Asia-Europe Relations and Global Governance (Routledge Contemporary Asia Series)

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Asian–European Relations

Interregional relations are a novel field within international relations which have increasingly been attracting scholarly interest. Thus, over the last five years or so, the study of interregional relations has firmly established itself as a research field, initially within political science, and gradually in economics. This volume assesses interregional relations between Asia and Europe. It contributes to the most recent developments in research by providing rich empirical work to test existing theoretical frameworks. Featured in this volume are conceptual contributions, in particular, theoretically inspired studies which conduct in-depth investigation of a broad variety of interregional interactions, such as the political management of globalization through interregional cooperation, regional security, human rights and finally, the dialogue between Asian and European NGOs. The economic contributions likewise undertake an extensive assessment of areas such as interregional trade and investment flows, the Asian Development Bank and interregional company mergers. Applying established theories to concrete phenomena, Asian–European relations provides a comprehensive understanding of interregionalism and how cooperation between Asia and Europe should be fashioned in the new millennium. The integration of political and economic research in this book will be of interest to graduates and researchers in the fields of international relations, international economics, regional integration, and interregionalism. Jürgen Rüland is Professor of Political Science in the Department of Political Science at the University of Freiburg. Gunter Schubert is Chair Professor of Greater China Studies at the Institute of Chinese and Korean Studies, Eberhard Karls University in Tuebingen. Günter Schucher is senior research fellow at the GIGA Institute of Asian Studies in Hamburg. Cornelia Storz is Professor for Japanese Economy in the Faculty of Economics and Business Administration at the Johann Wolfgang Goethe University in Frankfurt.

Routledge contemporary Asia series

1 Taiwan and Post-Communist Europe Shopping for allies Czeslaw Tubilewicz 2 The Asia–Europe Meeting The theory and practice of interregionalism Alfredo C. Robles, Jr 3 Islamic Legitimacy in a Plural Asia Edited by Anthony Reid and Michael Gilsenan 4 Asian–European Relations Building blocks for global governance? Edited by Jürgen Rüland, Gunter Schubert, Günter Schucher and Cornelia Storz

Asian–European Relations Building blocks for global governance?

Edited by Jürgen Rüland, Gunter Schubert, Günter Schucher and Cornelia Storz

First published 2008 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 This edition published in the Taylor & Francis e-Library, 2008. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” Routledge is an imprint of the Taylor & Francis Group, an informa business © 2008 Selection and editorial matter Jürgen Rüland, Gunter Schubert, Günter Schucher and Cornelia Storz; individual chapters, the contributors All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0-203-93097-5 Master e-book ISBN ISBN10: 0-415-45057-8 (hbk) ISBN10: 0-203-93097-5 (ebk) ISBN13: 978-0-415-45057-7 (hbk) ISBN13: 978-0-203-93097-7 (ebk)

Contents

List of illustrations Notes on contributors Preface and acknowledgments List of abbreviations

vii ix xi xiii

PART I

Introduction and theoretical issues 1 Interregionalism and interregional cooperation: the case of Asia–Europe relations

1

3

JÜRGEN RÜLAND AND CORNELIA STORZ

2 Regional organizations as actors in international relations: interregionalism and asymmetric dialogues

32

MATHEW DOIDGE

PART II

Case studies of Asian–European interregional relations involving government actors 3 Governance, Asia–European relations and regional trade agreements

55

57

DORIS FISCHER

4 Interregional trade and investment between Asia and Europe: an empirical investigation

73

HANNS G. HILPERT AND KLAUS-JOCHEM KECKER

5 The Asia–Europe Meeting (ASEM) and its contribution to the political management of globalization HOWARD LOEWEN AND DIRK NABERS

95

vi

Contents

6 Asian–European relations: more security through inter- and transregional relations?

114

FRANK UMBACH

7 EU–Asia human rights policy: pursuing the path of institutionalism

143

MARTINA TIMMERMANN

8 On the potentials of interregional policy cooperation: the case of Europe’s participation in the Asian Development Bank

173

WERNER PASCHA

PART III

The non-state dimension of Asia–Europe interregionalism

199

9 Merger and acquisition between Japanese and European enterprises: how to integrate different institutional regimes

201

ANDREAS MOERKE

10 Beyond the taboos? The opportunities and limitations of Asian–European track-two dialogue

223

KATJA FREISTEIN

11 The democratization of inter- and transregional dialogues: the role of civil society, NGOs and parliaments

244

SEBASTIAN BERSICK

PART IV

Conclusion

271

12 Main findings and conclusion: assessing the surplus value of Asia–Europe interregionalism

273

GUNTER SCHUBERT

Index

287

Illustrations

Figures 3.1 3.2 3.3 3.4 3.5 3.6 4.1 9.1 9.2 9.3 9.4

Transnational governance concepts Regional integration and global governance Expansion of RTAs Old versus new regionalism Benefits from transnational governance projects Optimal degree of multiple regionalism Trade flows (export values) between Asia, Europe and North America in 2005 Development of M&A according to direction Development of M&A according to ownership features Development of M&A according to ownership features Zexel’s integration into Bosch Japan

61 62 63 64 67 68 75 203 205 207 215

Tables 2.1 2.2 3.1 4.1 4.2 4.3

4.4 4.5 4.6 4.7

Matrix of most probable regional integrative responses Performance of functions of interregional dialogues according to actorness of dialogue partners Examples of multiple regionalism Share of world trade of the three largest world economic regions in 1994, 2002 and 2005 Relative importance of Asia–Europe trade in 1994 and 2002 as a percentage of total Asian/European exports/imports Interregional interdependence in comparison: Asian, European and North American export intensity in bilateral trade in 1994 and in 2002 Clusters in the 1988 export data Clusters in the 1995 export data Clusters in the 2005 export data FDI outflows of the principal investor countries to Asia in the 1990’s

47 49 62 74 76

78 82 84 86 90

viii 5.1 5.2 5.3 5.4 5.5 6.1 6.2 8.1 8.2

8.3 8.4 8.5 9.1 11.1

Illustrations World trade 1988–2004 Global foreign direct investment 1982–2005 Interregional trade relations Interregional trade shares to world trade Interregional Foreign Direct Investments (FDI) 1996 Asian and European participation in regional security cooperation The structure and members of the ARF Cumulative loan approvals from the (multilateral) World Bank Group and from RDBs by region, through 1995 Personnel representation among senior-level ADB staff (five major stockholders plus Germany, as of December 2003; in percent) Voting shares and voting power in the ADB: two scenarios on the assumption of unitary voting group behavior Two other scenarios for voting power, assuming the EU to be a united body Constituency rotation in the voting group involving Germany Dissolution of cross-shareholding Participants from civil society at the informal consultation “Connecting Civil Society of Asia and Europe” convened June 16–18, 2004 in Barcelona, Spain

98 99 103 103 103 116 130 174

183 185 186 191 208

261

Contributors

Sebastian Bersick is research fellow at the German Institute for International Politics and Security (Stiftung Wissenschaft und Politik, SWP), Berlin, Germany. Mathew Doidge is lecturer in the Department of Politics and International Studies at the University of Warwick, UK. Doris Fischer is guest professor at the Seikei University in Tokyo, Japan. Katja Freistein is a research fellow at the Peace Research Institute Frankfurt (Hessische Stiftung für Friedens- und Konfliktforschung, HSFK), Frankfurt/ Main, Germany. Hanns Günther Hilpert is senior research assistant at the German Institute for International Policy and Security (SWP), Berlin, Germany. Klaus-Jochem Kecker is research assistant in the Section Economy of East Asia, University of Bochum, Germany. Howard Loewen is a research fellow at the Institute of Asian Studies, GIGA German Institute for Regional and Area Studies, Hamburg, Germany. Andreas Moerke is partner at JEB interlogue Ltd. (Japan Europe Businesses), Tokyo, Japan. Dirk Nabers is a senior fellow at the Institute of Asian Affairs, GIGA German Institute for Regional and Area Studies, Hamburg, Germany. Werner Pascha is professor for East Asian Economy/Japan and Korea at the University of Duisburg-Essen, Germany. Jürgen Rüland is professor of political science in the Department of Political Science at the University of Freiburg, Germany. Gunter Schubert heads the Chair of Greater China Studies at the Institute of Chinese and Korean Studies of the University of Tübingen, Germany. Cornelia Storz is professor of economics in the Department of Economics at the Johann-Wolfgang-Goethe University Frankfurt/Main, Germany.

x

Contributors

Martina Timmermann is director of Studies on Human Rights and Ethics, United Nations University, Bonn, Germany. Frank Umbach is head of Security Policies in Asia-Pacific Program at the Research Institute of the German Council for Foreign Relations (Deutsche Gesellschaft für Auswärtige Politik, DGAP), Berlin, Germany.

Preface and acknowledgments

Interregional relations are a novel phenomenon in international relations that has increasingly attracted scholarly interest. Over the last five years or so, thus, interregionalism studies have firmly established themselves as a research field, particularly in political science, but gradually starting also in economics. Much of this literature discusses interregional relations in the context of an emerging, increasingly vertically and horizontally differentiated multilayered system of global governance. Interregional relations are thereby expected to influence the effectiveness of multilateral decision-making under the conditions of complex interdependence. More recent studies have gone beyond mere description of this new layer of international interaction and attempted to devise theoretical frameworks for the analysis of interregional relations. In the majority of cases, these still preliminary attempts to theorize interregional relations have operated with synoptic approaches, synthesizing the major arguments of the various strands of the theoretical literature on international relations. In an even more recent development, empirically extraordinarily rich studies have been submitted with the objective of testing theoretical arguments. This volume contributes to this latest stage in interregionalism studies. It does not venture to provide a new theory of interregionalism, but it takes stock of theoretical research and complements the present probing of theoretical assumptions as it provides insights to themes so far neglected in the fledgling research on interregional relations. Such themes include theoretical reflections on the actorness of the collective regional bodies involved in interregional relations as well as the role of non-state actors. As the international order is losing its statecenteredness and moving towards a multi-stakeholder process, civil society actors and, here, in particular non-governmental organizations (NGOs), but also parliaments, firms, development banks, labour unions and a whole gamut of pressure groups are becoming increasingly vocal and influential actors in international relations. To gauge their impact on interregional relations is one of the novel aspects of this volume. Among the policy sectors discussed in the volume, the reader may find some more conventional sectors such as security and economic cooperation, albeit treated in an innovative way, while others such as human rights have so far been rarely addressed in the context of interregionalism. New is also the interdisciplinary perspective of the volume which brings together political scientists and economists.

xii

Preface and acknowledgments

The idea for this volume goes back to an international conference organized by the German Society for Asian Studies (DGA) held in Berlin in May 2003. The conference drew intense interest not only among specialists on international relations and the international economy, but also among area specialists both on Europe and Asia. The DGA subsequently requested the editors to conceptualize a volume on Asia–Europe relations and to invite authors able to address novel themes related to this subject. A few papers presented at the conference, after updating and substantial revision, were included in the volume, while several others were newly written and filled some of the lacunae in research on interregional relations as identified by the editors. All papers have been extensively discussed among and with the editors and been subjected to repeated rounds of revisions. All of them are original contributions. The volume would not have come out without the great support of many individuals and institutions. We would, in particular, like to express our sincere thanks to the German Society of Asian Studies (DGA) for initiating this book project and steadfastly supporting it throughout. The Japan–German Centre in Berlin provided the venue for the conference initiating our book project. Our gratitude also goes to all authors who patiently responded to the numerous requests of the editors for revisions of the chapters. The editors also thank Mr Carl Carter for proofreading and editing the English texts. The three anonymous reviewers reading an earlier draft of the manuscript have provided extremely helpful comments and suggestions which have markedly contributed to an improvement of the volume as a whole. Last, but by no means least, our special thanks go to the research assistants in the Department of Political Science or the University of Freiburg: Julia Übelhör, Jöran Altenberg, Mikko Huotari, Benjamin Köhler, Jan-Simon Dörflinger, Sandra Schäfer and Dennis Mutschler. Without their dedicated and competent work and the many overtime hours spent proofreading and formatting the text the completion of the volume would not have been possible. Jürgen Rüland, Gunter Schubert, Günter Schucher and Cornelia Storz Freiburg, Tübingen, Hamburg and Frankfurt

Abbreviations

ACP ADB ADBI ADF AEBF AECF AEIPD AEMM AEPF AETUF AEVG AEVGR AEYPM AfDB AFTA AIPO APEC APRIS ARF ASEAN-ISIS ASEAN ASEF ASEM ASEP BMZ

C&R CAEC CASS CCPL CEO

Africa–Caribbean–Pacific states Asian Development Bank Asian Development Bank Institute Asian Development Fund Asia–Europe Business Forum Asia–Europe Cooperation Framework Asia–Europe Inter-Parliamentary Dialogue ASEAN–EU Ministerial Meeting Asia–Europe People’s Forum Asia–Europe Trade Union Forum Asia–Europe Vision Group Asia–Europe Vision Group Report Asia–Europe Young Parliamentarians Meeting African Development Bank ASEAN Free Trade Area ASEAN Inter-parliamentary Union Asia-Pacific Economic Cooperation ASEAN Programme for Regional Integration Support ASEAN Regional Forum Association of Southeast Asian Nations Institutes for Strategic and International Studies Association of Southeast Asian Nations Asia–Europe Foundation Asia–Europe Meeting Asia–Europe Parliamentary Partnership Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (Federal Ministry of Economic Cooperation and Development) Custody and Repatriation Council for Asia–Europe Cooperation Chinese Academy of Social Sciences Criminal Procedure Law and Administrative Punishment Law Chief Executive Officer

xiv

Abbreviations

CEPS CFSP CGDK COHOM CUSFTA DBJ DG EcFin EAEC EAEG EC ECHO ECOSOC ECSC EEC EFTA EG EIDHR EMU EPC EPG ETUC EU EURATOM FA FDI FDP FEALAC FES FIDH FNS FTA GATT GDP GmbH GNP HDI HDR HIV/AIDS HRC HRM HRW IBRD ICCPR ICFTU

Center for European Policy Studies Common Foreign and Security Policy Coalition Government of Democratic Kampuchea Council the so-called Working Party on Human Rights Canada–United States Free Trade Agreement Development Bank of Japan Directorate General for Economic and Financial Affairs East Asia Economic Caucus East Asia Economic Grouping European Community European Community Humanitarian Aid Office Economic and Social Commission European Community for Steel and Coal European Economic Community European Free Trade Area Europäische Gemeinschaft European Initiative for Democracy and Human Rights Economic and Monetary Union European Political Cooperation Eminent Persons Group European Trade Union Confederation European Union European Atomic Community Financial Assistance Foreign Direct Investment Liberal Party Forum for East Asia Latin America Cooperation Friedrich Ebert Stiftung Federation International de Droits de l’Hommes Friedrich Naumann Stiftung Free Trade Area General Agreement of Tariffs and Trade Gross Domestic Product Gesellschaft mit beschränkter Haftung Gross National Product Human Development Index Human Development Report Human Immunodeficiency Virus/Acquired ImmuneDeficiency Syndrome Human Rights Commission Human Resource Management Human Rights Watch International Bank for Reconstruction and Development International Covenant on Civil and Political Rights International Confederation of Free Trade Unions

Abbreviations ICFTU-APRO ICSECR IDPAS IIAS ILO IMF IOC IOR-ARC IPD IR ISEAS JAMA JCIE JETRO JHA JIC JICPA JPY LLC LLP M&A MAI MCA MDB MERCOSUR METI MMC MNC MNE MoF MOI NAFTA NGO NIE NOK NTA OCR OECD OEM OSCE PCA PRC PWC

xv

Asian and Pacific Regional Organisation International Covenant on Social, Economic and Cultural Rights Institutional Development Programme for the ASEAN Secretariat International Institute of Asian Studies International Labour Organization International Monetary Fund International Organizing Committee Indian Ocean Rim Association for Regional Cooperation Institute for Popular Democracy International Relations Institute of Southeast Asian Studies Japan Automobile Manufacturers Association Japan Centre for International Exchange Japan External Trade Organization Justice and Home Affairs Japan Investment Council Japan Institute of Certified Public Accountants Japanese Yen Limited Liability Company Limited Liability Partnership Merger and Acquisition Multilateral Agreement on Investment Music Cooperation of America Multilateral Development Bank Mercado del Comun Sur Ministry of Economy, Trade and Industry Mitsubishi Motors Corporation Multinational Corporation Multinational Enterprise Ministry of Finance Memorandum of Intent North American Free Trade Agreement Non-governmental Organization Newly Industrializing Economies NOK Corporation New Transatlantic Agenda Ordinary Capital Resources Organization of Economic Cooperation and Development Original Equipment Manufacturer Organization for Security and Cooperation in Europe Partnership and Cooperation Agreement People’s Republic of China PricewaterhouseCoopers

xvi

Abbreviations

R&D RDB RELEX RTA SAARC SADC SARS SOM SPD TA TAC TEU TSE UK UN UNCHR UNCTAD UNDP UNHCHR USA USD USSR WGAD WSSD WTO

Research and Development Regional Development Bank General Directorate for External Relations Regional Trade Agreement South Asian Association for Regional Cooperation South African Development Community Severe Acute Respiratory Syndrome Senior Officials Meeting Social Democratic Party Technical Assistance Treaty of Amity and Cooperation Treaty on European Union Tokyo Stock Exchange United Kingdom United Nations United Nations Commission on Human Rights United Nations Commission on Trade and Development United Nations Development Programme United Nations High Commissioner for Human Rights United States of America US Dollar Union of Soviet Socialist Republics Working Group on Arbitrary Detention World Summit on Sustainable Development World Trade Organization

