The Geo-Trade Blog endorses and reproduces in full an article by Javier
Solana, published on 25 Jun 2013 on World Politics
Review and on:
http://javiersolana.esadeblogs.com. Javier
Solana was the EU high representative for foreign and
security policy, NATO secretary-general and foreign minister of
Spain. He is currently president of the ESADEgeo Center for Global
Economy and Geopolitics and distinguished fellow at the Brookings
Institution.
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| Eastern Hemisphere: Europe & Asia |
One
of the key differences between Western and Asian cultures is their
view of time: Whereas history is linear and consequential as seen
from the West, Chinese and other Asian cultures perceive time as
being cyclical. In the latter view, the emerging Asian century is
simply a natural phase within this recurring flow. As renowned
economist Angus Maddison showed, China and India were the world’s
largest economies for centuries. Only upon the dawn of the Industrial
Revolution did Western Europe and the “Western
offshoots”—Maddison’s term for the U.S., Australia, New Zealand
and Canada—catch up and overtake the Asian giants. The weight of
the continents effectively changed as the technological advances of
the Industrial Revolution shrank the relative effect of population
size with respect to productivity and output.
Today, we are
witnessing another such tipping of the scales. Asia is returning to
its place in history, “re-emerging,” as it were, with China
currently holding second place in the ranking of world economies and
poised to take the lead in the near future. The wealth of
opportunities and challenges surrounding these changes can only be
managed through strategic thinking and cooperation on the part of all
parties involved.
After nearly two centuries at the apex of
the world economy, Europe, the "old” continent, together with
its American counterparts, must now adapt to new realities. Though
the United States’ role in Asia has traditionally been higher
profile, particularly in security matters, it is undeniable that
Europe is already looking east. Trade and investment links between
the European Union and Asia are strong and dynamic: Speaking in
regional terms, Asia has surpassed NAFTA to become the EU's main
trading partner, constituting a third of total trade. More than 26
percent of EU outward investment is currently destined for Asia,
while inward investment is also on the rise. China on its own is the
EU’s second-biggest trading partner, after the United States.
In
a global context of strong interdependence and flux, Europe must work
from its strengths. It must draw on its history in order to play a
constructive and active role in the transition toward the Asian
century. Just last year, the European Union, the key piece in
Europe’s institutional architecture, was awarded the Nobel Peace
Prize for its accumulated history of reconciliation and its
contributions to peace. The EU and its predecessor organizations were
indeed the fulcrum that turned a continent of war into a continent of
peace and stability: What started as a commercial alliance developed
into the most sophisticated regional institution on the planet. The
EU and its member states are now facing the most acute difficulties
in the union’s existence—but the construction’s historical role
in achieving European stability is indubitable.
In
contrast, Asia, in its current configuration, is still an unstable
continent. Reconciliation was never achieved in a number of painful
conflicts between its countries; borders remain contested, and
disputes regularly flare up. These unhealed wounds are supremely
delicate, particularly in the absence of a strong regional
institutional network capable of containing sparks of conflict.
Especially critical is the unbreakable nexus between security and
trade, which looms large for Asia’s governments, dependent as they
are on the endurance of steady, intelligent economic growth in their
task of providing their young and dynamic populations with the means
to shape their own lives.
A Vertiginous Ascent
The
defining characteristic of Asia’s present rise has been its
unprecedented, sustained growth rates. After the Industrial
Revolution, it took Britain 150 years to double its economic output
per capita. While the same doubling took the United States 50 years,
China and India have recently achieved this feat in as little as 12
and 16 years, respectively. What is more, the Asian acceleration is
affecting populations on an entirely different scale than in the
past: The two Asian giants alone have taken no fewer than 2.5 billion
people with them in their take-off, over a third of the earth’s
population.
This growth explosion has granted a large portion
of the global population positive freedoms that were formerly
unattainable. China alone managed to lift 680 million people out of
extreme poverty between 1981 and 2010, and the proportion of East
Asians living on $1.25 per day plunged from 77.2 percent to 12.5
percent over the same three decades. However, there is still a long
path ahead. According to the World Bank’s poverty indicators, for
example, almost 70 percent of India’s 1.2 billion inhabitants still
subsist on less than $2 per day.
Important challenges follow
in the wake of these momentous changes. Countries will have to tackle
domestic issues such as urbanization and the related issues of
pollution and congestion. Resource stress is another cross-border
problem that will not dissipate on its own. As hundreds of millions
are catapulted into the global middle class, their demands grow—but
the resources and energy required to meet these demands are in short
supply.
