Bridging Two Continents: EU-ASEAN Trade and Investment

Abstract

The Association of Southeast Asian Nations (ASEAN), with its combined population of well over 300 million, has become both a major trade partner for the European Union (EU) and a commercially interesting location for foreign direct investment (FDI). This has been achieved in the face of a relatively unfavourable EU trade policy. Recently, there has been a limited re-appraisal of the EU approach in view of the growing economic importance of the ASEAN countries and more generally of the Asia-Pacific region. Compared with other East Asian countries, Europe has considerable historical, cultural and commercial links with most of ASEAN’s member countries. ASEAN could therefore be seen as a bridge for Europe to the wider Asia-Pacific region. The United States (US) has such a link through its participation in the Asia-Pacific Economic Cooperation (APEC) forum. Should the European Union thus seek to strengthen its institutional link with ASEAN and adopt a more open and supportive trade policy framework? A difficulty for EU policymakers has been that exports from ASEAN are highly competitive in European markets, provoking protectionist demands and making it difficult to maintain open market access. For their part, the ASEAN countries are focused on the short-term imperatives of dealing with the financial and economic crisis that struck them in 1997. Hence, the EU-ASEAN bridge instead of being enlarged is in danger of being blocked. As blockage is more likely the more disparate is the traffic in each direction and the more restrictive are the rules, this chapter examines the nature of EU-ASEAN trade and investment flows, their adjustment implications and the EU’s trade treatment of ASEAN.