Part I

Introduction and theoretical issues

1

Interregionalism and interregional cooperation The case of Asia–Europe relations Jürgen Rüland and Cornelia Storz

Introduction The post-Cold War period has seen a profound transformation of the international order. Superpower rivalry and ideological conflict have given way to globalization as the major material factor shaping international relations. Its impact, however, has been ambiguous. Globalization has produced both: on the one hand, conflict and fragmentation, but, on the other, also new forms of institutional order. While especially in the southern part of the globe globalization has been a major source of violence and conflict, often with ethno-nationalist and religious overtones, it is also the driving force behind the emergence of a system of global governance and the concomitant vertical and horizontal differentiation of international institutions. Global governance refers to a “system of interlocking (mostly, but not exclusively, governmental) institutions, which regulate the behavior of states and other international actors in different issue areas of the world politics” (Rittberger and Bruhle 2001: 2). Vertical institutional growth is mainly the result of new intermediary institutions linking the regional level with the global and national levels of policymaking, while horizontal growth finds its expression in regime-building in policy fields such as security, trade, finance, environment, migration, human rights, and so on. Although the growing web of international institutions is more “thickly” developed in the Triad, consisting of the world’s economic core regions in North America, EU-Europe and East Asia, institution-building – fragmentation and armed conflicts notwithstanding – has also taken place in the global south. A major factor spurring international institution-building is the so-called “new regionalism.” After a first wave of region-building in Europe and Latin America in the 1950s and 1960s, a second wave of regionalism commenced in the mid-1980s (Mansfield and Milner 1997; Väyrynen 2003; Doctor 2007). Since then regional organizations proliferated in virtually all world regions, even those that, like Asia, have theretofore been viewed as “regions without regionalism” (Palmer 1991). The proliferation of regional institutions is a response of nation states to the “complex interdependence” (Keohane and Nye 1989) caused by globalization. The rapid growth of transnational economic transactions is only one example for this process. The border-crossing

4

J. Rüland and C. Storz

pathologies of globalization such as environmental degradation, irregular migration, transnational organized crime, international terrorism and the spread of pandemics such as HIV/AIDS, SARS or avian flu are other phenomena spurring region-building. From the perspective of nation states, regional organizations thus perform a dual function: an enabling function and a protective function. The “enabling function” denotes the ability of regional organizations to capture more effectively the opportunities of globalization. Regional organizations may, for instance, accelerate economic growth by creating larger markets and new economies of scale, even though this is often hardly more than a second best solution when global multilateral trade liberalization is deadlocked. By “protective function” we mean the quest of nation states to insulate themselves from the adverse effects of unbridled economic liberalization, privatization and deregulation, to regain their capacity to steer complex processes of socioeconomic change and to strengthen their bargaining power in global international forums. This pooling of resources and, occasionally, of sovereignty, may thus be viewed as a strategy of strengthening and reinventing the nation state under the conditions of globalization (Link 1998; Dittgen 1999). The “new regionalism” differs from the old regionalism in several ways. First, it differs in the type of membership. Unlike the more homogeneous regional organizations of the 1950s and 1960s, socioeconomic, political and cultural diversity is a hallmark of many of the new regional groupings. Second, the new regional institutions align themselves with the concept of “open regionalism,” signifying their compatibility with multilateral trade liberalization and especially the World Trade Organization (WTO); even if in fact it is still an open question whether these regional integration arrangements contribute as “building blocks” to a multilaterally “nested”1 institutional order (Bhagwati 1971, 2004; Padoan 1997; Hurrell 1995; Wyatt-Walter 1995; Schirm 1997; Roloff 1998, 2001; Mattli 1999; Hettne et al. 1999 and Hänggi 1999). A corollary of the “new regionalism” is novel intermediary institutions. Subregional trans-border institutions such as the Euroregions in Europe (Hrbek and Weyand 1994) or the growth triangles in Asia (Thambipillai 1991) are linking the regional level and nation states, whereas interregional institutions represent an entirely new layer in international relations, connecting the regional with the global level. With the proliferation of regional organizations, the latter, albeit to varying degrees, became increasingly autonomous players with own actorness qualities2 in the international system, as they began cultivating regular ties to other regional organizations. The EU was pioneering this trend (Edwards and Regelsberger 1990), but the Association of Southeast Asian Nations (ASEAN), too, became a hub in interregional relations. Since the second half of the 1990s, other regional organizations followed the EU’s and ASEAN’s example, thus transforming the hubs into a true network, as Doidge observes in this volume.3 Yet, interregional relations, as an offshoot of the “new regionalism” have only in the last decade attracted scholarly attention. In the meantime, knowledge on interregional cooperation has markedly increased. Much of this knowledge we owe to studies on Asia–Europe relations.

Interregionalism and interregional cooperation

5

However, due to the fluid, amorphous and multi-faceted nature of these relations, many significant empirical aspects such as human rights or economic cooperation have been insufficiently analyzed; additionally, theoretical assumptions are often at odds with empirical evidence, and have been tested only recently. In this volume, we refer to the first aspect in which further research is needed, and seek to close some of these empirical blind spots. By retrieving the state of the art of research on Asia–Europe relations, our introductory chapter serves a bottom line from where to start in this endeavor. This entails the clarification of key concepts used in the chapters of this book and a short introduction into the history of interregional relations between Asia and Europe. Identifying three generations of research, we trace the growing ramification of research themes in the field of Asia–Europe relations. The lacunae identified in this overview will then help us to contextualize the present volume and the themes it addresses.

Conceptual clarifications Although this volume assembles scholars coming from different disciplines and a plurality of theoretical approaches, a common conceptual platform is needed. We have to make sure that all chapter authors use core concepts in a coincidental way. In other words, there should be no major deviations in the use of geographical terms or concepts such as regionalism, regionalization or interregionalism. We start our definitions with geography. As this volume is on Asia–Europe relations, we have to clarify what we mean by “Asia” and “Europe.” By Asia, we refer to Northeast Asia and Southeast Asia, institutionalized in ASEAN + 3. The term Europe refers to the member states of the European Union. If authors in this volume use other definitions, it is specifically indicated in the respective chapters. Asia and Europe are the two main regions we consider here, understood as two parts of the world which each consciously share patterns of interaction driven by a variety of actors in different forums and policy areas. Regionalization refers to a market-driven process spurred by trade, foreign direct investments and civil society interactions “which leads to increased interdependencies between geographically adjacent states, societies and economies. Externally, it is characterized by a ‘relative decline of interdependencies’ ” (Roloff 1998:72; Gilson 2002; Hänggi et al. 2006:4). Regionalism, on the other hand, denotes a conscious policy of nation states for the management of regionalization and a broad array of security and other global challenges. Normative questions such as – how should regional institutions be designed, how regional identities evolve or which goals should be achieved – will be discussed under this heading. The institutional forms of regionalism vary and range from informal inter-state cooperation to regime-building and the formation of intergovernmental, in the European case, even supranational institutions. As regionalism is usually imposed on societies and economies, it represents much more than regionalization a top-down process (Hänggi et al. 2006:4). In regionalization,

6


actors are non-governmental in nature; in regionalism, governments are the actors. This distinction between governmental and non-governmental actors is reflected in the organization of this book. The contributions in Part II of this volume refer to governmental actors, Part III, to non-governmental, private actors. For analytical reasons, the level of actors is divided; however, this does not mean that they are independent from each other: dense interactions by private actors, e.g. on the market, but also in other areas, often lead to a demand to build up common institutions, and institutional cooperation on the other side may induce stronger interactions on the private level. Similar to realism, interregionalism also refers to processes of cooperation between regions that are initiated by governments or the bureaucracies of regional organizations. If we subsequently speak of interregionalism we use it as a generic term, covering a broad range of phenomena as shown in an empirically rich study authored by Hänggi (Hänggi 2006). In this volume, the term “interregional” captures two types of relationships: the first type has been categorized in the literature as “bilateral interregionalism,” “bi-regionalism” (Rüland 2001, 2002) or “pure interregionalism” (Faust 2006; Aggarwal and Koo 2005) and basically describes a group-to-group relationship. There are no common overarching institutions; both sides exclusively rely on their own institutional infrastructure. The ASEAN–EU dialogue relations fall in this category, other examples are the EU–Mercosur relations, EU relations with the South African Development Community (SADC) or ASEAN–Mercosur relations to name a few. More disagreement, prevails regarding the second major Asian–European dialogue forum, the Asia–Europe Meeting (ASEM). While some scholars define ASEM as a group-to-group dialogue and, hence, as a manifestation of bilateral interregionalism (Gilson 2002), others categorize it as “trans-regionalism,” “hybrid interregionalism” (Aggarwal and Koo 2005) or “cluster of relationships” (Pareira 2003). As there are persuasive arguments for all three classifications, it would go beyond the scope of this chapter to even try resolving this terminological dispute. Although in recognition of the considerable variation of interregional dialogue formats, a majority of scholars classify ASEM [together with other forums such as the Asia-Pacific Economic Cooperation (APEC), the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC) and the Forum for East Latin America Cooperation (FEALAC)] as a “trans-regional” forum, for reasons of terminological simplification, we subsume it here under the generic concept of interregionalism.4 In this volume, we examine Asia–Europe relations primarily at the interregional level. This means that we pay less attention to the bilateral dialogues between the EU and major Asian powers such as China, India and Japan (which can also be traced back to the 1970s), although we do not ignore them where they become relevant for the explanation of the interregional policy processes (as, for instance, in Chapter 6 on security and Chapter 7 on human rights). Following Hänggi, these bilateral dialogues are here considered as “interregional relations in the wider sense” (Hänggi 2006:41). Also the bilateral relations between individual members of the EU and their Asian partners are only taken


7

into account as a supplementary source of information. Finally, we also examine the specific and very concrete problems of trans-national interactions such as in the case of mergers between Asian and Europe firms (compare Chapter 9 in this volume) or cooperation between civil society actors (see Chapters 10 and 11 in this volume).

The evolution of Asia–Europe relations Interregional relations between Asia and Europe can be traced back to the early 1970s. It was ASEAN which sought closer relations with the European Community (EC). ASEAN was responding with these overtures to the first enlargement of the EC. With the accession of the United Kingdom (UK) to the EC imminent, former British colonies Malaysia and Singapore feared losing their comparatively liberal Commonwealth trade preferences (Snitwongse 1989; Dreis-Lampen 1998; Bridges 1999; Yeung et al. 1999). At a more general level, ASEAN sought ways to mitigate the discriminatory effects of the European Common Market and to avert the protectionist tendencies in the EC following the fluctuation of exchange rates after the collapse of the Bretton Woods monetary system and the stagflation caused by two oil crises. But ASEAN’s rapprochement to the EC was also a strategy to diversify its trade relations in the wake of aggressive Japanese trade offensives in the Southeast Asian region and the traditionally strong dependence on the American market, US investment and military protection.5 Viewed against this background, ASEAN interests centered on improved access to the European market, price stabilization for agricultural commodities, the attraction of more European investment, technology transfers and development aid. A cooperation treaty signed in 1980 eventually formally institutionalized ASEAN–EC relations. Broadly speaking, ASEAN–EU relations adopted an asymmetrical donor–recipient relationship. ASEAN was much more dependent on the EC in terms of markets, investment and technology than vice versa, a fact illustrated by the lackluster participation of European foreign ministers in the regular ASEAN–EC ministerial meetings. This unspectacular and distantly friendly relationship remained unchanged until the end of the Cold War. However, by the early 1990s cracks appeared in the relationship. They must be attributed to the EC’s policy of conditionalities which made liberal democracy, respect of human rights, market economy and disarmament cornerstones in its relationships with non-Western countries. With the Cold War over, the US and the EC were less inclined to cooperate with authoritarian, albeit pro-Western, regimes. In the process the EC vocally criticized sluggish democratization and human rights violations in Southeast Asia. European criticism zeroed in on ASEAN’s policy of “constructive engagement” towards the oppressive military junta in Burma/Myanmar and Indonesia’s occupation of East Timor, a former Portuguese colony annexed by Jakarta in 1975. ASEAN countries rejected this criticism as interference into their domestic affairs and a violation of the UN-sanctioned sovereignty principle.

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ASEAN–EC relations remained deadlocked until the eleventh ASEAN–EC ministerial meeting at Karlsruhe in September 1994. In Karlsruhe the EU backtracked from its normative positions and returned to a more pragmatic policy towards ASEAN. This shift was a response to the economic boom in East Asia and the protracted economic recession in Europe. Scared by what was regarded as the dawning of a Pacific century and by intensifying economic cooperation across the Pacific after the Seattle Summit of APEC in 1993, the EU began to devise strategies for strengthening its position in Asia. The EU’s Asia Strategy paper of 1994 for the first time elevated Asia to a priority in its external relations. At the same time it sought to document that Europeans were prepared to treat Asia on a more equal footing. In Karlsruhe both sides agreed to concentrate henceforth on common interests. The meeting thus paved the way to the formation of a new interregional forum, the Asia–Europe Meeting (ASEM). An Asian–European summit meeting was first proposed in October 1994 by Singaporean Prime Minister Goh Chok Tong. Only one-and-a-half years later, in March 1996, the first ASEM Summit convened. It was followed by five additional summits, the last held in September 2006 in Helsinki. ASEM brought together the EU-15, the President of the EU Commission, ASEAN-7 plus China, Japan and South Korea.6 The Asian membership was largely identical with a Malaysian proposal of December 1990, when Malaysia’s former Prime Minister Mahathir Mohamad called for the establishment of an East Asian Economic Grouping (EAEG), later renamed East Asian Economic Caucus (EAEC). In the meantime, ASEM has increasingly taken over many functions of the erstwhile ASEAN–EU dialogue which was mired in another crisis when in 1997 ASEAN admitted Burma (Rüland 2000:434f.). Between 1997 and 2000 ASEAN–EU ministerial meetings were suspended and talks only resumed after a weak compromise over (low profile) Burmese participation could be reached. Apart from holding six summits, ASEM became increasingly institutionalized and a plethora of subsidiary institutions have since sprung up. ASEM now consists of three pillars: a political, an economic and a socio-cultural pillar. Proposals to add a social pillar have been launched at the 2004 summit in Hanoi, but so far not materialized. Consultations take place in regular ministerial rounds (including the foreign, economic, finance and environmental ministers as well as the ministers responsible for migration). The summits and ministerial meetings are prepared and followed up by senior officials’ meetings. The Asia–Europe Foundation (ASEF), the Asia–Europe Vision Group (AEVG), the Asia–Europe Business Council and a People’s Forum are representing civil society and complement the governmental dialogues (Bersick 1998). The Asia–Europe Cooperation Framework (AECF) serves as the ASEM Charter and defines the norms of interregional cooperation (Yeo 2003:162).

