Source: EURLEX
Language: en
Format: md

**COMMISSION OF THE EUROPEAN COMMUNITIES**

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                             C0M(94) 314 final

                              Brussels, 13.07.1994

        COMMUNICATION FROM THE COMMISSION TO THE COUNCIL

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**TOWARDS** **A** **NEW**

**ASIA STRATEGY**

**INDEX**

Executive Summary, 1

I Overall Objectives 3

II Existing EU Policy Instruments in its Relations with Asia 4

III The European Union's New Political Approach towards Asia 7

IV The EU's New Trade & Co-operation Strategy towards Asia 1.13

V Conclusions 22

Annex I Asian Countries: Basic Economic Statistics 25

Annex II Trade Flows in Asia 26

Annex III The EU and Asia: Agreements, Trade and Aid 30

**Executive Summary**

he rise of Asia is dramatically changing the world balance of economic power. By the year 2000, the World Bank estimates that half the
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growth in the global economy will come from East and Southeast
Asia alone. This growth will ensure that by the year 2000 one billion
Asians will have significant consumer spending power and of these, 400
million will have average disposable incomes as high, if not higher, than
their European or US contemporaries.

The European Union needs therefore to accord Asia a higher priority
than is at present the case.

The Union needs as a matter of urgency to strengthen its economic
presence in Asia in order to maintain its leading role in the world economy.
The establishment of a strong, co-ordinated presence in the different
regions of Asia will allow Europe at the beginning of the XXIst century to
ensure that its interests are taken fully into account there.

Asia's growing economic weight is inevitably generating increasing
pressures for a greater role in world affairs. At the same time the ending of
the cold war has created a regional environment of unparalleled political
fluidity. Consequently the European Union should seek to develop its
political dialogue with Asia and should look for ways to associate Asia
more and more in the management of international affairs, working towards

a partnership of equals capable of playing a constructive and stabilising role
in the world.

In order to seize these new opportunities the Union should seek to make
a positive contribution to regional security dialogues and to follow closely
developments in particular in the area of arms control and non-proliferation,
regional disputes (Korea, Spratly, Kashmir) and the security of sea lanes.
Matters relating to good governance, including human rights, should also
play an important role in the Union's relations with Asian countries.

The success of Europe in taking advantage of the business opportunities
in Asia largely depends upon decisions taken or not taken by the private
sector. The Union's role is to pursue market-opening for both goods and
services and to overcome obstacles to European trade and investment by
encouraging a favourable regulatory environment for business in Asia.
Active participation by European companies on Asian markets it should be
noted can contribute to providing qualified jobs for European workers.

To achieve its aims, the Union needs to adopt more pro-active strategies:
emphasising fuller, and increasingly targeted use of economic co-operation
to promote European trade and investment. This can largely be achieved
within present financial resources.

Reforms of previously centrally managed economies, such as China,
India or Vietnam, are an extremely important aspect of the momentous
changes sweeping across Asia. European participation in these changes
both at the institutional and at the private sector level, will contribute to
reinforce mutual understanding and economic links.

The Union needs to conduct a co-ordinated programme of public
relations in order to raise its profile in Asia.

By the year 2000, South Asia will still contain the single largest concentration of the world's poorest people, so development cooperation will
remain as an instrument to contribute to the Asian governments' own
efforts at poverty alleviation. Enhanced co-ordination between the Union
and its Member States is required in order to achieve critical mass and the
desired impact.

**Ï. Overall Objectives**

sia defined. The term "Asia" is an over-simplification : Asia is not a single
region. The 26 countries of Asia discussed in the present Communication have
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different cultural traditions and different social, economic and political profiles,
even if industrialisation is making some of these differences less marked than in the
past. [1 ]

The main thrust of the present and future policy in Asia is related to economic matters.
However, this major component of the Union policy has to be presented in the
framework of the political and security balance of power in the region.

**Overall Objectives**

**• To strengthen the Union's economic presence in Asia** in order to maintain the
Union's leading role in the world economy. The establishment of an important presence
in Asia will allow Europe at the beginning of the XXIst century to ensure that its
interests are taken fully into account in this key region. Given the pace of growth in
Asia, active participation by European companies can also contribute to providing
qualified jobs for European workers.

- To contribute to stability in Asia by promoting international co-operation and
understanding; the Union must to this end widen and deepen its political and economic
relations with the countries in Asia.

 - To promote the economic development of the less prosperous countries and regions
in Asia. Given that Asia for the foreseeable future will continue to contain the world's

largest concentration of poor people, the Union and its Member States will need to
continue to contribute to poverty alleviation and sustainable growth.

 - To contribute to the development and consolidatione of democracy and the rule of
law, and respect for human rights and fundamental freedoms in Asia.

**Priorities**
If the EU is to achieve these objectives, this will require a considerable effort to reorient existing policies and to move into new domains. The magnitude of this effort calls
for a more efficient use of all available resources. Not least, this implies more coordination within the Union.

^he 26 countries covered in this Communication are grouped according to 3
geographic regions: The 8 countries and economies of **East Asia** (China, Japan, North
and South Korea, Mongolia, Taiwan, Hong Kong, Macao); the 10 countries of **South-**
**east Asia** (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Cambodia, Laos, Vietnam and Burma); and the 8 countries of **South Asia** (India, Pakistan,
Bangladesh, Sri Lanka, Nepal, Bhutan, Maldives and Afghanistan). Relations with the 5
Central Asian republics are currently dealt with in the context of the CIS and are
therefore not included here.

This also calls for a set of clear policy priorities across Asia which can be followed up
in a manner best suited to the individual circumstances of each country and region:

- To continue to strengthen the Union's bilateral relations with individual countries and
regions in Asia.

- To raise the profile of Europe in Asia.

- To support efforts by Asian countries to cooperate at the regional and subregional
level such as the ASEAN Regional Forum with a view to enhancing peace and security
in the region and generally to strengthen the Union's relations with regional groups such
as ASEAN or SAARC.

- To associate Asian countries in the management of international affairs and in
particular to encourage them to play a more active role in multilateral actions with a
view to maintaining international peace and security. To strengthen links with Asian
countries in multilateral fora, and further encourage Asian participation in multilateral
organisations.

- To pursue all actions necessary to ensure open markets and a non-discriminatory
business environment conducive to an expansion of Euro-Asian trade and investments.

- To integrate into the open, market-based world trading system those Asian countries
which are moving from state controls to market-oriented economies.

- To contribute to sustainable development and to poverty alleviation in the least
prosperous countries of Asia.

**II.** **The** EU's **Existing Policy Instruments in its Relations with Asia**

In proposing new strategies for Asia, the European Union does not start from a
_tabula_ _rasa:_ the Union has already gained considerable experience in Asia:

**Bilateral Relations**
Traditionally the EU conducts its bilateral co-operation with many countries and
regions in Asia, as elsewhere, in the framework of Trade and Co-operation
Agreements (see Annex III, Table 1).

The EU also has a structured political dialogue with most partners of the Asia
region.

On a bilateral level, it is the case with Japan (on the basis of an EU-Japan
Joint Declaration), China (recent exchange of letters between this country and
the EU), India (on the basis of the joint political declaration of last December),
Pakistan. With Sri Lanka, there has been an agreement of principle to initiate the
dialogue, although it has not yet taken place. South Korea has requested a
formalised arrangement.

At the regional level, the political dialogue takes place with ASEAN (there is
no bilateral dialogue with individual members of ASEAN). There is provision
for an annual EU-ASEAN meeting at the ministerial or senior officials level, and
there is another ministerial level meeting every year in the framework of the
ASEAN Post Ministerial Conference (PMC) where the EU is one of the dialogue

partners, the others being the US, Canada, Australia, New Zealand, South Korea
and Japan.

At an even broader level, the EU is taking part in the only collective regional
security dialogue, the ASEAN Regional Forum (see page 9), which includes
most Asian countries and will meet annually starting this year.

The political dialogue has mainly taken place at the ministerial or political
director level, either in a Troika format or with the Presidency and the
Commission.

Fifteen years ago the European Commission's only Delegation in Asia was in
Tokyo. Today there are 10 delegations in Asia (see Annex III, Table 1 for list).

**Multilateral** **Co-operation**
The Union is engaged in a wide-ranging dialogue with Asia within the UNsystem on subjects of common interest relating to international peace and
security. The Union has in recent years greatly expanded its economic cooperation with Asian countries. This has not only happened in the context of the
GATT where the role of Asian countries has increased considerably
commensurate with their growing importance in world trade, but also in UN fora
such as UNCED or CSD and in the OECD with Japan (and shortly Korea).

