European and Asian leaders will this week discuss a stalled trade agenda between the world’s fastest and slowest-growing regions, as the debt crisis undermines expansion of commercial ties.
Europe’s economic woes may exacerbate protectionist tendencies that make it harder to expand trade with its biggest commerce partner at a time when the U.S. and Australia are forging new agreements, according to Fredrik Erixon, head of the European Centre for International Political Economy in Brussels. Apart from a trade deal with South Korea, the 27-member European Union has seen talks lag with China, Japan, India and Southeast Asian countries since 2007.
Europe needs to improve its policy toward the entire Asian region in order to take up a greater part of Asia’s economic expansion, but we’re not really seeing it,” he said by phone. “The train is about to leave the station and Europe certainly isn’t on it.”
Europe’s leaders face pressure to boost ties with Asia after U.S. President Barack Obama declared a pivot to the region and Australian Prime Minister Julia Gillard unveiled a strategy last week to make her country “a winner in the Asian century.” At stake is safeguarding links that European economies are increasingly counting on, with the 19 Asian nations participating in a summit starting in Laos today accounting for 38 percent of the EU’s total trade last year, up from 30 percent a decade ago.
Euro-Area Slowdown
The International Monetary Fund expects the euro area’s economy to contract 0.4 percent this year, while China is forecast to grow 7.8 percent and the U.S. may expand 2.2 percent. Trade growth between the EU and Asian countries attending this week’s meetings slowed to 6 percent through the first six months of 2012 from a pace of 8 percent last year, according to the bloc’sdata.
Asia’s exports to the EU will drop “quite significantly” in the near term as countries deleverage, Changyong Rhee, the Asian Development Bank’s chief economist, said by phone. Closer policy coordination is needed between leaders from the two regions to ensure a global recovery, he said.
“The U.S., Canada and Australia are more aggressive in Asia than Europe,” Rhee said. “The EU may be slow because you have to harmonize all countries together to have a free trade agreement, but once you have one FTA between the EU and another country it’s actually 27 FTAs.”
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