EU to challenge Asian partners over barriers

THE European Union will use the conclusions of the first Asia Europe summit to challenge its Asian partners to "put their money…

THE European Union will use the conclusions of the first Asia Europe summit to challenge its Asian partners to "put their money where their mouths are", with firm commitments to binding rules on investment and the opening of their telecommunications markets.

"We want to see some of the rhetoric turned into practice," a senior European Commission source said after the summit had issued a call for both sides to work to remove barriers to trade and achieve a dramatic improvement in investment flows.

The confident tone reflected a strong belief in Brussels that the EU has not been given sufficient credit for its own market opening efforts and that it is capable of matching any proposals for reciprocal liberalisation that the Asian countries are likely to make.

At the insistence of the Asian participants, the weekend summit called for both sides to commit themselves to "open regionalism" - a catchphrase that embodies the principle that the advantages of a trade pact between one group of countries should be extended to outsiders.

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In the context of EU Asia relations, open regionalism has been seen as a challenge to the EU to match the ties Asia is forging with North America through the Asia Pacific Economic Co-operation forum, whose members are committed to creating a free trade zone over the next 15-25 years.

Both Japanese Prime Minister Mr Ryutaro Hashimoto and Thai Prime Minister Mr Banharn Silpa archa made comments to that effect during the summit, fully aware that the adoption of a goal of free trade with Asia is a political non starter in Europe.

But EU officials complained that the Asians' rhetorical emphasis on open regionalism was at odds with an unwillingness to adopt a step by step approach to liberalisation in the short term.

For the objective of further liberalisation in EU Asia trade to be realised, the EU regards a multilateral deal on investment rules as crucial. "European businesses will not invest in Asia without the assurance of a firm basis for their investment," an official said.

But the Bangkok conference, despite the stress on the need for greater investment, did little to narrow differences on the issue.

Countries like Indonesia restated their reluctance to be tied to rules which would give foreign investors equal access to local businesses.

Ownership restrictions, which would be outlawed if the Asian countries adopted the investment code currently being developed in the Organisation for Economic Cooperation and Development, are also seen by some as the only guarantee that technology and expertise are transferred in business contacts between the first and the developing world.

The Asians' unwillingness to make firm commitments on investment was mirrored by a reluctance to bow to EU pressure to improve their offers on opening up telecommunications markets.