Research on Asia–Europe relations: the state of the art As a novel phenomenon, interregional cooperation and interregionalism are also new fields in the study of international relations, both within economics and


9

political science. Yet, it was political science which established interregionalism as a field of research. It is thus hardly surprising that so far most of the theoretical and conceptual contributions to this novel research theme came from political science. Economists have discussed interregional economic interaction from mainly an empirical perspective or have – as far as APEC is concerned – treated it as a process of regional economic integration. As this volume assembles contributions of economists and political scientists, a brief discussion of some of the core assumptions of political scientists and economists should precede a more detailed portrayal of the state of the art of research on Asia–Europe relations. Economics has generated a rich literature on regional economic integration analyzing why integration takes place, and which effects it has. Some of these assumptions are applicable to the study of interregional relations are outlined in the following. Arguing from an institutional perspective, different theoretical streams have tried to answer the question of why regional institution-building takes place. Welfare economics, for instance, argues that this is due to partial market failure in the allocation and in provision of public goods, such as environmental or security goods, which cannot be addressed by the market mechanism, but needs (public or private) institutions. This argument was originally used to explain the formation of international organizations and was later transferred to regional organizations. More recent approaches (Budzinski 2006) argue from a competition-policy inspired point of view that different levels of integration lead to competition between these spaces, resulting in dynamic efficiency gains. •

•

Transaction-costs based theories argue that regional integration may be a constructive step in that transaction costs of politics, as well as of markets, are lowered: it reduces the number of negotiation partners in comparison to global organizations, and thus speeds up negotiation processes (Haggard 1997). In this logic, different forms of transaction costs determine the selection of institutional regimes. More recently, game-theoretic approaches (Lawrence 1996; Ethier 1998) argue that the number of negotiation partners have to be taken into account as well: a smaller number of partners may make sense since benefits derived from cooperation can be attributed more clearly, and, given a certain homogeneity of players, consensual or majority decisions are easier (Camerer and Knez 1997; Welfens 2003: 41–43).

At the same time, however, integration schemes often remain behind the expected result, and it has been intensely discussed why this is the case. •

Some economists have argued that reality is not a given fact, but a constructed one. Referred to the above mentioned approaches this means that transaction costs, market failures, and even the homogeneity of preferences do not just exist, but are constructed (Herrmann-Pillath 1998). The Cecchini

10

•

J. Rüland and C. Storz Report which stressed the reduction of transaction costs by a common regional integration in the European market is a good example of how perception of reality can be shaped. More traditionally it has been argued that transaction costs are not only reduced, but at the same time increased due to increasing administrative costs; that the transfer of competition-policy to regions may lead to race-tothe bottom effects as well; and, finally that the rational choice approach is insufficient in explaining real world phenomena since political actors are motivated by self-interest, so that regional integration may lead to new forms of political failure.

These arguments can in principle be applied to interregional cooperation as well, and the authors in this volume explicitly or implicitly refer to one or the other of the mentioned theories. In the respective contributions of this volume it becomes clear that the special conditions under which cooperation takes place have to be considered carefully, and that depending on them – e.g. the homogeneity of preferences between actors – different conclusions have to be drawn. Political scientists would have difficulties following some of these arguments. Especially, the argument of trade theorists that the level of the integration’s aggregation (be it bilateral, sub-regional, regional or interregional) is irrelevant and that, hence, the logic of regional integration can be applied to interregional cooperation agreements as well is mostly not shared. Interregional economic interaction has so far in no case even reached the level of a free trade area, the most basic level of economic integration acknowledged by Balassa (1962) in his influential trade theory. Although – as shown below – institutions shared between regions may emerge in the process of interregional interactions, they are so preliminary and “soft” that the term “integration” is inappropriate to characterize these processes of change so that we decided in this volume to choose the terms of institutional cooperation and common institution-building. With the “cultural turn” in social sciences (Reckwitz 2000), political scientists have become increasingly aware of the fact that material changes in the international environment and changing actor capacities are only partly able to explain processes of regional and interregional cooperation. More than in economics, where the insights provided by constructivism have been incorporated only in some studies, this critical stance towards rational (or bounded) decisionmaking, has established itself as a major epistemological strand in political science. By attributing attention to cognitive factors such as ideas, norms and identities, reflexivist approaches are in a better position to explain the cultural path dependencies of non-Western regional groupings and region building as a result of the interaction between regions. Social constructivism has thereby paved the way to the study of regional cooperation cultures and may thus interpret the effectiveness of interregional relations as being determined by the degree to which regional cooperation cultures are compatible (see Chapter 5 in this volume). Although constructivist approaches can rightly claim to explain better than rationalist approaches normative stasis and change, many authors


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unwittingly fall into the Eurocentrism trap when projecting future developments of regional cooperation. The European example which often dominates theorizing on regionalism (Nienhaus 2003) is here re-introduced through the backdoor by arguing that changes in the international environment and the management of interdependence demand shifts shallow institutionalization towards more legalized and contractual concepts of regional cooperation and the concomitant pooling of sovereignty. Three generations of research on interregional relations In line with Europe’s precursor role in establishing group-to-group relations, early studies naturally concentrated on the European Union and its hub and spoke system of external relations. The volume edited by Edwards and Regelsberger (1990) was pioneering in providing a theoretically-informed overview of the EC’s group-to-group dialogues, followed by a similar attempt of Piening (1997). The case study literature emerging from the mid-1990s onward, mainly concentrated on the ties between Asia and Europe. Other inter- and transregional relations have been covered to a much lesser extent. EU–Mercosur relations have generated some scholarly interest as well (Sanchez-Bajo 1999; Faust 2005), whereas more peripheral dialogues such as, for instance, the Forum for East Asia Latin America Cooperation (FEALAC), the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC) or EU–South African Development Council (SADC) relations have been widely ignored and have become an object of research only recently (Hänggi et al. 2006). By contrast, APEC, Asia’s transpacific link, did become a major research theme, but it is often mistakenly treated as a (mega-)region and less as an interregional forum. Although ASEAN–EU relations and ASEM are the interregional relations attracting most research interest, lacunae with regard to theory, functions, efficacy and cooperation culture remain. These must be attributed to three factors: first, that the majority of studies operate with theoretical deductions; second, that they preferably take a systemic perspective and; third, that they have a tendency to analyze Asia–Europe relations from a bird’s eye view. In other words, the majority of studies mainly focus on government interactions at summits or ministerial meetings. Sectoral policy studies, studies on trade and investment, and studies of non-governmental interactions between Asia and Europe are still rare. Such studies, however, are needed to explore to what extent interregional dialogues live up to the expectations placed on them and to what extent they actually perform the theoretically deducted functions. It is thus the objective of this book to explore in greater depth issues often neglected or overlooked in the study of Asia–Europe relations. This includes topics such as Asia–Europe cooperation in the field of security, a much more detailed analysis of economic exchanges, and also non-governmental interactions. In other words, it is the objective of this volume to provide a better understanding of Asia–Europe relations by providing theoretically-informed studies of a broad range of policy areas where Asians and Europeans cooperate.

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Research on Asia–Europe relations – and interregional cooperation in general – can be divided into three major generations. Their main themes and results will be briefly discussed in the following sections. The first generation discovering the phenomenon Studies on Asia–Europe relations are not entirely new. Some of them date back to the 1980s, providing a comprehensive overview on the EC–ASEAN relationship at the time.7 An often quoted article authored by Mols also provided useful insights into the dynamics, prospects and obstacles of the relationship (Mols 1989). Others – including studies of political economists – mainly focused on the economic dimension of Asia–Europe relations, exploring the potential, and barriers, for more trade (Narongchai and Rieger 1982; Harris and Bridges 1983; Dahm and Harbrecht 1988; Dent 1999). The Internal Market of the EC and related integration issues were in the focus of the first analyses (Langhammer and Rieger 1988; Langhammer 2001; Drysdale and Vines 1998; Kim 1993; Wagner 1991). A common trait of these studies is that they treat the cooperation between regional organizations as a unique and novel phenomenon, although not yet as an emerging institutional pattern of global governance. More than scattered articles and occasional book publications on Asia–Europe relations appeared only after the formation of ASEM in the mid1990s. This went hand in hand with the discovery of interregional relations as a new layer of international relations. Yet, most of these studies lack a solid theoretical foundation. They are mainly descriptive, impressionistic and journalistic accounts of the intensifying Asian–European relations. While this is hardly surprising, as some of these publications were authored by insiders of the fledgling dialogue such as diplomats, high-ranking European officials and professional Asia watchers, scholars of international relations only gradually began to reflect interregional cooperation more systematically. At least four major themes can be discerned in this early stage of research on Asia–Europe relations. First, there are the contributions describing the process leading to the formation of ASEM, how it evolved and what particular interests have persuaded Asians and Europeans to promote cooperation (Camroux and Lechervy 1996; Rüland 1996; Serradell 1996). The ubiquitous hint that ASEM constitutes a missing link in the Triadic relations is an implicit, though not further reflected, realist argument, suggesting that both sides are intent of balancing other developments in the crucial triangular relationship between North America, EUEurope and East Asia. Many of these studies are policy-oriented, driven by the zeal of the authors to deepen and nurture Asia–Europe relations. Their laudable purpose was to inform the (European) public about the objectives and significance of the new and, therefore, still obscure institution, at the same time criticizing, sometimes in strong words, the Eurocentric bias of European foreign policy elites, the resultant neglect of Asia and a tendency among Europeans to regard Asia more as a threat than an opportunity. Departing from the EU’s Asia Strategy paper of 1994 and similar policy papers devised by EU member countries


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prior and after 1994,8 some of the literature came up with concrete recomendations on how to improve Asia–Europe relations.9 There was an inclination in these contributions to take to task the EU for its economic bias, manifested in the primary objective of avoiding marginalization in the world’s economically fastest growing region. In consideration of the close linkages between economics and security, they proposed closer cooperation in the field of security and, in order to foster mutual understanding, in the areas of science and culture. Intercultural communication constitutes the second major theme of early Asia–Europe studies. The strained relations between the EC and ASEAN in the first half of the 1990s were in this literature explained as cultural misunderstandings. Most of these studies were influenced by the Asian value hypothesis, then at the height of its popularity. The Asian value hypothesis was an attempt of Asian leaders and intellectuals to construct an Asian collective identity based on political and social norms sharply distinguishing Asia from the West, legitimizing a political and economic order at variance with liberal democracy, individual human rights and European welfare capitalism. While many authors unwittingly subscribed to the essentialist notion of culture inherent in the Asian value hypothesis, they nevertheless rightly deplored that little is done to tackle prevailing cultural stereotypes. The resultant mutual lack of empathy, they reasoned, can only be overcome by devoting more resources to cultural studies and promoting better mutual understanding through people-to-people exchanges (Stokhof 1999). The establishment of the Asia–Europe Foundation (ASEF), which precisely pursues these laudable objectives, must in part be attributed to these writings (see also Chapter 11 in this volume). Taking the Asian value hypothesis at face value also led some of these authors to present recommendations to European policymakers as to how conduct the dialogue with the Asian side. They advised them to avoid a “Cartesian approach” (a rational, result-oriented negotiation-based approach) (Sopiee 1994) and rather accept ASEAN’s relational approach as embodied in the ASEAN Way as the basis for cooperation.10 The ASEAN Way marks the core of the ASEAN collective identity and accentuates norms such as sovereignty, equality, peaceful conflict settlement, non-interference and non-intervention into the internal affairs of member states, quiet diplomacy, personalism, consensual decision-making and mutual respect and tolerance (Dosch 1994, 1997; Acharya 1997, 1999, 2001; Narine 2002; Haacke 2003; Hund 2003; Rüland 2006b). European policymakers and the European Commission’s bureaucrats were consequently urged to pursue a pragmatic course, to avoid sensitive issues such as democracy, human rights and policies towards Myanmar and East Timor and to explicitly acknowledge that ASEM is a dialogue format based on mutual respect and equality. While this position was subsequently indeed adopted by many European bureaucrats and diplomats, political leaders, foreign ministers and European parliamentarians often took a more offensive stance, only temporarily and hesitantly subduing their normative positions. They were resumed after the Asian financial crisis had wrought havoc on Asia’s economies and severely

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weakened Asia’s international bargaining position, thus giving Europe’s Asia policy an opportunistic flavor. Internal divisions in the EU impairing a more cohesive Asia policy constituted a third theme. According to these analyses the EU had to grapple with three major, though partly cross-cutting fault lines: first, divisions between large and small countries, second, divisions between more protectionist and more free trade-oriented member countries and; third, divisions in the field of security policies. Larger European powers such as France, the United Kingdom, Germany and Italy, which are heavily dependent on exports and global economic competitiveness, were seen as pursuing a more pragmatic Asia policy. By contrast, smaller European nations such as the Netherlands, the Scandinavian countries and Portugal were believed to be less prepared to sacrifice the normative elements of their foreign policy on the altar of economic objectives. France, Italy and other southern European nations with protectionist leanings were faced by Germany, the Netherlands and the UK, which favored a more liberal trade regime. Finally, conflict over security policies alienated France and the UK from the rest of Europe. As permanent members of the UN Security Council and nuclear powers much to the chagrin of their European partners they aspired for a special status separate from the EU in Asian regional organizations such as the ASEAN Regional Forum (ARF). A fourth theme centered on the institutional evolution of ASEM (Bersick 1998). While acknowledging that ASEM’s cooperation culture rests on “soft law” and “soft institutionalization,” a characteristic typical for the “new regionalism,” some of these studies nevertheless searched for evidence that an evolution is underway towards “deeper” institutionalization. Hopes in this direction were derived from two observations: first, that ASEM facilitated the growth of many subsidiary institutions and second that the scope of the dialogue consistently expanded. The dispute over the norms of Asia–Europe cooperation was a derivative of a similar discussion over the adequacy of the ASEAN Way which accompanied ASEAN throughout the 1990s, but which gained momentum after the Asian financial crisis and the inability of Asian regional organizations to address the crisis in a meaningful way. While some scholars argued that “soft law” and a low level of legalization are the best way for highly heterogeneous groupings such as ASEAN to build up trust and an collective identity (Kahler 2000; Abbott and Snidal 2000), others maintained that without a more binding nature, more precision and a more committing agenda the dialogue would invite to free-riding and defection and thus soon become irrelevant. The presumed need for deeper institutionalization and more binding agreements was vigorously discussed in many track two meetings (i.e. informal meetings where scholars, government officials and civil society representatives discussed sensitive issues of Asia–Europe relations, see also the contribution of Freistein in this volume). This debate pitted two coalitions against each other: one in which Asian officials and the older generation of Asian scholars supported by European diplomats pleaded for retaining the ASEAN Way as the best institutional framework for promoting Asia–Europe relations, and another in which European


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scholars, politicians and the younger generation of Asian scholars called for accelerated institutional development. The second generation: theorizing on Asia–Europe relations The contributions of the first generation were important in that they recognized that besides the national, regional and global level, further levels of political interaction exist. However, they tended to focus in a more descriptive way on selected empirical phenomena of interregionalism. The second generation starting in the late 1990s intended to overcome these short-comings, and applied theories and concepts of international relations and international economics onto interregionalism. By drawing from realism, neo-institutionalism, and social constructivism, second generation studies made an effort to determine functions and effects of interregionalism. After preliminary attempts to contextualize Asia–Europe relations in an emerging system of global governance (Rüland 1996), a first explanation which could claim coming close to a theory-guided systematic analysis was a chapter contributed by Maull and Tanaka to a publication by the Council of Asia–Europe Cooperation (CAEC), one of the mushrooming Asian–European track two forums. Maull and Tanaka highlighted the institutional balancing functions of ASEM within the Triadic relations and the integrative effects of the dialogue for the groupings involved (Maull and Tanaka 1997). The subsequent debate was characterized by the theoretical deduction of functions of interregional forums (Rüland 2001, 2006a). In the process, five major functions were distinguished: balancing, institution-building, rationalizing, agenda-setting and identity-building. These functions reflected the major schools of thought in international relations theory. In economics, the discussion of interregional phenomena is still in an early state, but as we have argued above, some of the mentioned integration-related theories may reasonably be applied to interregional relations as well. In the debate about the functions of interregional forums, realists, for instance, stressed the balancing functions of interregional forums. While acknowledging that military balancing has become less important in the postCold War period, realists maintain that balancing and power politics have increasingly shifted to institutions. International institutions thus mutate into arenas for balancing games. At stake is control over decisions in global multilateral organizations such as the UN, the WTO and the International Monetary Fund (IMF). Most of this “soft balancing” (Pape 2005) takes place within the Triad. According to this view the interregional dialogues formed in the late 1980s and throughout the 1990s were sequences of “institutional balancing” (Roloff 1998, 2001, 2006). They have been triggered by the EU through its single market and monetary union projects. APEC as well as the Canada–United States Free Trade Agreement (CUSFTA) and, subsequently, NAFTA, were thus regarded as responses to the European Single Market, ASEM a response to APEC and the New Transatlantic Agenda (NTA) an

