COOPERATION AGREEMENT BETWEEN THE EUROPEAN ECONOMIC COMMUNITY

(now EUROPEAN UNION) AND MEMBER COUNTRIES OF THE ASEAN

(INDONESIA, MALAYSIA, PHILIPPINES, THAILAND, SINGAPORE)



A Simple Research Paper
College of Business, Economics and Management
Bicol University
Daraga, Albay



In Partial Fulfillment of the Requirements on
ECON 22: International Economics



Submitted to:
Grace C. Torres
Instructor



Submitted by:
Ronald Onguda
Charie Ann Bonita
Mary Grace Neptuno
Mary Joy Loverez
Cindy Matocios
Maricar Loquinario
Jordan Balane
Karen Mae Casin
Jessa Mirandilla
AB Economics IV-A




October 2014


BACKGROUND
The Association of South-East Asian Nations (ASEAN) and the European
Economic Community (now European Union) are regional economic organizations that
have been interacting with each other on economic, trade and political matters for more
than four decades. Their economic ties are manifested by the Interregional Framework
Cooperation Agreement between the European Economic Community (EEC) and the five
member-countries of the ASEAN (Indonesia, Malaysia, Philippines, Thailand and
Singapore) which was signed on July 3, 1980 at Kuala Lumpur, Malaysia and put into
effect on January 10, 1980 with indefinite duration. The free trade agreement said to
have increased trade between the two distinct cultural regions that have different
respective resource endowments and product specializations. ASEAN trading partners
mostly provided agricultural products and manpower to parts of Europe, while EEC (now
EU) provided financial investment, industrial products and resources to parts of
Southeast Asia. The mutual economic benefit between the two regional economic
organizations also encouraged more trade agreements between their respective country-
members. Thus, the Cooperation Agreement of 1980 serves as the foundation for the
formulation of the succeeding trade agreements between the countries of the East
(ASEAN) and the West (EU).

PRIMARY OBJECTIVES
The encouragement of closer economic links through mutually beneficial
investment
The encouragement of technological and scientific progress.
The opening up of new sources of supply and new markets.
The creation of new employment opportunities.

BASIC INFORMATION*
ASEAN European Union
Country Imports (2013) Exports (2013) Total Trade Balance
Indonesia 14,398 9,710 24,108 -4,688
Malaysia 18,381 14,311 32,692 -4,070
Philippines 5,116 5,804 10,920 688
Thailand 17,068 15,041 32,109 -2,027
Singapore 17,598 29,160 46,758 11,562
*The data are presented on EU perspective.

Based on the data shown above, the largest trading partner of EU (formerly known
as European Economic Community) among its ASEAN partners is Singapore, followed
by Malaysia and Thailand. Moreover, Singapore is also the highest importer of European
exports while the Philippines is the smallest trading partner, with the smallest amount of
imports and exports with the European Union. However, the trading participation of the
country with EU is growing with the highest average growth rate in both imports (6.3%)
and exports (18.5%).
-5
0
5
10
15
20
25
30
35
40
45
1980 1986 1991 1996 2001 2006 2011 2013
%

o
f

G
D
P

Trade Status of Indonesia (1980-2013)
Exports
Imports
Net Exports
-20
0
20
40
60
80
100
120
1980 1986 1991 1996 2001 2006 2011 2013
%

o
f

G
D
P

Trade Status of Malaysia (1980-2013)
Exports
Imports
Net Exports
EFFECTS
The free trade agreement also has differing effects on each country based on their
imports, exports, net exports, and total trade size depending on other factors, such as
inflation and world events. In this paper, we had partially analyzed the trade status of the
five members of ASEAN from 1980 (the year of the effectivity of the treaty) up to 2013.

Indonesia
The country initially experienced increases in both exports and imports, but started
to decline after 2001, possibly because of the bombing of the World Trade Center.
Overall, the net exports of Indonesia mostly suffer stagnation and decline after the
effectivity of the treaty. Thus, we could assume that the treaty may have been
disadvantageous to the developing country.











Malaysia
The 3rd largest trading partner of the EU experienced constant developments after
1980 as net exports grew between 1990s and 2000s. The imports and exports of
Malaysia are mostly parallel to each other, allowing less severe fluctuations in the net
export through the years.







-20
-10
0
10
20
30
40
50
60
1980 1986 1991 1996 2001 2006 2011 2013
%

o
f

G
D
P

Trade Status of the Philippines (1980-2013)
Exports
Imports
Net Exports
-20
-10
0
10
20
30
40
50
60
70
80
90
1980 1986 1991 1996 2001 2006 2011 2013
%

o
f

G
D
P

Trade Status of Thailand (1980-2013)
Exports
Imports
Net Exports

Philippines
The Pearl of the Orient Seas seem to be the 2nd smallest trading partner of EU
despite their close cultural ties as the country was a colony of a European nation for over
300 years. Like Malaysia, the countrys imports and exports is mostly parallel as year
progresses. However, the Philippines experienced constant negative net exports after
initial increase since the implementation of the treaty.








Thailand
The imports and exports of Thailand are also closely parallel to each other,
causing constant fluctuations in net exports as the year progresses from 1980. The net
exports of the country remained positive since the turn of the 21st century, but it is mostly
negative a decade after the effectivity of the treaty.