The consumption shift is already taking on
geo-economic and geopolitical expressions in the short term. They
have recently hit front pages in the West: As America’s Smithfield
Foods, the world’s largest pork producer, was targeted by a Chinese
meat processing firm in an acquisition effort, the contours of the
largest Chinese takeover of a U.S. corporation to date came into
view. The long-term consequences, however—which require a type of
policymaking that is perpetually subject to the effects of time
discounting—are no less daunting. It is unquestionable that the
negative externalities of the Asian demand hike and of the overall
current brand of growth, such as rising greenhouse gas emissions and
their contribution to climate change, will be felt globally.
Injecting Energy Into an Unstable Continent
As Asia
heats up through the energy of its economy, its countries become more
dynamic, multiplying both opportunities and risks. It is a well-known
principle of physics that as energy is applied to moving gas
molecules, collisions between them become both more frequent and more
powerful. Since Asia lacks a strong network to soften, mitigate and
contain potential friction, risk levels surge with the growing
kinetic energy of its states.
The Asian paradox is thus as
follows: Integration among Asian nations is deep in economic terms,
but underlying security and political tensions are also deep and even
growing, all without an undergirding set of norms, rules and
institutions to manage the countervailing pressures. Asia is, in
effect, an unfinished continent, where historical wounds did not
fully heal and ragged scars remain where reconciliation was never
achieved. Historical mistrust magnifies anxieties stemming from the
asymmetric rise of certain countries within the continent.
Worrying
signs of this phenomenon abound: Nationalism is on the rise and is
repeatedly put on provocative display. Territorial disputes over
unsettled borders, whether in barren stretches of no man’s land in
the Himalayas or small islands in the South and East China Seas,
flare up recurrently. Meanwhile, as military spending continues to
decline in Europe and North America, it is on the rise in Asia,
growing at 3.3 percent last year, according to SIPRI. Vietnam, in
particular, increased its defense spending significantly in the face
of the increasing naval assertiveness of its large neighbor. The
second-largest military spender in the world, China, has increased
its expenditure by 175 percent in real terms over the past decade,
the largest increase for the period among the top 15 spenders in the
world.
In our globalized and interdependent world, however,
trade and security are inseparable. Take the ongoing spat between
Tokyo and Beijing over the Senkaku/Diaoyu Islands, for example, in
which a territorial dispute saw Japan's auto exports to China plummet
80 percent in just three months last year. The security-economy nexus
is one Europe understands all too well: It is indeed the foundation
on which the European Union was built. It also forms a solid bedrock
for European engagement with Asia: By way of its own experience,
Europe is capable of contributing to the gradual construction of
rules-based, cooperative security in Asia. The benefits of such
cooperation, as well as further regional integration, would extend
far beyond continental borders.
A Smart Pivot
Since
World War II, Asia’s security stability has largely been based on
U.S. guarantees. The United States has acted as an outside
underwriter and balancer in the continent just across the Pacific—but
today’s shifts in economic weight and the assertiveness that come
with them are changing not just the perspectives, but also the
stakes. In this context, the United States has commenced a pivot,
more delicately termed “rebalancing,” toward Asia. Although
President Barack Obama’s plan to focus more on Asia is clearly
being hampered by dramatic events in the Middle East that continually
clamor for his attention, America remains committed to its strategic
reorientation.
In one of her final speeches as secretary of
state, Hillary Clinton insisted that the U.S. wanted “Europe to
engage more in Asia along with us: to see the continent not only as a
market, but as a focus of common strategic engagement.” Following
the tides of history, trade is the scout that moves quickly into new
territories, generally with further engagement in tow. The EU’s
trade relations with Asia already flow strong, and the ongoing
bilateral free trade agreement (FTA) negotiations will serve to
accelerate this critical stream. Nevertheless, European engagement
does not stop at trade.
Herein lies the key to the EU’s
reorientation toward Asia, which may at first sight appear illogical:
The European Union is not a Pacific power and has never been seen as
a great power in Asia. This, precisely and paradoxically, is part of
its strength. Europe is engaged in Asia but does not represent a
threat. The relations between the two continents are therefore not
restricted to the sticky, black-or-white choice between competition
and cooperation, but can and have advanced beyond such calculations.
In a continent hardwired to focus on hard security and national
interests, some might yet question Europe’s relevance. But Europe’s
niche lies in outside-the-box thinking, in the kind of smart security
that only diplomacy and institutionalized cooperation can bring.
Along with its extensive experience in institutional architecture,
the old continent has a unique toolbox on offer.
Working From
Experience: Regional Integration
Europe’s history has proved
that regional integration is a powerful path to a more peaceful
coexistence, creating fertile ground for trade to prosper. Clearly,
it is also a fruitful area for development within Asia, whose
regional network will require strengthening to absorb the shocks that
can arise within the energetic continent. In Southeast Asia, one such
institution is already firmly in place: the Association of Southeast
Asian Nations (ASEAN), which is now almost 50 years old. ASEAN’s
institutional architecture bears the closest resemblance to the EU’s
structure of any regional organization in the world, making it a
natural and like-minded partner for the union.
