Economic Relations between Europe and Asia in the context of the ASEM

1
Economic Relations between Europe and Asia in the
context of the ASEM

• Paul Isbell
• Senior Analyst
• International Economy and Trade
• II Forum Asia Casa Asia
• Barcelona Nov. 22-23, 2004

2
Background to ASEM

• End of Cold War (late 80s-early 90s)
• Shift from bipolar to multipolar intl. system
• Three principal pillars of world system (nearly
  90 of world GDP)
• United States (and increasingly the Americas)
• Asia
• Europe
• Emergence of Regionalisms (EU, NAFTA, ASEAN and
  broader Asian and American integration processes)

3
Background to ASEM

• Emergence of inter-regionalisms
• Traditional Transatlantic relationship, renewed
  in 1990 with the beginning of the Transatlantic
  Dialogue (TAD) Goals to eliminate non-tariff
  barriers to trade and barriers to services trade
• New forms Asia Pacific Economic Forum (APEC)
  beginning in 1989 and now with more than 20
  member states. Bogor Goals to achieve free and
  open trade by 2010 and 2025 in the context of
  open regionalism

4
Background to ASEM

• The Euro-Asian relationship The weak link in
  the new triangular core of the world system
• Transatlantic and Transpacific links denser
• No formal inter-regional dialogue or grouping
  between Europe and Asia
• Enormously growing potential
• Economic emergence of Asia
• Trend toward regionalisms in Asia
• Potential for more efficient inter-regional
  dialogue
• Potential Advantages deeper economic links,
  political dialogue to help other international
  fora, mutually beneficially re-balancing of intl.
  system

5
The Birth of Asia Europe Meeting

• Bangkok Summit of Heads of States/Gov (1996)
• 15 member states of the EU 7 members of ASEAN
  3 countries of Northeast Asia (China, Korea,
  Japan)
• Goal Strengthen the inter-regional relationship
• Bases Mutual respect and equal partnership
• ASEM V at Hanoi Official enlargement of ASEM to
  include 10 new EU members states 3 recent
  entries into ASEAN (Cambodia, Laos, Myanmar)
• Membership now at 38 states EC (over 50 GDP
  and international trade)

6
The ASEM Process

• ASEM remains an informal dialogue
• Multi-dimensional political, economic, cultural
  dialogue
• Common ground for non-binding, mutually
  beneficial projects and goals (consistent with
  national sovereignty and other international
  commitments)
• Incremental in nature and complementary to work
  and objectives of existing, more binding
  international fora (WTO, Bretton Woods
  institutions, etc)
• To improve efficient functioning of global
  governance
• To facilitate further deepening and broadening
  of regional integration in both regions

7
The ASEM Process

• No permanent institutions
• By choice, lacks a Secretariat (unlike APEC,
  ASEAN)
• Rotating national coordinators (existing state
  officials)
• Bi-annual Summits of Heads of State and Govt.
• Annual Foreign Affairs, Finance and Economics
  and Trade Ministerial Meetings
• More frequent Senior Officials Meetings (SOMs)
• ASEM has come of age
• 5 Summits (Bangkok, London, Seoul, Copenhagen,
  Hanoi
• Over 15 Ministerial meetings, numerous WGs, etc.

8
ASEMs Economic Pillar

• ASEMs Economic Pillar
• The terrain of the Finance and Economy Trade
  Ministers, and Senior Officials of Trade and
  Investment (SOMTI)
• Two traditional areas of activity
• Trade Facilitation Action Plan (TFAP) seeks
  common ground on reducing non-tariff barriers to
  trade by facilitating and streamlining
• -customs procedures, standards and conformity
  assessment, public procurement, quarantine and
  SPS procedures, intellectual property issues, the
  mobility of business people, distribution issues,
  and other trade facilitation issues

9
ASEMs Economic Pillar

• Investment Promotion Action Plan (IPAP)
• Investment Promotion Activities
• Investment Policies and Regulation
• Activities related to the regulatory and legal
  framework governing the investment environment
• ASEM High Level Dialogue on Key Investment Issues
• Investment Experts Group (IEG) have held numerous
  meetings since the inception of the IPAP to
  monitor progress and set future goals

10
Weaknesses of ASEM

• Process Remains Informal (progress incremental)
• Lacks Concrete Goals (undermines perceived
  relevance, identity)
• Lack of Institutional Infrastructure (lacks
  continuity)
• Summit Fatigue (resource overstretch)
• Still excludes large parts of Asia (South Asia,
  Central Asia, lacks a Eurasian continuity)
• Asymmetry in Objectives (deeper
  institutionalization vs advocates of shallow
  informal dialogue
• Lack of Symmetry in Interest
• Between regions (EU vs Asia)
• Within regions (France vs UK, EC vs members, SE
  Asia vs NE Asia)

11
The Euro-Asian Economic Relationship

• Europe and Asia each others second most
  important inter-regional trade and investment
  partner
• In each case, some distance behind the United
  States and its partners in the North American
  Free Trade Association (NAFTA)
• Since Asian crisis and emergence of the Euro, the
  Euro-Asian economic relationship has become more
  significant
• In last 25 years, the share of EU imports coming
  from the economies of Asian ASEM has risen from
  less than 10 to nearly 25

