To briefly overview: The Eurasian Economic Union (EEU) has an integrated single market of 183 million people and a gross domestic product (in US Dollar terms) of over 4 trillion (PPP). The Association of Southeast Asian Nations (ASEAN) has an integrated market of approximately 650 million people and a GDP (in US Dollar terms) of almost 3 trillion.
Both organizations endeavor to allow for the free movement of goods, capital, services and people and provides for common policies in macroeconomic sphere, transport, industry and agriculture, energy, foreign trade and investment, customs, technical regulation, competition and antitrust regulation.
Rumor has it that by November of this year there may be a Free Trade Agreement (FTA) signed in Singapore between ASEAN and the EEU. This is still in the realm or rumor however, it does persist. Just this week I received several calls from business colleagues from ASEAN countries (specifically in this case Thailand, Singapore and Vietnam) who would very much like to see such an FTA come into being sooner rather than later, this year if at all possible.
Aside from opening up respective markets, one of the common and independently repeated themes was their overdependence on the US Dollar and the recently growing geopolitical uncertainties associated with trading within US defined and permitted trade corridors using the dollar.
The trend seems to be growing among many trade dependent countries to try to diversify from the greenback. It is worth noting former central banker Agustin Carstens, who confirmed a recent Bank for International Settlements (BIS) report that the US dollar makes up at least 80% of all the letters of credit outstanding, which are the means of settlement of international trade contracts.
It is an unsettling imbalance for any country to be involved in, and some diversification away from the US Dollar may alleviate the worst potential effects down the road. This is becoming a very real present-time concern for many nations especially when the US Fed is on a hawkish path, draining US Dollar liquidity on a monthly schedule.
Therefore, if the Powell-led Fed continues on its rails, and the US administration keeps pressuring trade with restrictive measures it may lead to a dollar shortage among non-US banks. That could well and truly affect international trade as it known today, add to this mix tariffs, sanctions, pressuring and the resulting destabilization in rates and currencies especially in the more vulnerable EM’s, then a real economic witches brew is cooking.
Optimistically, there is an expectation that some form of an agreement between ASEAN and the EEU will happen as originally intended for November 14 – 15 at the East Asia summit in Singapore, which will be attended by the heads of the ASEAN countries. What may be the fly in the ointment is whether Australia, India, China, New Zealand, United States, South Korea and Japan will be supportive of such initiative. The jury is still out on that.
That said, the Foreign Minister of Singapore, Mr. Balakrishnan apparently stated that he hopes to prepare all the necessary documents by November, when Vladimir Putin will arrive on a state visit. It [the FTA] is quite fully developed, but there are still a few important legal issues left. He went on to say that although time is short, they hope to settle still outstanding issues before Putin’s visit.
Hope springs eternal, we will just have to wait, see and trust that no outside party will make it their business to play spoiler, and delay this inevitable diversified progress from happening.
The FTA document that has been in preparation for several years will not be limited solely to regulating trade relations. It is expected to embrace a wide range of topics, including cooperation in the innovation sphere, joint development of promising technologies and projects, including those related to the digitization of the economies of the EEU countries, as well as logistics and transport businesses.