As ASEAN
continues to evolve, striving toward its goal of three-pillared
integration—political-military, economic and socio-cultural—by
2015, EU support to the project will be invaluable. Recent
experiences have reminded us, however, that experiments in regional
integration are anything but effortless. These structural building
exercises are novel in world history, and as in any innovation
process, each failure represents a lesson learned and a way forward.
ASEAN, for one, operates in a particularly challenging environment,
where many of its interlocutors prefer traditional bilateralism over
multilateralism, to a degree that can be damaging to the regional
integration process.
From its side, the EU is working through
a range of difficult issues brought front and center by the storm
winds of the global economic crisis. These struggles are likely to
have a twofold effect on the region-to-region association. On one
hand, some of the challenges to regional integration have been
exposed. As is the way of European integration, however, these
hurdles too will ultimately be overcome, doubtless providing fruitful
lessons for future integration blueprints—in Europe and
elsewhere.
On the other hand, Europe’s dire economic
situation highlights and enhances the need to harness growth. One of
the main channels of opportunity is the emerging markets of Asia.
Here too, the ASEAN-EU link, which represents a combined market of
more than a billion people, is paramount. The bloc of 10 ASEAN member
states is the EU's third-largest trading partner outside Europe, with
more than $270 billion in goods and services traded in 2011. For
ASEAN, the EU is the second-largest trading partner after China and
the largest provider of investment by far, averaging some $12 billion
annually from 2000 to 2009.
Reinforced relations with ASEAN
will also prove critical if the EU is to continue on its path to
becoming an official participant in the East Asia Summit. An
encouraging sign in the relationship upgrade came last year, when the
European Union was finally legally able to sign ASEAN’s Treaty of
Amity and Cooperation, and an additional stumbling block was removed
from the equation when Myanmar recently shifted to political reforms
and opening.
The Security Niche
Beyond the two-way
institutional bonds, Europe brings further concrete experience to the
table in Eurasian relations. Not too long ago, Europe was a war-torn
continent crisscrossed with deep wounds and trenches. It has since
then been uniquely successful in reconciling the once-warring
parties, making it well-placed to share its conflict resolution
experiences. This is one aspect of a second axis to Europe’s smart
pivot, which builds on instrumental cooperation in such
nontraditional security areas as maritime security, humanitarian
assistance, disaster prevention and response, and peacekeeping.
The
EU’s first-ever European Security and Defense Policy (ESDP) mission
in Asia is a concrete demonstration of Europe’s contribution to
strategic stability in Asia. It was Jakarta that formally invited the
EU to lead a monitoring mission in Aceh after signing the Helsinki
Memorandum of Understanding with the separatist Free Aceh Movement
(GAM) in 2005. In cooperation with five ASEAN countries—Thailand,
Malaysia, Brunei, the Philippines and Singapore—as well as with
Norway and Switzerland, the EU’s Aceh Monitoring Mission monitored
the implementation of various aspects of the peace agreement,
including disarmament, demobilization and reintegration of GAM
fighters and the implementation of the legislative changes in the
MOU. While Asia’s circumstances are undeniably very different from
Europe’s, the “old” continent’s expertise has already shown
its value in the East.
There are many other concrete security
areas that connect even more directly to trade. The South China Sea,
for example, sees the passage of more than half of the world’s
commercial shipping. Asia’s seas and straits are therefore
extremely sensitive. One concrete danger, as recognized by Singapore,
Malaysia, Indonesia and Thailand in their Malacca Strait Patrol
initiative, is piracy. In the adjacent Indian Ocean, the EU has been
implementing successful counterpiracy measures since 2008. The
lessons from Operation Atalanta are already bearing fruit, leading to
joint military operations between the EU and its strategic partner
India in the Indian Ocean.
Increasing Flow Rates: Trade
Liberalisation
Today’s global crisis has provided
irrefutable proof that the link between economic growth and stability
is bidirectional: Both for Europe’s advanced economies with their
corresponding demographics and for Asia’s extremely young,
burgeoning populations, growth is vital. Despite its present
difficulties, Europe continues to hold great opportunity as the
world’s largest economy, with half a billion consumers in a $16.7
trillion market. Asia is the European Union’s largest trading
partner, accounting for 42.5 percent of total trade in 2011. South
and East Asia’s exports to the EU may have fallen by 7.2 percent
last year, but trade ties remain robust, and the incredible economic
potential for both parties is obvious. It is critical to fully grasp
that potential, by stepping up trade and investment initiatives and
continuing ongoing trade liberalization.