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American response to Asian and European preparations for ASEM. NonTriadic regions join and form interregional forums in order to adjust to shifts in the Triadic power equation or to play off Triadic regions against each other. Examples are Mercosur’s relations with the EU which is directed against US dominance in the Americas or the IOR-ARC which is an institutional expression of the fact that neither India nor South Africa belong to any major interregional grouping and that Australia is likewise isolated even though it is a member of APEC (Rüland 1996; Dent 1999; Pareira 2003; Bersick 2003; Loewen 2004; Adelmann 2007). There are only few papers in political economy discussing this phenomenon explicitly for the relation between Europe and Asia, but policy-oriented institutes have stressed new options which regions may derive from higher negotiation power. Below the global level, mobilizing political power by regional institution-building is more associated with losses of welfare. Institution-building, rationalizing and agenda-setting are functions associated with liberal institutionalism. Institution-building refers to the claim that interregional forums contribute to an emerging multilayered system of global governance in at least three respects: first, by creating a new layer of international institutions, second, by institution-building inside these interregional dialogues (through summits, regular ministerial rounds, senior officials’ meeting, nongovernmental dialogue forums, economic, scientific and cultural cooperation) and, third, by stimulating processes of intraregional coordination and cooperation (Rüland 2001). The last point was illustrated by Soesastro and Nuttall who showed that the superior coordination machinery of the EU forced the Asian members of ASEM to develop coordinative mechanisms, too, for the preparation of ASEM meetings (Soesastro and Nuttall 1997). The need for coordination increased the frequency of intraregional interactions, an important requisite for enhancing the transparency of policies and interests, developing greater predictability and mutual trust and, hence, for strengthening an East Asian collective identity. It may thus be argued that a spillover of better coordination is qualitative increases of intraregional cooperation. Another institutionalist argument is the presumed potential of interregional dialogues to act as rationalizers of global multilateral forums. This function refers to the fact that global forums are usually overstretched by an increasing number of members, increasingly heterogeneous interests, and technically increasingly complex policy matters. Interregional forums may thus serve as clearing houses, reducing the number of controversial issues and interests before they enter global institutions (Rüland 1999, 2001). Dent has termed this ability of interregional forums to incur a proactive partnership with multilateral institutions “multilateral utility,” which he distinguishes from “multilateral deference,” a passive response to globalization pressures that often entails delegating or transferring an issue for debate or action to current frameworks of multilateral cooperation (Dent 2004, 2006). “Multilateral utility” and “rationalizing” come close to what Aggarwal has called “nesting” (Aggarwal 1998), i.e. the question “how different levels and types of international relations may work in a congru-


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ent, coordinative and cooperative manner, and how these may dovetail into global-multilateral frameworks” (Dent 2006: 117). Closely related to “rationalizing” is the agenda-setting function which – as Keohane and Nye have emphasized – becomes an increasingly important function where military power is increasingly less able to influence other issue areas, where conventional issue hierarchies related to military power erode and where politics shifts to institutional arenas (Keohane and Nye 1989). Interregional forums provide convenient platforms for building broad-based coalitions that may strongly lobby in favor (or against) issues in global institutions. Rationalizing and agenda-setting are thus regarded as important requisites for the management of interdependence, a key function of global governance. The functions of “rationalizing” and “agenda-setting” are mainly based on the preferences of actors for greater homogeneity which makes negotiation processes easier; an argument which has been brought forward in the discussion on the function of regions as “building blocks to global governance” (Haggard 1997). Again, there are few contributions on interregional relationships but they suggest that a theoretical deduction can be applied (Langhammer 2003). Asia–Europe relations also became an object of the intensifying debate between rationalists and reflexivists. While reflexivism covers a broad range of cognitive and critical international relations theories, Alexander Wendt’s social constructivism has become the most influential, albeit “thin” version of reflexivism in studies on Asia–Europe relations and East Asian regionalism (Wendt 1992, 1994, 1999). In a nutshell, social constructivism posits a mutually influencing relationship between structure and agency and views international relations as a cognitive process determined by previous experiences and interactions. Actor interests are thus not givens – such as “national survival” in realism or “economic welfare” in liberal theories. For constructivists interests do not exist exogenously, they are endogenously and inter-subjectively constituted. They are the result of the actors’ construction of their own identity and the identity ascribed by them to others. Identity “describes a process of self-recognition of sharing and adjusting lines or borders between self and others” (Hund 2003: 24). Gilson, in a theoretically sophisticated study, rejects the view that Asia–Europe relations and ASEM in particular are a mere response to processes of globalization (Gilson 2002), a view that is shared by Loewen and Nabers in Chapter 5 of this volume. Relations between Asia and Europe are rather the result of interactions that date back much further and which are characterized by oppressive colonial rule, an asymmetrical donor–recipient relationship, lecturing about democracy and human rights, and European failure to treat the Asian side as equals. Asian moves to construct an own collective identity, an identity creating sharp boundaries in terms of political culture, economic order and social norms towards Europe (and the West in general) must be understood against the background of this longstanding relationship and the concomitant experiences and perceptions (Gilson 2002). Asian–European relations may thus be viewed as a process Hänggi has aptly termed “regionalism through interregionalism” (Hänggi 2003).11 Also some economists have applied constructivist arguments to

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the study of interregional relations – not to Asia–Europe relations, but to APEC – and show convincingly how identities are and can be intentionally constructed as a prerequisite for regional institution-building (Herrmann-Pillath 1998). These five functions are hardly mutually exclusive; they are often inextricably intertwined. Scholars theorizing on ASEM and other interregional dialogue have therefore increasingly opted for a combination of theoretical approaches (Roloff 1998, 2001; Dent 1999; Rüland 2001; Bersick 2003; Aggarwal 2004; Soderbaum, Stalgren, and Von Langenhore 2005; Schirm 2006), another manifestation of the increasing convergence of the different theoretical schools in international relations research (Baldwin 1993). Roloff, for instance, concluded that the coincidence of intensifying (economic and institutional) competition and growing interdependence in the Triad is best captured by the concept of “concert” and interregionalism consequently conceived as a “concert of regions” (Roloff 1998, 2001, 2006). A “concert” may be regarded as a “middle way” between a balance of power system and cooperation (Väyrynen 2003: 29), albeit one which is closer to the paradigm of power than to cooperation on a fictive continuum. Link’s distinction between “competitive cooperation” and “cooperative competition” also addresses the blurred relationship of power and cooperation in Triadic relations (Link 1998). While in Roloff’s analysis the balancing aspect and the relative gains perception predominates, Yeo, Bersick, Pareira and Loewen tilt towards a neo-institutionalist argumentation (Yeo 2003; Bersick 2003; Pareira 2003; Loewen 2004). However, interpreting ASEM as a metaregime (Yeo 2003: 144f.) or a regime (Bersick 2003) – is an interesting albeit not fully satisfying approach. Given the fact that ASEM conspicuously lacks binding rules and even so more dispute settlement procedures, as a full-fledged regime requires, it would be more adequately designated as a proto-regime (Aggarwal 1993). Pareira’s proposition to view ASEM as a “cluster of relationships” is state-centered and refers to the multilayered nature of state interactions enabled by interregional dialogues. However, the theoretical foundation on which his concept is built needs further elaboration (Pareira 2003: 25). The majority of studies argue from a systemic perspective, an “outward-in perspective” as Roloff calls it (Roloff 2006), while neglecting the domestic dimension of interregional dialogues. Working with Olson’s public choice approach, Faust in a recent study on EU–Mercosur relations has charted a way to overcome this dilemma (Faust 2006). Similar studies using an “inside-out” approach are absent for Asia–Europe relations, although in their studies of East Asian regionalism Solingen (1999, 2004, 2008) and Aggarwal and Koo (2005) have highlighted the impact of domestic coalitions on region-building. The third generation: testing the theories Second generation studies were fruitful in facilitating a better theoretical understanding of interregionalism. However, a certain weakness is that contributions of this second generation neglect studying concrete empirical issue areas and actors of interregional relations. This is deplorable as interregional dialogue forums have


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enormously ramified in terms of policy fields and actors since their formation. ASEM, for instance, while initially prioritizing foreign, economic and finance policies, has now branched out into more policy fields including environment, culture, labour and employment, science and technology, educaton, small and medium enterprises, migration and information technology. Apart from the executive interregionalism characterizing the official track one, there is now a growing number of track two meetings, civil society forums, business dialogues, cultural and educational events. Shedding light on the interactions of this markedly broadened agenda and the increasing number of actors is necessary for gaining more precise insights into the functions and effects of interregionalism. To analyze in a more differentiated way, concrete policy fields and actors of interregional relations is exactly what this volume tends to do: to test the theories by providing new empirical insight to themes so far not covered by studies on interregional relations. Testing the theories has just started. It is mainly inspired by theoreticallyinformed doctoral dissertations which provide abundant empirical material for testing second generation theorizing (Yeo 2003; Pareira 2003; Bersick 2003; Loewen 2004, 2005; Doidge 2004). An outstanding contribution is Robles’ work on EU–ASEAN development cooperation (Robles 2004). Working with a political economy approach, Robles shows that ASEAN–EU cooperation mainly worked to the advantage of the EU and that the dialogue did not perform most of the functions deducted by the theoretical literature. Still, institutional balancing is the function most intensively performed by interregional forums. However, ASEM’s record is rather modest even in this respect. As Loewen argues, only its establishment in the mid-1990s constituted an act of balancing as the formation of the forum was in the first place an institutional response to APEC and NAFTA (Loewen 2004). More recently, the anti-terrorism declaration of the Copenhagen Summit of 2002 may be added. The declaration was a thinly veiled criticism of American unilateralism, Washington’s doctrine of domination, and its presumed right to execute pre-emptive strikes against rogue states without a UN mandate (Maull 2006). The “multilateral utility,” i.e. the rationalizing and agenda-setting functions have so far been developed even more modestly. Much more frequently are interregional forums, and ASEM is no exception, fostering bilateralism as they provide ample opportunities for the leaders to meet at the sidelines of summits. One purpose of such bilateral meetings is coalition building, an activity which can be better captured by realism than liberal institutionalism. Doidge and Robles, for instance, show that the impact of interregional forums was weak even where ample opportunities existed to strengthen global multilateral decision-making (Doidge 2004, Robles 2004). Robles names the example of cooperation at the UN General Assembly, Doidge the contribution of Asian–European institutions to accelerating and smoothing negotiations in the WTO. Where sensitive issues are at stake, interregional dialogues seem to have made little difference. One case is human rights which are – as Manea persuasively argues – still dominated by “rhetorical action” instead of “communicative action” (Risse 2000; Manea 2004). Yet, rhetorical action is not necessarily

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equivalent to communicative and normative stagnation. One interesting recent development is the decision of ASEAN leaders to include “democracy” in its Vientiane Action Program (2004–2010), which was thus elevated to an ASEAN core norm, and the condemnation of (violent) changes of government via coups. It would be indeed interesting to find out as to what extent this major change in the normative domain has been triggered by ASEAN’s interactions with Western partners in interregional dialogue forums such as ASEM and APEC. Yet, in the absence of more profound research, it is still speculation and premature to establish such a causal link. Doidge’s work on actorness complements and at the same time transcends the ongoing theoretical debate on the functions of interregionalism. Doidge shows that actorness (i.e. the capacity of a regional organization to act autonomously) is an important intervening variable explaining the functional performance of interregional forums. His actorness model defines actorness by three requisites: action triggers, policy processes/structures and performance structures. Action triggers refers to the goals and principles of a given organization and its capacities to respond to emerging situations, policy processes/structures refers to the ability to take decisions in relation to an action trigger and performance structure refers to the capacity of an institution to implement a decision, the possession of the tools relevant for achieving a goal decided upon.12 The functional performance of interregional dialogues thus varies with the symmetry of actorness. The greater the asymmetries of an interregional dialogue, the less likely is it that the forum performs the functions attached to interregionalism (Doidge 2004).

The approach of this volume This volume on Asia–Europe relations seeks to deepen insights into interregionalism and interregional cooperation through case studies. It thus includes more traditional economic approaches, focusing on the effects of cooperation, on political economy approaches, focusing on the process of interregional cooperation in ASEM, and on approaches from political science on interregionalism, analyzing the processes and functions of interregional cooperation. The different theoretical concepts are unified by a common institutional approach. In this volume, institutions are interpreted as general rules that influence the behavior of actors. With regards to Asia–Europe relations, the simple starting point of the authors in this volume is that the institutional setting of Asia–Europe relations has had a certain impact on social, political and economic behavior; may it be on trade, security, human rights or other areas. Some contributions thus focus on the effects of Asia–Europe relations, evaluating the more “traditional” question of “stumbling stones” versus “building blocks,” i.e. the concrete contribution of ASEM and other Asian–European forums towards a global order (compare Doidge, Loewen and Nabers, Pascha, Umbach in this volume), while others analyze more the process of institutional broadening and the evolution of ASEM (compare Bersick, Freistein in this volume). A question which addresses a yet unresolved problem is, at which point in


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time and under what conditions interregional cooperation such as the ASEAN–EU dialogue or ASEM takes place. In the area of measurable outcomes, such as the establishment of common investment rules, the speaking with one voice in international forums such as the WTO, or the contribution to economic welfare, the impact of ASEM may be assessed skeptically (compare Nabers, Pascha). A more positive assessment may be reached when institutions’ benefits are understood in a more basic sense, that is, the communication which takes place in ASEM on different levels (compare Chapter 11 in this volume; Storz 2005a). If one indeed accepts the impact of institutions on behavior as a common starting point, and additionally the concept of actor capacity, which draws upon a rational choice model of behavior meaning that actors, fulfilling certain tasks, have an individual interest in maximizing their influence (compare Doidge in this volume, and Köster 2004 for international standards), then certainly the structures established by ASEM and their impact might not be underestimated. Doidge’s concept of actorness in this volume is compatible with recent game-theory approaches which argue that every utterance affects the relationship between players (Farrell and Rabin 1996; Sally 2005). If talks indeed alter actor communication in an embedded game, it is then questionable to liken talks in general, particularly Asia–Europe talks, to “cheap talks” or “talk shops.”13 Approaches based on a broad understanding of institutions may challenge the above mentioned more critical stance towards interregional cooperation, arguing that the static focus on measurable outcomes and self-interested actors alone neglects the important dimension of the dynamics and the genesis of regional institutional arrangements. In this sense, even a weak interregional cooperation may eventually be favorable for economic and political transactions: it may function as a “branding,”14 which may influence decisions right from the beginning by coining mental models in a new way. To be sure, it is an option and not a given fact that interregional cooperation and in particular ASEM indeed realizes this opportunity as the contributions in this volume show. The volume consists of four parts: the introduction and theoretical issues of Asian–European relations (Part I); Part II focuses on specific policy fields of Asian–European relations; and Part III addresses the non-state dimensions of Asia–Europe interregionalism. The conclusion (Part IV) summarizes the main findings and draws some preliminary inferences concerning the leading questions of our volume, namely the surplus value of Asia–Europe interregionalism, and related empirical evidence. It draws particular attention to the empirical richness of the case studies. Part I takes up theoretical issues for a basic problem, namely whether and/or to which degree interregional cooperation contributes to an emergent global governance order. Following the introduction, Doidge (Chapter 2) argues that one has to carefully take into account the specifics of cooperation and institutions when assessing them. One important factor, to which especially political science is pointing and which has been taken up in political economy too, is the question of power. In this volume, Doidge draws on the concept of actorness in order to show how the outcome is influenced by the specific actor’s

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characteristics in and between regions. In a region, only specific groups may be interested in certain effects of regional integration so that it becomes important which actors in a region participate in the negotiation process (as discussed in Part III). It has been shown that the lack of homogeneity between actors – in this case regional actors – may even contribute to divergent economic development, using the case of regional economic integration agreements between poorer countries in Africa with wealthier ones. Thus, economic integration does not lead necessarily to better chances in catching up (Welfens 2003: 31), and the homogeneity of actors becomes an important condition of smooth and wellworking coordination and integration agreements (Mansfield and Milner 1997). In Parts II and III, specific political and economic aspects of the bilateral and interregional relations between Europe and Asia are analyzed. For the sake of analytical clarity, we have separated the respective level of actors, which are in Part II of governmental, in Part III of non-governmental nature. Most contributions concede – to varying degrees – that interregional forums may contribute to an emerging global order, but they mostly accentuate very clearly the existing difficulties. The interesting point is that depending on the specific type of actors, the outcome seems to be assessed at least slightly differently: whereas most contributions in Part II, analyzing governmental relations, assess the outcome of ASEM in a more skeptical tone, the outlook in Part III, studying nongovernmental relations, seems to be somewhat more optimistic. Policy fields where Asia–Europe relations contribute little to an emergent structure of global governance (Fischer, Chapter 3) include political dialogue relations (Loewen and Nabers, Chapter 5), foreign trade policy (Hilpert and Kecker, Chapter 4; Pascha, Chapter 8), security policy (Umbach, Chapter 6) and human rights policy (Timmermann, Chapter 7). At the same time, however, the assessment is somewhat different when one examines Asia–Europe relations from a nongovernmental perspective. All contributions of Part III (Moerke, Chapter 9; Freistein, Chapter 10; Bersick, Chapter 11) ascribe to ASEM and related discussion forums an important role in forming common identities, and in changing long-established practices. Certainly, the degree differs, but especially the contribution of Moerke shows how bottom-up approaches via the market concretely functions and how long-established rules – in this case in human resource management – of two different actors may change. Culture and norms which have been identified as barriers towards cooperation and institutionalization (compare Chapter 5 in this volume), are thus not be understood as static, but may be susceptible to change in an evolving common institutional setting. The contributions thus show, that and how cognitive processes are determined by previous experiences and interactions, as argued by social constructivism, and how they can be re-shaped by developing common institutions. This result seems to support the assumption, that the specific properties of the actors and their interaction play an important role for the outcome of cooperation. Indeed, it may be that non-governmental actors possess more similar characteristics and are ex ante more unified through common interests. Moreover, at least in the case of M&A, it becomes clear that when an agreement on common institutions is


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found, the change of practice may be more easily realized than expected. It thus remains a task for further research to identify why the assessment seems to be different depending on the actor’s characteristic. While applying the question of the value added of interregionalism and interregional cooperation to a broad range of political and economical issues, the empirical richness of the contributions in this volume shows that a more differentiated approach towards the assessment of such processes is required. The assessment has to carefully take the respective policy fields into account, and will differ according to the criteria and chosen time frame. We hope that this volume contributes to a better understanding of the new phenomenon of interregionalism, and helps to give a more comprehensive insight into the options and constraints of interregional cooperation in an emerging global order.

