Making the EU a Credible Economic Hedge for ASEAN

In the latest ISEAS – Yusof Ishak Institute State of Southeast Asia Survey 2025 (SSEA 2025), 30.9 per cent of respondents cited deepening cooperation with like-minded partners beyond ASEAN as a credible strategy to mitigate risks emanating from rising protectionism and nationalism. This followed the most-cited response (at 40.9 per cent) of accelerating regional integration among ASEAN Member States (AMS). Since the 2021 iteration of the survey, the European Union (EU) has been ASEAN respondents’ most preferred strategic hedging partner to hedge against uncertainties emanating from the US-China strategic rivalry. In this year’s SSEA survey, 36.3 per cent of respondents ranked the EU highest among strategic partners of choice.

Despite the high regard for the EU as a trusted strategic partner and its consistency as a responsible stakeholder that respects and champions international law, its standing on economic influence in the region significantly pales in comparison. In SSEA 2025, only 2.6 per cent of respondents felt that the EU was the most influential economic power in the region. With a more unpredictable and heavy-handed US trade policy approach, both the EU and Southeast Asia would have more impetus and a greater urgency to drive forward stronger economic engagement and strategic partnerships. Respondents in Vietnam (55.5 per cent), Indonesia (42.5 per cent), and Thailand (39.8 per cent) are the strongest proponents of the EU as a preferred strategic hedging partner. These countries are also among the hardest hit by the Liberation Day tariffs.

The EU is ASEAN’s third-largest trading partner, accounting for eight per cent of total trade. It is a significant export market for Cambodia (13.8 per cent share), Vietnam (12.3 per cent share), and the Philippines (11.2 per cent share). For imports, the EU is most significant as an import source for Singapore (10.4 per cent share), Malaysia (7.8 per cent share), and Thailand (7.8 per cent share). Though the EU’s presence in trade activities is relatively well spread out across the region, it currently has free trade agreements (FTAs) with just two ASEAN countries, Singapore (2019) and Vietnam (2020). That said, it is pursuing bilateral FTAs with other AMS, including Thailand and Malaysia. Although intentions for an EU-ASEAN FTA have been on the cards, this is a longer-term objective, with the bilateral route currently being a speedier and more pragmatic option.  

Based on the World Bank’s Deep Trade Agreements database, the EU’s FTAs with Singapore and Vietnam are similar in terms of the broad policy areas that they cover. Legally enforceable provisions in areas like intellectual property rights and movement of capital illustrate the EU’s emphasis on these areas when negotiating trade agreements. Taking the EU-ASEAN Business Council White Paper on elevating EU-ASEAN relations as guidance, there are various themes that carry more importance with the EU business community, like transparency in regulations and harmonisation in standards, especially Sanitary and Phytosanitary (SPS) requirements.

Since the 2021 iteration of the survey, the European Union has been ASEAN respondents’ most preferred strategic hedging partner to hedge against uncertainties emanating from the US-China strategic rivalry.

An analysis of the relevant chapters in the EU-Singapore and EU-Vietnam FTAs (such as technical barriers to trade and SPS) shows the EU’s nuanced approach in these areas. It is one that is cognisant of the unique policy conditions of the individual AMS signatories. For instance, the reference to international standards and technical assistance is more pronounced in the latter agreement, reflecting Vietnam’s relative lower level of maturity of regulatory institutions and institutional capacities. The tailor-made approach that the EU has taken in forging these partnerships with regional players augurs well in gaining further trust.

The EU’s deeper engagement with ASEAN can refer to the more negative sentiments the region currently has with respect to its strategic relationships with the US and China. In the SSEA 2025, the potential threat to a country’s sovereignty is one of respondents’ most-cited aspects of concern, for both the US and China, that they think could worsen their country’s bilateral relationship with either major power. When asked what could worsen their impressions of the US and China, 29.2 per cent and 28.2 per cent of respondents, respectively, cited interference with domestic affairs (in the respondents’ countries). In contrast, the EU’s high regard for the rule of law and global rules-based order are its most admired traits, with 29.5 per cent of respondents holding this view. The EU should capitalise on this sentiment while preserving the sovereign rights and values of its strategic partners in ASEAN.

ASEAN sees itself as the leader in championing the global free trade agenda (23.8 per cent of respondents), followed by China (20.6 per cent) and the US (19.0 per cent). This is an important point. ASEAN may hold high regard for the EU’s stance on international standards as it signals a high likelihood that the EU, as a trade partner, will comply with global rules-based mechanisms rather than undermining them. However, the respondents’ show of confidence in the EU does not necessarily equate to an appetite among AMS to adopt EU rules (on trade or other areas) wholesale. ASEAN-based rules reflecting its ideals and the “ASEAN way” may still be the preferred choice for AMS. The SSEA 2025 results show that this region will place more trust in working with those most likely to uphold the rules-based order, especially when the global trade landscape has become more turbulent and uncertain in the opening quarter of this year.

2025/120