trade aspects need to be further reinforced. European industry has expressed an urgent request in light of the preferential market access being provided to its competitors and in order to exploit more effectively new economic opportunities with one of the most dynamic regions in the world. A comprehensive economic and political approach will strengthen Europe’s position and influence in Southeast Asia.
Furthermore, as these countries continue to develop economically, the impact of non-tariff barriers on our trade is growing and the need for a more robust framework to resolve such issues will become even more urgent. The establishment of a free trade area provides an additional incentive for ASEAN countries both to profit from our experience and identify solutions and approaches which are more compatible with those of the EU.
2. NATURE AND SCOPE OF THE AGREEMENT
A comprehensive FTA with the countries of ASEAN should aim to improve market access for goods and services, covering substantially all trade. It should provide for enhanced provisions on trade in goods and services and include binding provisions on regulatory transparency in areas relevant for mutual trade and investment, including standards and conformity assessment, sanitary and phytosanitary rules, intellectual property rights including enforcement, trade facilitation and customs, public procurement, and trade and competition, including state aid. It should also provide for co-operation on trade and sustainable development, including both its environmental and social dimensions.
In going above and beyond the existing commitments in the WTO, the FTA should be fully WTO-compliant, in particular, with Article XXIV of the General Agreement on Tariffs and Trade (GATT) and Article V of the General Agreement on Trade in Services (GATS). The relationship between the FTA provisions and the Partnership and Co-operation provisions will require further examination prior to the conclusion of the agreements.
This approach is in line with the “Global Europe’ strategy, which underlines that new competitiveness-driven FTAs would need to be comprehensive and ambitious in coverage, aiming at the highest possible degree of trade liberalisation, including far-reaching liberalisation of services and investment.
3. PREPARATION OF THE DRAFT NEGOTIATING DIRECTIVES
Consultations with Member States, EU institutions, civil society (including European business) and ASEAN countries have taken place for the preparation of the draft negotiating directives, as well as for the accompanying impact assessment. These consultations were undertaken in the context of the future orientations for EU trade policy, the related adaptation of its FTA strategy, and the specific prospects for an FTA with ASEAN countries.
Consultations with ASEAN are still ongoing with regard to the architecture of the FTA, taking into account the diversity in the economic situation of ASEAN members. The Commission will inform the Council of the results of these consultations prior to the adoption of the negotiating directives, including its proposal with regard to the ASEAN countries with whom to launch negotiations.
The Commission has drafted an impact assessment which analyses the possible impact of an FTA with ASEAN countries. A more detailed Sustainability Impact Assessment (STA) examining the Agreement’s potential economic, social, and environmental effects will be conducted in parallel to the negotiations.
The objective is to complete these negotiations no later than two years after their effective start. In line with normal practice, the Commission will report regularly to Member States in the appropriate committees of the Council on progress in the negotiations. When negotiations are more advanced, the Commission will make an assessment of how to proceed, including the option of bilateral negotiations with ASEAN countries, in coherence with PCA negotiations, if it is not possible to conclude negotiations at a regional level.
In light of the above, the Commission recommends that:
The Council authorises the Commission to negotiate a Free Trade Agreement with countries of the Association of South East Asian Nations (ASEAN);
The Council appoints a special Committee (133) to assist it in this task;
The Council issues the attached negotiating directives.
PART 2 - DIRECTIVES FOR THE NEGOTIATION OF A FREE TRADE AGREEMENT BETWEEN THE EUROPEAN COMMUNITY AND ITS MEMBER STATES AND COUNTRIES OF THE ASSOCIATION OF SOUTH EAST ASIAN NATIONS (ASEAN) NATURE AND SCOPE OF TELE AGREEMENT
The Free Trade Agreement (FTA) will exclusively contain trade provisions applicable between the parties. Other issues will be regulated under the existing cooperation agreements or in the non-trade provisions of future Partnership and Cooperation Agreements (PCAs) with the countries concerned. The legal .relationship between the free trade provisions and the PCAs or other co-operation agreements will be decided prior to their conclusion.
2. The Agreement shall be comprehensive, balanced, and fully consistent with World Trade Organisation (WTO) rules and obligations.
