European and US strategies for the Indo-Pacific share an understanding that ASEAN and Southeast Asia are the Indo-Pacific’s geographic centre, with statements from European and US leaders highlighting the prominent role for ASEAN in regional engagement. However, trilateral and minilateral cooperation beyond ASEAN, for example via AUKUS or the Quad, are also seen in both Europe and the US as enabling focused and practical collaboration.
Bilateral ties with partners in the region remain important. Australia, India, Japan and New Zealand are regarded on both sides of the Atlantic as fundamental partners. European countries are also looking to deepen relations with countries such as Indonesia, Malaysia and South Korea (currently in the process of drafting its own Indo-Pacific strategy). These partners are partly selected based on historical ties – for example, those of the Netherlands with Indonesia, the UK through the FPDA and the Commonwealth, and the US through its alliances with Australia, Japan, the Philippines, South Korea and Thailand. But cooperation is ultimately driven by strategic interests and values regarding both economics and security.
There is nevertheless some divergence between European and US strategies on, for example, whether the entire Indian Ocean littoral or even the western coast of the Americas should be included in the Indo-Pacific. Differences also exist in emphasis on subregions of the Indo-Pacific and on regional institutions and groupings such as the Indian Ocean Rim Association, the Pacific Island Forum or the Quad. Such divergence offers the opportunity for coordination and cooperation among the transatlantic partners through burden-sharing geographically and institutionally.
A ‘division of labour’ in defence and security
Most European nations recognize that the US is an indispensable and unavoidable partner in the region (especially in case of military conflict). The UK has gone further still by partnering formally with the US in the Indo-Pacific, for example via AUKUS and the PBP Initiative.
European naval forces are already engaged in the Indian Ocean through EUNAVFOR’s Operation ATALANTA and the Combined Maritime Forces in the Northwestern Indian Ocean. The EU has also established a new Maritime Area of Interest in the Northwestern Indian Ocean, in which it will implement its Coordinated Maritime Presences concept aimed at ensuring a continuous European naval presence in that region.
Given that the US does not view the western Indian Ocean and East Africa as part of the Indo-Pacific, and given the limited capacity for a European military presence in Southeast Asia or the Pacific (with the exception of France and the UK), there is potential to explore a ‘division of labour’ in the Indian Ocean and Pacific subregions. This division would be driven partly by the need for advanced defence planning and resource allocation, and partly by the logic of building on existing partnerships in those respective subregions.
Economic partners and target markets
The principal economic focus for the transatlantic partners is on those countries in the Indo-Pacific: (i) that offer large and growing markets; (ii) that can play a substantive role in addressing economic security concerns; or (iii) where economic engagement can have a disproportionate impact on relations overall.
ASEAN, India and Japan each represent large export markets, with ASEAN and Indian GDP both expected to grow faster than that of China in 2022. The EU concluded negotiations for a free trade agreement (FTA) with New Zealand in June 2022 and continues to pursue trade deals with Australia, Indonesia and India (in addition to launching the EU–India TTC in April 2022). The UK is also undertaking in its own negotiations with India but is aiming for a narrower deal than that pursued by the EU. The UK already has trade agreements in effect with Japan and Vietnam, and has signed agreements with Australia and New Zealand which have yet to enter into force. Meanwhile, in June 2022, the UK and Singapore signed a digital economy agreement – representing the first such agreement concluded by a European country.
Many companies in Europe and the US are seeking to diversify both export markets and sources of supply away from China to other countries in the Indo-Pacific region.
Economic engagement with Taiwan has become more urgent due to its role in the global semiconductor sector, its liberal economy and democratic polity and – most recently – China’s increasingly aggressive rhetoric against Taiwan and demands to limit Taiwan’s involvement in multilateral agreements. Signalling this desire to deepen economic relations, the US and Taiwan launched an Initiative on 21st-Century Trade in June 2022. The EU is also seeking to upgrade its trade and investment ties with Taipei and the UK continues its own annual trade talks with Taiwan, with a particular emphasis on trade, technology and green energy.
Many companies in Europe and the US are seeking to diversify both export markets and sources of supply away from China to other countries in the Indo-Pacific region. This so-called ‘China Plus One’ strategy could benefit countries such as Malaysia, Thailand and Vietnam. China is treated more cautiously by transatlantic governments than it was five or 10 years ago. Around 60 per cent of China–US trade is subject to either Chinese or US tariffs. Ratification of the EU–China Comprehensive Agreement on Investments, negotiated in 2020, has been blocked in the European Parliament, at least until Chinese sanctions against MEPs and European political entities are lifted. The UK is no longer pursuing an FTA with China, while talks under the UK–China Joint Economic and Trade Commission and the China–UK Economic and Financial Dialogue have been on hold since 2018 and 2019, respectively. Finally, European and US objections to China’s lack of compliance with WTO agreements and its trading practices remain unresolved.
Despite these developments, as the largest economy in the region, China will remain the most important trading partner for the EU and US, as well as for many countries in the Indo-Pacific.