A printable version of this commentary is available here.
Yeo Lay Hwee (Director, EU Centre)
The Year in Review – 2013
2013 has been relatively calm for the European Union (EU) after a few tumultuous years of financial and sovereign debt crises, and political and social tensions over bailouts, budget cuts and austerity measures. Economies receiving the EU-ECB-IMF bailout are on the mend, with Ireland the first to exit the bailout at the end of 2013. Portugal has also begun to win back investors’ confidence and is preparing to return to international debt market in 2014. And in early December, Greece has its credit rating raised two notches from C to Caa3 and with the expectation that Greece will emerge from recession in 2014.
While unemployment remains high in the EU, and several painful structural reforms remain to be done, overall, the mood in general is more positive. The Economic Sentiment Indicator compiled by the EU has been on upward trend since May, and recovery in the Eurozone is on track. EU citizens are also more confident about the recovery in Eurozone. The autumn 2013 Eurobarometer showed that 51% of EU citizens are optimistic about the EU’s future, showing an upward trend from 2012.
With less time spent fire-fighting, the EU in 2013 was able to focus its attention on longer term issues such as the active implementation of its global trade strategy, and identifying priority actions for stronger cooperation in its Common Security and Defence Policy.
Engagement with Asia has been sustained
Following the “pivot” to Asia in 2012, the EU has been able to sustain its high level engagement with Asia in 2013 with several visits by European leaders to the region. Catherine Ashton was at the ASEAN Regional Forum (ARF) in Brunei and also participated in the ASEM Foreign Ministers Meeting in India. She also visited Myanmar in November launching the EU-Myanmar Task Force to provide comprehensive support to the political transition and economic reforms in Myanmar. The Task Force was announced in a joint statement by the President of the European Council, Van Rompuy, President of the Commission, Barroso and President U Thein Sein of Myanmar during the latter’s visit to Brussels in March 2013. Since then, the EU has lifted all its sanctions with the exception of the arms embargo, re-opened trade benefits under the General System of Preferences and adopted a Comprehensive Framework on EU policies and support to Myanmar. (Europa Press release, 11 November 2013).
Trade and Investments
The EU is following through its global trade strategy and stepping up trade and investments links with Asia. Negotiations for an EU-Japan FTA had been launched in March 2013. This FTA when concluded would account for more than a third of global GDP. Mandates have also been given from the European Commission to start negotiating investment agreements with China and the ASEAN member countries. Singapore’s relation with the EU has been further strengthened with the signing of the EU-Singapore FTA and the initialing of the Partnership and Cooperation Agreement (PCA). Within ASEAN, the EU has also begun FTA negotiations with Malaysia, Vietnam and Thailand, and open to start negotiations with other ASEAN partners as soon as possible.
However, in the realm of trade and investments, the real game changer would be the partnership agreement that the EU is negotiating with the US. Termed the Transatlantic Trade and Investment Partnership (TTIP), the first round of negotiations took place in July. Despite the Europeans’ unhappiness over extensive American spying operations in the EU revealed by Edward Snowden, the second round of negotiations in Brussels went well and progress was made in identifying areas of common ground to prepare for text-based discussions in rounds ahead. A deep and ambitious TTIP would have its effects felt beyond the EU and the US and could serve a bigger purpose of promoting transatlantic common objective to set higher standards of trade liberalization. It will have an impact on the multilateral trading system as well as for EU’s other trade partners in particular those in Asia.
Summing up, after a prolonged period of crisis in Europe with the EU very much absorbed in addressing the internal socio-economic and political challenges, the EU has emerged in 2013 a little more confident, and much more proactive in its engagement with the outside world through trade and diplomacy. What can we then expect in 2014?
The Year Ahead – 2014
2014 may again bring some uncertainties and anxieties as the EU witness a series of leadership changes. A new College of Commissioners will be appointed and will take office in November as the current President of the Commission, Barroso, stepped down on 31 October after two successive terms. President van Rompuy will also step down as President of the European Council at the end of November, and so will Catherine Ashton who has indicated that she will not seek a 2nd term as High Representative.
As it is now, all these three positions are still “decided” at negotiations within the European Council (the meeting of heads of state and governments). The call for some of these positions to be based on direct elections has not been heeded, and member states still wield decisive power on the appointments. Keen EU watchers will be following these appointments closely as who are in these leadership positions could have some impact on the “style” and substance of the EU.
European Parliament Elections
An important event in the 2014 calendar is the European Parliament (EP) Elections on 22-25 May. This is the only EU institution where its representatives are elected directly through universal suffrage. Before 1979, Members of the EP were nominated from national parliaments. With direct elections introduced in 1979, and with the desire to plug the democratic deficit, the powers and purview of the EP has been increased with subsequent treaty changes. The 2009 Lisbon Treaty has further strengthened the powers of the EP, consolidating its role as co-legislator with the Council, and giving it additional responsibility in several policies ranging from agriculture, energy security to international trade. MEPs will now have to give their consent to international agreements negotiated by the EU such as the Free Trade Agreement (FTA) which the EU has concluded with Singapore.
The elections in 2014 will be closely watched because of the rise of far right and Eurosceptic parties across Europe. Partly as a result of the economic and financial crisis – with rising unemployment, years of austerity and the renationalization of European politics, many of these far right parties have already made inroads into national parliaments. It will not be surprising if there would also be a rise in the number of Eurosceptic and far right votes at the upcoming EP elections. These in turn might have a knock-on effect on EU’s engagement with the outside world in the area of trade and investment because of economic nationalism and on issues concerning immigration and movement of people. The results of the EP elections will also affect the leadership changes in the EU, in particular with regards to the appointment of the president of the European Commission. The EP has the power to approve or reject the nomination of the President of the Commission and Commissioners.
2014 will see two important meetings for EU-Asia relations, the 20th ASEAN-EU ministerial meeting and the 10th ASEM Summit.
ASEAN has grown to be an important partner for the EU. Recognizing the centrality of ASEAN in the Asia-Pacific, and the political transition taking place in several of the ASEAN member states, the EU has stepped up its engagement with ASEAN. However, ASEAN in 2014 may be heading for some turbulence as the domestic politics in countries such as Thailand and Cambodia become more volatile, and economic growth taper in some due to incomplete structural reforms. The EU would have to tread carefully and exercise patience as ASEAN under Myanmar’s chairmanship work towards consolidating the three Cs – community, connectivity and centrality – in its ASEAN 2015 vision.
The EU has to build on the momentum achieved in the 2013 ASEM Foreign Ministers meeting in New Delhi to shape a focused agenda for the 10th ASEM Summit to be held in the 2nd half of 2014. Situation in Asia in 2014 will not be as rosy as those who believe in the coming Asian century. Regional tensions, political instability and relative economic weakness will mean an “uneasy” year for Asia. Whether the EU has the diplomatic bandwidth and dexterity to sustain dialogue and engagement in an increasingly complex landscape in Asia will be seen by how well it is going to manage the ASEM summit.
Trade and investments ties between the EU and Asia will continue to be an important arena to engender needed structural economic reforms in both Europe and Asia. The progress of TTIP and EU-Japan FTA will be closely watched by the other EU’s trading partners.
Summing up, 2014 will be a year of change and challenges. While the mood in the EU may be more optimistic, challenges remain as reflected by Standard & Poor’s downgrading of EU’s credit rating from AAA to AA+ and the rise of far right politics. EU will also face increasing changes in the Asian landscape and need to be pragmatic and patient to make further headway in its relations with Asian partners.
EU-Myanmar Task Force
European elections 2014: Different this time?