Page 7 - AEI Insights 2018 Vol 4 Issue 1

ECONOMIC RELATIONSHIP BETWEEN ASIA AND EUROPE:
CASE STUDIES OF SINGAPORE’S EXPORTS TO
CHINA AND THE EU

a+
Fumitaka Furuoka
a
Aida Idris
b
Beatrice Lim
b
Rostika Petrus Boroh

a Asia-Europe Institute, University of Malaya, Malaysia
b Faculty of Business, Economics and Accountancy,
Universiti Malaysia Sabah, Malaysia

+ Corresponding author: fumitaka@um.edu.my

Abstract

1 Inter-regional trade negotiations between the EU and ASEAN have not met with much success
since they were first tabled in the Asia-Europe Meeting (ASEM) in 1996. This has led to
separate discussions between the EU and individual ASEAN member countries to establish
bilateral free trade agreements (FTAs). Singapore was the first ASEAN country to formalise a
bilateral FTA with the EU, initialled in 2014 as the EU-Singapore Free Trade Agreement
(EUSFTA). At the same time, Singapore has also developed a close trade relationship with
China by establishing a China-Singapore Free Trade Agreement (CSFTA) in 2008. Despite the
obvious significance of the EUSFTA and CSFTA, there has been little systematic research on
the export-growth nexus in Singapore. Thus, this paper examines whether Singapore’s exports
to China and the EU are beneficial for its economic development. Empirical findings indicate
that there is unidirectional causality between exports to China and economic development,
consistent with the export-led economic development hypothesis. Nevertheless the findings
also show that, in line with the neutrality hypothesis, there is an independent relationship
between exports to the EU and economic development. These findings have considerable
implications on Singapore’s international trade policy and practices.

Keywords: export, economic development, free trade agreement (FTA), Singapore

Introduction

In January 2017, US President Donald Trump intentionally weakened inter-regional linkages
between Asia and North America by signing the Presidential Memorandum to withdraw
officially from the Trans-Pacific Partnership (TPP). Prior to that, the TPP was considered as
the “biggest” trade deal in the history of inter-regionalism, containing an ambitious plan to
create a rule-based economic integration and strengthen cooperation within the Asia-Pacific
region. Under these circumstances, inter-regional economic ties between Asia and Europe,

1 This study was conducted as part of a Jean Monnet Center of Excellence project (Project Number: 586907-
EPP-1-2017-1-MY-EPPJMO-CoE).