Hopes are high that the 10^th Asia-Europe Meeting – or ASEM summit – to be held in Milan on October 16-17 will confirm the credibility and relevance of Asia-Europe relations in the 21^st century.

ASEM has certainly survived many storms and upheavals since it was initiated in Bangkok in 1996 and now, with ASEM’s 20^th anniversary in 2016 approaching rapidly, the challenge is not only to guarantee ASEM’s survival but also to ensure that the Asia-Europe partnership flourishes and thrives.

Talk about renewal and revival is encouraging as Asians and Europeans seek to inject fresh dynamism into ASEM through changed formats and a stronger focus on content to bring it into the 21^st century.

ASEM’s future hinges not only on whether governments are ready to pay as much attention to ASEM and devote as much time and energy to their partnership as they did in the early years but also on closer engagement between Asian and European business leaders, civil society representatives and enhanced people-to-people contacts.  An ASEM business summit and peoples’ forum will be held in parallel with the leaders’ meeting.

Shada Islam. Courtesy of Twitter

Significantly, the theme of the Milan summit – “Responsible Partnership for Sustainable Growth and Security” – allows for a discussion not only of ongoing political strains and tensions in Asia and in Europe’s eastern neighbourhood, but also of crucial questions linked to food, water and energy security.

Engagement between the two regions has been increasing over the years, both within and outside ASEM. Five of the 51 (set to rise to 52 with Croatia joining in October) ASEM partners – China, Japan, India, South Korea and Russia – are the European Union’s strategic partners. Turkey and Kazakhstan have formally voiced interest in joining ASEM, although approval of their applications will take time.  There is now a stronger E.U.-Asian conversation on trade, business, security and culture.

Exports to Asia and investments in the region are pivotal in ensuring a sustainable European economic recovery while the European Union single market attracts goods, investments and people from across the globe, helping Asian governments to maintain growth and development.  European technology is in much demand across the region.

Not surprisingly, Asia-Europe economic interdependence has grown.  With total Asia-Europe trade in 2012 estimated at 1.37 trillion euros, Asia has become the European Union’s main trading partner, accounting for one-third of total trade.  More than one-quarter of European outward investments head for Asia while Asia’s emerging global champions are seeking out business deals in Europe.  The increased connectivity is reflected in the mutual Asia-Europe quest to negotiate free trade agreements and investment accords. For many in Asia, the European Union is the prime partner for dealing with non-traditional security dilemmas, including food, water and energy security as well as climate change. Europeans, too, are becoming more aware of the global implications of instability in Asia.

ASEM’s connectivity credentials go beyond trade and economics.  In addition to the strategic partnerships mentioned above, Asia and Europe are linked through an array of cooperation accords. Discussions on climate change, pandemics, illegal immigration, maritime security, urbanisation and green growth, among others, are frequent between multiple government ministries and agencies in both regions, reflecting a growing recognition that 21^st century challenges can only be tackled through improved global governance and, failing that, through “patchwork governance” involving cross-border and cross-regional alliances.

Discussions on security issues are an important part of the political pillar in ASEM, with leaders exchanging views on regional and global flashpoints.  Given current tensions over conflicting territorial claims in the East and South China Seas, this year’s debate should be particularly important.

Asian views of Europe’s security role are changing. Unease about the dangerous political and security fault lines that run across the region and the lack of a strong security architecture has prompted many in Asia to take a closer look at Europe’s experience in ensuring peace, easing tensions and handling conflicts.  As Asia grapples with historical animosities and unresolved conflicts, earlier scepticism about Europe’s security credentials are giving way to recognition of Europe’s “soft power” in peace-making and reconciliation, crisis management, conflict resolution and preventive diplomacy, human rights, the promotion of democracy and the rule of law.

In addition, for many in Asia, the European Union is the prime partner for dealing with non-traditional security dilemmas, including food, water and energy security as well as climate change. Europeans too are becoming more aware of the global implications of instability in Asia, not least as regards maritime security.

Meanwhile, over the years, ASEM meetings have become more formal, ritualistic and long drawn-out, with endless preparatory discussions and the negotiation of long texts by “senior officials” or bureaucrats. Instead of engaging in direct conversation, ministers and leaders read out well-prepared statements.  Having embarked on a search to bring back the informality and excitement of the first few ASEM meetings, Asian and European foreign ministers successfully tested out new working methods at their meeting in Delhi last November.

The new formula, to be tried out in Milan, includes the organisation of a “retreat” session during which leaders will be able to have a free-flowing discussion on regional and international issues with less structure and fewer people in the room.  Instead of spending endless hours negotiating texts, leaders will focus on a substantive discussion of issues.  The final statement will be drafted and issued in the name of the “chair” who will consult partners but will be responsible for the final wording.  There are indications that the chair’s statements and other documents issued at the end of ASEM meetings will be short, simple and to-the-point.

ASEM also needs a content update.  True, ASEM summits which are held every two years, deal with many worthy issues, including economic growth, regional and global tensions, climate change and the like. It is also true that Asian and European ministers meet even more frequently to discuss questions like education, labour reform, inter-faith relations and river management.

This is worthy and significant – but also too much.  ASEM needs a sharper focus on growth and jobs, combating extremism and tackling hard and soft security issues. Women in both Asia and Europe face many societal and economic challenges.  Freedom of expression is under attack in both regions.

ASEM partners also face the uphill task of securing stronger public understanding, awareness and support for the Asia-Europe partnership, especially in the run up to the 20^th anniversary summit in 2016.

The 21^st century requires countries and peoples – whether they are like-minded or not – to work together in order to ensure better global governance in a still-chaotic multipolar world.