3. The Agreement shall provide for the progressive and reciprocal liberalisation of trade in goods and services as well as rules on trade-related issues.
PREAMBLE AND GENERAL PRINCIPLES
4. The preamble will indicate that the partnership between the European Community (EC) and countries of ASEAN is based upon common principles and values, and will refer, inter alia, to:
The commitment of the parties to sustainable development and the contribution of international trade to sustainable development in its economic, social and environmental dimensions, including economic development, poverty reduction, full and productive employment and decent work for all, as well as the protection and sustainable use of eco-systems and natural resources;
The commitment of the parties to an FTA in full compliance with their rights and obligations arising out of the WTO;
The right of the parties to take measures necessary to achieve legitimate public policy objectives on the basis of the level of protection that they deem appropriate,provided that such measures do not constitute a means of unjustifiable discrimination or a disguised restriction of international trade;
The belief that the FTA will create a new climate for trade relations between the two parties and above all for the development of trade and investment;
The commitment of the parties to communicate with all relevant interested parties including the private sector and civil society organisations.
TITLE 1: OBJECTIVES
5. The Agreement shall confirm the joint objective of progressively and reciprocally liberalising substantially all trade in goods and services, in full compliance with WTO rules.
6. The Agreement will recognise that sustainable development is an overarching objective of the parties and will aim at ensuring and facilitating respect of international environmental and social agreements and standards. The Agreement will recognise that the parties shall not encourage foreign direct investment by lowering domestic environmental, labour or occupational health and safety legislation and standards, or by relaxing core labour standards or laws aimed at protecting and promoting cultural diversity.
The Agreement’s economic, social and environmental impacts will be examined by means of an independent Sustainability Impact Assessment (SIA), which the Commission shall undertake in parallel with the negotiations and which will be finalised ahead of the signature of any final Agreement. The SIA will aim to clarify the likely effects of the Agreement on sustainable development on both sides as well as to propose measures (trade or non trade) to maximise the benefits of the Agreement and prevent or minimise potential negative impacts.
There will be a specific chapter of the Agreement on trade and sustainable development, including both social and environmental issues, and addressing such measures. Sustainable development will also be taken into account throughout the Agreement.
TITLE 2: TRADE IN GOODS
7. Duties on imports and exports and non-tariff measures
The aim of the Agreement will be to dismantle import duties and charges having an equivalent effect on both sides over a period of time not exceeding 10 years, with a view to offering similar market access opportunities on both sides at the end of this period. Taking into account their different levels of development, ASEAN countries will have a certain measure of flexibility as regards transitional periods. The Agreement will cover substantially all trade in goods between the parties. The aim will be to ensure the highest possible degree of trade liberalisation.
The basic duties to which reductions are to be applied shall be those applied by the Community erga omnes on the day before signature of the Agreement and the external tariff applied by each ASEAN country erga omnes on the day before signature of the Agreement.
GSP preferences currently applied by the European Community to products originating in ASEAN countries shall be covered in the Agreement. Simultaneously, ASEAN beneficiary countries shall be withdrawn from the list of countries benefiting from Regulation No 980/2005 (GSP Regulation).
8. The Agreement shall provide for a maximum of frontloading of full liberalisation commitments, taking into account the importance of ensuring to the maximum extent feasible parity with FTAs being negotiated with other major trading partners, as well as the different levels of development of ASEAN countries.
9. Specific provisions will regulate products identified as sensitive, for which for instance, longer transitional periods or partial liberalisation commitments with a review clause will be foreseen. Any such specific provisions or treatment will be kept to a minimum, in terms of both tariff lines and value of trade between the parties. For products not subject to full liberalisation commitments, following the application of the Agreement, a clause will consider possibilities for further liberalisation.
10. The Agreement will forbid any ban, restriction or other non-tariff barrier (NTB) to trade which is not justified by the general exceptions set out below, and which could amount to a means of arbitrary discrimination or a disguised restriction on trade between the parties.
Provisions and procedures will be included to ensure the elimination of unjustified non-tariff obstacles to trade. The Agreement will contain provisions concerning the prohibition of fiscal discrimination. Product-specific NTBs may be solved on a request and offer basis, in parallel with exchanges on tariff concessions. Where relevant to further the objectives of the Agreement and to improve market access at a level which cannot be achieved sufficiently through horizontal rules, the Agreement should include sector specific commitments on NTBs. The Agreement will also envisage appropriate domestic procedures to prevent NTBs and other unnecessary obstacles to trade, including through transparency in regulations.
