Report: Rethinking Trade with Asia: Strategies for Sweden and the EU in trade with emerging markets

Asia’s emerging markets show strong economic growth, increasing in importance for Sweden and the EU. The report highlights the role of free trade agreements and examines how Sweden and the EU can balance economic opportunities with geopolitical realities in Asia.

Heidi Lund, what is this report about?

In this report, the National Board of Trade analyses and proposes strategies for enhanced trade with Asia’s emerging markets, building on the region’s economic dynamism.

Several markets analysed in the report—including Bangladesh, the Philippines, India, Indonesia, Malaysia, Thailand and Vietnam—show strong economic development, creating both opportunities and challenges for Sweden and the EU.

Why is trade with Asian emerging markets important for Sweden and the EU now?

Currently, Sweden’s trade with emerging Asian economies is modest, with Swedish exports making up only about 2 per cent of total goods exports. However, geopolitical tensions—including US protectionism and Chinese economic coercion—highlight the need for both Sweden and the EU to explore other mechanisms to strengthen existing partnerships for enhanced trade.

With global economic growth driven by Southeast Asia and India, trade with these economies holds significant potential for both Sweden and the EU. However, the benefits of deeper trade engagement with these emerging economies are likely to materialise in the longer term.

What makes India, Malaysia and Vietnam especially interesting as trade partners for Sweden?

As a starting point, it is important to note that the markets analysed in the report differ and should not be directly compared.

India stands out as a distinct major Asian power and is regarded by many stakeholders as an important trading partner for the EU, comparable to China. Stakeholders describe India as a democracy with a market similar to the EU, in that it consists of many internal markets. It is also a priority market for Sweden, with around 280 Swedish companies currently established in the country. A vast domestic market and a growing middle class make India particularly important for consumer goods. In addition, India could offer an opportunity for greater trade diversification.

Malaysia can be seen as a Southeast Asian hub for manufacturing and electronics, with a number of multinational companies based in Penang. In terms of the potential for trade with Malaysia, cooperation in semiconductors and advanced electronics has been highlighted in particular.

Vietnam is of growing interest to Swedish companies, with stability and predicted strong growth over the next decade. The EU–Vietnam free trade agreement adds further value, where there are opportunities for Swedish food exports, although work remains to prevent and remove existing trade barriers.

How do EU free trade agreements boost opportunities for Swedish companies?

Sweden’s bilateral trade with emerging markets in Asia is primarily driven by the purchasing, sales and investment decisions of Swedish companies. The EU’s role in trade policy is to improve the conditions under which these decisions are made. Free trade agreements—with legally binding commitments on tariffs, regulations and investments—improve and stabilise the rules on which Swedish companies base their decisions.

This was confirmed by the companies interviewed for this analysis, who point to concrete benefits such as removing regulatory barriers and cutting costs. Modern EU free trade agreements also include sustainability chapters supporting the green transition, an area where many Swedish companies are already investing.

As a result, there is clear potential in the EU’s ongoing negotiations with most of the emerging markets in this analysis.

In the report you discuss whether increased trade with emerging Asia can reduce dependence on China. What are your main findings?

We question whether deeper integration with Asia’s emerging markets, particularly within ASEAN, can truly reduce dependency on China. These economies are closely intertwined with China through trade and investment.

India may offer an alternative, but much will depend on the outcome of the EU–India free trade negotiations and India’s future relationship with China.