Notes 1 For the concept of “nesting,” see Aggarwal (1998). 2 For the growing literature on actorness, see Sjoestedt (1977), Allen and Smith (1991, 1998), Hill (1993), Bretherton and Vogler (1999) and Doidge (2004). 3 See the contribution of Mathew Doidge in this volume (Chapter 2). 4 On the more precise concept of trans-regionalism, see Aggarwal (1998); Rüland (1999, 2006a); Köllner (2000); Loewen (2004). 5 Compare for the Japanese stance towards regional economic integration in Asia: Abe and Plummer (1996); Storz (2005b). 6 At the fifth summit in Hanoi ASEM (2004) was enlarged by the accession of the ten new eastern and southern European members of the EU and on ASEAN’s side Cambodia, Laos and Burma/Myanmar. At the Helsinki Summit of 2006 ASEM was further enlarged by the accession of Bulgaria and Romania, India, Pakistan, Mongolia and the ASEAN Secretariat. 7 See, in particular, the comprehensive volume edited by Schiavone (1989). 8 See, for instance, Auswärtiges Amt (1993). 9 For an anthology of such contributions, see Reiterer (2002). 10 On the diversity of European and Asian cooperation cultures, see also the contribution of Loewen and Nabers in this volume. 11 Compare for the role of perception and signalling applied to the case of foreign direct investment several contributions in Storz (2005c), too. 12 See also the contribution of Mathew Doidge in this volume (Chapter 2). 13 Compare for the role of mental models and the genesis of trust and its role in competition and cooperation an overview of the literature in Banerjee and Richter 2001, esp. pp. 12–15. 14 There is not much literature on the concept of “branding” in foreign economic theory. Compare for a first discussion Grimes (2005).

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Maull, H.W. (2006) “American Foreign Policy. Between Isolationism and Internationalism, Unilateralism and Multilateralism,” in J. Rüland, T. Hanf and E. Manske (eds) American Third World Policies after the End of the Cold War, Armonk, New York: M.E. Sharpe. Maull, H.W. and Tanaka, A. (1997) “The Geopolitical Dimension,” in C.G. Hernandez, S. Nuttall, and S. Soesastro (eds.) The Rationale and Common Agenda for Asia-Europe Cooperation, CAEC Task Force Reports, Tokyo and London: Council for Asia-Europe Cooperation: 31–41. Mols, M. (1989) “EG-ASEAN: ein Modell interregionaler Zusammenarbeit?” Integration, vol. 12, 3: 127–139. Narine, S. (2002) Explaining ASEAN, Boulder: Lynne Rienner. Narongchai Akrasanee and Rieger, C. (1982) ASEAN-EEC Economic Relations: Proceedings of a Conference on ASEAN-EEC Economic Relations, Singapore: Institute of Southeast Asian Nations: ASEAN Economic Research Unit. Nienhaus, V. (2003) “Europäische Integration,” in D. Bender (ed.) Vahlens Kompendium der Wirtschaftstheorie und Wirtschaftspolitik, München: F. Vahlen. Padoan, P.C. (1997) “Regional Agreements as Clubs: The European Case,” in E.D. Mansfield and H.V. Milner (eds) The Political Economy of Regionalism, New York: Columbia University Press. Palmer, N.D. (1991) The New Regionalism in Asia and the Pacific, Lexington: Lexington Books. Panagariya, A. (1999) “The Regionalism Debate: An Overview,” The World Economy, vol. 22, 4: 455–476. Papastamkos, G. (2000) “Welthandelsordnung, regionale Teilordnungen und interregionale Klammerordnungen: die handelspolitische Präsenz der EU in einer globalisierten und regionalisierten Weltwirtschaft,” Ordo (Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft), vol. 51: 457–477. Pape, R.A. (2005) “Soft Balancing against the United States,” in International Security, vol. 30, 1: 7–45. Pareira, A. (2003) ASEM (Asia-Europe-Meeting), Frankfurt a.M.: Peter Lang. Pascha, W. and Storz, C. (2005) “Institutionen in der Entwicklung Ostasiens: Eine Einführung,” in W. Pascha and C. Storz (eds) Wirkung und Wandel von Institutionen. Das Beispiel Ostasien, Stuttgart: Lucius & Lucius. Pelkmans, J. (2001) European Integration: Methods and Economic Analysis: Financial Times, London: Prentice Hall. Perroni, C. and Whalley, J. (2000) “The New Regionalism: Trade Liberalization or Insurance?” The Canadian Journal of Economics, vol. 33, 1: 1–24. Piening, C. (1997) Global Europe: The European Union in World Affairs, Boulder: Lynne Rienner. Ravenhill, J. (2001) APEC and the Construction of Pacific Rim Regionalism, Cambridge: Cambridge University Press. Reiterer, M. (2002) Asia-Europe: Do They Meet? Reflections on the Asia-Europe Meeting (ASEM), Singapore: Asia-Europe Foundation. Risse, T. (2000) “ ‘Let’s Argue!’ Communicative Action in World Politics,” International Organization, vol. 54, 1: 1–39. Rittberger, V. and Bruhle, T. (2001) “From International to Global Governance: Actors, Collective Decision-making, and the United Nations in the World of the Twenty-first Century,” in V. Rittberger (ed.) Global Governance and the United Nations System, Tokyo: United Nations University Press.


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Robles, A.C. (2004) The Political Economy of Interregional Relations: ASEAN and the EU, Aldershot: Ashgate. Roloff, R. (1998) “Globalisierung, Regionalisierung und Gleichgewicht,” in C. Masala and R. Roloff (eds) Herausforderungen der Realpolitik. Beiträge zur Theoriedebatte in der Internationalen Politik, Köln: SH-Verlag. Roloff, R. (2001) Europa, Amerika und Asien zwischen Globalisierung und Regionalisierung. Das Interregionale Konzert und die ökonomische Dimension internationaler Politik, Paderborn: Schoeningh. Roloff, R. (2006) “Interregionalism in Theoretical Perspective: The State of the Art,” in H. Hänggi, R. Roloff and J. Rüland (eds) Interregionalism and International Relations, London and New York: Routledge. Rüland, J. (1996) “The Asia-Europe Meeting (ASEM): Towards a New Euro-Asian Relationship?” Rostocker Informationen zu Politik und Verwaltung, Heft 5, Rostock: Universität Rostock. Rüland, J. (1999) “The Future of the ASEM Process: Who, How, Why and What?” in W. Stokhof and P.V.D. Velde (eds) ASEM. The Asia-Europe Meeting: A Window of Opportunity, London and New York: Paul Kegan International. Rüland, J. (2000) “ASEAN and the Asian Crisis: Theoretical Implications and Practical Consequences for Southeast Asian Regionalism,” The Pacific Review, vol. 13, 3: 421–451. Rüland, J. (2001) “ASEAN and the European Union: A Bumpy Interregional Relationship,” Discussion Paper C 95, Bonn: Rheinische Friedrich-Wilhelms-Universität Bonn, Zentrum für Europäische Integrationsforschung. Rüland, J. (2002) “Dichte oder schlanke Institutionalisierung? Der neue Regionalismus im Zeichen von Globalisierung und Asienkrise,” Zeitschrift für internationale Beziehungen, vol. 9, 2: 175–208. Rüland, J. (2006a) “Interregionalism: An Unfinished Agenda,” in H. Hänggi, R. Roloff and J. Rüland (eds) Interregionalism and International Relations, London and New York: Routledge. Rüland, J. (2006b) “Traditionalism and Change in the Asian Security Dialogue,” in S. Hoadley and J. Rüland (eds) Asian Security Re-Assessed, Singapore: Institute of Southeast Asian Studies. Rüland, J., Manske, E. and Draguhn, W. (2002) Asia-Pacific Cooperation (APEC): The First Decade, London: RoutledgeCurzon. Sally, D. (2005) “Can I say ‘bobobo’ and mean ‘There’s no such thing as cheap talk’?” Journal of Economic Behavior and Organization, vol. 57, 3: 245–266. Sanchez Bajo, C. (1999) “The European Union and MERCOSUR: a case of interregionalism,” Third World Quarterly, vol. 20, 5: 927–941. Schiavone, G. (1989) Western Europe and South-East Asia: Co-operation or Competition? Houndmills: Macmillan. Schirm, S.A. (1997) “Transnationale Globalisierung und regionale Kooperation. Ein politikökonomischer Ansatz zur Erklärung internationaler Zusammenarbeit in Europa und den Amerikas,” Zeitschrift für Internationale Beziehungen, vol. 4, 1: 69–106. Schirm, S.A. (2006) “Hemispheric Interregionalism: The Free Trade Association of the Americas (FTAA),” in H. Hänggi, R. Roloff and J. Rüland (eds) Interregionalism and International Relations, London and New York: Routledge. Serradell, V.P. (1996) “The Asia-Europe Meeting (ASEM): A Historical Turning Point in Relations between the Two Regions,” European Foreign Affairs Review, vol. 1, 2: 185–210.

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Sjoestedt, G. (1977) “The External Role of the European Community,” Swedish Studies in International Relations No. 7, Farnborough: Saxon House. Snitwongse, K. (1989) “Interaction and Collaboration of the EC and ASEAN in the UN System and International Conferences,” in G. Schiavone (ed.) Western Europe and South-East Asia: Co-operation or Competition? Houndmills: Macmillan. Soderbaum, F., Stalgren, P., and V. Langenhove, L. (2005) “Introduction. The EU as a Global Actor and the Dynamics of Interregionalism: A Comparative Analysis,” in Journal of European Integration, vol. 27, 3: 365–380. Soesastro, H. and Nuttall, S. (1998) “The Institutional Dimension,” in C.G. Hernandez, S. Nuttall and H. Soesastro (eds) The Rationale and Common Agenda for Asia-Europe Cooperation (CAEC Task Force Reports, Tokyo and London: Council for Asia-Europe Cooperation. Solingen, E. (1999) “ASEAN, Quo Vadis? Domestic Coalitions and Regional Cooperation,” Contemporary Southeast Asia, vol. 21, 1: 30–32. Solingen, Etel (2004) “Southeast Asia in a New Era: Domestic Coalitions from Crisis to Recovery”, in Asian Survey. vol. 44, 2: 189–212. Solingen, Etel (2008 forthcoming) “The Genesis, Design and Effects of Regional Institutions. Lessons from East Asia and the Middle East”, in International Studies Quarterly, June 2008. Sopiee, N. (1994) “Asian Approach Best Way to Building Enduring APEC,” The Straits Times, 1 September 1994: 27. Stokhof, W. (1999) “Bringing the Communities Together: What More Can be Done?,” in W. Stokhof and P. van der Velde (eds) The Asia–Europe Meeting (ASEM). A Window of Opportunity, London: Kegan Paul, pp. 35–46. Storz, C. (2005a) Japan and Germany in Competition for FDI: Tax, Regulation and Strategies, Marburg: Schriften der Universitätsbibliothek. Storz, C. (2005b) “Standardization and the convergence of production systems,” in W. Pascha (ed.) Systemic Change in the Japanese and German Economies. Convergence and Differentiation as a Dual Challenge, London and New York: RoutledgeCurzon. Storz, C. (2005c) “Yôroppa keizai tôgô to chûshôkigyô (European Integration and SME),” Kansai Daigaku Keizai Gakubu 100 Shûnen Kinenshi (Festschrift anläßlich des hundertjährigen Bestehens des Fachbereichs Wirtschaftswissenschaften an der Kansai Universität), Kansai: Kansai Daigaku Keizai Gakubu. Swann, D. (2001) The Economics of Europe: From Common Market to European Union, Harmondsworth: Penguin Books. Thambipillai, P. (1991) “The ASEAN Growth Triangle: The Convergence of National and Sub-national Interests,” Contemporary Southeast Asia, vol. 13, 3: 299–314. University of Helsinki (2006) An Evaluation of ASEM in its First Decade and an Exploration of its Future Possibilities, Helsinki: University of Helsinki, Network for European Studies. Väyrynen, R. (2003) “Regionalism: Old and New,” International Studies Review, vol. 5, 1: 25–51. Viner, J. (1950) The Customs Union Issue, New York: Carnegie Endowment. Wagner, N. (ed.) (1991) ASEAN and the EC. The Impact of 1992, Singapore: Institute of Southeast Asian Studies. Welfens, P.J. (2003) “Regionale Integration in der Ordnungs-, Außenwirtschafts- und Wachstumstheorie,” in D. Cassel and T. Apolte (eds) Regionale Integration und Osterweiterung der Europäischen Union, Stuttgart: Lucius & Lucius.


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Weltbank: www1.worldbank.org/publications/pdfs/61128.pdf Wendt, A. (1992) “Anarchy is what States Make of it: The Social Construction of Power Politics,” International Organization, vol. 46, 2: 391–425. Wendt, A. (1994) “Collective Identity Formation and the International State,” The American Political Science Review, vol. 88, 2: 384–396. Wendt, A. (1999) A Social Theory of International Relations, Cambridge: Cambridge University Press. Wyatt-Walter, A. (1995) “Regionalism, Globalization, and the World Economic Order,” in L. Fawcett and A. Hurrell (eds) Regionalism in World Politics. Regional Organization and International Order, Oxford: Oxford University Press. Yeo, L.H. (2000) “ASEM: Looking Back, Looking Forward,” Contemporary Southeast Asia, vol. 22, 1: 1–32. Yeo, L.H. (2003) Asia and Europe. The Development and Different Dimensions of ASEM, London: Routledge. Yeung, M.T., Perdikis, N. and Kerr, W.A. (1999) Regional Trading Blocs in the Global Economy: the EU and ASEAN, Cheltenham: Edward Elgar.