11. All customs duties, taxes or charges on exports and quantitative restrictions on exports to the other party which are not justified by exceptions under the Agreement shall be abolished upon the application of the Agreement.
12. Rules of origin
A protocol setting out simple and development-friendly rules of origin to be applied and providing for administrative co-operation will be annexed to the Agreement. The protocol will be based on the orientations of the Commission Communication of 16 March 2005 entitled “The rules of origin in preferential trade arrangements”.
13. Anti-fraud measures
A clause in the Agreement concerning enhanced administrative co-operation will set out the procedures and appropriate measures that the parties may take where a lack of administrative co-operation in customs matters, irregularities or fraud are established.
14. Financial responsibility
Provisions should also be included to examine jointly the possibility of adopting appropriate measures in case of errors committed by the competent authorities in the application of the preferential rules of origin, where such errors would lead to consequences in terms of import duties.
15. Technical regulations on industrial products, standards and conformity assessment
The Agreement will refer to a number of general principles (such as proportionality, no undue restrictions, transparency, non-discrimination) to be applied by the parties in their mutual trade. Apart from confirming the provisions of the WTO Agreement on Technical Barriers to Trade, the parties shall also establish provisions that facilitate access to each others’ markets. The aim will be to include provisions on the adoption of recognised international standards and on the streamlining of testing requirements in a number of priority sectors. The Agreement will also aim at improving dissemination of information to importers and exporters, developing common views and promoting good regulatory practice, seeking compatibility and convergence of technical regulations, promoting close co- operation with and between relevant organisations responsible for standardisation and accreditation.
16. Sanitary and phytosanitary measures
On sanitary and phytosanitary measures, the conditions negotiated shall follow the provisions of the negotiating directives adopted by the Council on 20 February 1995 (Council document 4976/95). Furthermore, the Agreement will refer to a number of general principles of the WTO Agreement on Sanitary and Phytosanitary Measures, including proportionality, undue delays, transparency, and non-discrimination, to be applied by the parties in their mutual trade, with the objective of facilitating access to each other’s market while safeguarding public animal and plant health.
The Agreement should in particular seek to achieve full transparency as regards sanitary and phytosanitary measures applicable to trade, work towards the establishment of a mechanism for recognition of equivalence including the prelisting of food-producing establishments, and work towards recognition of the disease-free health status of the parties and the principle of regionalisation for both animal and plant diseases, while maintaining essential minimal cheeks at the external border. Animal welfare shall be within its scope.
17. General exceptions
The Agreement will include a general exception clause based on Articles XX and XXI of the GATT.
To maximise liberalisation commitments, the Agreement will contain a bilateral agricultural safeguard clause by which either party may restore Most Favoured Nation duties where a rise in imports of a product from the other party is causing or threatening to cause serious injury to its domestic industry.
19. Anti-dumping and countervailing measures
The Agreement will include a clause on anti-dumping and countervailing measures providing that any of the parties may take appropriate measures against dumping and/or countervailable subsidies in accordance with the WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 or the WTO Agreement on Subsidies and Countervailing Measures. The Agreement will also integrate commitments that go beyond WTO rules in this area in line with EC rules and previous agreements (e.g. public interest test and lesser-duty rule, additional consultations).
TITLE 3: TRADE IN SERVICES, ESTABLISHMENT
20. The Agreement shall provide for the progressive and reciprocal liberalisation of establishment and of trade in services with the aim to ensure a high level of market access opportunities, consistent with the relevant WTO rules, in particular Article V of the GATS.
Taking into account their levels of development, ASEAN countries will be allowed a certain measure of flexibility in overall terms as well as in individual sectors and subsectors. Any transitional period should in principle not exceed 10 years.