**Commercial policy**
The mainstay of the Union's Commercial policy, both in general and towards the
countries of Asia, has always been an active commitment to trade liberalisation
within the multilateral system with respect for all of the rules and commitments
that this entails. Increased market access for the Union's exporters has been
successfully pursued via the Uruguay Round and other actions at the multilateral
level. The Union has also sought to improve market access for European
business through its bilateral relations.

Trade promotion on a European level from Europe to Asian markets is
undertaken, to various degrees, across the region. However, the main trade (and
investment) promotion activities from Europe to Asia are made by the EU
Member States acting individually.

The Union has at its disposal a number of trade policy instruments: antidumping measures and safeguard measures. These are in conformity with the
Union's multilateral obligations and commitments which limit their use accordingly. With respect to textiles all existing restrictions under the MFA will be
phased out over ten years as agreed in the Uruguay Round.

**Development aid**
Between 1976 and 1991, the European Union disbursed aid worth more than 32
billion ECU to Asia. This makes the Union the second largest donor to Asia,
after Japan but with three times more than the USA. Of the total amount
disbursed by the Union, about 11% came from the budget line for Asia and Latin
American countries administered by the Commission (see Annex III, Table 3).
Only a small portion of this was allocated to economic co-operation, the
remainder going mainly to rural development projects and food aid. However

effective this assistance may have been in the past, the need was felt to re-assess
its effectiveness with a view to adapting the approach to the changed conditions
in much of Asia.

**An important start was made in the** _**Developing Countries**_ _**of**_ _**Asia and**_ _**latin-**_
_America Regulation_ of 1992. The Regulation foresees two main lines of cooperation: (i) development aid for the poorest countries and population groups
and (ii) economic co-operation with countries or regions with high growth
potential. Environmental issues have to be taken into account in both forms of
co-operation. Economic co-operation, and this was the innovation in the
regulation, is aimed at improving the business and regulatory environment in
partner countries in order to stimulate two way trade and investments with the
direct participation of the private sector to the benefit both of the Union and the
partner country.

In 1991, the EC Council and its Member States adopted a resolution on
human rights, democracy and development. On this basis, the EU gives high
priority to specific agreed actions aimed at consolidating democracy and
promoting human rights in some Asian countries. This kind of activity is
increasingly diversified covering fields such as the support of elections, NGOs,
free media, vulnerable groups, information on, and sensitivity to, human rights.

**In 1993, despite the feet that for many years Asia has had many** **high** **growth developing**
**countries, only** **12%** **of the EU aid for Asia was committed to economic** **co-operation.** **The**
**remainder was used for activities broadly intended to alleviate poverty (the main commitments**
**went to South Asia. In both China and India the EU's largest activity undertaken in the** **1980s**
**was a dairy development project financed mainly out of the** **food** **aid budget.**

**Co-operation** **in specific sectors.** Various forms of technical assistance and cooperation are financed from special budget lines for example for **energy,** the
**environment, tropical forests, science and technology, AIDS prevention** and
**narcotics control.**

NGOs. Widespread support for Non-Governmental Organisations is available,
including certain country-specific NGO funds (for example for Cambodia or
Vietnam).

**Humanitarian aid,** refugee and emergency assistance are important contributions to the alleviation of suffering in Asia.

**GSP.** The Union is well aware of the importance to developing countries of
access to its market. To this end, preferential market access has been unilaterally
offered to Asian developing countries for many years under the EU's
Generalised System of Preferences scheme. Indeed, the Asian countries are the
main beneficiaries of the scheme, accounting for as much as 72% of imports by
the Union under the scheme in 1992. On the 1 June 1994, the Commission
adopted its Communication to the Council and the European Parliament relating
to the revision and the updating of the principles to be followed in the
elaboration of the new scheme to be applied for the period 1995 to 2004. The
Commission will shortly table its proposals for the detailed operational scheme,

more founded than in the past on the concept of development, which will be
implemented on 1 January 1995.

**Stabex** was extended to Bangladesh and Nepal in 1987 under a five year scheme
and to Burma in 1988. These are the only countries in Asia to have benefited
from Stabex.

**Investment and financial facilities**

**EIB.** In addition to its contributions to balanced development within the Union,
the European Investment Bank also finances investment projects in non-member
countries. Since 1992, the EIB has extended its lending operations to the Asia
and Latin America regions on an experimental basis. The scheme is open to
countries there which have a co-operation agreement with the Union. An
allocation of 250 million ECUs per year over three years is available for these
countries. During the first year of operation, loans worth 100 million ECU were
made to projects in Asia.

**ECIP.** **The European Community** **Investment** **Partners** facility promotes joint
ventures in Asian, Latin American and Mediterranean countries between local
and European operators. Between 1988 and end 1993, 292 projects for a total
ECIP financing of+/- 30 million ECU have been approved for Asia.

**III.** **The European Union's New Political Approach towards Asia**

**1.** **The Justification for Closer Political Relations**

**Introduction**

The European Union is entrusted with the task of developing a common foreign
and security policy to enable it to protect its interests and values as well as
playing a constructive role in world politics.

The increase of the relative weight of Asia in the world economy will
considerably reinforce the political weight of this region on the international
political scene.

To keep Europe in its major role on the world stage it is imperative to take
account of the emergence of these new Asian powers.

The maintenance of peace and stability in Asia is an important factor not only
for the protection of the Union's interests in this region, including economic
ones, but also for the respect of international obligations and agreements on
which the Union itself depends for its security, e.g. regarding non-proliferation.
It is therefore essential that the Union develops the capacity to play its proper
role in the region.

**1.1 Security Arrangements in** Asia
Political and security relations between Asia and the major powers are
undergoing a gradual but profound shift under the combined influence of rapidly
spreading economic growth and the end of the Cold War.

From a security viewpoint, the US remains the key player in the region and
the current situation is characterised by a web of bilateral security arrangements
between the United States and a number of Asian countries. At the present
moment, no single Asian country or outside power appears to be in a position to
take over the role of the US.

The US is in the process of developing a more pragmatic relationship with
Asia. Whereas in the Cold War the US was prepared to subordinate its economic
interests to the goal of containment, it is now focusing more and more on the
economics of the relationship.

A further sign of such a shift in US policy towards Asia is the recent decision
to extend (with a few exceptions) the MFN-treatment of Chinese exports into the
US. The US thus delinked trade and human rights. This shift may also be
regarded as a move towards a more long-term strategy aimed at influencing
developments in China by further integrating China into world trade and
economic relations.

Japan enjoys a privileged security relationship with the USA. The Japanese
constitution renounces Japan's right to declare war and proscribes the use of
Japanese forces outside Japan. Participation in certain international
peacekeeping operations has, however, been possible.

In the wake of die Soviet collapse, Russia has tended to turn inwards and
refrain from an active role, but remains a country to be reckoned with, notably
with regard to developments in North Korea.

Pakistan, through its involvement in Afghanistan, and also China and India,
are playing a significant role in former Soviet Central Asia, a key area for the
stability and future development of Russia.

In the aftermath of World War II, Europe's former Asian colonies gained their
independence leading to the almost complete withdrawal of European forces
from the region. Hong Kong and Macau will revert to China in 1997 and 1999,
respectively. As a result, the European influence on developments in Asia has for
many years been exerted mainly through the medium of trade and investment, as
well as development co-operation and cultural exchanges. It is to be noted,
however, that some Member States still have wider interests in the region and
maintain relationships that include a security component (e.g. the Five Power
Defence Arrangement which links the UK with Malaysia and Singapore).

**1.2 Political and Security Co-operation between Asian** **Countries**
The reduction of tensions in the world has allowed the Asian countries to take
the first modest step in the direction of developing an Asian identity and
cultivating Asian approaches to Asian problems starting at the subregional level.

The change in the "rapport de force" with non-Asian powers is translating into
political confidence, notably and vocally among the countries of South East
Asia, which no longer hesitate to question our moral values and our social
systems.

Economie growth and imitation effects are having a dampening effect on
intra-regional tensions: there is a shared perception in Asia that growth leads to
prosperity, which in turn generates stability and security. But economic growth
also makes it possible to expand military budgets: a number of countries, notably
in South East Asia, have been active in developing their capabilities, especially
in the naval field, and in spite of the soothing effects of economic growth, there
remain a number of potentially serious regional flashpoints (Spratlys, Kashmir).

The first steps towards a regional security forum are taking place under the
auspices of ASEAN, but at the same time there are signs that Asia is moving
towards a classical balance of powers diplomacy.

The Union has a long-standing relationship with ASEAN. There is a formal
EU-ASEAN agreement (1980). The EU participates in the annual ASEAN Post
Ministerial Conference, which will now extend to the newly created regional
security forum, the ARF (ASEAN Regional Forum). The ARF will be meeting
for the first time this year. It encompasses most of the countries of Asia except
North Korea and includes North America, the EU and Russia. In conformity with
the principle of ASEAN itself, the discussions are to be consensus oriented and
the participants clearly wish to avoid conflictual debate.