2

Regional organizations as actors in international relations Interregionalism and asymmetric dialogues Mathew Doidge

The goal of this chapter is to address the concept of actorness and to suggest the likely outcome when qualitatively different regional actors meet. It begins with consideration of a number of prominent approaches to the issue of actorness, drawing on these to establish an understanding of actor capacity that is flexible but without sacrificing explanatory power. Finally, with reference to the EU–ASEAN relationship, it explains how the concept of regional actorness may interact with the functions that have been posited for interregional dialogues, and in so doing seeks to clarify the impact of asymmetric relationships between regional actors on interregional cooperation. While group-to-group dialogues have a long history, being traceable back to the first Yaoundé Convention, an association agreement concluded between the European Community and the Associated African States and Madagascar, interregionalism, defined as group-to-group dialogue, often premised upon regional organizations, is a relative novelty in international relations. In the wake of the systemic transformations of the early 1990s, the number of such dialogues has expanded significantly, transforming the system from the European Communitycentered hub-and-spoke structure of the bipolar period into a true network, incorporating multiple hubs. Despite the relative newness of the phenomenon, its ever more inclusive nature has led to its characterization as a “lasting feature of the international system” (Hänggi 2002: 3). Interregionalism remains, however, a comparatively poorly understood phenomenon, though this situation is gradually changing as academics increasingly focus their attention upon this newest arena of global governance. Most recently, this has resulted in the elucidation of a number of functions that these dialogues are expected to perform. The development of this framework has raised new questions, however, most particularly: to what extent are these functions dependent on the constellation of regions involved? More specifically, what effect will a qualitative difference in the nature of these regions have? The following discussion seeks to address this, approaching the issue of qualitative differences in regional organizations through use of the concept of actorness. As such, discussion begins with an overview of the way in which the concept of

Interregionalism and actorness

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“being an actor” in international relations has been utilized with regard to regional organizations to date. From these, a basic concept of actorness is distilled. With this concept in mind, the example of EU–ASEAN relations is used to explain the impact on interregionalism of asymmetric relationships between regional actors.

Actorness: the state of play Broadly speaking, considerations of actorness are of two types: paradigm-driven and unit-driven. Paradigm-driven approaches to actorness are not so much definitions as context-driven understandings. In essence, the goal is not to develop a definition of actorness but to develop a paradigm within which the international system as a whole can be understood. Implicit within this is an understanding of what constitutes a significant actor. It is this approach (or perhaps more correctly “non-approach”) to international actors that has historically dominated this field. Paradigm-driven literature on actors can be classified into a number of conceptual groupings, each highlighting different actors and processes. Traditionally, realism has been the most dominant paradigm-driven approach. By incorporating the assumptions that the international system is characterized by anarchy, that the currency of international politics is power (and particularly political/military power) and that the primary locus of such power is the nation state, classical realism posited a system where the term “international actor” is effectively synonymous with “nation state.” Anything below this level is deemed to be insignificant to the functioning of the international system, thus precluding the possible influence of, for example, corporations, domestic publics or even strong individuals. By the 1970s, US–Soviet détente and the ending of the “first” Cold War led political theorists increasingly to challenge realist orthodoxy, and particularly the centrality of the state and the place of military power, and to seek new explanations for international activity, a process championed by those concerned with such issues as transnationalism, political economy and interdependence. At the same time, the European project had advanced far beyond its roots, with the merger of the executives of the three communities (the European Economic Community, European Community for Steel and Coal and EURATOM), the completion of the customs union, the presentation of the Werner Report on Economic and Monetary Union (EMU) and the adoption of the Davignon Report on European Political Cooperation (EPC). The advent of EPC was particularly significant, signaling as it did the emergence of an externally focused regional organization. As a result of this theoretical ferment, of the continued development of the European Community (EC) (and its inherent challenge to classical conceptions of actorness) and of the emergence of ever more regional integration projects, from the 1970s theoretical work on international actors underwent a profound transformation with the introduction of unit-driven approaches. In contrast to paradigm-driven understandings of actorness, unit-driven approaches explicitly seek to define what an actor is, or more often whether a

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particular entity is an actor.1 This frequently involves the categorization of various types of actor, some of which may be sui generis, but is primarily concerned with the elucidation of what is required in order to act, consideration of what enables effective action, and so on. Just as unit-driven theories were inspired by European integration, their subject matter has also been primarily concerned with understanding the place of the European regional project on the world stage – the history of modern actorness theory is therefore a history of the attempt to understand the European Community/Union’s place in the international system. In aiming to develop basic criteria of actorness, however, unitdriven approaches are, by definition, generalizable. Indeed, a framework of actorness is to be judged according to two criteria – its explanatory power and the extent to which it may be generalized. Arguably, the progenitor of modern unit-driven actorness theory is Gunnar Sjöstedt. In the late 1970s, motivated by the “inescapable conclusion” that when assessing the actorness of the European Community “the theoretical instruments available are few, and to the extent they exist, intolerably crude” (Sjöstedt 1977: 5), Sjöstedt wrote The External Role of the European Community (1977) in an attempt to outline a framework for determining the extent to which the then EC could be considered a “genuine actor in the international system” (ibid.: 6). He begins with the fundamental premise that “the capacity of being an actor is most appropriately conceived [sic] of as a variable property which the Community may possess to a greater or lesser extent” (ibid.: 14), thus allowing for the concept of stronger and weaker actors within the international system. However, Sjöstedt does not presuppose the ultimate form an actor will take. While he does attempt to define the “principal nature of an international actor” (ibid.: 12), he aims to construct this in a way that highlights the minimum structures/processes necessary for actorness without adding on too many of the “extras” that help to give an actor its shape/character. It is this highly structural approach that adds significant value to the undertaking, allowing a focus on actors themselves rather than on the result of their action,2 and facilitating direct comparison between actors. Where Sjöstedt’s work presents limitations, however, is in the fact that while trying to provide as simple a framework as possible, too much complexity is introduced. The postulation of certain actorness criteria with the EC in mind results in the establishment of a framework of actorness for organizations similar in form to the EC – regional economic organizations – but which fit uncomfortably when applied to other organizations. From the end of the 1970s, with the waning of détente and the onset of the “second” or “new” Cold War, those challenging realist and now neorealist theory found the foundations of their argument to be less firm than they had once believed. As such, significant work on unit-driven theories of actorness virtually disappeared in the 1980s. It was not until the ending of bipolar conflict and the collapse of the Soviet Union in 1989–1990 that the hiatus in actorness theory came to an end. Further tentative steps towards understanding non-state actors were subsequently taken in the early 1990s, but were ironically characterized by an unwillingness to challenge the pre-eminence of the nation state. The


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result was the emergence of theories seeking to increase the flexibility of existing frameworks, while not going so far as to assert the existence of alternative types of actor. Flexibility of definition was an important factor in the work of David Allen and Michael Smith (1991), but their approach initially3 differed from that of Sjöstedt. Rather than redefine actorness as Sjöstedt sought to do, Allen and Smith introduce flexibility by effectively side-stepping the actorness question, arguing instead that non-actor entities4 can be important influences in the international system. They began their consideration of the place of the Western Europeans in the international arena by stating that the “problem faced and often highlighted by analysis of a ‘European foreign policy’ is that whilst Western Europe is clearly consequential in the international arena, its status and impact are inherently ambiguous” (Allen and Smith 1991: 95). They argued that Western Europe is neither a purely dependent entity, nor a “fully-fledged statelike actor” (ibid.: 96), and in so doing contended that only a state-like structure could be considered a true actor. Thus, while implicitly agreeing with Sjöstedt that the theoretical instruments available were inadequate, Allen and Smith differ in their approach by assuming at the outset that Western Europe is not an actor and by therefore attempting to establish a framework for assessing the place of an entity in what is effectively a “pre-actornes” phase.5 In doing this they are asserting both that there is a pre-actorness stage, and that even at this point an entity may have influence over its external environment. Drawing particularly on the work of Young (1972) and Hanrieder (1978), Allen and Smith set out to consider both tangible and intangible participation in issue areas. Quoting Hanrieder (1978: 1280) that “[a]ccess rather than acquisition, presence rather than rule, penetration rather than possession have become the important issues,” they essentially argue that it is important to consider whether or not an entity possesses influence in a given realm of activity, rather than focusing purely on whether it can act in a purposive manner. In this way, a number of important factors that would otherwise be eliminated from consideration can be incorporated into any issue analysis or broader discussion of the international system. “Presence,” they argue, “is a feature or a quality of arenas, of issue-areas or of networks of activity, and it operates to influence the actions and expectations of participants” (Allen and Smith 1991: 97). It can be defined with reference to a combination of factors: credentials and legitimacy, the capacity to act and mobilize resources and the place it occupies in the perceptions and expectations of policy-makers (ibid.: 97–98).6 These are judged along two dimensions: tangible/ intangible and positive/negative. Importantly, by application of the resulting matrix to Western Europe, it was recognized that the presence of an entity may not be consistent across issue areas, but may be variable and multi-dimensional, playing an active role in some areas and a less active one in others (ibid.: 96–97). It is this recognition of variability and multi-dimensionality and of the influence of non-actor forces within the international system that Allen and Smith contributed to the development of actorness theory.

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Christopher Hill’s 1993 article on the capability–expectations gap in relation to Europe in the international arena was the next significant work to emerge in consideration of the formation of EC/EU actor capacity.7 The work draws from and builds upon that of Sjöstedt (1977) and Allen and Smith (1991) in conceptualizing Europe as a non-state actor. In so doing, Hill (1993: 306) recognizes that “the realist view that the state is the basis of power and interest in the international system . . . has correspondingly damaged the Community’s image as a powerful and progressive force in the reshaping of the international system.” Indeed, this can be taken one step further in asserting that the realist conception of international relations damages the perception not only of the European Union, but of any non-state actor. Hill constructs his analysis by extrapolating from the functions the then EC performed, as well as those it is likely to perform in the future (with regard to the structural or institutional requisites the Community would need in order to fulfill these functions). His assertion is that a distinct gap has opened between what the Community is able to do and what it is expected to do, a sort of dissonance of capabilities and expectations (Holland 1995: 557). In so doing, Hill harks back to the heavily structural nature of Sjöstedt’s attempt to understand the role of the EC, reintroducing this approach into consideration of actorness. At the same time, however, Hill’s emphasis on only those requisites necessary for the fulfillment of its functions serves to further streamline the concept of actorness. It is for this reason that The Capability–Expectations Gap has been considered a seminal contribution to the debate. Also of great importance in Hill’s work is the concept of Europe as an international relations system rather than as a foreign policy-making body as such (Hill 1993: 321–325). This contributes to the notions of variability and multidimensionality by allowing the analysis of activities for which decision-making processes may be disparate. That is to say, the concept of an international relations system expands the concept of actorness by recognizing that actor capability may be possessed by a “collective unit,” such as the European Union, rather than reducing analysis to constituent units, thus following the maxim that “the whole is greater than the sum of its parts.” Where Hill had re-established Sjöstedt’s structural approach to actor capacity, he was followed by a number of theorists seeking to incorporate more clearly the concepts of variability and multi-dimensionality into consideration of actorness. With this group, consideration of actorness was taken beyond structural requisites and into consideration of effectiveness. In her 1997 work, for example, Antje Herrberg stresses the need to develop an approach to considering the European Union as a “complex whole,” arguing that “it is the operation of the European Union in a multilevel context encompassing the international environment, the European Commission and its constituent Member States which presents an analytical challenge” (Herrberg 1997: 37). The EU is seen as a system that, at different times and across differing issue areas, will give more or less weight to a number of variables, including the assertion of national identity at the European level, the level of integration in the policy area, the degree


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of independence at the institutional level, and the pressures and constraints inherent within the international system (ibid.: 43–44). As such, it is argued that one of the most important factors in considering EU identity and indeed actorness is system cohesiveness. System cohesiveness is important, states Herrberg, as “the more cohesive, i.e. the tighter, the system is the more effectively it can react to the international system” (ibid.: 45–46), in other words, the more “effective” the international actor will be. As such, a continuum structure is suggested. Richard Whitman’s (1998) consideration of the international identity of the European Union begins with a discussion of identity and, by implication, actorness. At the outset Whitman asserts that the “European Union has an identifiable and coherent international identity” (Whitman 1998: 2), and contends that in considering the nature of this identity one must consider the external relations and Common Foreign and Security Policy (CFSP) aspects together. This stands in contrast to what he identifies as a convention within the literature of maintaining a distinction between the then EC’s external competencies, and those conducted among the member states on an intergovernmental basis (ibid.: 2). Two reasons for this are advanced. The first is that as outwardly directed policies they have important similarities justifying a single framework approach to their analysis. The second is that with the Maastricht Treaty and the establishment of the three-pillared structure, there is now “a single institutional framework that warrants study in totality” (ibid.: 3). To this may be added a third, overlooked by Whitman, that states (the dominant actor in the international arena) make no such sub-division of foreign policy, and it would therefore seem peculiar not to adopt a similar approach when considering non-state actors. What is being posited, therefore, is a conception of the EC/EU as variable and multidimensional, with differing competencies being the subject of varying decisiontaking structures (supranationalism versus intergovernmentalism). By the late 1990s, consideration of actorness had become commonplace and had settled into the pattern established by these earlier works. In 1998 Allen and Smith revisited the notion of presence in a discussion of the European Union’s security role. Spurred on by the continuing evolution of the European project, and particularly by the 1996 Commission Opinion on the Intergovernmental Conference citing as one of its three key aims “making the EU’s presence felt in the world” (Allen and Smith 1998: 53), a core aspect of this work was to consider the transition from presence to purpose, that is, from the pre-actorness phase to actorness itself. In this respect they argue that institutional capacity is of as much importance as collective will, thus reinforcing the notion of actorness as a structural phenomenon. They assert a tripartite formulation constituting learning capacity, carrying capacity and mobilization capacity. In short, it is argued that actorness constitutes the capacity to understand a situation (learning capacity), develop a policy (carrying capacity) and apply necessary and appropriate resources to the achievement of that policy (mobilization capacity) (ibid.: 54–55). Finally, Jupille and Caporaso (1998), too, consider the role of the European Union as an actor, beginning their analysis of the EU’s role in global

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environmental politics with discussion of the concept of actorness. Continuing the established trend, they settle into a highly structural approach, outlining four components of actor capacity: recognition, authority, autonomy and cohesion. Setting aside recognition, acknowledged as being a “minimum condition that adds little substantive understanding of any given entity, but simply registers it on the analytical radar” (ibid.: 215), Jupille and Caporaso’s three primary actorness criteria are focused heavily on policy structures, a result of two factors. The first is the nature of their case study, which looks at negotiation within the UN Conference on the Environment and Development. Actor capacity in such a scenario is essentially a function of its ability to come to common positions at the regional level. Secondly, decision-taking structures are the component of actorness that, in the case of actors such as the EU, illustrate most variation, while the concrete tools for goal achievement (Allen and Smith’s “carrying capacity”) are either present or absent. Given that decision-taking structures and actorness are both variable elements, it is a relatively simple matter to mistake the two as being synonymous. This, in essence, is what Jupille and Caporaso have done, with their actorness criterion focused on the possession of legal competence (authority), institutional distinctiveness and a level of independence from other actors (autonomy), and the ability to reach a common position (cohesion) while giving no consideration at all to the possession of relevant tools. As such, while their work is valuable, it fails to recognize that, in situations other than the multilateral negotiation of their case study, these components of actor capacity may be insufficient. It is, for example, very difficult to conceive how their actorness framework would be sufficient in cases requiring the use of hard power, for example the organization of peace-keeping operations. As such, the framework of actor capacity outlined, while valuable, is incomplete.