It was Asia’s
opening to international trade, first implemented by the Asian tigers
and later advanced by China, that propelled Asia forward in its cycle
of re-emergence. This opening has continued in the form of a
three-dimensional proliferation of trade liberalization agreements:
From intraregional agreements whose number—counting both
established and developing agreements—has quintupled over the past
12 years, to bilateral agreements with non-Asian nations and
larger-scale projects such as the Trans-Pacific Partnership.
Last
year’s EU-South Korea FTA, which was the first bilateral EU-Asian
FTA to enter into force, was the first of a new generation of free
trade agreements. The deal is comprehensive in scope, rapid in
implementation and high in ambition: 98.7 percent of EU-Korean
commerce is set to be tariff-free after five years. With the
EU-Singapore FTA scheduled to enter into force this year,
negotiations with Malaysia, India and Vietnam ongoing, and formal
negotiations recently commenced with Japan and Thailand, the EU is
providing an unequivocal signal of its commitment to free trade and
its openness to business with exterior markets. This momentum must
continue and be fit securely into a strong, long-term EU strategy in
order to harness the economic growth that is so critical to all
sides.
The Global Dimension: Shared Interests
Throughout
history, the world’s economic heavyweights have carried
corresponding and sometimes oversized shares of global political and
strategic power. Great powers’ influence works most efficiently
when it is enshrined within globally accepted frameworks and
channels. Unilateral actions, by actors large and small, can provoke
dangerous effects that carry with them the risk of collateral damage.
On the other hand, the legitimacy and effectiveness of the world’s
global governance structures depend on constant evolution to suit the
shape of their participants. Only continuous development can ensure
that the world’s stabilizing systems do not fall into disuse and
irrelevance; this is another challenge the international community
urgently needs to face.
Given China’s growth rates and the
size of the population it is bringing along with it on its rise,
Europe clearly would like to see a more engaged and constructive role
for China in global governance issues. Moreover, Europe is an
excellent partner for Beijing, which feels more comfortable on the
global front in a G-3 constellation with the Europeans than alone
with the United States. In a possible G-2 relationship with the U.S.,
the hegemon that shaped the current international system, the forces
of competition presently prevail over the possible benefits of
cooperation. This international panorama sets an optimal scene for
the fourth aspect of Euro-Asian engagement, the global
dimension.
One of Europe’s unique advantages is its
experience in bringing together diverse coalitions of parties to get
things done. This instrumental diplomacy and the international
legitimacy it brings could suit China well. By identifying key areas
of alignment on the global front, China and Europe could
intelligently combine their complementary forces to move affairs
along swiftly, sending constructive international signals. The seven
local emissions-trading schemes poised to launch in China, which drew
lessons from the EU’s pioneering initiative, in addition to reports
of possible moves toward a Chinese carbon cap in 2016, make climate
change an excellent starting point for Sino-European strategic
cooperation on the global stage. Such targeted alliances, with their
high impact factors, would improve more than just the meteorological
climate.
Asian and European interests may also converge in the
Middle East. The region is as combustible as ever, but now there are
strong signals of circumstantial change. While the U.S. is attempting
to shift its focus to the East in light of both domestic energy
developments and global economic shifts, Asia is growing ever more
dependent on the Middle East for its growing energy needs. According
to International Energy Agency forecasts, 90 percent of Middle
Eastern oil exports will be destined for Asia by 2035. This kind of
dependence can turn toxic without a degree of strategic engagement.
With its international focus and presence, Europe, the Middle East’s
direct neighbor, is a natural and instrumental partner to Asia.
The
Way Ahead: Resolutely Pivoting Forward
As the world’s trade
flows consolidate their new directions, political and strategic power
must naturally follow. The final destination of these flows, however,
is for now an unstable place. As energy pools in Asia, its networks
are tested and its unhealed wounds strained. What Asia needs is
strategic stability, the kind Europe has achieved through
cutting-edge design projects of regional integration unique to this
world. This is at the heart of the EU’s smart pivot East, a pivot
that commenced with trade but must be sustained and redirected based
on strong ingredients of the “old” continent’s
history.
Present-day events show with increasing intensity
that Europe cannot navel-gaze as the world transforms. It badly needs
the growth that Asian markets can provide. It is critical, however,
that European nations refrain from building familiar roadblocks on
this route to growth. A renationalisation of foreign policy toward
the world’s most vibrant actor is understandably tempting, but it
will ultimately damage both national and EU interests.
With
dynamics unmarred by the disturbances of great power struggles, the
EU is well-placed to engage with Asia. The cooperative dynamics
described here, which target concrete areas of synergy and
instrumental collaborations, both intercontinental and global, stand
to bring both continents great returns.