As they grapple with their economic, political and security dilemmas – and despite their many disagreements – Asia and Europe are drawing closer together.  If ASEM reform is implemented as planned, 2016 could become an important milestone in a reinvigorated Asia-Europe partnership, a compelling necessity in the 21^st century.

Shada Islam is responsible for policy oversight of Friends of Europe’s initiatives, activities and publications. She has special responsibility for the Asia Programme and for the Development Policy Forum. She is the former Europe correspondent for the Far Eastern Economic Review and has previously worked on Asian issues at the European Policy Centre. 

At a makeshift e-waste workshop in China's Guiyu town, a migrant worker cooks computer motherboards over solder to remove chips and valuable metals. Credit: Jeffrey Lau/IPS

By Yilmaz Akyüz
GENEVA, Aug 9 2012 (IPS)

Growth in developing economies (DEs) has accelerated significantly in the new millennium.

Whereas in the 1980s and 1990s their average growth was barely higher than that of advanced economies (AEs), from the early years of the 2000s until the global crisis, the difference shot up to five percentage points. It widened further during 2008-11 with the collapse in AEs.

Although there is diversity, the acceleration is broad-based with all developing regions enjoying faster growth than in the past. The notable exception is China, which has grown in the new millennium at broadly the same (albeit rapid) pace as in the 1990s.

This divergence has widely been interpreted as the South “decoupling” from the North. However, the evidence does not show the desynchronisation of cycles between developed and advanced economies, and deviations of economic activity from underlying trends continue to be highly correlated.

The more significant question is whether there has been a durable shift in the trend growth of the South relative to the North. Such a view is widely held, including among policy makers in DEs. However, a closer look suggests that the growth surge in the South owes as much, if not more, to exceptional and unsustainable global economic conditions as it does to improvements in their own fundamentals. There is, consequently, no room for complacency in policy circles in developing countries.

Until the financial crisis hit in 2008, the credit, consumption and property bubbles in the industrialised North, particularly the U.S., generated a highly favourable global environment for emerging countries in trade and investment, capital flows and commodity prices.

At least one-third of pre-crisis growth in China was due to exports, mostly to AEs, and the ratio is even higher for smaller Asian export-led economies.

There is a strikingly strong correlation between property booms and current account deficits both in the U.S. and other countries that have subsequently experienced financial turmoil. China’s accession to the WTO also provided a major impetus to outsourcing and exports to AEs by removing uncertainties surrounding its access to the U.S. market.

From the early years of the 2000s, historically low interest rates and rapid expansion of liquidity in the U.S., Europe and Japan triggered a search for yield and a boom in capital flows to DEs.

This was supplemented by a surge in workers’ remittances, which amounted to over 25 percent of gross domestic product (GDP) in some smaller countries but exceeded three percent of GDP even in India. Commodity prices also rose strongly, largely thanks to rapid growth in China driven by exports to advanced economies.

The boom was accentuated as financial investors started to diversify into commodity-linked assets and search for yield in commodity markets. On some estimates, Latin America would not have seen much growth over the last decade had terms-of-trade, dollar interest rates and capital flows remained at the levels of the late 1990s.

With the subprime crisis the international economic environment deteriorated in all areas that had previously supported expansion in DEs. Capital flows and commodity prices were reversed and AEs contracted.

However, emerging economies showed resilience and were able to rebound quickly, particularly where a strong countercyclical response was made possible by favourable payments, reserves and fiscal positions built-up during the preceding expansion.

As a result, the growth impulse in some leading Southern economies has shifted to domestic demand, including in countries that had previously been export-led.

China has played a key role, launching a massive stimulus package in infrastructure and property investment. Because of its high commodity intensity, this investment-led growth has given an even stronger boost to commodity prices than the pre-crisis export-led growth.

Capital flows also recovered briskly thanks to sharp cuts in interest rates and quantitative easing in AEs in response to the crisis. They have been more than sufficient to meet growing deficits in several major DEs including India, Brazil, Turkey and South Africa.

For several reasons the exceptional growth enjoyed by the South over the past ten years is unlikely to be sustained over the medium term. First, returning to the extremely favourable international economic conditions prevailing before the global crisis is precluded by the large adjustments now facing the AEs.

Indeed, efforts to move policy back to “business as usual”, with the U.S. acting as a locomotive and running growing deficits, would seriously destabilise the international trading and monetary systems.

But nor can the post-crisis domestic demand-driven growth be maintained for long. There are already strong signs of deceleration. China’s strategy of offsetting the slowdown in exports to AEs with accelerated investment cannot work indefinitely.

It needs to shift to consumption-led growth, lifting private consumption from its “wartime” level of some 35 percent of GDP. Doing so will entail overcoming political hurdles since it will require significant redistribution of wealth and income.

Even a moderate slowdown in China, towards seven percent, could bring an end to the commodity boom, threatening growth prospects in a number of Latin American and African countries.

Moreover, the risk-return configuration that has sustained the surge in capital flows to DEs, notably the historically low interest rates and rapid liquidity expansion in AEs, cannot last forever. The most vulnerable are those that have so far enjoyed the twin booms in commodity prices and capital flows.

Most DEs need to overhaul their development models in order to sustain the kind of growth they have enjoyed over the past ten years.

The export-led Asian economies need to reduce their dependence on consumers in AEs by expanding domestic and regional markets.

Commodity exporters need to reduce their reliance on capital flows and commodity earnings ­the two key determinants of their growth, which are largely beyond national control. These call for a genuine departure from market fundamentalism and neoliberalism both in macroeconomic and structural policies.

(END/COPYRIGHT IPS)

* Yilmaz Akyuz, chief economist of the South Centre, Geneva. For further analysis see South Centre Research Paper 44 (http://www.southcentre.org)

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