Reports

Europe and Northeast Asia - A Roundtable Discussion

10 February 2005


Introduction

An EPC team headed by the EPC’s Chief Executive Hans Martens travelled to Seoul, South Korea to take part in the first ever EU-South Korea roundtable hosted by the Samsung Economic Research Institute (SERI) and the EU Delegation to the Republic of Korea. The roundtable was moderated by Cholsoo Charles Lho Executive Director at SERI’s Center for Global Cooperation.

The roundtable dealt with global governance issues, economic growth in Europe and Korea as well as with regional integration in Asia and Europe and the EU’s neighbourhood policies. The roundtable was accompanied by presentations by Hans Martens, Fraser Cameron, Axel Berkofsky and Nathalie Tocci (of the European University Institute in Florence). On the Korean side Kyeong Won Kim of SERI gave a presentation on the current state of the Korean economy and its future prospects.

The roundtable discussions also dealt with the issue of North Korea and the EU’s engagement in assisting Korea to resolve the nuclear crisis peacefully. European and Korean participants agreed that the EU’s policy of engagement towards North Korea was constructive and helpful. However, the Korean participants wished that the EU would play a more significant role in resolving the nuclear crisis and convince North Korea to give up its nuclear weapons programme. So far, the EU’s engagement was limited to humanitarian assistance, food aid and technical assistance.

Hans Martens, Chief Executive of the EPC and Jung Ku-Hyun, SERI’s president delivered the opening remarks of the roundtable which was followed by a dinner, hosted by H E Ambassador Dorian Prince, EU Delegation to the Republic of Korea.

First Session

Fraser Cameron, Director of Studies at the EPC, opening the first session of the roundtable, gave an overview of EU-Asia relations in general and EU-Korea relations in particular. Mr. Cameron argued that as the EU seeks to expand its influence on the global stage, including in Asia, EU-Asia relations (political and economic) needed to be intensified.

This was particularly important as Asia’s economic and political influence was steadily growing. Asia as a region attracts a growing percentage of global FDI, accounts for 21% of EU exports and accounts for 25% of the world’s GDP. EU-Korea relations were still largely dominated by trade issues but Mr Cameron argued that given recent changes in the EU and Korea it was time to deepen political and economic relations.

Second Session

Kyeong Won Kim gave an overview of the Korean economy and its problems that needed to be addressed in the near future.  Korea was able to overcome the difficulties caused by the 1997/1998 Asian economic crisis relatively quickly. As a consequence of the crisis, the Korean economy, he noted, underwent a number of structural changes such as reforms in the country’s financial and corporate sector. The structural reforms turned out to be successful and were accompanied by an average economic growth rate amounting to 6.1% between 1999 and 2004. Furthermore, Korea was able to attract increased global foreign direct investment (FDI). Since 1998, Korea has received a total of 79.2 billion US dollars. Korea’s economy is an export-led growth regime and the recent slowdown in exports has led to slowing economic growth rates in Korea. Furthermore Korea currently suffers from weak domestic consumption that is likely to further slow down economic growth in the coming years. After reforms at the end of the 1990s the structural reforms of the corporate sector have come to a standstill. This issue will have to be addressed to get the country’s economic growth back on track. Whereas Korea’s household debt (unlike Japan) is under control, the country’s financial institutions’ bad loans are once again posing a problem. 

Hans Martens then gave a presentation on growth and sustainable competitiveness in the EU, focussing on the analysis of the sustainability of EU growth and the sustainability of competitiveness comparing the relevant data of EU Member States.

Mr. Martens emphasised the EU’s difficulties in finding a balance between its “real” and fiscal economies having lead to expansionist fiscal policies and enormous public debt. These policies, Mr. Martens explained, were also accompanied by income distribution imbalances and slowing economic growth rates within the EU.

Compared to the US, however the EU’s fiscal policies could be still be described as sound. The current (and continuously growing) US deficit was very likely to have a negative impact on the global economy. Europe’s experience with expansionist fiscal policies had led to problems with the EU’s Growth and Stability Pact which governs the Euro. Some EU Member States still had difficulties honouring the criteria of the pact. This in turn had triggered an inner-European debate on whether to change the pact and allow EU Member States to apply the criteria more “flexibly.” Martens then elaborated on the question of how to secure long-term competitiveness of the EU economies and gave an overview of the EU’s so-called “Lisbon Strategy,” launched by the EU Heads of State and Government in 2000. The Lisbon Strategy and its goal to make the EU the most competitive economy by 2010, Martens indicated, had turned out to be overly ambitious and will not be possible without implementing structural reforms. Lastly, Hans Martens addressed the issue of ageing societies in Europe, a problem familiar to a number of Asian countries, including Korea.

Third Session

Nathalie Tocci gave an overview of the EU Neighbourhood Policy (ENP). Finding ways to engage the EU’s southern and eastern neighbourhoods, Ms. Tocci said, has become one of the major challenges facing the EU. The challenges derive from the wish to capitalise on the EU’s most significant success: enlargement and the process of democratic transformation accompanied with economic reforms in the EU’s new Member States. The purpose of the ENP, Ms. Tocci maintained, was to find new ways of acting beyond the traditional accession/non-accession dichotomy, by offering forms of inclusion in the Union other than full membership.

The roundtable was closed with the presentation by Axel Berkofsky, Senior Policy Analyst at the EPC who discussed EU and Asian political and economic integration. Berkofsky compared integration processes in the EU and Asia and sought to assess whether the EU integration process model can be a model for Asia. Berkofsky concluded that EU-style political integration would not, at least not for the time being, become a priority for Asian governments. Whereas Asian economic integration was bound to make further progress through bilateral and multilateral free trade agreements (FTAs), Asian nations will remain reluctant to pursue further political integration which would go along with the implementation of legally-binding rules of integration. The so-called “principle of non-interference in internal affairs” was to remain an obstacle to further political integration in Asia. Berkofsky concluded that stable Sino-Japanese relations and full reconciliation were key to a meaningful political integration in Asia. Asia was not yet ready for an EU-style integration. However, Asian governments would very likely continue alternative forms of regional integration not necessarily identical with EU strategies of integration.