The future of EU-Asia relations

I would like to thank the organizers and the hosts of this Seminar for inviting me to participate in this very interesting seminar aimed at deepening our understanding of the dynamics of and interaction between the European and Asian regions.

Arguably, my participation in this Seminar is intended to provide or add an Asian voice and perspective to the truly animated and intense discussions among Europeans the whole day. This I will try to do.

Asia of Today

Although globalization has made our world a smaller place in recent decades, there is still a tendency for many Western citizens to hold a single image of Asia. In the earlier part of the last century, Asia was seen as a vast region rich with the heritage of ancient eastern civilizations but unable to harness its potentials. Towards the end of the same century, when the world witnessed at least 2 waves of “Asian economic miracles”, albeit rudely interrupted by the “Asian financial crisis”, Asia was increasingly seen as a dynamic region that posed a serious threat to the more economically advanced regions of the world.

If not a single image, the term “Asia” tends to be represented by its most dominant economic and cultural icons, namely, Japan, China and India. The latter two have particularly been gaining great influence in the world economy, with their phenomenal growth performance and potential. Consider these :

 UNCTAD reported that in 2003, when FDI’s fell by 21% in EU, by 57% in North America and 33% in Central and Eastern Europe, FDIs to Asia increased by 13%.

 The House of Lords, citing a Goldman Sachs 2003 study, names China and India as the 2 of the 4 biggest engines of economic growth, whose economies combined with those of Russia and Brazil may overtake the G6 economies (US, Japan, Germany, United Kingdom, France and Italy) in US dollar terms ;

 Trade Secretary Patricia Hewitt, in her speech before the Labour Conference the other day, highlighted the fact that India produces a quarter of a million science and IT graduates a year and that China contributes more to the world economy than the G7 countries put together ;

 The Chancellor of the Exchequer, Gordon Brown, also speaking at the same Conference, alluded to the “competition” from developing countries that have become world manufacturing centres and he goes on to mention India, China and, my own country, the Philippines.

 China, as the evolving hub of world manufacturing activity, absorbs about US$450 billion of foreign investments yearly.

 The ability of the US economy to sustain deficits at levels that go well beyond the European norm is seen by many as largely due to the appetite of Japanese and Chinese funds.

Indeed, this is one face of Asia now. But my main message to you today is that Asia has many faces. Asia embodies an interesting mix of ancient culture and progressive outlook. There exists complementary diversities in the member countries’ political past, forms and styles of government, cultures, spiritual beliefs and stages of economic development. Some have colonial linkages with certain European countries.

The picture of Asia depicted by the rapidly growing economies of, for instance, China and the Asian tigers, should be contrasted with the more limited economic potentials of the smaller and less well-off nations in the Mekong region or in South and Central Asia, for instance. Even within the major Asian countries, one must take full account of the vast gaps in levels of development and living standards between the pockets of prosperity and the often much wider rural hinterlands, where people have to struggle to meet basic needs.

Moreover, more than the vastness of its land area, Asia’s most important resource is its people. We are only too aware of this in our country as we provide the world with one of the most competent and qualified groups of engineers, nurses, and seafarers. 1 out of every 5 seafarers around the world is a Filipino, 2 out of every 3 foreign nurses in UK are Filipinos and we have hundreds of thousands of engineers and workers in the Middle East, including Iraq. In a sense, many Asian countries have provided a responsive solution to the “under-investment” in education and training by certain countries.

Another area of significantly diverse condition is agriculture. In a number of economies in Asia, agricultural productivity has increased dramatically, such that this sector has become a significant export winner and source of foreign exchange. Thus, it comes as no major surprise that this has driven Asian negotiators to actively pursue within the WTO Doha Development Agenda the wider market access and removal of all trade distorting mechanisms in agriculture by developed countries as a precondition to movement in the Singapore issues.

ASEAN : Also a model of integration

But it is also true that in the midst of all this diversity, there are now intensified efforts to achieve greater economic integration within Asia and ASEAN provides a veritable platform for such integration.

Let me highlight the following :

 ASEAN, the association of 10 Southeast Asian countries of Brunei, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, has a GDP of about US$700 billion, about the same as that of China, and ASEAN’s population is half that of China. That means, the consumption power of the ASEAN market is twice that of China ;

 FDI flows to ASEAN grew by 48% from US13.7 billion in 2002 to $20.2 billion in 2003. For years, the EU is the biggest source of FDIs for the region, with UK taking the lead.

 ASEAN is now the 4th biggest trading region in the world. The EU, before it expanded on May 1 to 25 countries, had been the second biggest export destination of ASEAN goods that are essentially materials and components which make European products competitive globally.

 Most of ASEAN is now a free trade area. The first 6 signatories to the Common Effective Preferential Tariff (CEPT) scheme for the ASEAN Free Trade (AFTA), namely Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, by themselves contributing 96% of all ASEAN trade, have reduced their tariffs on intra-regional trade to no more than 5 % for almost all products in the Inclusion List.

