The Bottom Line.
In this Asia-Pacific Insight originally published in the South China Morning Post, Philippe Bonnet and Antoine Martin comment on the recent of an EU-Asia Connectivity strategic policy proposal by the European Commission. Whilst building ties between Asia and Europe make a lot of sense from a business cooperation perspective, they write, trying to create connectivity “the European way” – i.e. by imposing a rules-based mindset to Asia – is a rather surprising idea. A change in mindsets would be interesting, however…
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An EU Strategy on connecting Europe to Asia… the European way?
[By Philippe Bonnet and Antoine Martin]
European politicians recently demonstrated that there is an enormous gap between Europe and Asia. The news did not make the headlines, but in mid-September, the European Commission and the European High Representative for Foreign Affairs and Security Policy released a Joint communication regarding a “vision for a new and comprehensive strategy to better connect Europe and Asia”. Problematically, this policy paper does not reflect regional opportunities.
It goes without saying that EU-Asia connectivity is a big, hot and important topic. Asia has long been the factory of the world, and China’s Belt and Road Initiative is raising eyebrows everywhere in the West. Mainly because most people have no idea what the thing is about, as a matter of fact. Meanwhile, China-US trade complications are a never-ending story, and the changing landscape in Asian geopolitics is leading many people to ask questions.
So, the European Union is increasingly making efforts to invest in building a stronger relationship with Asia and Eurasia.
Promoting economic ties between the two regions seems like a great idea because the economics are extremely significant. As the connectivity strategy notes, Asia represents 60% of the world population and accounts for 35% of the EU exports (€618bn) and 45% of the EU imports (€774bn). Plus, the region might – still according to the EU – require over 1.3 trillion per year for infrastructure development to sustain its current economic pace (against 1.5 trillion in Europe for the whole 2021-2030 period).
Over the summer, Brussels therefore announced the signature of a free trade agreement between Europe and Japan (the Japan-Europe Economic Partnership Agreement or JEEPA) which suggested that, somehow, Europe was able to do business with Asia more intelligently than Washington. And, strong of this success, the Commission moved on with an EU-Asia connectivity project.
The problem is that the policy paper has not conveyed the message it was intended to convey.
What do we mean by “connectivity”?
As surprising as it sounds, the European Commission did not talk about building ties based on business. It did not look for common interests and did not think in terms of building pragmatic mutually interesting bridges. Instead, the Commission talked about applying the EU model of rules-based institutions and mindsets to Asia. It talked about pushing Asia to adopt rules and to adopt the Western way of doing things. In the strategy document, in fact, the blueprint is called very openly “The European Way: Sustainable, comprehensive and rules-based connectivity”.
The EU suggests that there is an opportunity to connect Europe and Asia by building air, road and rail connection, but they do it in terms of air-decarbonization and good practices. Cooperation is part of the deal but strict bureaucracy takes over as the priority is to “adhere to high standards of transparency and good governance”
When it comes to China, the policy emphasizes that “the EU should strengthen the existing cooperation […], promote the implementation of the principles of market access and a level playing field, as well as rely on international standards”. And as far as Japan is concerned, the idea is that “the EU should coordinate closely efforts to promote international standards”.
A profound gap in mindsets.
In short, the EU’s strategy demonstrates how big the gap is between the West and the East. The document says what the EU could do and what it should do. And when it says what it “will” do, the focus is put on trying to understand how things work over here.
This position is easy to explain: the Asian dimension is new to Europe. The EU connectivity policy furthers a previous policy from 2016 in which (Central) Asia was described not as an economic partner per se, but as a way to counter-balance the political and energy instability created by Russia. As a result, the European Union is now wondering how to move things forward with a region it now needs to understand in order to operate better. And it is visibly looking for a way to shape its message.
What comes next?
This leads to two very important questions: what comes next, and how do Europeans create a durable relationship with Asia based on reciprocity and mutual interests? Two important stakes are worth mentioning here.
Stake one: Connectivity with who?
Asia is a big place and the Connectivity proposal takes a very holistic approach to it. Yet, defining what the European Commission means by “Asia” would appear to constitute a sine qua none requirement. The proposal talks about developing market principles in China and happens to mention Japan, but are there countries worth targeting more than others?
When discussing the initiative, a common idea is that the connectivity thing is the EU’s answer to the Chinese Belt and Road Initiative (BRI). This makes sense, of course. Yet, the policy paper does not mention it explicitly. And it does not mention alternative countries with significant growth rates and economic potentials so the policy goal is somehow confusing. A major stake, therefore, will be for Europe to define which partners it wants to connect with in particular.
Stake two: The connectivity method (and mindset).
The second important stake is that of methods and mindsets.
The European mindset is focused on business stability and business certainty, therefore the current policy message unsurprisingly focuses on creating rules and building certainty. This is not a bad thing, as China isn’t for instance famous for the strength of its legal standards or for the stability of its financial system. Hence, to this extent, Europe has an opportunity to contribute to building a reliable EU-Asia connectivity.
Yet, building connectivity “the European way” by imposing a mindset is probably not the best way to proceed.
From the Asian perspective, what matters is whether there are opportunities to construct win-win business relationships. But Europe is so focused on building rules that the connectivity policy only mentions that the EU “intends to support platforms for matching European and Asian businesses, with a focus on SMEs and envisages creating a Business Advisory Group for Euro-Asian connectivity” at the last paragraph, immediately before the policy document’s conclusion.
Connecting Europe to Asia: a hint.
What that means is very straightforward: the European mindset needs to evolve.
>> Related Reading: China’s Eurasia Means we need a new business mindset.
The connectivity policy conveys an important message, i.e. business needs to be safe, but the message so far is paternalistic. If the purpose is to create real connectivity with Asia and Eurasia, the discourse will have to change and the idea of matching European and Asian businesses will need to gain importance in the public discourse.
The potential for Europe-Asia business is immense and rules will matter, this is for sure. But, ultimately, the difference will come from operational businesses willing to bet on Asia more than from technocrats seeking to create rules. The key, in the meantime, is to realize that European and Asian mindsets are different and that things get done in the region because the modus operandi is, precisely, to get things done.
A shorter version of this insight was published on the South China Morning Post under the title ‘For the EU to connect with Asia, it must learn the ‘Asian way’ of doing business’.
Philippe Bonnet | Co-Founder of The Asia-Pacific Circle
Philippe Bonnet is the Co-Founder of The Asia-Pacific Circle and an experienced business strategy advisor at Business Talents, Hong Kong. He advises clients on their business development methods, with a particular interest for Europe – Asian business mindset.
Dr Antoine Martin | Co-Founder & Head of Insights
Dr. Antoine Martin is the Head of Insights of The Asia-Pacific Circle, which he co-founded in Hong Kong in 2016 with Philippe Bonnet. Antoine follows analyzes and comments on developments in international trade and Fintech policy, with a particular focus on Asia-Pacific relations. He is also a scholar at The Chinese University of Hong Kong, Faculty of Law, a leading academic institution in Asia.
Beyond following Asia-Pacific trends, Dr. Martin enjoys pushing, challenging and helping entrepreneurs, lawyers, bankers and experts of all kinds to identify their message and formulate their ideas. His ultimate goal being, of course, to give them more tools to engage in value-creating discussions with their interlocutors. Now, can you see a trend? Would you like to share some thoughts? Please get in touch!
Disclaimer: The views expressed are those of their author(s) only and do not reflect those of The Asia-Pacific Circle or of its editors unless otherwise stated.
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