European and Asian Integration: Achievements and Challenges

Opening Remarks by Haruhiko Kuroda
President
Asian Development Bank

At the European Commission

10 March 2008
Brussels, Belgium

I. Introduction

Distinguished guests, ladies and gentlemen:

I am honored to be here today to open this important conference on European and Asian Integration: Achievements and Challenges, jointly organized by the European Commission and the Asian Development Bank.

Asia’s export-orientation continues to be the foundation of our economic success, giving rise to an obvious and quite natural gravitation toward regionalism. In fact, we expect economic cooperation and integration to be a key pillar of Asia’s future development strategy as we move deeper into the 21st century.

China and India’s increased openness, their vast domestic markets and rapidly expanding productive capacity will continue as major drivers of the region’s growth. Coupled with cooperative efforts of ASEAN, the expanded ASEAN+3 and the relatively new East Asian Summit process, we have seen intraregional trade and cross-border investment expand rapidly. In the decade since the Asian financial crisis, there has been greater cooperation in linking financial systems and calls from several quarters for regional exchange rate stability. These palpable moves toward integration have placed regionalism-and regional initiatives-high on the list of national priorities and, in some cases, mainstreamed in national agendas.

Market-led regional economic integration in Asia has deepened as production networks have grown. And it will continue to do so as Asian governments increasingly nurture the trend. Before I set the stage for today’s discussions on financial stability, macroeconomic interdependence and Asian regionalism in general, let me briefly touch upon the evolving relationship between our two regions, Asia’s economic prognosis, and the risks we see in the immediate months ahead.

II. Europe and Asia: Growing Ever Closer

Although our discussions will be primarily about the process of integration within our respective regions, in many ways Europe and Asia are also closer today than ever before. And it is not simply due to reduced structural distances caused by high-speed infrastructure, financial mobility and globalization. There is a very strong, and growing, cultural element as well.

As our societies meld in tandem with our products and services, contact between cultures expands. Tourism has increased dramatically over the past decade. Twenty million Europeans visited Asia in 2005, 70% more than in 1995. And two million more Asians visited Europe in 2005 than a decade earlier, a 42% increase. While more Europeans practice martial arts, Asian football has become world class. The arts, both classical and popular, whether from Cannes or Bollywood, cross our regions’ borders more fluidly. And of course, food is the great equalizer: as Chinese restaurants spread out across Europe, it is not unusual to find Asians savoring European dishes. Even the European “Spaghetti Bowl” of free trade agreements has been seamlessly translated into an Asian “Noodle Bowl” of FTAs.

As Asia continues to diversify its export markets, our economic contact intensifies. Total trade between Asia and Europe nearly doubled between 2000 and 2006-to almost $1 trillion, with Asian exports to Europe growing at nearly the same pace as European exports to Asia. Asian portfolio investments to Europe grew 90% from 2001 to 2006. And European assets invested in Asia more than tripled over the same period-both to more than $1 trillion. Given the current global climate, it is unlikely these trends will change.

Our two regions have much to share. We both follow an incremental step-by-step, pragmatic approach to integration. And while Asia lacks the grand-plan for regionalism as you have in Europe, the European Commission and ADB can effectively work together and use our distinctive expertise to add value to economic cooperation and regional integration more generally.

That’s why we were so pleased to note the great interest shown by several European scholars in preparing our study on the emergence of Asian regionalism. The book-to be launched at the ADB Annual Meeting in Madrid in early May-includes several important contributions from European colleagues. Our study team welcomed the excellent comments it received when it visited here last September. Today we will discuss some of the results of that study, in particular on financial market integration and macroeconomic interdependence in the context of the current global economic situation.