These achievements are all the more impressive if one considers that :

 The region suffered a severe setback during the financial crises of 1997 ;

 The region has its share of terrorist attacks ;

 SARs outbreak last year and recently avian flu ; and

 The oft-repeated observation on China’s rapid growth and its appetite for foreign direct investments.

Further, one must take particular notice of the fact that the fundamental basis of ASEAN’s existence is only a declaration by the member states rather than a treaty. It is very much unlike the Treaty of Rome of 1957 which created the European Economic Community or the Treaty of Maastricht that brought forth the European Union. Yet this unique development feature of ASEAN did not deter its leaders from boldly and aggressively pursuing a host of projects on regional cooperation such as the creation of the ASEAN Economic Community (AEC) by 2020.

The ASEAN leaders were explicit in recognizing that economic integration is not an end in itself but, more importantly, a tool for enhancing competitiveness, which is an economic imperative for sustained economic growth and catalyst for reducing poverty and realizing equitable and inclusive development within and across the ASEAN member countries. This is yet another unique characteristic of the ASEAN economic integration model.

Even now, there are ongoing discussions for ASEAN FTAs with China, India and Japan. A successful negotiation round and implementation of an ASEAN-China FTA alone will create a combined market of 1.7 billion people, a GDP of US$2 trillion and a total trade of US$ 1.23 trillion.

The “New” European Union

The Economist reckons that the addition of the ten new members to the EU added 20% to its population, 23% to its land area, but only 4% to its GDP. In other words, the per-capita GDP in the Union goes down significantly as a result of the enlargement. It further estimated that if the 15 members of the EU before enlargement grow at around 2% per annum and the newcomers at around 4%, it will take 50 years for the latter to catch up economically. Although, of course I have not yet factored in the annual assistance to the newcomers of around €30 Billion annually, which can accelerate their growth if utilized in the same way that Ireland wisely leveraged EU subsidies in the past.

Strong and competitive economies in the whole of the EU is in our interest, although this strength should not translate into more protectionist regulations or increased export subsidies in different sectors. Strong EU economies are not perceived as threats in Asia. What can be threatening, and for now is still the source of questions in our minds, is that fortress Europe might actually not be a myth, because of all the internal adjustments and reforms, in areas like taxes, pensions, or workers’ rights, which the state and the electorate have yet to agree on, causing you to be inward-looking, and because of the pull factor which the extreme right continues to exert on your domestic politics. I have heard it said, although I welcome your contrary views, that 10 to 15% of the electorate across Europe voting extreme right is now considered a normal occurrence.

One trend which I find encouraging is that in government and in a number of intellectual circles, some of you think that the issue of outsourcing or off-shoring is viewed rather differently than the hysteria coming out of the media. I quote what Patricia Hewitt, British Secretary of Trade and Industry, says of global outsourcing : “an extra job in India is not one less job in Britain. It is not only one less person in poverty in India ; it is also one more potential customer for our goods and services.” Not to mention the competitiveness value added to European products and services.

Towards political and cultural cooperation

Although I think that economics constitutes the imperative of short and medium-term relations and even drives the pace of structural reform in certain countries, which is why China’s membership in the WTO is so encouraging, and ASEAN enlargement and integration is such an exciting process, protecting our common longer-term interests requires us to consider our political and cultural identities and ties.

In and of themselves, the EU member states and common institutions and networks, stable and sophisticated, are changing at this moment. This is due not only to enlargement, but also to a changing global landscape. Admittedly, the depth of your cooperation in migration, justice, police, customs, trade, development aid, is not uniform from one sector to another ; the seat of decision-making and coordination among yourselves and with third parties vary according to sector. Hence, the legal and political personality of your appointed representatives, institutions and networks in relation with third parties, and our interlocutors will vary. This very important phenomenon, of course, adds a layer of complexity to our efforts in Asia, both in the public and the private sectors, to dialogue with you, some of whom are not necessarily equipped to deal with such a myriad of interlocutors. Enlargement has created an additional risk for those in Asia, i.e. the information gap which was slowly narrowing between Asia and the EU at 15 members has now suddenly widened between Asia and the EU at 25. Many of us do not have diplomatic presence in the accession countries and vice-versa, so more opportunities must be created for interaction.

What you finally decide on the European constitution is of interest, because we find ourselves to be amongst the “stakeholders” in your common foreign and security policy, your development aid (of which you are the second largest donor in the Philippines), your trade policy, your justice and home affairs policy and coordination.

One of the risks for countries like the Philippines lies in the debate on the EC’s development assistance priorities, which touch on the need to focus on least developed countries ; although the debate is rich, I refer to a study submitted to the Institute for Development Studies which evokes the arbitrariness of some classifications and political considerations of donors dealing with more complex middle income countries like those in some parts of Asia. Your continued engagement in the Philippines at the same or increased levels will be very productive, where, I would like to point out, many of your NGOs and development partners have found many of their own success stories and strengthens their moral mandate and technical expertise.

