No. 9 — March 8, 1996

Weekly Review

--- by Christopher B. Johnstone

In an effort to strengthen economic and political ties between their two regions leaders and senior representatives from 10 East Asian countries and the European Union gathered March 1 and 2 in Bangkok for a series of bilateral and multilateral meetings. As expected, the first-ever Asia-Europe summit featured discussions that focused largely on economic issues and avoided such controversial subjects as human rights and labor standards. The event produced few concrete results, but leaders from both regions nevertheless stressed its importance. For EU officials the summit represented an opportunity to spur increased European participation in East Asia's heady economic growth. Europe's efforts in East Asia currently are perceived as lagging behind those of the United States in the region. For the Asian participants, who initiated the meeting, the summit symbolized the region's growing self-confidence and diplomatic clout — as well as the "equality" it has achieved with a continent that includes countries that formerly held colonial rule over parts of Asia. The gathering also afforded Asian delegates the chance to deplore the EU's perceived drift toward an exclusive regional economic bloc. Moreover, the meeting highlighted East Asia's growing efforts to balance what often is seen as America's excessive influence in the Asian Pacific — and to expand the region's multilateral dialogue on political and security issues as a hedge against the possible future decline in U.S. military commitments in East Asia.

The European Union was represented by leaders from 11 of its 15 members as well as by a delegation from the European Commission; heads of state from Denmark, Greece, Spain and Sweden were kept home by pressing domestic matters and sent senior diplomats instead. The East Asian contingent included leaders from the seven members of the Association of Southeast Asian Nations — Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam — as well as from the People's Republic of China, Japan and South Korea.

Some countries not invited to participate made known their displeasure about the choices on the non-European representation at the meeting. Several countries — among them Australia, India, New Zealand and Pakistan — expressed interest in attending but were rebuffed. Officials in the United States, while outwardly welcoming the new dialogue between the two regions, noted with concern that the Asian delegation represented precisely the proposed membership of the East Asian Economic Caucus. Washington has opposed creation of EAEC — the brainchild of Malaysian Prime Minister Mohamad Mahathir — as a potential effort to create an exclusive regional economic bloc. Out of respect for Washington's position Japan has provided at best only lukewarm support for EAEC. Moreover, Tokyo has expressed a willingness to broaden Asian representation at future meetings.

For the invited participants the summit represented an opportunity to strengthen what widely is seen as the weak leg in trilateral relations among North America, East Asia and Europe. EU interest in the Bangkok gathering stemmed largely from a perception that Europe has been missing out on business opportunities in the world's most rapidly growing region — despite the fact that in many ways European companies have been no less successful in penetrating Asian markets than their American competitors. In fact, the European Union exported more to — and imported less from — Asia (including South and Central Asia) in 1994 than did the United States. In addition, levels of American and European foreign direct investment in the major economies of Southeast Asia — including China — largely have been equivalent since 1986. Japan, of course, has been the most "successful" industrialized country in gaining access to East Asia's economic boom. Asia's largest economy continues to run a large trade surplus with the region and supplies a significant share of its foreign direct investment. (Hong Kong, Singapore, South Korea and Taiwan together invest much more, however.)

Despite Europe's solid record of economic achievement in East Asia, the EU perception of growing exclusion continues — perhaps in large measure as a result of the creation and swift evolution of the Asia Pacific Economic Cooperation forum. The 18-member body does not include any participants from Europe. More important perhaps, APEC is working toward becoming a major force in promoting regional trade and investment liberalization. Participating economies have pledged to achieve "free and open trade and investment" in the region by 2010 for developed-country members and 2020 for developing economies (see JEI Report No. 39A, October 20, 1995).

Not surprisingly, therefore, British Prime Minister John Major and German Chancellor Helmut Kohl chose to attend contract signing ceremonies in Thailand to mark the consummation of major business deals between corporate partners in their respective countries and Thai companies. Other EU participants expressed enthusiasm over such potential business opportunities as proposals to construct a railroad between Southeast Asia and Western Europe and to consider "cooperation" in the development of the Mekong River Basin in Indochina.

For the most part, however, few concrete promises emerged from the Bangkok meeting. Although Thai officials in the days before the summit had proposed setting APEC-like goals and dates for achieving free trade between the two regions, those suggestions met opposition from several other Asian delegations and were not adopted. In a statement released at the close of the two-day session the participants "expressed [their] resolve to generate greater two-way trade and investment flows between Asia and Europe." Yet, to accomplish that goal officials agreed only to "undertake facilitation and liberalization measures ... [and] aim for the reduction of trade barriers." Senior officials from the two regions will "convene an informal meeting at an early opportunity on ways to promote economic cooperation and in particular liberalization and facilitation of trade and investment." The participants also announced that an Asia-Europe Business Forum would be created to foster "greater cooperation between the businesses and private sectors of the two regions."