Although ARF may over time develop into the overall security forum for the
Asian region, it is likely that subregional groupings may emerge to deal with
specific problems, such as those of North East Asia. These subregional
groupings may or may not operate in the framework of the ARF. The European
experience gained from establishing and operating the CSCE may be of a certain
relevance in this connection.

**1.3 Asia in Search of a Role in World Politics**
With the increasing strength of Asia and individual Asian countries it is however
inevitable that this region will wish to play a more prominent role on the world
stage. Economic importance rather than military force will serve as a platform
for its influence.

In connection with the debate on the restructuring of the United Nations
Security Council it is already evident that Asia wants a stronger and also a
permanent representation. It is well known that certain of the more important
Asian countries feel entitled to a permanent seat in the Council. Considering the
special responsibilities associated with being a permanent member of the
Council this is a clear sign that these countries have the ambition to involve
themselves in political questions relating not only to the Asian region but also
beyond.

Another indication pointing in the same direction is the participation of
certain Asian countries in international peacekeeping operations outside the
Asian region. It is very much in the interest of the Union that the responsibilities
of carrying out such operations be shared between as many countries as possible.

**10**

**2.** **Characteristics of** **the** **new Political Approach towards Asia**

**2.1 Strengthening the Political Dialogue with Asia**
The political dialogue between the Union and Asia should develop within the
following parameters.

The political dialogue must gain its legitimacy from the Council and from the
European Parliament with the Commission playing the special role conferred
upon it. The approach by the Council towards Asia is partly a reflection of the
different historic relations between the individual Member States and the region,
partly their present interest in strengthening such relations, often dictated by
economic considerations. The Union's obligations entered into under global
arrangements also play an important role. The European Parliament has adjusted
its structures and working methods to accommodate its increased responsibility
post-Maastricht. Its interparliamentary Delegations and sectoral committees, as
well as ad hoc missions, have established contacts with all the major countries of
the region.

Asia has on its side consistently advocated an outward looking European
Union which represents for the Asian countries a major source of income and
investments. Asia has repeatedly encouraged Europe to show a greater interest in
the region. The Asian countries have however refrained from being too specific
in identifying the precise subjects which they would wish to elaborate further in
a political dialogue with the Union. This may be explained by some uncertainty
about how the Union works (representation), partly by a perception of the
European Union as being a difficult partner to negotiate with (Uruguay Round).

The basic objective of the policies towards Asia in the coming years must
therefore be to increase Asian interest in and knowledge of the Union and to
demonstrate to the Asian countries the ability and commitment of Europe to
make a positive contribution to the peaceful development and stability of the
region. The EU should, in particular, develop its political dialogue with those
countries in the region which are prepared and able to make a significant
contribution to the maintenance of the region's peace and stability.

2.1.1 The European Union has already initiated a political dialogue with several
Asian countries and group of countries and is in the process of developing
dialogues with a number of others. The existing dialogues have typically
consisted of a presentation of the general situation of the respective parties and
discussions on regional and global problems. It might, however, be desirable to
focus on specific subjects with appropriate preparation and follow-up. One way
of achieving this would be to dedicate Troika meetings to agreed themes on
which the parties would have sufficient time to elaborate.

In the future more effort should be spent on developing the political dialogue
at expert level with a view to deepening the dialogue and if possible making it
more operational.

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**2.1.2** The Union participates in the ASEAN Regional Forum which provides for
a wide-ranging dialogue on security concerns encompassing the greater part of
Pacific Asia. The Union must follow the evolution of the ARF and develop ways
for making its own particular contribution to the discussion of such matters.

**2.2 Subjects for Political Discussion**

**1.** **Arms control and non-proliferation**
Rapid economic growth, territorial disputes, increasingly ambitious armament
programmes, the potential for distrust in such a large region and the weakness of
the multilateral organisations for political consultation are all factors which
could lead to regional conflicts in Asia capable of disrupting world equilibrium
and thereby impinging on CFSP objectives.

Whereas global military expenditure fell by 20 % in 1993, such expenditure
grew in East Asia alone.

The European Union considers policies on arms control and the nonproliferation of weapons of mass destruction (nuclear, chemical, biological,
ballistic missiles) as important elements of the Common Foreign and Security
Policy. These are probable areas for future joint action. The EU should explore
the possibility of continuing or initiating dialogue on some of these points with
the Asian countries.

The EU could focus these discussions on the following:

- Conventional Arms. The UN Conventional Arms Register was the result of a joint EC-Japan
initiative and came properly into effect at the beginning of 1993. The gathering and
publication of data are an essential measure of confidence where conventional arms transfer is
concerned. The EU has already initiated a dialogue, which should be pursued, with many of
the region's countries on the need to improve the register's coverage and efficiency.

At the 48 UN General Assembly, the international community began its reflection on the
"Convention on prohibitions or restrictions on the use of certain conventional weapons which
may be deemed to be excessively injurious or to have indiscriminate effect" in order to
examine, in particular, an amendment to its Protocol II on anti-personnel mines. These
negotiations will run to 1996. A successful outcome would be in the joint interest of the EU
and the Asian countries given the use of such mines in conflicts in the region.

- The indefinite and unconditional extension of the NPT in 1995 is one of the CFSP's most

important short term objectives. The EU will continue its efforts to improve the Treaty's
coverage. At the same time, the Union will make great diplomatic efforts with the countries
of the region party to the Treaty to reach the objective of such an extension.

- Strengthening the IAEA's Safeguards System. The international tension brought about by
North Korea's attitude on nuclear inspections underlines the need to reinforce the efficiency
and maintain the credibility of the IAEA's safeguards system. This challenge for the
international community also provides an opportunity for the EU and the Asian countries to
cooperate.

**•** [Export Policies on the Export of Sensitive Goods and Technologies. Given the industrial ]
and commercial dynamism of the Asian countries and the deepening of their already welldeveloped technological abilities as suppliers, they are already major suppliers of goods and

12

technologies which could be sensitive for the proliferation of weapons of mass destruction,
whether in the chemical, ballistic, biological or nuclear sectors. (According to the IAEA, Asia
is the only region in the world where there is an increase in the use of nuclear generators for
domestic electricity supply with the number of nuclear power stations set to double from 70
in 1992 to 140 by 2010). A dialogue between the EU and Asia on the basis of objectives of
non—proliferation and legitimate industrial, technological and trade development is of prime
importance.

- Conventions Prohibiting Chemical and Biological Weapons. The rapid and concrete
implementation of the obligations of the 1993 Convention Prohibiting Chemical Weapons and
the strengthening of the terms of the 1972 Convention Prohibiting Biological Weapons are
important short-term objectives for the EU with a view to consolidating the international
non-proliferation and disarmament system. These topics could be appropriately pursued by
the Union in its dialogue with Asian partners.

- Comprehensive Nuclear Test Ban Treaty. The EU actively supports the efforts of the
Disarmament Conference in Geneva to conclude a universal and verifiable treaty and should
encourage its Asian partners to join in that support.

**2.** **Human Rights**

The development and consolidation of democracy and the rule of law and
respect for human rights and fundamental freedoms together form a major
objective of the external policy of the European Union. Regarding human rights,
the general approach of the EU is endorsement of existing international standards, as set down in the relevant international instruments, to which most or all
Asian countries are signatories. In this respect, the Union should encourage all
countries to become signatories of and to fully implement all relevant international instruments. The European Union pursues this objective, inter alia,
through dialogue guided by the Vienna Declaration and Programme of Action of
the 1993 UN World Conference on Human Rights, to the success of which both
the Union and the Asian countries have actively contributed.

In the first place the dialogue on human rights will predominantly be dealt
with in its its context and in appropriate fora both bilateral and multilateral, such
as the UN Commission on Human Rights where the governments of the
countries concerned are most likely to be under scrutiny.

The concept of the interrelationship between human rights, democracy and
development, should be inspired by the assumption that economic development
could bring about the progressive construction of civil society and thus improve
the exercise of human rights, which in their turn could also be an important
factor for development.
Emphasis should also be given to facilitating legislative and institutional reform,
and, in this respect, technical training and granting of scholarships as well as
visits and seminars could be envisaged.

