21st
Jul 2016

Asia and Europe inching closer to each other

Cooperation between Asia and Europe in the last 20 years has enhanced the relations of the two continents in all fields, from international trade to global economic recovery, infrastructure and migration. Asia and Europe have signed many bilateral trade agreements and discussions are ongoing on regional deals.

These achievements were in full display at the 11th Asia-Europe Meeting (ASEM) Summit held on 15-16 July 2016 in Ulaanbaatar, Mongolia where 53 Heads of State and Government – 30 European and 21 Asian countries, as well as the ASEAN Secretariat and the European Union – got together under the overarching theme of ‘20 Years of ASEM: Partnership for the Future through Connectivity’.

Leaders at the ASEM 11 Summit, 15-16 July 2016, Ulaanbaatar (Mongolia). Source: http://www.aseminfoboard.org/events/11th-asem-summit-asem11

Leaders at the ASEM 11 Summit, 15-16 July 2016, Ulaanbaatar (Mongolia). Source: http://www.aseminfoboard.org/events/11th-asem-summit-asem11

The ASEM dialogue process was first launched on 1 March 1996 in Bangkok, Thailand, to enhance relations and various forms of cooperation between the then 15 members of the European Union and its Commission, the then 7 members of the Association of Southeast Asian Nations (ASEAN), and the individual countries of China, Japan, and South Korea which would form the so-called ASEAN+3 grouping. A series of enlargements saw additional EU members join as well as India, Mongolia, Pakistan, and the ASEAN Secretariat in 2008, Australia, New Zealand and the Russian Federation in 2010, Bangladesh, Norway, and Switzerland in 2012, Croatia and Kazakhstan in 2014.

When the ASEM was inaugurated in 1996, it was conceived as an instrument for bridging the missing link between the EU and East Asia. At the time of the first ASEM in 1996, North America and East Asia had already established an institutional mechanism (the Asia-Pacific Economic Cooperation) for deepening inter-regional cooperation and North America and the EU had further bolstered their transatlantic ties. In this context, it was perceived that there was a glaring missing link as far as relationship between the EU and East Asia was concerned and that the ASEM process would serve to fill this missing link in the triangular relationship: North America-EU-East Asia.

ASEM paramount objective has always been the enhancement of economic relations between the two regions. The ASEM process allows the EU to avoid the risk of being isolated by too close a collaboration among the Asia-Pacific countries while also giving East Asia the opportunity to counterbalance US presence by opening up to Europe.

Europe’s economic presence in Asia is felt particularly in the areas of trade and monetary policy. For instance, Brussels is Beijing’s most important commercial partner—the two trade more than one billion euros a day. The EU is ASEAN’s third-largest trading partner, after China and Japan, but ahead of the United States. Overall, Asian markets are the destination for almost one third of EU exports and offer rapidly expanding market opportunities for European firms, which are also among the biggest contributors of FDIs in the region

Following the surge of trade relations, Asia has become the largest buyer of euro-denominated assets. The share of euros in the foreign exchange portfolio of Asia’s major central banks’ accounts is, on average, for around 25-27 percent of the holdings of Asia’s major economies, reaching 30% and above in China (the world’s largest holder). This makes the euro the second-most-important reserve currency in Asia – after the dollar, but ahead of the yen.

Europe’s economic rebalance toward Asia is rooted, as in the case of the United States, in the realisation that Asia has become central to global prosperity and to the Western powers’ own growth prospects. Since 2011, the EU has signed free-trade agreements with South Korea and Singapore; it is negotiating one with Japan, Vietnam, Malaysia and Thailand; and has opened discussion on a trade and investment agreement with the whole of ASEAN.

At the last ASEM summit, leaders from the two regions explored plans for an inter-regional investment and trade agreement that would counterbalance the US-led Trans-Pacific Partnership (TPP). Such dynamics deserve to be followed closely by European and Asian companies for the potential that they could have for trade, investment and jobs creation on the Eurasian continent.

More on this in the interview to Dr. Casarini by Xinhua News.