0
50
100
150
200
250
1980 1986 1991 1996 2001 2006 2011 2013
%

o
f

G
D
P

Trade Status of Singapore
(1980-2013)
Exports
Imports
-10
-5
0
5
10
15
20
25
30
35
1980 1986 1991 1996 2001 2006 2011 2013
%

o
f

G
D
P

Net Exports of Singapore
(1980-2013)

Singapore
The small island state of Singapore is the largest trading partner of the European
Union among the ASEAN member countries. It has a very high percentage of imports
and exports that are also closely parallel to each other as the year progresses from the
effectivity of the treaty. After initial decrease, the country enjoys high net exports that had
greatly increased since the effectivity of the treaty.

Total Trade of ASEAN Member Countries
The total trade is the imports and exports of ASEAN with EU. As shown in the
figure below, the ASEAN initially experienced decrease in total trade after the
implementation of the Cooperation Agreement (1980) but eventually started to increase
about 10 years later. However, the free trade agreement had different effects to every
parties involved.

0
100
200
300
400
500
600
700
800
900
1000
1980 1986 1991 1996 2001 2006 2011 2013
%

o
f

G
D
P

Total Trade of ASEAN with EU (as a whole)
Total Trade
0
50
100
150
200
250
300
350
400
450
500
1980 1986 1991 1996 2001 2006 2011 2013
%

o
f

G
D
P

Total Trade of ASEAN Member Countries
with EU (individually)
Indonesia
Malaysia
Philippines
Thailand
Singapore
The figure below shows the separate total trade of the five ASEAN Member
Countries who entered on a free trade agreement with European Economic Community
(EEC), now known as the European Union (EU) in 1980. All countries experienced initial
decline in total trade after the effectivity of the treaty (between 1980 and 1986) but later
recovered and increased through the 21st century. However, the level of decline and rise
in total trade differs on each country. The country (Singapore) with highest total trade
suffers the largest decline, while the country (Philippines) with least total trade suffers the
least decline. The rate of recovery and increase in total trade after 1986 also differs
among the countries.
In summary, the primary advantage of the Cooperation Agreement (1980) is the
eventual augmentation of total trade between the regional economic organizations as a
whole. The stronger connections between the two organizations allowed more products
and services to be traded among the countries, mutually benefitting their respective
populace. The Europeans would gain access to more products and resources from
Southeast Asia, while the Asians would have access to more products and resources
from Europe. The mutual trade benefits also include access to technological and
scientific developments, higher investments and greater employment opportunities
between EU and the ASEAN member countries.
On the other hand, there also disadvantages in the Cooperation Agreement (1980)
including the unequitable distribution of economic benefits and opportunities among the
trading partners. For instance, the net exports of Indonesia declined greatly than any of
the ASEAN trading partners of the EU. It implies that international markets are not a level
playing field as countries with surplus products may dump them on world markets at
below cost. Conversely, Malaysia seems able to adapt with the competitive environment
to increase net exports and total trade.
CONCLUSION
The Cooperation Agreement between the European Economic Community (EEC)
and the five member-countries of the ASEAN (Indonesia, Malaysia, Philippines, Thailand
and Singapore) arguably laid the foundation for the modern free trade agreements
between Southeast Asian countries and European countries. The Philippines as one
contacting parties in this free trade agreement had experienced the advantages and
disadvantages of the treaty. With low capital at that time, the Philippines would have
difficulties in maintaining a balance of trade with the technologically advanced Europe.
The country did experienced limited increase in total trade but unable to recover positive
net exports since about decade after the effectivity of the trade agreement. On the other
hand, countries like Malaysia and Indonesia were able to maintain a lengthy balance of
trade with the augmentation of total trade with Europe which is seen as one of the effects
of the trade agreement. If these countries were able to adapt and prosper under the
weight of a competitive European market, why not the Philippines?
The Philippines could not be considered as a loser from this free trade agreement
as it gained greater access to industrial resources and products from Europe which are
vital in making the country more competitive. Although the country is facing trade deficits
with EU, there is still the possibility that the country may prosper with the accumulation of
large capital and financial investment that may gear up its productivity. The weight of
whether the trade agreement is advantageous or disadvantageous depends on ones
perspective. After all, economic development cant be only determined by the value of net
exports or the Gross Domestic Product. The free trade agreement may have not provide
a favorable balance of trade to some of the contracting parties (including the Philippines),
but it did provide greater exchange of goods between the two regions, thus sharing
economic prosperity and development thru trade. Therefore, we could imply that all
contracting parties in the free trade agreement are better-off regardless of whether their
net exports are positive or negative. However, countries like Malaysia and Thailand did
gain more advantage over the other trading parties in this free trade agreement, as
detailed by their relatively increasing total trade, net exports, and favorable balance of
trade. This could only imply that the condition of having equal mutual benefits is the
utopia of any free trade agreement, meaning it cannot be attained. In general sense, all
contracting parties (the ASEAN members and EU) benefitted from the Cooperation
Agreement (1980) due to the inherent Gains of Trade but the scale of such gains differ
among the parties as some of them gain more piece of the pie than the others based on
the data gathered.


BIBLIOGRAPHY
Official Journal of the European Communities. (2012, June 13). Retrieved October 9,
2014, from http://ec.europa.eu/world/agreements/downloadFile.
http://europa.eu/rapid/press-release_IP-00-98_en.htm
Imports of goods and services (% of GDP). (2014). Retrieved October 17, 2014, from
http://data.worldbank.org/indicator/NE.IMP.GNFS.ZS
Exports of goods and services (% of GDP). (2014). Retrieved October 17, 2014, from
http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS/countries