The Link Between Trade With and Investment in ASEAN Countries: Lessons for EC Suppliers and Policymakers

Abstract

A view on EC economic relations with third countries in Europe and overseas gives a puzzling result. In terms of institutionalised relations, the Community is among the most active entities in the world. Major trading partners are linked institutionally to the Community through preferential or non-preferential trading arrangements. EC member countries have additionally negotiated investment guarantee agreements with the most important host countries. National and ‘Euro’ chambers of commerce provide substantial information on investment opportunities and trade possibilities supported by permanent representatives of the Community in major partner countries. Such intensive activities contrast strikingly with the performance of the Community in world trade and investment. Since 1970 the share of the Community in developed countries’ exports has declined; most visibly in industries like machinery and transport equipment where one would have expected EC suppliers to have comparative advantages, and less visibly (or even with rising shares) in sectors like food where such advantages do not seem to exist.¹ Deteriorating competitiveness vis-à-vis Japanese suppliers in sophisticated products on one hand, and rising competitiveness in food products because of subsidising exports and protecting local production on the other hand provide keys towards explaining such shifts in trade shares.