Losing Out In Asia: The Perils of Principle
Europe took the high road, shunning narrow trade deals to pursue the greater global good, and now it’s paying the price.
By Sonia Kolesnikov-Jessop
April 4 2005 issue - Europe is on the high road to big business losses. As the United States races to make trade deals with nations across the world, Europe has held back, on lofty principle. If every nation cut unique deals with every other, the likely result would be a web of conflicting rules that would tangle rather than free world trade. Instead, Europe has pushed to revive talks on further opening the global trading regime. But while Europe stands on principle, it’s increasingly clear that America is racking up lucrative trade advantages. That, in any event, is the message European businesses in Singapore will deliver to EU Trade Commissioner Peter Mandelson when he arrives in the city-state in April. "European companies now feel they could be at a potential disadvantage," says Joachim Ihrcke, vice president of Eurocham, the European Chamber of Commerce in Singapore, which is urging the EU to cut a deal that rebalances the playing field.
Eurocham says its members ignored the agreement Washington made with Singapore, until it took effect early last year and quickly started producing results. Citibank, for example, will soon be allowed to open as many branches and ATMs as it chooses in Singapore, while European rivals like Standard Chartered are limited to 25 sites, at most. Citibank is also the first foreign bank with permission to enter talks to link to the local ATM network. European telecoms say U.S. rivals now enjoy better protections from being unfairly denied access to local networks, while European manufacturers see that a complex "sourcing initiative" will make it easier for Singapore IT manufacturers to import cheap components for use in finished exports to the United States only. That will lower U.S. business costs, at Europe’s competitive expense.
Singapore was the first Asian state to sign a free-trade deal directly with the United States, but it was a harbinger. Washington sees the deal as a template for current talks with Thailand, and possible future deals with Malaysia and the Philippines. China, Australia, India and Japan are also pursuing bilateral deals across Southeast Asia. The European deal book in Asia is blank. And with global talks going nowhere, European corporations now worry about being left out of the money. "Many feel something should be done," Ihrcke says.
The European Union is listening. Former EU trade commissioner Pascal Lamy was a globalist who did not open talks on a single new bilateral trade deal during his five-year tenure. Since succeeding Lamy in October, Mandelson has said he is "ready to consider" new regional or bilateral talks. That’s music to the business lobby.
But it is not the high road. In some ways, the U.S. deal has benefited all business in Singapore. By demanding tougher enforcement of intellectual-property rights, the United States helped protect all makers of movies and CDs from piracy. Yet it’s increasingly clear that the deal is unbalancing the Singapore market, long considered one of the fairest in Asia. For example, the city state now recognizes the diplomas of architects, lawyers and doctors from America, but generally not those from Europe. The only thing that could truly level the field is a global deal.