Provisional Summary of the
Brainstorming Session on Economics

March 11, 1997

The chairperson opened the session by introducing himself and asked participants to introduce themselves as they gave their comments in order to save time. He noted that there were two Chairs present from economy-related workshops and suggested starting with a summary of these. Beginning with his own summary, he observed that Mr. Yoshitomi had given a very useful presentation on globalism versus regionalism, using globalism in the context of multilateralism. Mr. Yoshitomi referred to the proliferation of regional trading arrangements, and explored the differences between customs unions and free trade areas. The paper also looked at the APEC liberalization process, outlining the APEC concepts of open regionalism and collective unilateralism in this regard, particularly the function of peer pressure. The chairperson noted that participants had raised some doubts about the efficacy of this non-binding kind of approach. The workshop had reached the conclusion that regional trading arrangements were not necessarily contradictory or harmful to the multilateral system, nor necessarily compatible, and that such arrangements therefore needed to be looked at on a case-by-case nature. Today's workshop discussion turned from the creation of regional arrangements to trade and investment, with no clear conclusion yet to emerge. In regard to trade and competition, the Europeans favored an anti-trust approach where the Asians preferred to emphasize the linkage between anti-dumping and anti-trust. Another topic raised was LLDCs and how to prevent these from becoming marginalized. In regard to China's accession to the WTO, all participants were enthusiastic about having China as a new member in order to increase the universality of the WTO. Trade and labor issues were also discussed intensively, and will be pursued again at the next session.

The chairperson of Workshop IV noted that one topic of discussion had been investment, and particularly the greater control of the investing country compared to that of the host. The role of the private sector in economic development was discussed, starting with the role of the government, which was something on which participants' views differed. Political and cultural dignity issues were touched upon as a potential obstacles to economic development. Competition, finance, technology transfer and human resource levels were also discussed.

An Asian participant added that education had also been an important theme, particularly the export of education from Asia to Europe. A European participant asked whether there had been any discussion on the environment, and was told that it had been covered in Workshop IV and could also be covered in the chairperson's workshop. A member of the multimedia workshop noted that there had been discussion on the impact of technology on culture, the over-dependence on the US of Internet traffic and content and the uneven regional diffusion of information technology.

The chairperson opened the floor for comments. An Asian participant noted that there was no need to stick to the subjects of the workshops. He referred to competitiveness in particular, noting his interest in how the EU would respond to this issue, as on the one hand Europeans enjoy an extremely high quality of life, while on the other hand European countries also face stiff competition from both Asia and the United States. He felt it could be difficult to resolve these two aspects, but was interested in how the Europeans saw this. Turning to EU investment in Asia, he noted that Europe was lagging well behind aggressive US and Japanese efforts, generally choosing trade over investment, and felt that this could be a key to improving Asia-Europe economic linkage.

An Asian participant mentioned that the above issues were closely related to the European rule-based world, which included GATT and the EC, where the Asians often felt they were being forced to adapt to the West rather than take their own approach. He wondered whether China in particular, therefore, might find it difficult to conform to the existing world order. Another Asian participant noted the speed of technological development, with the United States in particular streaking ahead and an according danger that other countries would be left behind.

An Asian participant asked how governments could foster private sector initiative and cooperation, which was highly effective in terms of mutual benefit. He also wondered if there was any way to build a stronger public-private interface within the ASEM structure so that private sector recommendations and initiatives could actually be taken up at ministerial and leaders' meetings.

Referring back to the trade relationship between the EU and East Asia, a European participant noted that this was becoming increasingly important. There were two strong misperceptions in Europe, firstly that there had been a decline in trade between Europe and East Asia. The other misperception was that the EU was an open trading bloc, whereas it was in fact still very much a trade fortress, an issue he hoped to see addressed. The chairperson noted that East Asia was now the largest trading partner of both the US and Japan.

An Asian participant asked why the ratio between European trade and investment was so unbalanced, and whether this would not eventually disadvantage the Europeans in Asia. A European participant responded that there had been an increase in both trade and investment between Asia and Europe, but that in terms of stock the US-EU relationship was obviously still much stronger; however, he felt that in flow terms, the EU was moving in the right direction. He noted that the concept of Fortress Europe was now seldom heard, with the EU choosing to become more open as this was in its own interests. Another European participant said that the EU could be seen as becoming much more open, but there was still a lot of room for improvement, with very high duties still levied against Asian countries, for example. GSP was also not only an exception to GATT rules on reciprocity, but was causing a lot of Asian nations to withdraw from GSP. In regard to investment he agreed that while stock levels were low, flow levels were increasing steadily.

A European participant commented that Asian countries were at very different stages of economic development, creating unique investment situations in each, some of which were very difficult for European companies to deal with. Companies did not like the idea of not being able to control their investment after five to ten years, and were turning instead to countries which did not place these kind of restrictions on investment. He further noted that US and Japanese companies which had been in Asia longer enjoyed certain privileges which European newcomers did not.