There is a strong current within the EU to reform internal labour and employment markets conducive to economic growth. The new social contract you eventually agree will be felt thousands of miles away, as your social and political philosophies have always done, by intellectuals, technocrats, trade union leaders, civil society groups, not to mention how these standards may become unspoken benchmarks for those who advocate change in Asia.

On justice and home affairs, I don’t need to repeat what is perhaps known to most of you – the high stakes we, and you, have in ensuring the welfare of our workers in Europe. I say this not only because of the enormous economic benefits they bring to both Europe and my country, but also because we have every interest to ensure their security in Europe as our workers very often find themselves on the frontline ; hence, a dialogue which is reasonable and mutually accommodating will benefit everyone.

The EU is an important player in many regions of the world, not least of which is in the Middle East, where you exercise considerable influence. How you play out with partners events in the Middle East, and we hope you get it right, is very significant for us in the Philippines, who have about 2 million workers in that region, whose Muslim political and religious leaders yearly seek education there and return to the Philippines revived with the Islamic faith, where officials put the number of Filipino Muslim pilgrims who travel to Saudi Arabia between 300 and 500, although this number may run into the thousands if one accounts for those pilgrims who travel independently.

The debate on strengthening your own military capabilities is current, particularly since your engagement in the Balkans have demonstrated the need to find European solutions to European problems. But the EU can and must continue to engage in the exercise of soft power, which I observe constitutes one of your political competitive advantages in Asia, and where you have such a successful track record.

Another exciting area is in renewable energy where we see European users requiring a paradigm shift. In the Philippines, we are slowly making that shift, as our energy mix now makes us the second largest producer of geothermal energy in the world, second only to the US, and we have reduced our dependence on oil from 99% in 1973 to a shade below 50% today. There is scope for complementarity, exchange of best practices and sharing of technology and resources.

As Europe and Asia examine where they were and where they are now, they find many circles of convergence. Our cultural interaction at present is therefore not only necessary and inevitable for historical or socio-economic reasons ; it is desirable. Culture is shared between us : this protean word carries three different levels of meaning and captures our shared heritage, according to one cultural theorist : “the general process of intellectual, spiritual and aesthetic development, a particular way of life, whether of a people, a period or a group, and the works and practices of intellectual and especially artistic activity.” But I think that our interaction is desirable, because, according to my preferred definition, culture is the “site of convergent interests, rather than a logically or conceptually clarified idea.”

A number of EU countries are the strongest players in cultural diplomacy in Asia, which you have successfully employed as an agent of transformation of taste, levels of expectations, communication abilities, and even some spending habits, as a result of which interest in economic exchange is increasing. Although I must observe that these programmes have been largely concentrated among the affluent, intellectual and urban populations. On the other hand, European knowledge of Asia is largely limited to its cultural giants – China, Japan, and India, and more recently, Thailand. There is room for the cultural diplomacy of lesser-known countries in Asia to take off in Europe, and one of the starting points could be an exchange of best practice at government level among European and Asian partners.

So even if our interaction may sometimes seem chaotic, we need to remain focused on the fact that we have political systems which, although diverse, are somehow inter-operable, to use a word much favoured in military establishments. In view of my time constraints, I run the risk of being taken for a reductionist among many of you, when I say that the values underlying these political systems are shared, surging from spiritual, intellectual, aesthetic, and social movements. We all aspire for peace, charity and justice, order and predictability, security and progress for the greater good, which I think now, we all rationally believe and intuitively know to be both individual and collective.

EU has a several options towards elevating its relationship with Asia to a higher level :

 Strengthen bilateral relations with individual countries, enhancing development cooperation to address development gaps in Asia, thereby increasing trade and investments ;

 Enhance inter-regional dialogues and cooperation with regional groupings in Asia—ASEAN, South Asia, and Central Asia ;

 Play a more active role in the ASEAN Regional Forum (ARF) ;

 Elevate the Asia-Europe Meeting (ASEM) process from a dialogue format into a concrete inter-regional organization between EU and ASEAN+3++.

ASEM has huge potentials, if its members can generate the political will to give ASEM a more active role in world and regional affairs. Joint ASEM action could address issues of common concern and interest and could be the lynchpin of an EU strategy towards Asia in the future. The important role of inter-regional organizations to bridge differences, identify commonalities and strengthen understanding and cooperation between peoples from different regions like Asia and Europe cannot be overemphasized.

In conclusion, although evolving EU-Asia relations are driven understandably by immediate economic interests, there is manifest “site of convergent interests” which make our political and cultural relations inevitable and desirable.

H.E. Edgardo B. Espiritu, Philippine Ambassador to the Court of St. James’s