3. **Drugs**

The drug phenomenon constitutes a global problem and is today considered a
major threat to the stability and democracy of societies confronted with it. Drug

13

trafficking, drug production and drug consumption also presents a problem to
Asian regions and has significant repercussions on the European economies and
EU security and stability. The globality of the problem is widely recognised and
the need for co-operation at international level is clearly voiced. The European
Union therefore already initialised a dialogue on drug and drug related matters
with some Asian countries such as India and China. This approach has to be
pursued in order to enhance awareness of the drug problem at the highest
political level. In fact the necessity for the systematic inclusion of the drugs
question in the political dialogue has been stated and elaborated in the recent
communication from the Commission to the Council and the European
Parliament on a European Union Action Plan to Combat Drugs. The
implementation of this drug plan has already been identified by the Corfu
Council as a priority. The immediate objective of a political dialogue on drugs
with Asian countries should be the improvement of the capacity and willingness
of the countries concerned to commit themselves fully in the fight against drugs.
A further aim will be the ratification by third countries of the three United
Nation Conventions on narcotic drugs and psycho tropic substances.

**IV. The European Union's New Trade** _**&**_ **Co-operation Strategy**

**Towards Asia**

**1.** **Justification** **for a** New **Trade & Co-operation** **Strategy**

**1.1 Economic growth in Asia**

urope's interests in Asia are (i) to benefit from the economic
opportunities and to respond to the economic challenges in the region
which contains the world's fastest growing countries, and which could
# E
represent between a quarter and a third of the world economy by the
year 2000; (ii) to integrate into the open, market-based world trading system
those Asian countries such as China, India or Vietnam which are moving from
state controls to market-oriented economies; and (iii) to assist in the enormous
problem of poverty alleviation.

To secure these objectives, and to prepare for the growing role of the Asian
powers in world affairs, the European Union needs to accord Asia a higher
priority than it has done in the past. The Union also needs to re-assess its
policies towards the countries and regions of Asia, moving from the defensive to
the pro-active. This can only be achieved by the Union and its Member States in
co-ordination and with the direct participation of the European private sector.

**14**

**Characteristics of** **économie** **growth in Asia.** Economic growth in the three
regions of Asia has been extensively analysed and described (see Annex IV for
economic profiles of the countries and regions of Asia). The main characteristics
having direct implications for the European Union's new strategies are as
follows:

- **Variations in growth:** Average GNP growth per capita in East Asia between
1965 and 1990 was 5.5%. Southeast Asia was not far behind, but the average
conceals important variations. East and Southeast Asia contain some of the
world's richest countries to be sure, but they also contain some of its poorest
(e.g. Mongolia, Burma, Cambodia, Laos or Vietnam). South Asia has on average
had less rapid growth (1.8% over the same period), but there have also been
important increases in wealth.

- **Rapid spread of growth:** Economic growth in Asia has spread very rapidly
from one country, and from one region, to the next.

Given the above two points, European Union strategies will have to be **flexible**
and **modular** in order to anticipate changes in all three regions of Asia, and they
will have to be geared to the particular circumstances of the different countries
and regions there.

**Continued high growth in large parts of developing** Asia. Despite the slowdown in Japan and in most of Europe (and in the US until 1993), the IMF
reckons that Asian GNP will have grown on average by 44% between 1990 and
1995, (compared to 16% and 11% respectively for Latin America and Africa,
and minus 32% for Eastern Europe and the former Soviet Union).

Growth of this order shows every sign of continuing and expanding,
transforming as it does those countries and areas as yet untouched. There are
signs that South Asia too could also enjoy higher growth in the next ten years,
especially if the momentum of the restructuring process is maintained. However,
South Asia will only succeed in substantially reducing poverty if economic
growth there is matched by a significant reduction in birth rates.

**Trade within Asia is growing rapidly,** but growth trends within the three
regions are very different (see graphs in Annex II). Here as elsewhere, East Asia
has led the way: the increase in trade between East and Southeast Asia is
striking. The proportion of trade between these two regions in 1991 (as
compared to their trade with the rest of the world) was about the same as in
NAFTA (42%) and this share was arrived at in a much shorter space of time. The
jump in intra-trade is a "natural" development, i.e. it was achieved without
formal trade arrangements and it is for the moment unlikely to lead to such
arrangements. The growth of intra-Asian trade has led to a decline in dependence
upon developed country markets in North America and Europe to a degree never
before seen. South Asia for the moment remains outside the growth in intraregional Asian trade.

**15**

**External trade** plays a key role in both high speed and developing Asia's
economic growth, although in varying degrees. The World Bank reckons that
half the growth in world trade up to the year 2000 will be generated in East and
Southeast Asia alone. This holds out enormous opportunities for the Union and
can help create many new jobs.

Total East Asian trade doubled over the last decade. In 1992 it stood at one trillion ECU (of
which Japan accounted for half). Trade in Southeast Asia has also grown, but not as rapidly: in
1991 it was 350 billion ECU. South Asia's total external trade ($50 billion) has only grown 25%
over the same decade (the Union's two-way trade with all the countries of South Asia is only
marginally larger than with Singapore).

Some countries in the region have a well established record as free trading
nations, others have only recently started to liberalise their trading regimes,
while there are also countries which do not yet participate in international trade.
Trade policy with an emphasis on _de facto_ market access for both trade in goods
and services will therefore be a key component in the Union's strategies towards
not only developed Asia but also Asia's newly emerging markets.

In the area of trade the Union is, after the US, the most important market for the
developing Asian countries, absorbing in 1993 as much as 128 billion ECU of exports or
27% of their total exports (see Annex III, Table 2). Without doubt, the Union has
benefited as Union exports to these countries increased from 15 billion ECUs in 1980 to
93 billion ECUs in 1993. Concomitantly, the share of developing Asia in Union
exports jumped from 7% to nearly 20%, thereby overtaking the 18% share of the US in
total Union exports.

The inclusion of the EFTA countries in the Union will not greatly alter EU trade results with
Asia countries since EFTA's trade with them is only about 10 to 15% of that of the Union
(although individual EFTA countries hold important shares of specific Asian markets).

**Foreign direct investment** (FDI) plays quantitatively and qualitatively an
important role, in particular in East and Southeast Asia. The EU's relative share
has declined steeply (between 1986 and 1992 only 10% of the region's FDI
came from the Union), therefore the Union's new strategy will emphasize
investment promotion and the creation of favourable conditions for European
investment in Asia.

Total **FDI** flows to these regions increased steadily during the eighties, with Japan being the long
established leader of the three, followed by the US. Although Japan has the highest stock of
cumulative FDI in Asia, since 1991, annual investments from Taiwan, Korea and Hong Kong
have been at a higher level.

**Sustainability of growth in developing Asia.** The impressive economic growth,
especially in developing East Asia, should not prevent a critical assessment of its
sustainability: **high growth** calls for adjustment (just as does low growth and
stagnation, albeit adjustment of a different type). In the context of much of Asia
this concerns in particular political liberalisation, as better paid, better fed people
demand more individual freedom. The ability to address this issue in a

16

satisfactory way will no doubt be of critical importance in sustaining economic
growth in many Asian countries.

Sustaining high growth will also be determined by the ability to improve infrastructures, the
lack of which can easily become a bottleneck to future growth.

Some countries need to invest heavily in mass education and the reform of their educational
systems. This was one of the most important strategies for high growth and equitable income
distribution in East Asia. All large countries in the region (China, India, the Philippines,
Thailand, Indonesia and Vietnam) face severe regional imbalances as economic development
has been in these countries first and foremost either concentrated in urban centres, or closely
associated with one particular part of the country.

The environmental sustainability of unchecked rapid growth in the region is a source of
growing concern with increasingly global dimensions. This applies not only to tropical forests,
but also to the relatively low levels of energy efficiency in many countries of the region. Coupled
with the relatively abundant supply of carbon rich fossil fuels (India, China) this is a problem
which poses a particularly urgent challenge.

**Market transition.** Many countries of Asia are in the process of reforming their
economies to make the transition from centrally planned to market based
systems. Many are still hampered by large and inefficient state enterprises. The
new strategies of the Union will be aimed to assist the ongoing reform process. It
is after all in the enlightened self-interest of the Union to encourage die growth
of new markets which are open and compete within the internationally agreed
framework of the GATT.

**Poverty also has its imperatives.** Asia's future is not a homogenous picture of
dynamic growth. A characteristic of high speed growth in East and Southeast
Asia was that it brought with it a dramatic increase in human welfare and huge
reductions in poverty. The same is not so easily obtained in South Asia which in
the year 2000 will still contain the single largest concentration of the world's
poorest people. This represents more than just a brake on the South Asian
countries' economic development and their potential as future markets for
European business. People below the poverty line have higher fertility rates,
greater vulnerability to disease and little option but to pursue short-term,
environmentally degrading practices. These are challenges of global significance: poverty alleviation will therefore remain an important strand of the
Union's Asia strategy.

