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European Commission

[Check Against Delivery]

Karel De Gucht

European Commissioner for Trade

Asia & Europe: an enduring and deepening economic relationship

Asia Europe Meeting (ASEM): A partnership for the 21st Century

Friends of Europe Conference

Brussels, 8 July 2014

Ladies and gentlemen,

The dramatic economic and political changes taking place in Asia require Europeans to think hard about the future of our relationship with the countries to our East.

But in doing so we must remember that this is not a new relationship – but one with a long and deep history.

After all, the famous early trade routes between Europe and Asia not only brought prosperity to individual merchants, they fundamentally changed the character of life in Europe – bringing variety and innovation – from the decimal system to the fireworks. Trade was also, we must acknowledge, the main driver of the regrettable past of European colonialism in the region.

History reminds us too that while the current economic rise of so many Asian countries is certainly shifting the global economic centre of gravity to Europe's east; it is, in reality, only returning to a more central position. And this is the mathematical consequence of lifting hundreds of millions of people out of poverty.

All this is to say that Europe and Asia are not strangers, but rather old partners renewing and deepening their ties, for the benefit of people at both ends of our vast land mass, and on the islands all around it.

This is why the Asia Europe Meeting is so important. It provides the Heads of State and Government of 51 Asian and European countries a forum both to build on our existing relationship and to deepen our ties.

The success of that endeavour is essential for the economic future of the European Union.

There are two forces by which international trade and investment boost growth:

Imports work on the supply side of the economy – making companies more competitive by giving them access to the world's best inputs at the world's best prices.

Exports work by responding to demand – giving us access to the world market.

The phenomenon of global value chains that produce goods in many steps, across many countries boosts both of these effects even more.

For these forces to help build a sustainable recovery in Europe, links with Asia are essential.

On the supply side, let me explain this with an example. Imports from China are essential to the competitiveness of many industries in Europe. Why? Because the parts and components that we get from the Chinese are used in European factories to make European finished products. The result is that more than a million jobs in Europe depend directly on imports from China.

On the demand side, we need to look at the bigger picture. The economic advancement of so much of the world's population is creating massive new markets for European products. Economists project that over the next 20 years more than 60% of the world's growth is going to happen in Asia. And by the way - that projection already assumes a gradual slowdown in growth in many countries there.

The conclusion: Europe has to be connected to Asia if it wants to be part of global growth. It's that simple.

The good news is that we are already doing very well.

The EU is one of the largest trading partners of all Asian countries. And in 2012 we were either the first, second or third most important trading partner for ten of ASEM's Asian members. By way of comparison, the United States has this kind of relationship with just two of those countries, as the second most important trading partner, after the EU, of Japan and China.

Moreover, the European Union's deep relationship with China in particular plugs us into wider regional value chains, as does our status as the second largest partner for Singapore – the gateway to ASEAN.

For ASEAN as a whole, trade with the European Union represents some 13% of their total. This puts us in third place behind China and Japan. This is the result of geography and regional value chains. But we again outperform the US, who comes fourth.

And on top of all of this the EU is also a major investor in Asia, where we sent more than 20% of all our investment flows in 2012. And around 13% of all investment flows into the EU came from the region the same year.

That's a lot of figures. But I don't say all of this just to give an economic lecture.

I say it because too often in Europe we focus on our weaknesses. We sometimes forget that the Single Market and makes us a trade and investment powerhouse. We need to remember it when we design our policies.

What then should our policies be?

If we are doing so well can we just sit back and relax? Clearly not.

It is essential that we build the bridges that will allow our relationship to continue to flourish. In doing so we must use our resources wisely, focusing on what we can do to get pragmatic results.

Our first area of action is on the bilateral front:

Since 2011 we have been seeing the benefits of our ground-breaking free trade agreement with South Korea – with Europe's exports to Korea up 24%. We now meet regularly in the framework of the agreement to make sure it is fully implemented.

We have also finished negotiations with Singapore, which is just the first of several negotiations with ASEAN countries. Talks are now underway with Malaysia, Vietnam and Thailand. And it is my goal that these agreements serve as building blocks for an eventual broader deal with ASEAN as a whole.

We are also in negotiations with India. They have been ongoing now for some time. But that is because we are determined to achieve a high quality result. And the EU looks forward to working with the new Indian government to achieve that.

Furthermore, we are negotiating a free trade agreement with Japan – the region's second largest economy and one of the EU's most important trading partners. One year into this highly ambitious negotiation we have already made significant progress on key areas like non-tariff barriers. We will continue to work hard to bring it to an ambitious conclusion.

Our relationship with China, given its size and role in the region, is naturally both close and complex. We are now well into a negotiation to improve both access and protection for investments in both directions.

If we take all of these agreements collectively, they will open markets for either trade, investment or both with 95% of the Asian economy. That will be an enormous step forward for EU-Asia economic relations.

It is true that these agreements do take time. But that is because they are of a very high standard. We could have concluded many of them long ago if we wanted low ambition deals that don't bring about real market opening.

Even so, these bilateral discussions are only part of our relationship with the countries of Asia.

We are also determined to work hard together in the multilateral context.

Last year's agreement on trade facilitation and other issues at the World Trade Organisation's ministerial conference in Bali has shown there is life in the multilateral trading system. Now Europe and Asia are together making sure that this agreement is fully implemented.

The European Union is also working with China, Japan, South Korea and Singapore, along with 9 other partners for a new agreement to liberalise trade in green goods.

But our most important task, of course, is to work with Director General Azevedo to find a way through the logjam at the core of the Doha Round. The European Union wants a meaningful outcome that reflects today's realities and will help spur global economic growth.

In our view that means working towards concluding the DDA in the shortest timeframe possible, by the next ministerial conference if we can. To achieve that, we will need to simplify our overall approach. All Members will also need to adjust their expectations and focus on their key interests. Only that will allow us to get a balanced outcome across the main parts of the negotiations.

Of course that is really only the beginning. No matter how successful our efforts are, a completed Doha Round will still leave major gaps in the multilateral rulebook:

We will still have to answer key questions like how to deal with the interaction of trade policy and regulation for example. There is also the vexed issue of what rules state-owned enterprises should follow when they compete in the open market.

And, over the medium term, the World Trade Organization will have to be the forum by which Europe, Asia and our other partners work out global answers to these trade questions.

Ladies and gentlemen,

The shift in the global economic balance of power means that the first trade and investment priority for Europe is to find ways to deepen the already significant bilateral ties between Europe and Asia. I would argue that we are well on our way to achieving that. What we need now are discipline and diligence.

But the bilateral relationship is really only part of the equation. The larger issue is how we are going to jointly help set the rules for the global economy of the 21st Century. As I have suggested that will ultimately need to happen in the World Trade Organisation, using our bilateral deals as something of a stepping stone.

Some may argue that this is not possible, that on these longer term issues Europe and Asia are too far apart. But I do not agree, I believe that as a group of trading nations we all have a shared interest in open markets. And the need for an international economic rule of law follows directly from this.

That, then, is not a European value, but a global one. So I have every confidence that by working together we will be able to succeed.

Thank you very much for your attention.


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