Language addressing the chief concerns of Asian delegates was equally ill-defined. Many East Asian states, particularly those with developing economies, have sought higher volumes of direct investment from Europe; to this end the participants in Bangkok cited the "urgent need to increase European investments in Asia from their present low levels." At the same time, however, many Asian participants gave a cool reception to EU proposals to grant foreign investors equal standing with local companies.

The declaration also stated, "[P]articipants from Asia and Europe will work closely together towards the success of the WTO [World Trade Organization]." This reference to multilateral cooperation amounted to an indirect promise that the European Union would not move further toward the creation of an exclusive regional economic bloc. APEC members have made similar pledges to ease the fears of possible exclusion among those outside that 18-member forum. The statement issued by participants at the Bangkok meeting also included calls for closer cooperation on such issues as technology transfers, environmental protection and cultural exchange.

Discussion of political and security issues also assumed a prominent position in the Bangkok meetings — in part out of the widespread belief in East Asia that the region relies too heavily on American power to preserve its stability and prosperity. Here, too, divisions among the participants prevented more than vague pronouncements. The delegates agreed on the importance of "strengthening" global efforts to curb the proliferation of nuclear and chemical weapons. The 21 participants also attached "particular importance" to completing work on the Comprehensive [Nuclear] Test Ban treaty in 1996. Real cooperation in these fields, however, will be complicated by China's ongoing nuclear testing program (see JEI Report No. 34B, September 15, 1995) and allegations that Beijing has sold weapons-linked technology to such countries as Pakistan and Iran. Many countries in East Asia also continue to harbor resentment toward Paris for the six nuclear weapons tests it conducted in the South Pacific last year, a program that France suspended in January. Further, China, France and Britain as well as the United States have expressed reservations about the Southeast Asia Nuclear Weapons Free Zone treaty signed by 10 nations in the region last December; France, however, reportedly expressed a willingness in Bangkok to sign the treaty. The pact bans the possession, manufacture and acquisition of nuclear weapons among the signatories, but several nuclear powers have asserted that the treaty implies territorial rights in the region's sea-lanes that the agreeing parties do not have. These divisions — along with the paucity of security and military cooperation agreements among countries in the two regions — could impede the development of deeper political ties between Europe and Asia.

Other topics, although not the focus of discussions in Bangkok, were important as well. Prior to the meeting several Asian participants had warned EU delegates not to raise such sensitive issues as human rights and labor standards. During multilateral talks the European representatives largely complied with that request. The meeting's final communique reaffirmed participants' "strong commitment" to the United Nations and the Universal Declaration on Human Rights but also pledged "nonintervention, whether direct or indirect, in each other's internal affairs." In bilateral discussions among the participants — which some observers described as more important than the multilateral talks — contentious issues received more attention. Mr. Major and Chinese Premier Li Peng, for example, discussed the future of Hong Kong — a subject of often rancorous exchange between London and Beijing as Great Britain prepares to transfer control over the city to China in 1997. In a visit to Hong Kong following the summit Mr. Major announced that Hong Kong residents would be granted visa-free travel rights to Great Britain after 1997. He also stated that London would "mobilize the international community" to protect Hong Kong's rights and freedoms after the transfer of power — an indication that London may pursue a harder line in its future policies toward Beijing. Portugal's new prime minister, Antonio Guterres, also held an unexpected meeting with Indonesian President Suharto. Lisbon suspended diplomatic relations with Jakarta in 1975 after Indonesia's invasion and annexation of East Timor, a former Portuguese colony. Mr. Guterres reportedly offered to restore partial diplomatic ties with Indonesia provided Jakarta releases a number of political dissidents from East Timor.

Whether the Asia-Europe summit will produce any lasting results remains unclear. Participants on both sides agreed that the meetings should not be institutionalized. An APEC clone for Europe thus is not in the cards for now, although the delegations in Bangkok agreed to hold meetings of foreign and economic ministers in 1997 and to hold the next summit in the United Kingdom in 1998. While many of the proposals in Bangkok well may come to fruition, Europe most likely will continue to be a region of only secondary importance to East Asia. The prominent political and economic role of the United States in East Asia thus is unlikely to diminish significantly — notwithstanding the frustrations among some in the region about the extent of American influence.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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