While respecting Article V of the GATS, the commitments made by the European Community shall not include:
National maritime cabotage, and
Air services, including domestic and international air transportation services whether scheduled, or non-scheduled, and services directly related to the exercise of traffic rights, other than:
- i. Aircraft repair and maintenance services during which an aircraft is withdrawn from service,
- ii. Selling and marketing of air transport services,
- iii. Computer reservation system (CRS) services, and
- iv. Other ancillary services that facilitate the operations of air carriers.
Audio-visual and other cultural services will be treated in a specific audio-visual and cultural co-operation framework. In developing this co-operation framework, the parties will maintain the possibility to preserve and develop their capacity to define and implement their cultural and audio-visual policies for the purpose of preserving their cultural diversity, while promoting cultural and audio-visual exchanges and favouring inter-cultural dialogue.
21. Respecting the respective competences of the EC and its Member States, the parties shall agree to establish a framework for establishment, which will be based on principles of transparency, non-discrimination, market access, stability and on general principles of protection.
Within this framework, the parties shall agree to grant treatment no less favourable for the establishment in their territory of the companies, subsidiaries or branches of the other party than that accorded to their own companies, subsidiaries or branches, taking due account of the sensitive nature of certain specific sectors.
22. The negotiations should address market access and national treatment across economic sectors and modes of supply and identify areas in which regulatory disciplines have a greater potential to facilitate mutual trade.
23. Whenever an ASEAN partner has concluded another economic integration agreement with a third country which is not within the ASEAN region, EU investors and service suppliers shall be granted at least parity with the treatments granted to investors and service suppliers of this third country as regards to cross-border supply of services and establishment.
24. The Agreement will not preclude the enforcement of exceptions on the supply of services justifiable under the relevant WTO rules (Articles XIV and XIV bis GATS).
TITLE 4: PUBLIC PROCUREMENT
25. The Agreement shall provide for a set of binding rules including adequate transparency provisions that support the setting up of effective procurement systems. They will also provide for challenge procedures and co-operation in the field of electronic procurement. To the extent appropriate, the procurement chapter should be consistent with the revised Government Procurement Agreement. The Agreement will envisage the progressive liberalisation of procurement markets at national, regional and, where appropriate, local levels, as well as in the field of public utilities, in particular in priority sectors. The objective is to achieve gradual market access on the basis of the principles of non-discrimination and national treatment. Market access commitments will take into account the different levels of development of ASEAN countries.
TITLE 5: TRADE AND COMPETITION
26. The Agreement shall include provisions on competition addressing competition rules and their enforcement.
27. These provisions shall identify. anti-competitive behaviour that would be considered incompatible with the proper functioning of the Agreement, to the extent that it affects trade between the parties, and include rules on restrictive agreements and concerted practices between undertakings, abuse of dominant position, mergers and state aid.
28. The provisions on competition shall address the appropriate legal framework and bodies in charge of implementation of competition rules to guarantee a transparent and an effective enforcement of their respective competition rules.
29. In order to facilitate reciprocal consultations and exchange of non-confidential information between the parties, provisions on appropriate co-operation in the field of trade and competition could be considered on a regional basis.
TITLE 6: INTELLECTUAL, INDUSTRIAL AND COMMERCIAL PROPERTY
30. The Agreement will include rules to ensure effective and adequate protection and enforcement of intellectual property rights (IPR). The Agreement shall include commitments to adhere to multilateral agreements in this field, and well developed elements on the recognition, protection and enforcement of rights, including on geographical indications.
TITLE 7: CAPITAL MOVEMENT AND PAYMENTS
31. The Agreement will strive for full liberalisation of current payments and capital movement, and include a standstill clause. It will entail carve-out provisions (e.g. in case of serious difficulties for monetary and exchange rate policy, or for prudential supervision or taxation), which will be in accordance with the provisions of the EC Treaty on the free movement of capital. Negotiations shall take into account the sensitivities attached to the liberalisation of capital movements not linked to direct investment.
TITLE 8: CUSTOMS AND TRADE FACILITATION
32. The Agreement shall include provisions to facilitate trade between the parties, while ensuring effective controls. To this end, it shall include commitments on rules, requirements, formalities and procedures of the parties related to imports, export and transit.
33. The Agreement shall promote the effective implementation and application of international rules and standards in the field of customs and other trade-related procedures, including WTO provisions, and World Customs Organisation instruments, inter alia, the revised Kyoto Convention. It shall also promote effective regional transit arrangements.