1.2 Asia **policies of Japan and the** US

A re-evaluation of the EU's policies towards Asia cannot take place in a vacuum.
All of the major international actors have an interest in the region, more so even
than the EU whose interest is in the first instance primarily economic. The Union
must therefore be aware of the ideas and actions of others if it is to safeguard its
interests and maximise the potential of its own policies.

Japan's presence in East Asia and the role that it has played in the region's development is
massive and on-going. Aid, trade and investment links are very strong and have proved to be
mutually beneficial. Recently there have been signs that Japan's relations with South Korea in
particular are improving. In the case of China, after a slow start, economic links are becoming

**17**

ever stronger. Southeast Asia is a major supplier of raw materials to Japan, and since 1985,
Japan has relocated manufacturing capacity there on a scale unmatched by either Europe or the
US. Japan is also intent on increasing its presence in South Asia; India is now a major recipient
of Japanese ODA. In addition, Japanese direct investment in India has increased in recent years,
albeit from a very low base. Japan is gradually assuming a higher profile throughout Asia,
although it is careful to disassociate itself from the more assertive tone of some US or European
pronouncements on human rights.

The United States has started to place increasing emphasis on its Asian Policy. The most
obvious sign of this has been its active promotion of, and participation in, APEC (Asia Pacific
Economic Co-operation, see ). At this stage it is far from clear that this initiative has been
successful. The recent trade dispute with Japan, a series of small disputes with Southeast Asian
countries and the question of China's MFN status all suggest that whilst the US wishes to
increase its economic presence in the region, it has not yet found the optimum balance between
the different policy strands. However, it is likely that away from "high politics", links between
the respective business communities will be strengthened. The US is India's largest trading
partner with total bilateral trade of about half EU-India trade. India has been selected as one of
the US Commerce department's "big ten emerging markets" (and a Section 301 target).

**1.3** **The need for new** EU **strategies**
Large parts of Asia are booming and market access is improving, but business
there must be earned. The presumed dependence in all three main regions of
Asia on Europe whether for their capital and know-how, or as a counter-balance
to Japan and the USA, is less valid today than even five years ago. The reason
for this is that Asia now has its own resources of capital, management and
technological capacity.

It follows therefore that the European Union needs new pro-active strategies
towards Asia. Above all it needs to strengthen its economic presence in Asia in
order to maintain its leading role in the world economy. In doing so it is able to
build upon the steps taken by individual EU members states to develop new
strategies towards Asia.

The costs of failing to develop pro-active strategies towards Asia
The Union stands to lose out on the economic miracle taking place there because of the strong
competition: from Japan and the United States, and also increasingly from companies within the
region's newly industrialised and capital rich countries such as Korea or Taiwan. To take but the
example of Japan. Already Japanese companies are competing with each other to consolidate
their position in Asian markets. They have invested heavily and are establishing the type of sales
and distribution systems which European companies have found so hard to penetrate in Japan
itself. If European companies are unable to take a full share of the world's main centre of growth
in the next decade this will affect their profits and competitiveness, not only in Asian markets,
but also world-wide.

If the Union loses out on the economic miracle taking place in Asia, this will have political
costs, and at the very least it will exacerbate the calls for more defensive policies from those who
view Asia as a threat rather than as a valuable partner, which in turn will further reduce the
benefits to be gained from Asia, and so on, in a spiral of decline.

18

Basis of **new strategies.** Not the least significant aspect of the ongoing Asian
transformation is that it represents the first achievement of sustained economic
growth by a major area of the world outside of Europe or regions of European
settlement. This means that the Union will not be able to take for granted
automatic acceptance of European values and ways of doing things. Universal
human rights are recognised in Asia as in Europe, but the manner in which these
are advocated and defended is crucial. For its part, the Union favours a frank and
open dialogue on these issues which should be developed as a necessary strand
in the policy mix.

Economic growth in Asia has been market driven, taking place for the most
part without formal regional structures. Therefore the Union's new strategies
will be based upon an appreciation of the cultural, economic, social and political
characteristics of each of the EU's individual partners in Asia.

The EU's strategies will also cover relations with regional groupings in Asia
such as the ASEAN (Association of Southeast Asian Nations); SAARC (South Asia
Association for Regional Co-operation); sub-regional arrangements such as the
numerous cross-border "growth triangles" now emerging; and supra regional
groups such as APEC (Asia Pacific Economic Co-operation), which link East
Asia across the Pacific to the Americas and Australasia.

**2.** **Characteristics of** **the** **New** EU **Economic Strategy Towards Asia**

**2.1 Economic policy implications**
This section elaborates the specific policies and instruments required to achieve
the policy objectives and the main policy implications within each of the
domains. The individual design of policies will of course be country specific and
must be elaborated in the light of their individual circumstances. The Union has
a great deal of policy experience in Asia and must build upon its previous

successes.

More and more countries within Asia are growing into economic and political
powers and are becoming increasingly integrated into the world system. The
EU's existing relations with them must be adapted to reflect the fact that we are
all now partners in a global economy. It is therefore essential that the EU
reinforces, or where it does not yet exist, establishes a non-confrontational
dialogue of equals, to address questions of bilateral concern and also to consider
jointly the growing number of global concerns: most notably the maintenance of
an open rule-based world trade system; preservation of public goods such as the
environment; and particular issues such as trade in narcotics or the prevention
and cure of AIDS.

Closer consultation and dialogue can generate a greater understanding of each
other's viewpoints and problems and facilitate the search for consensus
solutions. This can in turn help to avert disputes and provide an environment
which is of benefit to business both in Europe and in Asia. The importance of
such dialogue goes beyond the purely bilateral. If the Union can assist in the

19

development of a consensus approach, this will feed into inter-regional
initiatives (e.g. APEC) and smooth the path for work undertaken at the
multilateral level, for example concerning the post Uruguay Round agenda.

**Regionalism and multilateralism.** The EU has a long-standing relation with
ASEAN which remains a cornerstone of its dialogue with the region. The Union
has welcomed the ASEAN Free Trade Agreement and indeed welcomes all such
initiatives for regional co-operation provided they are consistent with the GATTbased multilateral trade system.

**2.1** . **1** **Raising the profile of Europe in Asia**
The impact of certain actions can be greatly enhanced if individual Union actors
join their forces. This applies as much to the business sector where the Union's
image can act as an important selling point as to international fora. It also applies
to co-operation programmes and activities, especially economic co-operation,
which take place within a highly competitive environment.

A greater knowledge of the Union and its activities would increase the
regard in which it is held in Asia. The EU should therefore provide much more
information about Europe and make a much greater effort to explain the nature
and objectives of EU policies in Asia. Greater efforts should also be made to
provide information on European financed activities in Asia, especially
economic co-operation (and also development projects). A wide range of different policies could fall within this domain:

**2.1.2** **Public information policy:** in order to draw up a more efficient public
information policy, a baseline all-media study of the European image in Asia is an
essential prerequisite.

**2.1.3** **An enhanced visitors programme** to invite distinguished Asian politicians,
journalists, academics and other leaders to Europe should be considered.

2. **1.4** **Strengthening Higher** Education **and training links with Asia,** including
University Co—operation schemes targeted into specific technological, policy and
management studies and emphasising the implementation of joint or mutually recognised
post-graduate programmes, joint-research projects and university-industry co-operation
activities. These will include, inter-alia, support to European and Asian Studies Centres
and joint Management and Technical training programmes, implemented whenever
possible with the active participation of European and Asian companies.

**2.1.5** **Encouraging decentralised co-operation** between the institutions which are
the basis of a pluralistic civil society. Such co-operation has in the context of the Union
been a powerful force in the shaping of the European identity. With regard to the EU's
relations with Asian countries, activities such as town twinning or cultural exchanges will be
invaluable in an environment where there is a serious lack of knowledge and of mutual
comprehension.

**2.1.6** **Improving European** expertise on Asia by supporting a network of European
centres specialising in Asia (to share perspectives and expertise on Asia and to provide counsel
and advice to European policy makers); and funding in countries such as Korea or China
initiatives based on the EU's young executives programme in Japan.

