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CONFIDENTIAL
EC/ASEAN relations
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7. The EC/ASEAN dialogue is important as a sign of ASEAN eagerness tomaintain close relations with the West despite US withdrawal from the region. The EC/ASEAN political relationship, embodied in regular Ministerial meetings, has so far been useful by enabling the Ten to demonstrate their support for ASEAN over Cambodia and ASEAN to support the Ten over Afghanistan. But the economic arrangements have been less satisfactory. The dilemma we face in dealing with ASEAN is that we are unable to give much substance to our professions of political support by a more forthcoming attitude on trade and other economic issues of importance to ASEAN. It is not easy in recession to shift EC trade policy in a more liberal direction. Market access is a source of ASEAN irritation with its other Western dialogue partners but this is partly allayed in other cases by large aid and investment flows. Although the EC has organised several investment seminars, the share of EC investment in ASEAN has not increased. The strategic advantages of a stronger ASEAN are also offset by the consideration that a united ASEAN could work to our disadvantage in economic negotiations. In the MFA negotiations, for example, we put economic considerations before strategic ones by settling first with Thailand in order to split the ASEAN front.
Trade and Investment
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All the ASEAN countries offer a great deal of scope for British exporters but until recently promise has been generally better than performance. The level of the UK's share of ASEAN trade and the volume of exports remain low in relation to the size of the market. In 1980 just under 2% of UK visible exports went to ASEAN (US $1.97 billion). Singapore, our largest ASEAN trading partner was only 27th in the UK Export League table in 1980. In the 1970's UK exporters concentrated on the new opportunities afforded by the EC and Middle East markets rather than South East Asia. Our market share has declined sharply especially in Singapore and Malaysia in the face of Japanese competition. Our share of OECD exports to the region is 6% compared to 39% in Japan, 27% for US, 7% for the FRG and 3% for France. Japan is willing and able to devote massive resources to South East Asia because the area is a vital source of energy and raw materials. With a small bilateral capital aid programme for only 2 of the ASEAN countries, we cannot compete with the scale of Japanese yen credits and aid for ASEAN industrial projects. But although Japan is likely to benefit at our expense in Malaysia from Mahathir's Look East Policy, most of the ASEAN countries do not want to see a Japanese strangle-hold on their economies and are actively encouraging greater EC economic involvement. British consultants should be encouraged to seek a high quota of projects financed by EC funds for ASEAN. In competing for the bigger projects British companies should sometimes consider combining forces with the Japanese as well as with EC partners. Growing interest in English language training is another asset which we could turn increasingly to our commercial advantage.
CONFIDENTIAL
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