Economic Policy and Global Environment

This report discusses the relationship between the EU and Singapore, and how EU's economic environment plays a key role in their economic relationship. It analyzes recent articles and applies economic theories to understand the implications of the Free Trade Agreement between EU and Singapore.

Running head: ECONOMIC POLICY AND GLOBAL ENVIRONMENT
Economic Policy and Global Environment
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1ECONOMIC POLICY AND GLOBAL ENVIRONMENT
Table of Contents
Introduction:...............................................................................................................................2
The relationship between the EU and Singapore:......................................................................2
Overview of the articles:............................................................................................................5
The economic interpretation of the article:................................................................................7
Conclusion:................................................................................................................................9
Reference:................................................................................................................................10

2ECONOMIC POLICY AND GLOBAL ENVIRONMENT
Introduction:
During the recent years there has been plenty of change in the dynamics of the global
business environment and most of them has been germinated through the growth in the
globalization. It has allowed the international trade to become liberal in nature backed by the
moderate growth of the technological progress during the 21st century has turned the global
business environment integrated by a large extent (Gilpin 2016). While during 90s
international trade was mainly sourced from the developed nations and ends at developing
nations, time has come to face a new trend the same. During present day not only the
developed nations rather developing as well as the underdeveloped nations too are trying to
catch up with the pace of the changing international trading environment. Motto of self-
reliance and growth in the foreign direct investment in the developed nations is changing the
decade old trade relationship among the nations. One of the biggest example of the same is
the willingness of the European Union to deal with the sing pore in order to enhance the trade
balance and the overall economic performance of both the trading partners (Hirst et al. 2016).
Out of various trade agreement taking place during the present date, it is one of the most
important one due to its magnitude, importance and future. Under this, scenario, this report is
aimed to discuss how the European Union’s economic environment performs an important
role in the case of the economic relationship between the Singapore and the EU. In order to
perform the same, the report will consider few journals and articles published within the last
twelve months and doing so it will portray the findings with economic laws in order to
achieve the objectives of the same.
The relationship between the EU and Singapore:
Since last one decade there has been growing trading relationship between the EU
nations and Singapore that has provided both the trading partners to come closer over the
years. Cooperation in terms of the technological advancement, supply chain creation, growth

3ECONOMIC POLICY AND GLOBAL ENVIRONMENT
in the employment and protection from the fluctuations in the market has been constrained by
a large extent for the Singapore (Pelkmans et al. 2016). On the other hand, growth in the
bilateral trading between Singapore and EU has provided the European nations like France a
scope to penetrate the Asian markets.
Figure 1: GDP of EU
Source: (Tradingeconomics.com 2018)
From the above figure, it can be seen that the GDP of the European nation has been growing
at substantial rate during the present date and as per Meissner (2016), one of the main reasons
for the same lies within the growing trade between the ASEAN economies like Singapore.
this rise in the GDP of the EU member countries highlights that, there has been rise in the
individual income of the EU state that is allowing them to export more amount of goods and
services and enhance their overall performance during the last three and half decades.

4ECONOMIC POLICY AND GLOBAL ENVIRONMENT
Figure 2: Trade position between EU and ASEAN economies
Source: (Hoang and Sicurelli 2017)
The above figure clearly shows the trade relation between the EU nations and the
countries of ASEAN economies. As it can be seen that Singapore is the main destination of
all the goods and services from EU region that highlights the importance of the same to the
EU nations. Contrary to this, it can be seen that, if there is loss in the trade with Singapore,
then it will lead to fall in the trade for the EU member countries as well (Hsu 2015). Moving
forward, it is also essential to highlights that, it has been found that over the years, if there is
loss in the trade balance of the EU members, then it is germinated due to the fall in the
business of the ASEAN economies who are arguably one of the largest trading partners of the
EU nations (Eckhardt and Poletti 2016).

5ECONOMIC POLICY AND GLOBAL ENVIRONMENT
Figure 3: GDP of Singaporean manufacturing industry
Source: (Tradingeconomics.com 2018)
Contrary to this, GDP of the Singapore is largely dependable upon the manufacturing
sector of the state and above figure showcase the upward trend of the industry. As it can be
seen that, with change in the GDP of the EU, there has been change in the growth path of the
GDP from the manufacturing sector of Singapore that highlights high level of association
between these two trade participants (Trade.ec.europa.eu 2018). Thus, it can be argued that,
Singapore and EU depends largely on each other for their trade growth. However, market size
of the EU member countries and their superiority in case of production allows them to
influence the trade pacts like FTA effectively. If there is rise in the growth of the GDP of the
EU member nations, then they will ratify the FTA with Singapore and in other case FTA
between them may get postponed as well (Hirst et al. 2016).
Overview of the articles:
in order to perform how much EU’s economic environment performs as a key tool for
the economic relationship with Singapore, this report will focus on the newspaper article
published on 20th April of 2018 with headline “Singapore welcomes 'important step' in
ratification of FTA with EU” (Kit 2018). in addition to this, the report will consider
additional three supportive articles those were published with the headline “EU-Singapore