**20**

**2.2 Strengthening the European** **Economic** **Presence in Asia**

**Economic co-operation is based upon the concept of mutual benefit, and as**
**such is qualitatively different from development co-operation. This characteristic**
**makes economic co-operation an important instrument in the EU's relations with**
**many of the Asian countries, where the level of development is rapidly rising. It**

**should be extended towards countries such as Korea for which at the moment it**

**is not used.**

**There is also obviously scope to strengthen links in the fields of** **scientific** **co-**
**operation and research and development, narcotics control, AIDS prevention and**
**environmental co-operation. The Union is of course already active in these areas,**
**but their potential needs to be exploited to the full.**

**Co-ordination with Member States and the private sector. The** **Union's** **co-**
**operation in Asia will be complementary to that of the Member States. In order**

**to achieve this and in order to increase the effectiveness of Union and Member**

**State co-operation activities, greater co-ordination will have to take place**
**between them in terms of: policy co-ordination; operational co-ordination,**
**including in the field; and co-ordination in multilateral fora. With regard to**
**economic co-operation, the direct participation of** **the** **private sector is also a** _**sine**_

_**qua non.**_

**The following activities** **(all** **of which contribute to economic cooperation in**
**the broadest sense) are intended to ensure that European private sector is faced**
**with a trading and investment environment which is conducive to economic**
**growth and international trade. These activities will therefore promote European**

**trade and investment in Asia:**

**2.** **2.1 Representations (lobbying): it is necessary to undertake all the appropriate steps**
**to obtain from Asian partners modifications of their legislation and administrative**
**regulations which hamper the development of European trade and direct investments.**
**Basic concerns include Standards and Quality Control; Intellectual Property Rights**
**and the negotiation of Mutual Recognition Agreements on standards, testing and**
**certification.**

**2.** **2.2 Providing expertise and policy advice to the ex-state trading countries of Asia**
**which have embarked on** **structural** **economic reform, such as China, Mongolia, Vietnam**
**or Laos, to assist them to set up the institutions, policies and laws to make a smooth**
**transition to market-based economies (an example would be the EU market transition**
**programme** **in** **Vietnam,** **the** **first** **major programme** **of this kind in Asia). Those countries who**
**have not so embarked (Burma, North Korea), should be encouraged to do so as soon as**
**political conditions permit.**

**Countries such as India and Pakistan which have already set about deregulating their**
**economies should be assisted in these policies.**

**2.** **2.3** **Promoting business co-operation between European companies and their Asian**
**counterparts This should be done by increasing information and by creating a favourable**
**framework** **for industrial** **co-operation** **and notably for** **SME's;** **through existing**
**instrument.**

21

Regarding the first point, information on trade and investments in both Europe and Asia,
and improved information with regard to Asian markets and contracts, are required.
The opening of European Business Councils; Joint Investment Committees and
especially European Business Information Centres (EBICs), are steps in the right
direction, but more need to be opened (there are none as yet in China, ex-Indochina or Pakistan).
The European Business Community in Tokyo and Seoul need to be supported. The^role of the
EBICs is to provide information on European and local market conditions, including trade and
investment opportunities. They are established in close co-ordination with bilateral Chambers of
Commerce and EU Member States' private sector representatives. To be successful, the
EBICs also require backward linkages to European business associations and Chambers of

Commerce and EU Industrial federations.

Second, a favourable framework for industrial co-operation which aims at creating a positive
climate for EU investment and co-operation, should be initiated by launching concrete activities
such as sectoral round tables, sufficiently horizontal industry-oriented training initiatives and
pilot actions in the field of technological co-operation."

2. 2.4 Establishing better links with European business associations **and Chambers**
**of Commerce.** This could either be done by the formation of a business association at the
European level as foreseen in the White Paper on Employment (e.g. "the Europe Asia Business
Association"), or by setting up a network with existing national associations. The objectives of
such an association or network would be to promote economic co-operation between the
European Union and the countries of Asia and to share perspectives and expertise on Asia and to
provide counsel and advice to European policy makers.

**2.2.5** **Enhancing** **co-operation** **in the fields of science and technology and**
**research and development.** There is no doubt that such co-operation can have a
positive effect upon the Union's economic presence within the region. To date the
majority of the Union's efforts in this domain has either been co-operation with Japan, for
example the new Forum on Science and Technology, or come under the Science and Technology
for Development programmes. The recently approved Fourth Framework Programme (1994-98),
Action 2, covers co-operation with third countries, especially developing countries and thus
provides a means of enhancing scientific and technological co-operation with Asia. It would be
important to reinforce these activities in so far as scientific co-operation in advanced fields such
as information and communication technologies, industrial, and materials technologies and
biotechnology's are concerned. A separate approach which merits a broader coverage is the
establishment of European technology centres:

- The funding available for international RTD co-operation under the 2nd Activity of the 4th
Framework programme is relatively limited. Co-operative projects with Asia must,
moreover, concentrate on areas where the co-operation will be beneficial to Community
interests.

- This being so, there may be scope for looking to other sources of funding, including under
other policies of the Union, and other types of RTD co-operation. For example, it is
particularly important to foster contact between young researchers of Asia and the Union as
future leaders in the economic fields in their respective regions and therefore potential
multipliers in terms of improving understanding and enhancing mutual interests.

2. 2.6 Establishing European technology centres especially in key sectors where
Europe has a comparative advantage, e.g. _the_ EC-Skigapore Regional Institute for
Environmental Technology which acts as a window for European research and development and

**22**

**services (in a sector which has equal salience both in dynamic and in developing Asia). Such**

**windows for European R & D should be co-financed by the Union and the host country and may**

**be based on institutional twinning. They should maintain close contact with other business**

**facilitation activities such as the EBICs.**

2. 2.7 **Supporting investment.** The Union is lagging seriously behind other
investors in the Asian boom (providing only 10% of inward FDI to East and
Southeast Asia between 1986 and 1992). Many of the activities and instruments
falling under economic co-operation (listed under points IV.3.1 to 2.2.6 above)
are therefore designed to support and promote European direct investment in
Asia (one of the main tasks of the European Business Information Centres for
example is to provide information on market and investment conditions in the
Asian countries and regions in which they are established). In addition, the
Union needs to promote direct investments by

  - **Providing** **financial** **incentives** for joint ventures and other forms of business tieup (e.g. by using the European Community International Investment Partners scheme,
ECIP, or the European Investment Bank or by sponsoring market research).

  - **Supporting trade promotion.** There is no need to duplicate Member State
export efforts, but better co-ordination is needed to maintain an active presence on
Asian markets as called for by the White Paper on Employment.

**2.2.8** **Co-operating to alleviate poverty**
**Development Aid** has traditionally been an important tool of the EU's policy,
politically as well as economically and, at least for some countries, it will
continue to be so.

East Asia has had an extraordinary success in reducing poverty by adopting
outward oriented trade strategies, by importing foreign technologies and
welcoming foreign investments. The Union supports this approach in its
emphasis on economic co-operation.

**Success can be claimed in alleviating poverty by South Asian governments and donors,**
**including those of the European Union. But the problems are complex and, given the magnitude**
**of the challenge and the limited resources available, aid needs to be constantly fine-tuned to**
**ensure effective poverty alleviation. This will include emphasising support for** **policies** **which**
**enable the poor to** **participate** **in growth by addressing barriers denying them access to**
**opportunities, assets, credit or basic inputs, or by investing in the poor, for example by**
**supporting primary education, health care (especially reproductive health care), preservation of**
**the environment, supply of services to reduce urban slums and potable water supplies in poor**
**regions.**

Since the aid administered by the Commission only accounts for about 10% of
the Union's total aid to Asia, in order to achieve maximum impact, the
Commission and the Member States need to enhance their coordination. In
addition, in evaluating the impact of its aid, the Union needs to ensure that the
balance between poverty alleviation and economic co-operation fits the changing
conditions in Asia. Account will also have to be taken of the overall political
conditions under which the aid is delivered to die recipient country in order to
ensure maximum efficacity.

**23**

**2.2.9** **Enhanced** **co-operation in the field of** **the** **Environment**

Given the growing importance of international and economic relations in the field of the
environment, it is important for there to be effective co-operation with the countries of
the Asian region.

Within the resources available, the development of Community relations on the
environment with countries in Asia need to be reinforced. Strong relations already exist
with japan and those with China and Korea are expected to move to a more formal
footing in the medium term. The global nature of many environmental problems and the
severity of the problems in certain Asian countries, as well as the promises made by the
Community at Rio necessitate an environmental dialogue with third countries.

**2.2.10** **Development of market for agricultural produciton**

Despite increasing agricultural production, there will be an increasing demand for
imports of agricultural products, partly due to a change in diet. In the medium term
these countries therefore will demand more cereals and livestock products from the
world market. Therefore, there is a risk that import protection, for which Japan and
Korea are striking examples, could spread even more in the region, although the
commitments taken in the Uruguay Round will help to contain this kind of development.
The European Union has an interest to be present on these markets with its agricultural
products too, particularly processed ones.

V. **Conclusions**

The range of policies and instruments as set out in Parts II to IV above will be
applied in a modular form which means that a coherent range of activities can be
applied to different countries and regions in order to meet the interests of the
European Union and its Member States, as well as the interests of the partner
and recipient countries.

