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When Europe Meets Asia : A Case of Mutual Rediscovery

A Throwback to the Era of the Silk and Spice Trade

Europe's foreign trade with Asia is far behind that of Japan or the United States, but the Old World has been slowly but surely closing the gap since the second half of the 1990's.

Returning Macao to Chinese control in 1999 may well have marked the end of Europe's colonial adventure in East Asia, but the 1990's have also witnessed an unmistakable rekindling of interest in the East on the part of an increasingly integrated EU, finally capable of some degree of diplomatic unity1. The largest commercial bloc on the planet, aware as it is that only a unified effort will succeed at counterbalancing American or Japanese interests on the world scene, can hardly afford to ignore this region where growth rates are skyrocketing and development opportunities abound.

Once the chilly effects of the Vietnam War and the Cold War wore off, as well as the slowdown occasioned by the UK's late entry into the Union (1973), investment flows from Europe to East Asia grew to a point where in 1994 the level of “Old World” investment (45.9 billion USD) rivalled that of the United States (47 billion USD) and were of the same order of magnitude as that of Japan (76.2 billion USD). Despite the economic crisis of 1997 - and helped by the upturn in 1999 - East Asia is now the leading source of foreign direct investment (FDI) in Europe and is as implicated in trade patterns with Europe as it was in the days of the silk and spice routes.

A constantly expanding deficit
The stubborn fact remains that despite efforts by the EU (training programs for business leaders and scientists, a chamber of commerce network defending the commercial interests of the Union), Europe's balance of payments with this teeming part of the world shows a large deficit (31 billion euros in 1997). This deficit continues to grow especially due to large, persistent, structural deficits recorded with China and Japan. Few countries outside of Italy, France, Sweden, and Denmark - whose trade surplus is only very slight - registered a positive balance with the region.

In South Asia, on the other hand, Europe has reconquered its position as number one trading partner with the countries of this region. Taking the case of India, 28% of its imports and 25% of its exports are with Europe. The free market policies pushed by the Indian government since 1991 drove trade levels steeply upward in less than a decade. The numbers are very promising, but it should not be forgotten that total export volume with the region still only represents 1.3% of all European exports.

Japan: between fascinating and frightening
The leading trade target for Europe in the Far East, for a long time Japan was the only significant outlet for Western goods in the region. Inspiring both admiration and apprehensiveness, Japan was viewed by the 1960s as more of a competitor than a partner. At the present time, Japan is in second place behind the United States as a supplier to Europe (accounting for 9% of its imports) while representing the third largest export market for Europe, behind the United States and Switzerland. Japan alone absorbs 5.7% of all EU exports. In Europe, large numbers of Japanese residents (nearly 140,000 and increasing regularly) contribute to the visibility of their firms and of Japanese culture (karaoke, manga, etc.).


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Summary

à lire

Asies Nouvelles. Atlas Géopolitique. Michel Foucher (dir). Belin, Paris, 2002.

Contact

Guy Faure
Deputy director of the Institut d'Asie Orientale (IAO)
CNRS-Université Lyon II-ENS lettres et sciences humaines
E-mail: Guy.Faure@ens-lsh.fr

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