Page 19 - ASEAN-EU Dialogue 2018: Regional and Inter-Regional Economic Cooperation: Identifying Priorities for ASEAN and the EU

the EU is world’s second largest exporter, the biggest importer, and also the biggest source for
both outgoing and inbound Foreign Direct Investments (FDI).

Trade liberalisation is a tool to reduce inefficiencies in domestic economic structures. It is also
a tool that contributes to kick-starting more innovations and productivity. ASEAN needs to
learn this lesson more carefully from the EU. However, before opening up to greater inter-
regional trade a stronger regional mechanism of enhanced trade liberalisation, and regional
economic integration is needed.

Some economists argue that one of the key outcomes of trade liberalisation is that it intensifies
competition for rival production units and pushes the less efficient companies out of the market.
While in case of the EU, it is a virtue, may be in some of the ASEAN countries also, especially
from the consumer’s point of view, but in most of the Southeast Asia, protecting the less
efficient firms is more a matter of social compulsion than a financial choice.

Conclusion
The world of economics is sometimes different from the realities of the world. Policymakers
of the developing countries of ASEAN keep that in mind at all times. In order to create a level
- playing field, the EU has created policies whereby the workers and industries hit by trade
liberalisation are provided some financial assistance. The European Globalisation Investment
Fund of the European Commission is there. Though its maximum annual expenditure is around
US$ 200 million only, it is still far better than the ASEAN which lacks such a systematic and
comprehensive mechanism.

So far as the EU-ASEAN FTA is concerned, one of the major bottlenecks is that the EU
procedures demand that all the member countries of ASEAN sign a Partnership Cooperation
Agreement including a commitment to the Human Rights and joining the International Criminal
Court. These are difficult issues for a regional grouping such as ASEAN, whose members are
too diverse - not just on economic issues but also in terms of mode of government, role of civil
society in the polity, and participation of private sector in the economic system. This has been
one of the reasons why despite trying hard, a region-to-region EU-ASEAN FTA negotiation
could not materialise, and the EU went ahead with bilateral FTAs with Singapore and Vietnam.
EU has high standards for products accessing their internal market, which could be an obstacle
for some of the Asian economies (Valero, 2018).

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