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FTA on track to come into force by 2019: Iswaran”, “Singapore, European Union move
forward towards ratification of bilateral trade deal” and “Why Asean and S’pore still matter
to Europe” on 26th may 2018, 02nd march 2018 and 19th august 2017 respectively. The articles
were chosen in such a way that it can provide in depth details regarding the recent
development of the pact between the EU and Singapore and addition lay these articles are
beneficial in order to analyse the present scenario of the trade agreement with the economic
concepts. As per the main article it can be seen that the Free Trade Agreement between EU
and Singapore known as EUSFTA is gaining pace in recent years under the influence of the
various external factors (Hong 2018). Being the first of its kind EUSFTA is a single trade
pact between Singapore and the EU, which will perform as the stepping stone towards the
larger engagement between these trading partners. As per the supportive articles it can be
seen that there were no such trade agreement between the ASEAN region and the EU, thus it
will allow both the trading partners to indulge in higher cooperation in all the fields ranging
from supports in terrorism to technology. One article has showcased that during 2017,
bilateral trade between EU and the Singapore was almost as high as 98.4 billion USD making
Singapore one of the most reliable and trusted trading partner for the EU regions (Pulch
2017). As per the commissioner of EU, there are more than 10,000 firms from EU who are
operating in Singapore as of now and it has helped both the partners to face economic benefit
(World maritime news 2018). Through the rise in the bilateral trade between the EU nations
and the Singapore, it can be seen that there was growth in production, efficiency has been
enhanced the performance of the overall economic parameters has been enhanced leading to
rise in the economic performance of both the trading partners. If the new trade agreement
takes place, then it will be first of its kind between ASEAN economies and EU states that will
open door for both the states to enjoy unlimited trading possibilities (Kit 2018). Introduced
back in 2007, implementation of the FTA will allow both the trading partners to showcase

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new statement in the region that both of the trading partners are not dependable upon their
respective regions for the international trade rather, they have breached their barriers to
expand their respective trade balance and better off the economic condition in domestic
scenario (Ying 2018). In order to understand the views of the newspaper, next section of the
report will portray the same with the economic theories.
The economic interpretation of the article:
Introduced by the Adam smith during 17th century, international trading theories are
one of the key economic tools that aids to determine the various aspects of the same (Suzuki
and Nijkamp 2016). as it can be seen from the theory of the Adam Smith, if there is absolute
advantage in production of goods and services with one nation in one good and the other
nation in another good, then trading will take place and thus it will better off both the
economies. Moving forward, Ricardian model argued, trade will take place if there is
comparative advantage in production of goods or services in one nation and the other one
lacks in the same (Cohn 2016). Since then, international trading has been rising around the
world and during 21st century it is one of the main source of the national income for the
economies as well. Considering the case of the EU and Singapore, it can be seen that both the
partners have well established trade relationship in different front. As per the history,
Singapore is highly indulged with the France in the field of R&D, aerospace, biomedical
science, consumer care business and others. On the other hand, EU nations purchase labour
intensive goods from Singapore, for instance, rice, banana, handicrafts and others which
allows both the economies to enhance the employment, production while reducing the
inflations through reducing the price (Mckenzie and Meissner 2017).

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Figure 4: Implication of tariff on trade
Source: (Mohan 2017)
As per the selected articles, FTA between EU and Singapore is going to take place
and it will allow both the nations to enhance their national income as well. Considering the
above figure, it can be seen that, if there is tariff on import or export of goods and service,
then it can enhance the domestic price of the product causing loss of the consumer surplus
and deadweight loss as well (Petersmann 2015). From the above figure, it can be seen that, if
there is tariff, then, import or export of goods and services will be Q3Q4 amount and the
price will be P+tarff. On the other hand, if there is free trade, then it will enhance the import
or export to Q1Q2 amount and the price will be lower as well leading to higher consumer
surplus and reduced price. Thus, as per the economic concepts, if the articles are analysed,
then it can be seen that there will rise in the overall economic benefit for both the nations
(Bahmani and Saha 2015).

9ECONOMIC POLICY AND GLOBAL ENVIRONMENT
Conclusion:
From the above discussion it has been seen that the EU and Singapore are enjoying
good trade relationship between the two nations and when it comes to the performance of the
economies, then they were moderate over the years. EU economic being superior to the sing
pore possess much amount of importance in case of the new Free Trade Agreement because it
can actually help them to enhance their presence in the Asian market. Apart from Singapore
and japan, none of the ASEAN economies has shown interest in the new FTA regime which
is all set to take place by the next year. this highlights that, if the new rule become active,
then both of the nation will have to allow free trade to the EU nations, which will lead the
already debt ridden Singaporean economy a slight hope to enhance their economic
performance. On the other hand, if EU can successfully implement the new law with
Singapore, then it will allow all the EU nations to unlimited access to the Asian economy in
future through the Singapore. thus, to conclude, it can be said that, success of the new trade
will largely be dependable upon the economy performance of the EU nations because in case
post FTA rule, if the EU nations faces loss or less amount of growth in their business in the
Asian economy, then they will prefer to opt out from the same. On the other hand, under the
FTA regime, consumer surplus and the standard of living in Singapore will be enhanced by a
large extent allowing them to enhance their overall economic performance in the coming
years.

10ECONOMIC POLICY AND GLOBAL ENVIRONMENT
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Meissner, K.L., 2016. A case of failed interregionalism? Analyzing the EU-ASEAN free
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