12
Euro-Asian Economic Relationship

• Share of EU exports to Asian ASEM has also
  increased from less than 7 to nearly 15
• In last 10 years, Euro-Asian merchandise trade
  flows have nearly doubled in both directions,
  from a combined total of US377bn in 1994 to
  US567bn in 2003

13
Euro-Asian Economic Relationship

• From perspective of Asian ASEM, the relative
  importance of Europe has declined somewhat
  relative to the US since creation of APEC
• Still, on average some 15 of A.ASEM exports go
  to EU while on average some 10 to 15 of imports
  come from EU
• Excluding intra-Asian ASEM trade, these EU shares
  would increase to approximately 30 and 25,
  respectively

14
Euro-Asian Economic Relationship

• Despite recent gains in Euro-Asian trade, the
  Euro-Asian economic link remains the weakest of
  the three major legs of the Transatlantic-transpac
  ific-Euro-Asian geo-economic triangle
• Transpacific Asian-North American merchandise
  trade is the most significant (US647bn combined
  trade 2003 vs Euro-Asian link with US567bn)

15
Euro-Asian Economic Relationship

• Transatlantic economic link appears weakest in
  merchandise trade terms with only US478bn
  combined trade flows 2003
• Predominance of transatlantic economy in services
  trade and FDI - most important world link
• Asian ASEM FDI stock in EU nearly 70bn
• EU FDI stock in Asian ASEM members totals some
  110bn
• EU stock levels in the US are now approaching
  US1trillion
• US FDI stocks in Europe are about US700bn
• EU-US services trade comes to some 225bn, while
  EU-Asian ASEM services trade sums to only 75bn

16
ASEM Attempts to Deepen Economic Relationship

• Asian Crisis and Creation of Euro catalysts
• London Summit (1998)-Seoul Summit (2000) ASEM
  Vision Group
• Headed by South Korean economist Il Sakong,
  along with 25 experts
• A Strategic Vision Report with Recommendations
  for the Future of ASEM (over 10 major
  recommendations)
• Free Trade in Goods and Services by 2025
• Macroeconomic policy coordination and reform of
  intl financial system
• Institutional recommendations, including an ASEM
  secretariat and a number of theme-specific ASEM
  centers
• Results disappointing, little concrete action
  taken, diversions of 9-11 and initiation of Doha
  Round

17
ASEM Attempts to Deepen Economic Relationship

• Copenhagen Summit (Sept. 2002)
• Preparations overshadowed by sense of drift
• Yet optimistic over successful launch of euro
• Creation of the ASEM Task Force for Closer
  Economic Partnership between Asia and Europe
• 10 Asian and 7 European independent experts
• Tasked to present concrete action-oriented
  recommendations for closer economic partnership
  to Hanoi Summit
• Role of Spain Rodrigo Rato, European
  Secretariat (Elcano Royal Institute, Alfredo
  Pastor Task Force Member

18
ASEM Task Force for Closer Economic Partnership

• Nearly two years of discussions and debate
• Revisited many of the themes of the Vision Group
  (free trade goal, institutional issues)
• Concentrated on Themes referred to in the
  Copenhagen Chairs Statement (wider use of euro
  in Asia, further development of Asian bond
  markets)
• Ambitious concrete recommendations in finance
• Broader recommendations aimed at capitalizing on
  the Euro-Asian strategic potential
• Insistence on institutional dimension

19
ASEM Task Force for Closer Economic Partnership

• General Recommendations
• Goal of Free Trade by 2025
• Inclusion of discussions of energy issues as a
  priority within the Economic Pillar
• Adoption of a common strategic agenda to promote
  stability and prosperity in the Euro-Asian
  landbridge
• Concrete, Action-Oriented Recommendations
• ASEM Secretariat (even if virtual)
• ASEM Trade, Investment and Tourism Promotion
  Center (even if virtual, to be hosted by Vietnam)
• ASEM Business Advisory Council (to increase
  ASEMs relevance to business communities)
• ASEM Yes Bond Market and Fund

20
ASEM Task Force for Closer Economic Partnership

• At the Hanoi Summit, ASEM Yes Bond Fund and
  ASEM Promotion Center captured most attention of
  leaders, along with the new proposed energy and
  Euro-Asian landbridge priorities.
• Task Force Recommendations now in hands of the
  Finance and Economy Ministers
• The Task Force conceived of European Asian
  economic relations in broader terms, beyond flows
  of trade and investment, to commonly-held
  strategic interests

21
Future of ASEM

• Common Interests, Complementary Needs
• Asia development, stability, more efficient use
  of Asian savings, facilitation of SME activity
• Europe broader use of the euro in Asia,
  development of SMEs, continued opening of world
  trade and investment markets
• Energy Issues, Prosperity of Central Asia
• Reform in Europe, integration in Asia
• ASEM link relevant for international stability
  and balance, for strengthening global governance
  and multilateralism