The Agreement shall include provisions to promote the exchange of best practice and experience, relating to particular areas of mutual interest. These areas may include issues such as modernisation and simplification of rules and procedures, standardised documentation, tariff classification, transparency and consultation, and inter-agency co- operation. The Agreement shall promote convergence in the trade facilitation field, where appropriate, building on relevant international standards and instruments.
34. The Agreement shall promote effective and efficient IPR enforcement by customs authorities, regarding imports, exports, re-exports, transhipments and other customs procedures, and in particular as regards counterfeit goods.
35. The parties shall aim at negotiating Customs Co-operation and Mutual Administrative Assistance Agreements which shall include, among others, provisions on joint co-operation, mutual exchange of information, technical expertise, confidentiality and the submission of evidence in judicial proceedings. The parties shall be encouraged to speed up the conclusion of such agreements under the existing mandate of the Commission. The parties should draw upon existing co-operation mechanisms and may consider developing additional provisions concerning cooperation on trade-related customs issues.
TITLE 9: TRADE AND SUSTAINABLE DEVELOPMENT
36. The Agreement will include commitments by both sides in terms of the social and environmental aspects of trade and sustainable development. The Agreement will include provisions to promote adherence to and effective implementation of internationally agreed standards in the social and environmental domain as a necessary condition for sustainable development. The Agreement will also include mechanisms to support the promotion of decent work through effective domestic implementation of International Labour Organisation (ILO) core labour standards, as defined in the 1998 ILO Declaration of Fundamental Principles and Rights at Work as well as enhancing co-operation on trade- related aspects of sustainable development. Consideration will also be given to measures to facilitate and promote trade in environmental goods, services and technology. The Agreement will foresee the monitoring of the implementation of these commitments, and of the social and environmental impacts of the Agreement, through inter alia review and public scrutiny, as well as instruments of encouragement and trade-related co-operation activities, including with relevant international fora.
TITLE 10: TRANSPARENCY OF REGULATIONS
37. The Agreement will include provisions regarding:
The commitment to consult stakeholders in advance of the introduction of regulations with an impact on trade;
The publication of, and public consultations on, all general rules with an impact on international trade in goods and services;
The procedures to avoid trade problems arising from regulations at an early stage;
Transparency as regards the administration, implementation and application of regulations having an impact on international trade in goods or services, including appropriate review procedures;
The creation of enquiry points and one-stop shops designed to provide specific information and to respond promptly to questions and enquiries regarding the operation of the Agreement.
Commitment to recognise and take steps to implement the principles of good governance in financial and tax areas relating to trade, where appropriate, such as transparency and exchange of information.
TITLE 11 INSTITUTIONAL FRAMEWORK AND FINAL PROVISIONS
38. The Agreement will set up a specific Trade Commission to monitor the implementation of the Agreement. Committees in specific areas may be established as appropriate and will operate under the framework of the Trade Commission.
39. In case of parallel FTA and Partnership and Co-operation Agreements (PCA5) with ASEAN countries, the conclusion of the Free Trade Agreement will be subject to the conclusion of PCAs with the respective countries. The relationship between the free trade and the partnership and co-operation provisions (in one single or two separate agreements) will be decided during the negotiations. This decision will ensure external political and economic coherence in particular in respect of the existence, application, suspension, and termination of the respective provisions.
As regards the institutional framework, it will be ensured that the trade and non-trade provisions will be administered through a coherent institutional structure. The Trade Commission shall report to the Joint Committees to be established under the PCAs, according to their bilateral competences.
40. The Agreement will include an appropriate and well-functioning dispute settlement mechanism, which will ensure that the parties observe mutually agreed rules.
41. The Agreement will include provisions for expedient problem-solving such as a flexible mediation mechanism. This mechanism would be without prejudice to the parties’ rights and obligations or to dispute settlement provided for under the Agreement.
 Consultations are ongoing with ASEAN on the architecture of the FTA negotiations. Upon conclusion of these consultations and prior to the adoption of this recommendation, the Commission will present its proposal concerning the countries with which negotiations should be launched
 COM(2006) 567, “Global Europe: competing in the world’, 4 October 2006