Individual components can be adjusted as countries evolve their economic
structure (see Annex I, Table 2). In other words, the Union and its Member
States should not seek to apply as many of the instruments as possible to as
many countries in Asia as possible. This could only result in spreading of limited
resources too thinly with a negative impact on both effectiveness and profile. It
will be necessary therefore to prioritise both in terms of countries and in terms of
sectors, and to apply different instruments to countries that are at different levels
of development. The new strategy requires a comprehensive approach covering
political, economic and cooperation aspects :

**24**

- The Union needs to accord Asia a higher priority and to deepen and extend its
dialogue with Asian countries and regional groupings. This dialogue should be
pursued both bilaterally and in the framework of multilateral organisations.

- The Union should, in particular, develop its political dialogue with those
Asian countries which are prepared and able to make a significant contribution
to the maintenance of peace and stability both within the region and globally.
Arms control and non proliferation are of particular importance. The human
rights issue form an integral part of the political dialogue.

- The Union should strengthen its relationship with regional and subregional
security fora. The ASEAN Regional Forum is of particular note in that it allows
for a wide-ranging dialogue on security concerns encompassing the greater part
of Pacific Asia.

- The Union needs to place greater emphasis on market opening, for trade in
goods and in services.;

- The Union needs to select priority sectors for economic co-operation which
reflect its own comparative advantage, e.g. banking, energy, environmental
technologies, transport equipment, telecommunications, etc.

- The Union needs to help integrate into the open, market-based world trading
system those Asian countries such as China, India, Vietnam or Pakistan which
are moving from state controls to market-oriented economies.

- Greater emphasis should be placed on pro-active economic cooperation. Top
priority for this type of co-operation should go to the newly emerging Asian
markets, largely, but not exclusively in East and Southeast Asia, namely South
Korea, China, Macao, Taiwan, Hong Kong, Indonesia, Malaysia, Pakistan, Philippines, Singapore, Thailand and India.

- The best experience of the Union and its Member States needs to be pooled in
poverty alleviation strategies to focus on the population of those countries with
major poverty problems, namely China, Mongolia, Cambodia, Laos, Vietnam,
India, Bangladesh, Bhutan and Nepal (and Afghanistan and Burma when political conditions permit).

_**^**_
_**u<>**_

**Index to Annexes**

**Annex I Asian Countries: Basic Economic Statistics**

**Table** **1 :** **GNP and Population** **25**
**Table** **2:** **Trade Structures** **26**

**Annex II Trade Flows in Asia**

**Table 1: Merchandise Imports of** **East,** **Southeast** **&** **South Asia** **27**
**Table** **2:** **Merchandise** **Exports of** **East,** **Southeast** **&** **South Asia** **28**
**Table** **3:** **Merchandise Balances of East, Southeast** **&** **South Asia** **29**

**Annex III The EU and Asia**

**Table 1: The EU's Agreements with the Countries of Asia** **30**
**Table** **2:** **The EU's Trade with the Countries** **of** **Asia** **31**

**Table** **3:** **The EU, Japanese and US ODA to Asian Countries** **32**

25

**Annex I**

**Table 1:** **Economic** **Profiles of** **the** **Countries of Asia, 1992**

_GNP($bn)_ _GNP_ _per_
_capi ta_

```
East Asia (minus Japan)

```

_Population_
_(millions)_

```
1,263

```

```
Korea 44 296 6,790

China 1,166 442 380

Taiwan 21 211 10,215
Hong Kong 89 15,380
Macau 0.5 t9,000
Mongolia tlOO
North Korea 23 23 tl,064
```

_**ll:*-&&Ktftm&t**_ **`Asia`** _**mm**_ _m_
```
ASEAN 325 382 1,175
 Brunei 0.3 t6 t21,150

 Indonesia 184 123 670

 Malaysia 19 52 2,790
 Philippines 64 50 770
 Singapore 44 15,750
 Thailand 58 107 1,840

Cambodia t2 t200

Laos 250

Vietnam 68 tl5 t220

Burma 44 tl88
```

**i i i v** **$c**ti*** _&#i&_ ;,| ***>i7&**
```
India' 884 271 310

Pakistan 119 50 410

Sri Lanka 17 10 540

Nepal 20 170
Bangladesh 113 25 220
Maldives 0.2 0.1 500

Bhutan 1.5 0.3 180
```

`Afghanistan` 22 t 2 . 4 t l 5 0
Source: _World Bank Atlas,_ _J994,_ Washington, 1994. _Note:_ Figures marked with f are for
1991 (Source: _Asian Development Outlook_ _1993;_ CRONOS estimates).

26

**Table 2: Trade Structures of Asian Countries**

The changing pattern of merchandise exports is a useful indicator of the economic
changes taking place in a country. The following table gives one view of how each
Asian country's exports fitted, or can be expected in the future to fit, one of 4 profiles:

I. Developing country (raw materials exports still predominant, but manufactured
goods other than machinery rising in importance);
II. Near Newly Industrialising Economy (Near NIE) (manufactured goods (typically
textiles & garments and electronics)* other than machinery, have become more
important than primary commodity exports, but machinery takes only a small share
of exports);
III. Newly Industrialising Economy (NIE) (machinery exports have overtaken primary
commodity exports; other manufactured goods exports are already declining in
importance);
IV. Developed, industrialised Economy (machinery exports, or knowledge intensive
exports, are predominant while exports of other manufactured goods or primary
commodities have sunk to relative insignificance).

**Trade Structures of Asian Countries**

**at Four Stages of Economic Development,** **1965-2000**

Korea (ROK) 1965 1990  - 2000

China 1965- 1990-2000

Chinese Taiwan 1965- 1990-2000

Hong Kong 1965-90-2000
Macao 1965- 1990 >2000

Mongolia 1965-90-2000
North Korea 1965-90- ->20(X)

**ASEAN**

Brunei 1965- 1990 >2000

Indonesia 1965-90-2000

Malaysia 1%5—>199() ->2000
Philippines 1965—> 1990-2000
Singapore 1965- 1990-2000
Thailand 1965—>1990 2000

Cambodia 1965-90-2000

Laos 1965-90-2000

Vietnam 1965-90- >2000

Burma 1965-90-2000

India 1965- ->1990  - 2000

Pakistan 1965- ->1990 >2000

Sri Lanka 1965-90-2000

Nepal 1965-90-2000
Bangladesh 1965-90-2000
Maldives

Bhutan 1965-90-2000

Afghanistan 1965-90-2000
Source: Basedon Nomura Sôgô Kenkyûjo, _Ajia_ _no hatten to risku,_ Tokyo, 1993.

###### II. 1 Merchandise imports of East, South-East and South Asia

**EAST ASIA** **(*)** **SOUTHEAST ASIA** **SOUTH ASIA**

Billion of ECU Billion of ECU Billion of *CU

82 83 84 85 82 83 84 85 86 87 **90** **91** **92**
82 83 84 85 86 87 90 91 92

**EAST ASIA** **(*)** **SOUTHEAST ASIA** **SOUTH ASIA**

Billion of **ECU** Billion of **ECU**

Billion of **ECU**

```
82 83 84 85 82 83 84 85 86 87 89 90 91 92

                                      V*.

```

```
82

```

_**i**_ _**•il**_ _**t^hmMt:--**_

```
   l*-'-f

83 84 85 86 87 89 90 91 92

```

```
(*) Japan Excluded

```

##### II.2 Merchandise exports of East, South-East and South Asia

**EAST ASIA** **(*)** **SOUTHEAST ASIA** **SOUTH ASIA**

**Billion of** **ECU** **BflftonofECU**

**Billion of** **ECU**

**82** **83** **84** **85** **86** **87**

**82** **83** **84** **85** **86** **87** **90** **81** **92** **82** **83** **84** **85** **86** **87** **90** **91** **92**

**EAST ASIA** **(*)** **SOUTHEAST ASIA** **SOUTH ASIA**

**Billion of** **ECU**

```
82 83 84 85 86 87 88 89 90 91 92

```

**(*) Japan Excluded**

```
  Binon of ECU
200

150 H

```

**Billion of** **ECU**

**82** **83** **84** **85** **86** **87** **89** **90** **91** **92** **8** **2** **8** **3** **8** **4** **8** **5** **8** **6** **87** **8 8 8 9 9 0** **9 1 9 2**

###### IL3 Merchandise balance of East, South-East and South Asia

**East Asia** **(*)** **Southeast Asia** **South Asia**

**Bien** **o!** **ECU** **BBonofECU** **BffionofECU**

**1** **i** **I**

**89** **90** **91** **92**

**_** **.** **.** **.** **(** **1** **.** **!** **.** **.** _**r**_
**K** **S** **3** **8** **4** **S** **S** **8** **6** **t** **7** **n** **«** **9** **0** **(** **i** **a** **2** **8S** **86** **87** **88** **»** **91** **92**

