EU and ASEAN call for Myanmar democracy, no trade deal

SINGAPORE, Nov 22 (Reuters) The European Union and Southeast Asian leaders called today for enhanced economic cooperation and the release of political detainees in military-ruled Myanmar, but set no deadlines for either.

A free-trade agreement between the EU and its fifth-largest trading partner the Association of South East Asian Nations (ASEAN) has stumbled over issues such as reform in military-ruled Myanmar, which the EU slapped sanctions on this week.

A joint declaration welcomed the decision of the Myanmar government to step up dialogue with detained opposition leader Aung San Suu Kyi and called for a peaceful transition to democracy, although the two blocs clashed over sanctions.

''We see some progress, but it is not sufficient,'' Jose Socrates, acting president of the EU, told a news conference.

''I disagree that the EU and ASEAN have fundamental differences over Myanmar -- both want human rights and democracy -- and both want to achieve that goal,'' Socrates said.

Singapore Prime Minister Lee Hsien Loong said negotiations between the blocs ''should not be held hostage'' by the Myanmar issue and said they had agreed to move faster towards free trade.

''It will take a lot of creative work,'' Lee said.

Talks over a free-trade agreement kicked off in May but have made little progress since then.

''We need to quicken our pace. We need to put in a little bit more drive,'' said the EU's trade chief Peter Mandelson. ''I have two concerns. One is the...level of ambition.'' The two groups said they would be mindful of the different levels of development and capacity in moving towards a deal.

ASEAN encompasses Cambodia, one of the poorest countries in Asia, and Singapore, the second richest in terms of GDP per capita.

Mandelson said banking secrecy laws in Singapore, one of Myanmar's biggest investors and accused of acting as banker to Myanmar's military rulers, were not a stumbling block to a deal.

The leaders said they had not spoken much of financial market turbulence, with EU Commission President Jose Manuel Barroso telling Reuters he was concerned about the strength of the euro -- at a record high versus the dollar -- for European exporters.

The leaders said record oil prices were also a worry, with Barroso saying they agreed in talks on climate change on the need to move away from fossil fuels to a lower-carbon economy.

''We are determined to go to the next conference in Bali to achieve a result,'' said Socrates, adding this would be a two-year road map to agreed on a new framework to replace the Kyoto Protocol by 2009.

Next month's Bali conference is seen by the UN, financial markets and green groups as one of the last opportunities for more than 180 nations attending to agree to work on a global formula to fight climate change before the protocol's current targets end in 2012.

LITTLE PROGRESS The EU diplomats welcomed a new ASEAN charter -- enshrining principles of democracy and human rights, economic integration and environmental protection -- but advocated a ''carrot and stick'' approach for reform in Myanmar.

The EU this week adopted sanctions against 1,207 firms in Myanmar and expanded visa bans and asset freezes on the country's military rulers in response to their bloody crackdown on the biggest pro-democracy protests in nearly 20 years in September.

The United States also expanded its sanctions against Myanmar's rulers in October. But ASEAN leaders say sanctions reduce the chances of leading the regime on a democratic path.

EU officials said once the bloc was satisfied with the progress of reforms, it could do more to help fight poverty in Myanmar, where protests started over fuel price hikes.

''There's great potential if we can further remove obstacles to our bilateral trade,'' said Barroso. ''It's up to ASEAN members to decide how far to go,'' he said, on ASEAN's integration aims.

ASEAN still needs to define what it means by a single market, with common economic and social policies or a single currency as in the EU seen as unlikely, analysts said.

US. Trade Representative Susan Schwab said this week a US- ASEAN trade deal was unlikely because of the political situation.

Diplomats say the new ASEAN charter, which gives the group a legal identity, means that the current option of excluding Myanmar from trade deals will end.

The charter, signed on Tuesday, needs to be ratified by the 10 ASEAN member states within 12 months for it to take effect.

But the Philippines President Gloria Macapagal Arroyo said its Congress might not ratify unless Myanmar releases Suu Kyi.

REUTERS PD KP1633