Actor capacity: a definition While, as has been seen, there is still no general agreement as to the exact requisites of actor capacity, a coherent framework of actorness may be distilled from the approaches outlined. By applying the recommendation implicit within Hill’s (1993) work that we assess an actor based upon those tasks it is expected to perform, a recognition of variation in task and therefore types of actor is gained. This may be incorporated into the framework of actorness requisites through construction of what is best referred to as a componentry approach to actorness. A componentry approach is one whereby additional analytical tools may be grafted onto a basic framework in order to allow more variegated analysis. The basic framework constitutes those characteristics necessary for actorness, regardless of the type of actor being considered – in essence, it is the “genetic code” by which an actor can be identified. To this may be added any components necessary for consideration of an actor of a particular character. Thus, in order to examine whether a given state is a strong or weak actor, one need simply attach the component that defines the expected roles/functions of a state actor and the value/effectiveness judgments that are to be applied to its attempts


39

to fulfill these roles/functions. In this way, a framework is developed that maintains parsimony in theoretical construction without losing explanatory power.8 According to Sjöstedt (1977: 16), actorness is the “capacity to behave actively and deliberately in relation to other actors in the international system.” This is reinforced by Bretherton and Vogler (1999: 20), who assert that: the attribution of actorness does more than simply designate the units of a system. It implies an entity that . . . is capable of volition or purpose. Hence, a minimal behavioral definition of an actor would be an entity that is capable of formulating purposes and making decisions, and thus engaging in some form of purposive action. Drawing on the paradigm-driven approaches to actorness discussed above, three fundamental requisites of actorness may be identified: action triggers, policy processes/structures and performance structures. Action triggers, a term which refers broadly to the goals, interests and principles of a given organization as well as to emergent situations (e.g. crises) requiring a response, are a recognition that a necessary predicate for any action is cause. Hobbes, for example, premised the social contract on the desire to avoid the state of nature and by so doing ensure the preservation of one’s own existence. Looked at in another way, Sjöstedt (1977: 85) said of action triggers9 that they are “the component of the actor capability which is to give clear instructions of how, and for what purposes, this instrument is to be employed.” The second requisite, policy processes/structures, refers to the ability to take decisions in relation to an action trigger. It is into this category that Herrberg’s (1997) “cohesiveness,” Allen and Smith’s (1998) “learning capacity” and “mobilization capacity,” and Jupille and Caporaso’s (1998) “authority,” “autonomy” and “cohesion” may be reduced. These structures/processes are characterized by the possession of authority to take a decision, by the level of institutionalization of the decision-taking structures, and by the manner in which decisions are taken, all of which may be subject to significant variation. Authority, for example, may be legal (it may be found in international law,10 constitutive treaties11 or constitutions), formal (it is recorded in written instruments which do not possess the status of law), or informal (it is the subject of convention rather than written rules or regulations). These can be perceived as a continuum progressing from informal processes at the “weaker” end12 to legal authority at the other. Institutionalization also conforms to a continuum, ranging from an informal situation where institutions are lacking to a highly structured institutional process. When lines of authority lie at the informal end of the continuum, and when institutionalization is low, decision-taking is subject to inefficiency (where it is possible at all) and could result in a struggle among any existing institutions for jurisdiction. In addition, processes that lack formal or legal status are more readily abandoned by participants, individually or collectively, when their own interests may be served otherwise. The more clearly defined the structure of the authority, and the higher the level of institutionalization, the more stable and predictable will be the

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decision-taking process, with participants being bound by stronger formal or legal ties, and more deeply meshed within institutions from which it is difficult to withdraw. Finally, the authority/institutionalization problem may be eased or exacerbated depending on the manner in which decisions are taken13 – are they, for example, based on a simple majority or is unanimity (with the corresponding possibility of veto) the rule? The third requisite of actor capacity, performance structures, refers to the possession of those structures and resources necessary for the performance of a task once the decision to act has been taken. If an organization does not possess the relevant tools for achieving a goal decided upon, that organization quite simply cannot act. To these fundamental requisites of actorness may be grafted that information defining a specifically regional actor, the core of which can be drawn from the specific circumstances in which such regional organizations have arisen. Increasingly, globalization and transnationalization accompanied by the relative decline, but not withering away, of the nation state have led to a reorganization of certain activities on a regional level. This reorganization received a boost with the end of bipolar antagonism and the corresponding increase of interest in all forms of cooperation within the international system. Fawcett (1995) points to a fear of economic and security marginalization14 resulting from globalization and decentralization of the international system as constituting the underlying rationale for this increasing regional organization,15 and is therefore suggesting a conscious policy of coordination at the regional level. In this respect, a distinction is made between what may be termed regionalism and regionalization (Hurrell 1995; Wyatt-Walter 1995; Gamble 2001), a distinction necessary when considering the emergence of regional actors. Regionalization refers to the development of regional linkages in a nonpurposive (from the perspective of states) manner. It is, in the words of Hurrell (1995: 39), “what early writers on regionalism described as informal integration and what some contemporary analysts refer to as ‘soft regionalism’.” This is seen particularly in the case of economic regionalization, the most important driving forces for which involve markets, private trade and investment flows, the decisions of private companies, etc. (Hurrell 1995; Ohmae 1993). What is being asserted, then, is that linkages, flows, networks and complexes develop between and within states of a region independently of the conscious policy of states, and that correspondingly these linkages, flows, networks and complexes need not accord with the borders of states – “whether they do is an accident of history” (Ohmae 1993: 79). This is, therefore, a non-purposive conception of regional coordination. In contrast, regionalism refers to “a conscious policy of states or sub-state regions to co-ordinate activities and arrangements in a greater region” (WyattWalter 1995: 77).16 Regionalism, therefore, ranges from an engagement in state level discourse in order to coordinate activity to the setting -up of regional institutions such that certain decisions are taken in a manner qualitatively different to that of state-to-state negotiation. Importantly, as recognized by Wyatt-Walter


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(ibid.: 78), where regionalism results in the development of common policy tools, the possibility of acting as a coherent whole in the international system (i.e. some form of actorness) is raised. Regionalism is, therefore, a requisite for actorness on a regional level, while simple regionalization lacks the necessary purposive component. The raison d’être for the formation of a regional organization by states, and its “domestic” purpose, is, therefore, coordination, in whatever field, economic, security, etc., in order to “maximize general welfare” (as defined in the introduction to this volume). Taking economics as an example, the global hyperspace that has emerged in this sphere has led to a de-territorialization of economics such that states, in order to avoid marginalization, band together to create a policy community with greater weight in the international system.17 As Hänggi (1999: 64) said, “the globalization process has been and is encouraging regionalism because the sharp increase in global competition is an incentive for countries and firms to pursue regional strategies as a defence against global competitors from outside the region and as a platform for the improvement of their global competitiveness,” with Rüland (2001: 5) asserting that “nation states, especially weaker and smaller ones, are . . . perceived as responding to the challenges of globalization by pooling resources and bargaining power.” A clear example of this thinking can be seen in Brazil’s pursuit of further, MERCOSUR-centered, integration in South America as “a way to get a better deal from rich countries in global trade talks and in the Free-Trade Area of the Americas” (The Economist 2003: 37). The regional actor, therefore, is a solution to the problem of loss of authority, or de facto sovereignty, in the international and global systems.18 A regional actor may thus be defined as a territorially-based organization, with a determinable identity, constructed by states for the purpose of designing and implementing a set of policies in relation to a given issue or issues, and which are directed towards the improvement of the position of those states on that issue or issues.19 Regardless of the level of integration achieved, a regional actor will remain a construct of these member states, which in turn constitute the primary units of organization of the regional actor. The legitimacy of the regional actor is premised upon the sovereignty of its state units. To cohere beyond this ordering principle is effectively to create a regional super-state, and therefore to leave the ranks of regional actors to join those of state actors. Indeed, if, as has been suggested, regional organization is a defensive measure adopted by nation states attempting to come to terms with the process of globalization, cohering beyond this regional framework may be interpreted as a failure of these states to cope. A cohesive regional unit will appear, according to Hurrell (1995: 44), when the region plays a defining role in the relations between the constituent units of the region, and between those units and third parties, and when the region forms the organizing basis for policy on a number of issues within the region. This latter is clearly related to policy instruments as discussed above. The addition of this regional actor component to the designated framework of actorness again leads to the elaboration of a continuum ranging from the purely

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intergovernmental regional actor as the least cohesive form to a supranational regional actor as the most cohesive. A supranational regional actor at its strongest is one in which the authority to act is premised upon legal foundations, and has been vested in institutions that exist above the level of the state. In this respect it is often characterized by such terms as a “pooling of sovereignty.” The institutional structure of such an actor is likely to be dense, with decisions taken within these structures being premised on simple democratic procedures (majority voting), and which are subsequently legally binding. A sense of collective identity (in terms of a positive connection with others) is likely to be relatively strong, with the process of identification having been facilitated by the supranational structure. Put simply, supranational institutions are arenas for intensive and relatively structured social interaction and consequently constitute relatively sophisticated tools of socialization. As such, while the state remains the basic organizing principle of supranational regional actors, decisions are taken based upon a higher level of social aggregation. In contrast, intergovernmental regional actors are most often, though not necessarily, thinly institutionalized, with bases of authority and structures of decision-taking being of the informal type premised on convention or agreement rather than written or legal texts. Further, decision-taking is generally premised upon unanimity as an organizing principle, a result of the perception of sovereignty as indissoluble. Taken together, this has the effect that norms and processes are non-binding,20 thus placing significant pressure on the cohesion of the grouping in instances where state interests are stronger than the collective norms to which they ascribe. This strain on cohesion will be more evident in an intergovernmental regional actor comprised of a large number of highly differentiated member states. Indeed, as Kraft (2000: 456) stated in relation to the Association of Southeast Asian Nations (ASEAN), “cohesion, while regularly strained by bilateral differences, has not been a problem as long as only ‘likeminded’ countries were involved.” In addition, in an intergovernmental actor comprised of heterogeneous sub-units, the development of a collective identity or consciousness is slower due to the privileging of national positions within the whole. While not going into any great detail, it may be recognized that the European Union and ASEAN occupy markedly different positions in the supranational–intergovernmental continuum of regional actorness. Put simply, ASEAN and the EU constitute qualitatively different types of regional actor. The EU has a Cartesian approach based on the rule of law. It develops along legalistic lines, extending authority through treaties and the legal system, establishing processes and norms that are binding in nature. Fundamental to this is a recognition that sovereignty is divisible. It tends, therefore, to the supranational pole of the continuum.21 ASEAN, on the other hand, is fundamentally intergovernmental in nature. Its authority is formal rather than legal and, correspondingly, is not binding. The Association itself is only thinly institutionalized. While the Treaty of Amity and Cooperation (TAC) of 1976 gave ASEAN’s principles legal status for the first time,22 it underpinned them with a recognition


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of sovereignty-centric norms of cooperation, thus negating any binding authority they may have possessed.

Interregionalism If actorness refers to the ability of an organization to purposively act in the international system, then ipso facto the level of actorness it possesses will dictate the extent to which the organization is able to express itself and achieve its goals externally. It stands to reason, therefore, that it will also affect its ability to engage cooperatively with other actors. One form of such cooperative activity is to be found in the expanding phenomenon of interregionalism. In response to the exponential increase in the number of interregional dialogues throughout the 1990s and the first years of the twenty-first century, a body of literature has emerged seeking to explain the role of such relationships in global governance. A framework of functions has been progressively elaborated, comprising: balancing, rationalizing, agenda-setting, institution-building and collective identity formation.23 Each of these functions, elements of which are highlighted below,24 is predicated on a certain level of actorness on the part of the dialogue partners. When this is recognized, the repercussions for interactions between qualitatively different regional actors such as the EU and ASEAN may be seen. The function of balancing is deduced from realism and the concept of actor competition. This concept, which traditionally related to political and military power, is reapplied in a modern globalized world with the recognition that power is increasingly founded upon economic strength. As a result, the number of entities recognized as significant in the international system has risen considerably, coming to include a range of actors of various types. With the notion of balancing in mind, emphasis is often placed by theorists on the balancing games played within a triad of regional economic superpowers, defined roughly as comprising Europe, North America and Asia. In this context, one of the key roles highlighted by theorists is that of “alliance-style” balancing. Here, interregional relationships between two triadic powers are viewed as alliances which may be utilized as the need arises to oppose unilateral behavior on the part of the third power (Rüland 2001: 6). Such cooperation requires the ability of partner regions to agree on common positions at the regional level, with the flexibility for these to be altered to achieve a common position at the interregional level. This clearly involves a significant level of actorness, which is the reason why such a level of cooperation has not been present to any great extent in EU–ASEAN relations to date. Indeed, theorists have had difficulty pointing to examples of balancing behavior, with the most utilized, that of cooperation on the issue of the Vietnamese invasion of Cambodia, being somewhat dated. Even in this example, however, closer analysis suggests the limitations posed for interregional cooperation by a lack of actorness. While at its best, cooperation concerning the Vietnamese occupation of Cambodia did not progress beyond routine declaratory statements and support for

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UN resolutions, even this low-level coordination was undermined whenever member state positions diverged. This may be seen in relation to recognition of the Coalition Government of Democratic Kampuchea (CGDK), with France and Ireland choosing to abstain until the report of the UN Credential Committee was adopted without a vote in 1983 (Snitwongse 1989: 233), and also in relation to aid where, in spite of the EC having agreed to withhold new aid from Vietnam until the Cambodian question had been resolved, pressure from France, Greece and Ireland subsequently resulted in a decision to donate emergency medical supplies to the Vietnamese. This led to some acrimony at the fourth AEMM in Bangkok in March 1983. EC–ASEAN cooperation was eventually saved through the release of a declaration asserting that no aid should be given to Vietnam “of such a nature as to sustain and enhance the Vietnamese occupation of Kampuchea,”25 a formula deemed to show sufficient European concessions to the ASEAN point of view. This tendency for cooperation to break down in the face of opposing member state interests was the result of severe limitations in the actorness of the two regional organizations in the politico-security arena. The Association was, and still is, intergovernmental in nature. The Community, through its European Political Cooperation (EPC) experiment, was taking the first steps on a path towards greater regional coordination. As with ASEAN, however, EPC was exclusively intergovernmental in nature, premised upon unanimity decisiontaking and the corresponding possibility of member state veto. The result in the eyes of many observers was that “the need for reaching a consensus, often at the lowest common denominator, . . . meant that there [was] more emphasis on procedures than on substance” (Tsakaloyannis 1991: 37). While the EPC system proved itself over time capable of dealing with matters of routine, it proved insufficient in situations where the perceived interests of member states were threatened. In neither ASEAN nor the EC, therefore, were policy processes/ structures sufficient to overcome entrenched member state interests, with intraregional cooperation, and as a result interregional cooperation, being largely dependent on the absence of major internal divisions. What is being argued, therefore, is that alliance-style balancing is dependent upon the absolute level of actorness of the regional organizations. It will only be performed where both groupings pass the necessary threshold of actorness, including the ability to come to collective regional positions. Where any of the partners fail to meet this threshold, alliance-style balancing will not occur. Thus, should the EU’s CFSP progress to the extent necessary, such cooperation will remain a bridge too far in the absence of corresponding development in ASEAN. The limitations posited by a lack of actorness are again to be found in the rationalizing and agenda-setting functions of interregional dialogues. Here it is argued that interregional dialogues allow global issues to be debated at a median level between truly global institutions and nation states, thus alleviating some of the problems inherent within global negotiations (rationalizing), and that the smaller numbers and greater sense of consensus and common interest at the


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interregional level lead to the possibility of establishing a combined negotiating agenda for expression in global negotiations (agenda-setting). As with alliancestyle balancing, however, the extent to which this is possible is dependent on the ability to come to common positions within regional actors. In the case of intergovernmental regional actors, with decision-taking premised on unanimity, decisions reached leave very little room for flexibility. This makes agreeing a subsequent interregional position a virtual impossibility, particularly where the partner also falls at the weak end of the regional actorness continuum. This actorness requirement has meant that, while rationalizing and agenda-setting are potentially the most significant of the deduced functions of interregionalism in terms of global governance, they are also the two least performed in the EU–ASEAN relationship. Thus, while Chairman’s Statements of the various EU–ASEAN meetings routinely report discussions of global multilateral issues, this has not led to cooperation in global fora. Indeed, for the EU, largely due to the disparity in actorness between the two groupings, the EU–ASEAN dialogue is not seen to be a suitable arena for such undertakings. Criticism is leveled at the Association for not being an “interesting partner,” a factor which, it is stated, could be overcome were ASEAN to provide the support of a real bloc of ten countries.26 Where EU–ASEAN relations have produced an outcome in the context of these deduced functions of interregional dialogues, it has been in those areas where either actorness is only tangentially important, or where a qualitative difference in actorness is necessary. The interregional institution-building function of these dialogues, for example, will occur regardless of the level of actorness. The operative factor here is the decision to enter a dialogue. Institutional proliferation is itself not an indicator of substantive cooperation, with institutions simply constituting the arena within which such cooperation may take place. Indeed, in the EU–ASEAN example, the inability to engage on substantive matters has led to a situation in which institutional proliferation has replaced it as an indicator of accomplishment, with the result that the basic framework of dialogue has been supplemented by an array of additional structures and programs over the years, often with little obvious benefit (Doidge 2004a, 2004b). This led one Commission official to comment: It’s clear that we have tried . . . over the last ten years, in different areas to get to a deeper level of integration with ASEAN, and we have failed. What we have been doing is financing left and right certain projects, which are maybe, if you take it all together, not very coherent, but were more or less giving in to the shopping-list of wishes on the ASEAN side.27 Indeed, most recently this process has led to the creation of a whole new structure in the form of ASEM, giving rise to debate over whether both are needed and raising questions as to the future of a specifically EU–ASEAN dialogue. While actorness is of only tangential importance to interregional institution building, it is a key factor in intraregional institution-building. Here the role of