; ) Japan Excluded

**30**

Annex III

**Table** **1: The** **European Union's Co-operation** **and** **Other Agreements with**
**the** **Countries** **of** **Asia** **(and** **Date** **of** **Establishment** **of EU** **Delegations** **in** **Asian**

**Countries)**

_**Framework Trade**_

_**and/or Co-operation**_

_**Agreements;**_
_**Declarations**_ _**etc.**_

_**Sectoral Trade**_

_**Agreements**_

_**Date**_ _**of**_
_**Establishment**_

_**of**_ _**Delegation**_

Korea (ROK)

Korea (ROK) Textiles (87) 1989

China Trade (78); Trade and Textiles (89) 1988
Co-operation (84)

Taiwan

Hong Kong Textiles (86) 1993'
Macao 1993 Textiles (87)
Mongolia 1993
North Korea

Textiles (87)

Textiles (89) 1988

ASEAN 1980

Brunei

Indonesia Tapioca (82)
Textiles (87)

1988 **[** ]**

Malaysia Textiles (87)
Philippines Textiles (87) 1990
Singapore Textiles (87)
Thailand Tapioca (82) 1978
Textiles (87)

Cambodia

Laos

Vietnam Textiles (93)

Burma

India 1973/82/94 Sugar Cane (75)
Textiles (87)

1982

Pakistan 1986 Textiles (87) 1988
Sri Lanka 1975/1994 Textiles (87)
Coconut (75)
Nepal 1994-5
Bangladesh 1976 Textiles (87) 1989
Maldives

Bhutan

Afghanistan

- Office; - •Representation

31

**Table 2: The European Union's Trade with the Countries of Asia**

**(1992)**
Unit Million HCU

_**Total trade**_ _**Exports**_ _**Imports**_ _**m**_

_m*_

_**Balance**_

_ffimimfâffr'tfftiiïï,_
**East Asia (not** **incl.** **Japan)** **6 9, 7 6 6** **2 8, 2 9 5** **4 1, 4 7 1** **- 1 3, 1 7 6**
**Japan** 7 2, 0 1 8 2 0, 5 0 7 5 1, 5 1 1 - 3 1, 0 0 4

**Korea** 1 3, 6 6 2 6,232 7, 4 3 0 - 1,198

                                                   **China** 2 3, 6 2 9 6,848 1 6, 7 8 1 9, 9 3 3

**Taiwan** 1 6, 9 6 2 6,249 1 0, 7 1 3 4, 4 6 4
**Hong Kong** 1 4, 6 9 2 8,784 5,908 2, 8 7 6
**Macao** 557 53 504 451

**Mongolia** 42 21 21
**North Korea** 222 108 114 **6**

_"'A"4im"'Vi'"_
***4»** **J** [* * / * » ] _**2&im&**_ _**-"*&;%$$-?\**_
**ASEAN** 4 1, 6 9 3 19,282 2 2, 4 1 1 3, 1 2 9

**Brunei** 641 419 222 197

**Indonesia** 8,399 4, 0 5 3 4, 3 4 6 293
**Malaysia** 8, 0 4 1 3, 1 0 3 4, 9 3 8 1,835
**Philippines** 3, 0 5 1 1,443 1,608 165
**Singapore** 1 1, 9 9 9 6,351 5,648 703
**Thailand** 9,562 3, 9 1 3 5,649 - 1,736

**Cambodia** 45 27

**Laos** 31 25 19

**Vietnam** 620 301 319 18

**Burma** 84 51 33 18

_WÊÊÊM_ _^^siifsamm_

IÉS
India 1 0, 1 2 3 5, 2 4 5 4, 8 7 8 367

**Pakistan** 3,392 1,812 1,580 232

**Sri Lanka** 1,068 451 617 166
**Nepal** 203 47 156 109
**Bangladesh** 1,075 328 747 419
**Maldives** 34 15 19

**Bhutan** 25 24 23

**I Afghanistan** 80 44 36
**I&3&X I** **?«&*&*** **^** _**>**_ **4** **#»,***'** _**m**_
**USA** 1 6 0, 6 9 3 7 3, 9 1 7 8 6, 7 7 6 1 2, 8 5 9

                                                         
**Latin America** 4 4, 5 5 4 2 0, 0 4 8 2 4, 5 0 6 4, 4 5 8

**USA** 1 6 0, 6 9 3 7 3, 9 1 7 8 6, 7 7 6 1 2, 8 5 9

                                                         
**Latin America** 4 4, 5 5 4 2 0, 0 4 8 2 4, 5 0 6 4, 4 5 8

[ East **Europe** 5 4, 1 5 7 1 7, 5 3 8 3 6, 6 1 9 1 9, 0 8 1

**Source: Eurostat**

**32**

**Table** **3:** **The** **European** **Union, Japan and US ODA** **to the** **Developing**

**Countries of Asia**

**(1976-1991)**

_EU_ _member_

_states ODA_

_to_ _Asia_

_**«•.**_ **jrWWW-r 9**

2, 4 9 3 . 0

3 7 6 . 9

**8/080.3**

6, 6 5 0 . 5

4, 2 8 1 . 5

4 2 1 . 3

8 0 6 . 5

1 2 1 . 2

1, 0 2 0 . 0

1 1 1 . 4

9 7 . 2

5 2 8 . 4

6 9 2 . 8

**3fc8,$44.7**

7, 1 6 8 . 8

2, 2 3 5 . 0

1, 4 9 1 . 3

8 0 5 . 2

3, 8 2 1 . 5

_Japan_ _s ODA_
_to_ _Asia_

_6_ _t_ _017.3_

5, 3 9 4 . 6

6 8 2 . 7

19,50€.4

1 7, 2 7 1 . 7

7, 2 4 3 . 9

1, 8 4 5 . 6

4, 1 1 2 . 1

1 3 5 . 8

3, 9 3 4 . 3

4 . 2

1 3 1 . 6

1 3 1 . 5

1, 9 6 7 . 4

$,€5U5„7

2, 3 9 6 . 4

1, 8 9 8 . 9

1, 5 4 7 . 4

7 0 4 . 2

3, 1 2 4 . 4

_Total EU ODA_

_to_ _Asia_

_(Commission_
_plus_ _member_

_states)_

**3 /** **Q63n** **Q**

2, 6 8 3 . 7

3 7 7 . 9

**„a,624*£**

6, 9 7 0 . 9

4, 3 8 1 . 6

4 2 7 . 7

8 7 7 . 5

1 2 2 . 1

1 1 6 2 . 0

_US ODA_

_to_ _Asia_

0

65

3 j 8 7 o

3, 7 7 4

1, 2 1 2

10

2, 2 1 0

9

333

22~~

0

10

70

_&_ _t_ _%%2_

1, 0 8 4

2, 0 4 3

840

235

2, 2 2 8

_t%miAëi\_

China

Korea

H, Smithed Asia
ASEAN

Indonesia

Malaysia
Philippines
Singapore
Thailand

Cambodia

Laos

Vietnam

Burma
... $&jMQt.&tàt.. .,

India

Pakistan

Sri Lanka

Nepal
Bangladesh
Afghanistan
_:_ _.çmww*Âi& ..._

_EU ODA_

_(administered_

_by_ _the_
_Commission)_

    - • $ *     - K _4_ _'_

1 9 0 . 7

1.0

_**%44*€**_

3 2 0 . 4

1 0 0 . 1

6 . 4 :

7 1 . 0

0 . 9

14 2 . 0

6 5 . 3

1 4 . 5

1 1 4 . 2

3 0 . 2

**:** **2,307*1**

1, 2 1 7 . 3

1 7 7 . 7

1 4 9 . 1

3 3 . 5

7 0 7 . 7

17 6 . 7

1 1 1 . 7

6 4 2 . 6

7 2 3 . 0

**: l ?** **f** **9 8 l, 8**

8, 3 8 6 . 1

2, 4 1 2 . 7

1, 6 4 0 . 4

8 3 8 . 7

4, 5 2 9 . 2

1 4 4 . 7

29,638.3

2 4 . 4

! 35*.27S*4

1 2 2 . 9 2 1 . 8 1 4 4 . 7 2 4 . 4 252

**£6,994»9** **3, 0 4 3 . 4** 29,638.3 ! 35*.27S*4 T0,623~"

Unit = $ million. Source: OECD

1 2 2 . 9

**£6,994»9**

2 1 . 8

**3, 0 4 3 . 4**

_**Z3>**_

**ISSN** **0254-1475**

**COM(94)314final**

#### **DOCUMENTS**

###### **EN 11**

**Catalogue number** **: CB-CO-94-340-EN-C**

**ISBN 92-77-71823-4**

**Office for Official Publications** **of** **the** **European Communities**

**Lr2985 Luxembourg**