EU launches drive to boost links with Asia in wake of financial crisis

Date: 14/01/1999

By Shada Islam

RELATIONS with Asia will feature high on the EU's foreign policy agenda this year, with at least five region-to-region meetings on monetary, economic and trade issues planned over the coming months.

Asian and European finance ministers will kick-start the discussions in Frankfurt this weekend (15-16 January) by focusing on the euro, international financial reform and the Asian economic crisis.

Senior officials from the EU and the Association of South East Asian Nations (ASEAN) will meet in Bangkok a week later to discuss ways of increasing Euro-Asian trade and investments.

ASEAN and Union foreign ministers will also hold top-level talks in March, with ASEM (Asia Europe Meeting) members China, Japan and South Korea joining them on the second day. ASEM economics ministers are also set to meet in Berlin in October.

The aim is to review all aspects of the Asia-Europe relationship in the wake of the Asian financial crisis. No ground-breaking agreements are expected but the EU, which was accused of being a fair-weather friend when the region was battered by currency storms last year, is hoping more frequent contacts will improve understanding between the two blocs and upgrade Europe's diplomatic and economic standing in Asia.

Top of the agenda is increased monetary and financial cooperation.

For Japan, the birth of the euro has focused attention on the underdeveloped role of the yen on global financial markets. During his visit to Europe last week, Japanese Prime Minister Keizo Obuchi called for a system of "tripolar cooperation" between Japan, Europe and the US to "allow the creation of a stable and developed international monetary system".

While Japan frets over the yen, other Asians believe the euro's arrival will be good for the region. "Asian governments welcome the emergence of a strong euro because over-reliance on the US dollar has been one of the causes of the recent monetary crisis in East Asia," said Tommy Koh, head of the Asia Europe Foundation in Singapore.

In Frankfurt, Asian finance ministers will get first-hand information on the single currency from European Central Bank President Wim Duisenberg. This will be followed by a discussion on Asia's economic crisis with the International Monetary Fund's (IMF) Michel Camdessus.

"Many Asian countries are starting to see the light at the end of the tunnel," said one EU monetary expert, who added that the Union believed the IMF programmes were working.

But future recovery will also depend on how fast Asian governments can restructure their financial sectors and increase banking supervision and regulation.

The EU's network of financial experts is one part of a complex jigsaw being constructed to restore confidence in the Asian economies. The Union also hopes to reorientate its cooperation programme for ASEAN countries to include measures to ensure transparency in governance, reform of civil administrations and better competition laws.

Asian diplomats warn that the region's economic future depends to a large extent on the world trading environment, and specifically on whether the Union and US markets will remain open to Asian exports.

The recent spate of anti-dumping cases lodged by the US and EU steel manufacturers are seen as a warning sign that many in the West are unwilling to accept an export-led recovery in Asia. "The meeting in Frankfurt will have to reaffirm Europe's pledge on free-flowing trade," insisted an Asian trade official.

Trade and investments will also top the agenda at a meeting of the EU-ASEAN Joint Cooperation Committee in Bangkok later this month. Senior officials from both sides are expected to approve a new work programme for enhancing customs cooperation, removing technical barriers to trade and increasing bilateral investment flows.

Meetings of the Joint Cooperation Committee have been cancelled at least four times in the past 18 months. The decision to reconvene it follows a recent EU-ASEAN agreement on Burma's participation, under which its officials will maintain a 'passive presence' at the talks, forbidden from speaking or displaying their national flag.

This truce could, however, be short-lived as the agreement is linked specifically to the Bangkok meeting. This could create a diplomatic headache for Germany when it hosts the meeting of Union and ASEAN foreign ministers in Berlin in March.

ASEAN officials insist Burma must be invited to Berlin and treated as a fully-fledged member of the association. But EU sanctions forbid European governments from granting visas to members of the country's military regime.

Careful diplomatic manoeuvring could allow Bonn to surmount that obstacle. But a larger problem remains. "It is all very well for Union officials to talk to low-level Burmese representatives in Asia," said one EU diplomat. "But if EU foreign ministers have to shake hands with their Burmese counterpart in Berlin, that will be another ball game and one which the European public will definitely not like."

Major feature.