An Asian participant responded that despite the lack of transparency, the Japanese, the Americans and even the East Asians were still investing in Asia, and that therefore the problem could be more in the eyes of the Europeans. A European participant replied that Japanese and US investors were perhaps better at getting around barriers, but European investors found these daunting. Another European participant suggested that the cultural uniformity in Europe made that environment more attractive to European investors than the more unknown Asian markets. An Asian participant commented that Europe had centuries of experience in Asia. A European participant suggested that the United States was much more aggressive in its approach to business in Asia and had extensively developed its diplomatic relationships there, something which Europe had yet to really work on. Another European participant wondered why in Asia-Europe dialogue Europe always ended up being accused as to why it did not have a greater presence in Asia. She noted that European companies were steadily moving into Asia and would have a far more significant presence there in five or ten years. She also felt that the image of the luxurious European lifestyle was a lingering misperception which did not reflect the European reality today. As for investment, investors were looking for a certain degree of predictability, which is something which Asian governments could address by, for example, increasing transparency and improving their investment regimes in areas such as ownership and intellectual property rights. Regulatory frameworks needed to be simplified to make it easier to invest, cutting down, for example, on the number of ministries which had to be dealt with in order to set up an operation. If Asian countries, and particularly Japan, were seriously interested in European investment, these were issues that needed to be looked at. Convergence was therefore important between the interests of consumers, government and the private sector. She felt it would also be more valuable to concentrate on the larger picture.

An Asian participant wondered why, however, Asian countries were expected to go so far to accommodate European investors when US and Japanese investors were going ahead anyway. The European participant explained that for those Europeans based in Asia, it was necessary to find ways to persuade their head offices in Europe, which were not very well-informed about Asia, that Asia was a worthwhile market, which necessitated translation into values which these head offices could understand. She therefore felt that both parties needed to come toward each other rather than expecting the other to do all the work.

A European participant asked whether discussion could focus more on convergence, a common approach between Asians and Europeans, which was something which had been referred to earlier in the context of closer business links. He offered to explain a little about the Trans-Atlantic Business Dialogue as a model which could be applied to some extent in the ASEM structure. The first such dialogue had been held in Seville in November 1995 between top business leaders from both sides of the Atlantic, producing a report giving recommendations on how to increase the two-way flow of trade and investment. Fifteen issue groups were subsequently established, with the results of their discussion reported back to an annual summit meeting. A second meeting was held last year, producing new recommendations, with a follow-up on these to see which had and had not been adopted and why. The European participant noted that a shortcoming of the dialogue was, however, that participants came in a private capacity, not necessarily therefore representing the view of the entire sector concerned. The chairperson added that the dialogue was doing useful work on the application of domestic laws and the way in which this could be harmful to business.

Returning to an earlier question, an Asian participant remarked that it could be useful to have the results of work in other work made available, such as that in the ASEM Business Forum and the Business Meeting. There was also a danger of forum fatigue however, with the over-proliferation of fora and duplication of dialogue. One area where more information was needed, however, was on how to do business in Asia, something which many European companies still felt very much in the dark about. He mentioned the executive exchange program which had been set up as very useful in this regard, as were the various language programs which were being set up. Companies could also be brought together to bridge this information gap, and there were in fact a couple of projects underway between ASEAN and the EU, but this was an area which could be further developed.

The chairperson referred to the EU market access database which was being set up for the use of European companies and wondered if something similar could be set up between Asia and Europe, allowing a two-way flow of information at a grass-roots level.

An Asian participant, going back to the idea of Europe trying to impose its values on Asia, reiterated that this was unfair as systems were already in place and prosperity to a certain extent attested to their effectiveness. Over the last decade, however, US and European eyes had turned to Japan to learn from Japanese systems which were being perceived as successful. Asian countries therefore had to work to produce systems which were equally worthy of attention. At the same time, if systems were in fact worthy and the fault was on the European side, sooner or later the Europeans would work that out. Asia therefore needed to go a certain way to adjust itself to Europe, to play it the European way at least initially, and would then perhaps find Europe coming to meet it.

An Asian participant outlined the topics for discussion at the upcoming ASEM Business Forum, which would be attended by members of the private sector to brainstorm on practical issues and practical solutions. Today's discussion would provide valuable input for this meeting, and he hoped to receive further comments from participants, on the basis of which he would produce a discussion paper for the working groups.

A European participant referred back to competitiveness, noting that constant change in the global economy brought about the need for constant adaptation, which was sometimes rather a painful process as countries woke up to a new social and economic landscape. This was the case with the German welfare system, which was being drastically overhauled despite strong opposition from the public. She also felt that the balance between regions was constantly changing, and that this was something the Europeans would have to face.

An Asian participant, also looking at competitiveness, said that his comment on East Asia excluded Japan, which faced many structural problems and which was only growing very sluggishly. Another Asian participant, continuing on this theme, suggested that Asians might not yet be very well-informed on European products. In the future, he felt that Europeans seeking to expand their business activities in Asia should look at the quality, price, reliability and advertising of their products --for example, Asians are often more familiar with Japanese brand names. Another Asian participant mentioned systems which allowed Asians to study and train in Japan, thus increasing their knowledge of the Japanese market and Japanese products.

An Asian participant, again on competitiveness, mentioned that the European integration process had functioned as very effective pressure on prospective member countries and also on countries wishing to enter the European market. He noted that he was encouraged to hear that various business-related conferences were being hosted within the ASEM structure, which was a slow but promising way of increasing business links. As to investment, he felt that the EC was encouraging Europeans to invest more in Asia rather than less. Conformity would probably be a matter of trial and error for the Asian countries, while being the beneficiary of rules already made to being part of the rule-making process was a somewhat painful process which Japan had already undergone and expected that Asian countries would also experience in due time.

The chairperson concluded the meeting by noting that the key themes had been investment and competitiveness, and that reliability and predictability were central to improvement of investment environments, which was an area that could perhaps be further addressed within ASEM.