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regional federators or regional integrators has occupied a key place in the literature on interregionalism, and particularly in that on the transregional ASEM process. In this respect Camroux and Lechervy (1996: 450) assert that “the composition, structure and behavior of one region, not only impinges upon, but also serves to structure the evolving nature of other regions,” with Maull and Tanaka (1997: 34–35) going on to acknowledge that, faced in an interregional dialogue by an integrated regional “other,” a grouping is effectively forced to coordinate more closely in order to make its position heard. In order for such an integrative reaction to occur at the regional level, much depends on the nature of the dialogue partner. Most fundamentally, it is necessary that the “other” with whom dialogue is being conducted is itself organized in a regional manner. If this is not the case, there is no external “other” per se, but rather a group of external “others.” In this scenario, there is no clear advantage to be gained by establishing a coordinated approach with other states in the region. This is not to say that there are no benefits to be had from participating as a member of a regional arrangement in a dialogue with a grouping of single states, but rather that such benefit is not sufficient to act as a trigger for the development of regional cooperation. Further, the greater the difference in comparative integration/actorness, the more likely is it that an integrative response will occur among the weaker of the groupings in question. Hänggi (2003), who has undertaken the most valuable investigation of “regionalism through interregionalism” to date, asserts that “the dynamics of interregional relations drive regional states to strengthen intra-regional cooperation, in particular so among the members of the regional entity which exhibits a lower degree of cohesiveness” (Hänggi 2003: 199).28 Thus a strong or supranational regional actor conducting a dialogue with a grouping of independent states is highly likely to trigger an integrative response among those states, while this likelihood is considerably reduced for a weak or intergovernmental regional actor (see Table 2.1). While the clearest examples of this process are to be found in the broader East Asia in the form of the EAEG/EAEC and ASEAN+3,29 indicators can also be seen in the EU–ASEAN dialogue. Here, at the request of the ASEAN Secretariat, the European Commission has been involved in developing programs explicitly targeted at building the capacity of the Association’s institutions.30 The Institutional Development Programme for the ASEAN Secretariat (IDPAS), which ran from 1995 to 1998, and its successor, the ASEAN Programme for Regional Integration Support (APRIS), which was launched in 2004, both aim to build the ASEAN Secretariat as an influential institution within ASEAN and as an effective dialogue partner, using the European Commission as a model. As one Commission official said of APRIS, the program is explicitly designed “to give the Secretariat some ammunition in order to go to the Member States and, using the Union experience as an example, argue for a supranational rather than intergovernmental approach to an issue.”31 In a similar manner, the collective identity formation function, which has most recently been explored by Gilson (2001) in the context of the ASEM

Strong regional actor

No integrative response

May trigger further integration in weaker partner

Triggers cooperation among states

Group B

Strong regional actor

Weak regional actor

States

Group A

Table 2.1 Matrix of most probable regional integrative responses

May trigger cooperation among states


May trigger further integration in weaker partner

Weak regional actor


May trigger cooperation among states

Triggers cooperation among states

States

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process, suggests that regional identities may be formed or reinforced as a result of interaction with an external other. This process is encouraged by the relatively dense framework of interaction that has become increasingly characteristic of interregional dialogues, most clearly seen in the EU–ASEAN example. As with intraregional institution-building, regional identity building is most likely to occur in situations where a heterogeneous or newly formed regional organization (Rüland 2001: 8) is confronted by a significantly more coherent other, “denigrated, feared or emulated” (Ruggie 1998: 873). In the EU–ASEAN example this has clearly been the case, with the Asian values debate being the most frequently highlighted example.32 From the early 1990s, human rights and fundamental freedoms became a recurring element of EU–ASEAN dialogue and dissension, with the nature of the debate being shaped by the configuration of the actors involved. As the stronger partner, the Union set the agenda of debate, though its comparatively higher level of actorness was still not sufficient to bring the Association’s position into line with its own. As the weaker and, indeed, less proactive of the two dialogue partners, ASEAN was cast in the role of responding to the Union position. This was done through the creation of a uniquely Asian view of human rights and fundamental freedoms, premised in part upon a concept of Asian values. Had the comparative level of actorness of the two organizations been reversed, it is likely the issue would have been marginalized.

Conclusion While the above discussion has applied only a very broad brush to the issue, it is clear that the level of actorness of regional organizations, understood in the highly structural terms outlined, will significantly affect the shape of interregional dialogues. In the case of EU–ASEAN dialogue, only those functions for which actorness is unimportant, or for which a qualitative difference in actorness is the causal factor, were performed. As such, the relationship has been characterized by interregional institution-building, and by intraregional institutionbuilding and collective identity formation for which ASEAN was the target. The more advanced, and perhaps “sexier” functions of alliance-style balancing, rationalizing and agenda-setting are not performed in this dialogue, the result of a lack of actor capacity on the part of one or both partners. Building on this, a rough matrix may be formulated projecting which of these functions is likely to be performed in dialogues between varying constellations of regional actors (Table 2.2). If actorness is significant in different ways in different areas, certain projections can be made about the evolution of interregional relations. If the assumption is made that regional actors will, over time, seek to increase their actor capacity, then, as a result, those functions defined as requiring sufficient actorness in absolute terms on the part of all parties to interregional dialogues will subsequently emerge as being able to be performed or performed better.33 However, as the absolute actorness of the parties to an interregional dialogue


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Table 2.2 Performance of functions of interregional dialogues according to actorness of dialogue partners Dialogue partner

Function

Strong regional actor Alliance-style balancing Institutionbuilding

Weak regional actor

Partner affected Strong regional actor

Weak regional actor

Yes

No

Interregional institution-building

Rationalizing Agenda-setting Collective identity formation

Yes Yes No

Interregional institution-building Intra-regional institution-building No No Yes

Alliance-style balancing Institutionbuilding Rationalizing Agenda-setting Collective identity formation

No

No

Interregional institution-building No No No

Interregional institution-building No No No

increases, the comparative difference in actorness will fall. If, therefore, the comparative difference in actorness diminishes, by definition the likelihood that, or the extent to which, these comparative actorness-related functions are performed will be reduced. This is perhaps self-evident, as the stronger a regional actor is in absolute terms, the more likely it is to have a firmly rooted identity and strong intraregional structures. What it means in terms of interregional dialogue, however, is that some of the deduced functions will effectively drop off over time. This, in turn, sets up certain expectations as to the way interregional dialogues between qualitatively different actors will function over time. It can, for example, be expected that the early period of relations will result in institutional proliferation, intraregional institution-building, and collective identity formation. As the actors and the relationship mature, however, it can be anticipated that the intraregional institution-building and identity formation functions will gradually be replaced by substantive cooperation in the form of the alliancestyle balancing function outlined, and importantly also the rationalizing and agenda-setting functions. This may be seen in EU–ASEAN relations, which, despite more than 30 years of dialogue, are still very much in their infancy. Indeed, as one ASEAN official commented of relations with the Union, “we are just planting the seeds now. . . . In future . . . you will see greater harmonization of our stand in various areas.”34

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While allowing some indication of the likely progression of interregional dialogues over time, the above conclusions also establish a set of expectations about the shape a dialogue will take. This facilitates the performance of a cost/benefit analysis by regional groupings prior to opening a dialogue with a new partner, in order to determine whether the likely outcome justifies the input in terms of time and resources. The above conclusions make it clear, for example, that should a strong regional actor enter a dialogue with a weak regional actor, the initial period of relations will garner little in the way of bigticket benefits – the important rationalizing and agenda-setting functions and alliance-style balancing are unlikely to be performed. Rather, these relationships will result in the building of the weaker partner through the processes of collective identity formation and intraregional institution-building. The creation of such a relationship is, therefore, a long-term prospect, with the initial period involving the development of the weaker grouping into a significant partner. In the EU–ASEAN dialogue, this period of “dialogue immaturity” has now spanned more than three decades. Having recognized the likely non-performance of the advanced functions of interregional dialogues when qualitatively different regional actors meet, it must be acknowledged that even if such relationships do not result in the performance of these functions and, indeed, may never yield the sort of regionalism necessary for their eventual performance, the collective identity formation and intraregional institution-building functions will produce greater regionalization and therefore securitization, and contribute to the emergence of regional security communities in the Deutschian tradition. This is a benefit that needs to be explicitly acknowledged in interregional dialogues involving a weak regional actor or disaggregated grouping of states. In considering the creation of a new dialogue with a weaker partner, policy practitioners in strong regional actors would do well to consider this.

Notes 1 As such, it is in the context of this approach that the most significant work on international actors has been undertaken. 2 Sjöstedt (1977: 11–12) argues that there are two approaches to considering actorness. The first concentrates upon the result of action on other actors or on the international system at large and therefore requires a significant input of research resources, thus limiting its value. The second concentrates upon the properties of the actor itself and is therefore diagnostic in nature, also requiring fewer resources than the first approach. It is this option that Sjöstedt favours. 3 By 1998 Allen and Smith accept the necessity for a redefinition of actorness in addition to their own concept of presence. This is discussed below. 4 The term “entity” is used here as Allen and Smith go on to suggest that their framework may be used to consider not only groups and organizations, but also less tangible entities such as ideas, beliefs, etc. 5 While the notion of presence as a “pre-actorness” phase is only implied in their 1991 article, Allen and Smith make it an explicit element of their theory in the follow-up piece published in 1998 (Allen and Smith 1998).


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6 They refrain, however, from developing these factors in detail. It was not until their 1998 work that any consideration was given to structures/processes. 7 Hill revisited this article in a work entitled Closing the Capabilities–Expectations Gap? (Hill 1998). However, as this second work provided no extension to Hill’s theoretical case, concentrating instead on assessing the change in Europe since the 1991 publication of The Capability–Expectations Gap, the article has not been given separate treatment in the following discussion. 8 See the comments of Cerny (2000: 535). 9 The component of Sjöstedt’s analysis most closely related to action triggers is termed by him a “community of interests.” 10 See Bretherton and Vogler’s (1999) discussion of legal personality under international law. Also Neuwahl (1998). 11 See particularly Jupille and Caporaso’s (1998) discussion of the contractual nature of authority in relation to the European Union. 12 Weaker in that they may more easily become the subject of dispute. 13 Jupille and Caporaso’s (1998: 219) “procedural cohesion.” 14 See Kupchan (1997) for discussion of why regional security arrangements matter in this respect. 15 See Telò (2001) for discussion of the origins of various regional arrangements. 16 Hine (1992: 115) forwards a similar definition, suggesting that “economic regionalism can be interpreted as the promotion by governments of international economic linkages with countries that are geographically proximate.” 17 See Kupchan (1997) and Mittelman and Falk (2000) for elaboration of motivations towards regional organization in relation to economics and security. 18 Indeed, Telò (2001: 7) says of new regionalism that it “can be seen as an attempt by states to react [to globalization] by strengthening regional control when traditional centralized national sovereignty no longer functions and to bargain collectively with extra-regional partners.” See also Eliassen and Børve Monsen (2001). 19 This draws on Wyatt-Walter’s (1995: 78) definition of regionalism. 20 After all, a truly sovereign state cannot be bound. 21 Yet, it must be remembered that the Union’s actorness is variable and multidimensional, tending more towards supranationalism in some areas (e.g. the economic sphere) than others (e.g. the politico-security sphere). 22 Its predecessor, the ASEAN Declaration (Bangkok Declaration) of 1976, was essentially a non-binding statement signed by the Foreign Ministers of the founding states announcing the formation of ASEAN and the aims, purposes and mechanisms of cooperation. 23 See Gilson (2001, 2002), Hänggi (1999, 2003), Maull and Tanaka (1997), Rüland (2001). 24 For greater detail on the five deduced functions of interregionalism, and of the place of actorness as a variable moderating their performance, see Doidge (2004a, 2004b). 25 See para. 8 Joint Declaration of the Fourth ASEAN–EC Ministerial Meeting. 26 Interview with Commission official, June 18, 2002, Brussels. 27 Interview with Commission official, June 18, 2002, Brussels. 28 My emphasis. 29 See particularly Hänggi (2003). 30 This therefore constitutes a more overt and purposive example of the process and is therefore somewhat rare. More common is integration as an unintended consequence of interaction with a more coherent other. 31 Interview with Commission official, March 17, 2003, Jakarta. 32 For detail on the debate, see Thio (1997), Doidge (2004a, 2004b). 33 Clearly, if regional actors do not increase their actor capacity over time, the range of functions of interregional dialogues able to be performed will remain narrow. 34 Interview with ASEAN official, April 14, 2003, Jakarta.

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Bibliography Allen, David and Michael Smith (1991) “Western Europe’s Presence in the Contemporary International Arena,” in Martin Holland (ed.) The Future of European Political Cooperation: Essays on Theory and Practice, New York: St. Martin’s Press. —— (1998) “The European Union’s Security Presence: Barrier, Facilitator or Manager?” in Carolyn Rhodes (ed.) The European Union in the World Community, London: Lynne Rienner Publishers. Bretherton, Charlotte and John Vogler (eds) (1999) The European Union as a Global Actor, London: Routledge. Camroux, D. and C. Lechervy (1996) “Encounter of a Third Kind?, The Inaugural AsiaEurope Meeting of March 1996,” The Pacific Review, vol. 9, 3: 442–453. Cerny, Philip G (2000) “Political Agency in a Globalizing World: Toward a Structurational Approach,” European Journal of International Relations, vol. 6, 4: 435–463. Doidge, Mathew (2004a) “East is East . . .”: Inter- and Transregionalism and the EUASEAN Relationship, Ph.D. dissertation, Department of Political Science, University of Canterbury. —— (2004b) “Interregionalism and Regional Actors: The EU-ASEAN Example,” in Wim Stokhof, Paul van der Velde and Yeo Lay Hwee (eds) The Eurasian Space: Far More Than Two Continents, Singapore: ISEAS. Economist, The (2003) “Recruitment Drive,” in The Economist, August 30–September 5, vol. 368, 8339: 37–38. Eliassen, Kjell A. and Catherine Børve Monsen (2001) “Comparison of European and Southeast Asian Integration,” in Mario Telò (ed.) European Union and New Regionalism: Regional Actors and Global Governance in a Post-hegemonic Era, Aldershot: Ashgate. Fawcett, Louise (1995) “Regionalism in Historical Perspective,” in Louise Fawcett and Andrew Hurrell (eds) Regionalism in World Politics: Regional Organization and International Order, Oxford: Oxford University Press. Gamble, Andrew (2001) “Regional Blocs, World Order and the New Medievalism,” in Mario Telò (ed.) European Union and New Regionalism: Regional Actors and Global Governance in a Post-hegemonic Era, Aldershot: Ashgate. Gilson, Julie (2001) “Europe-Asia: the Formal Politics of Mutual Definition,” in Peter W. Preston and Julie Gilson (eds) The European Union and East Asia: Interregional Linkages in a Changing Global System, Cheltenham: Edward Elgar. —— (2002) Asia Meets Europe: Inter-Regionalism and the Asia-Europe Meeting, Cheltenham: Edward Elgar. Hänggi, Heiner (1999) “ASEM and the Construction of the New Triad,” Journal of the Asia Pacific Economy, vol. 4, 1: 56–80. —— (2002) “Interregionalism in Comparative Perspective: In Search of a Typology.” Paper Presented at the Conference on “Inter-Regionalism in International Politics,” Freiburg, January 31 to February 1, 2002. —— (2003) “Regionalism through Interregionalism: East Asia and ASEM,” in Fu-Kuo Liu and Philippe Régnier (eds) Regionalism in East Asia: Paradigm Shifting?, London: RoutledgeCurzon. Hanrieder, Wolfram F. (1978) “Dissolving International Politics: Reflections on the Nation-State,” The American Political Science Review, vol. 72, 4: 1276–1287. Herrberg, Antje (1997) “The European Union in Its International Environment: A Systematic Analysis,” in Alice Landau and Richard G. Whitman (eds) Rethinking the European Union: Institutions, Interests and Identities, London: Macmillan.


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Hill, Christopher (1993) “The Capability–Expectations Gap, or Conceptualizing Europe’s International Role,” Journal of Common Market Studies, vol. 31, 3: 305–328. —— (1998) “Closing the Capabilities–Expectations Gap?” in John Peterson and Helene Sjursen, A Common Foreign Policy for Europe? Competing Visions of the CFSP, London: Routledge. Hine, Robert C. (1992) “Regionalism and the Integration of the World Economy,” Journal of Common Market Studies, vol. 30, 2: 115–123. Holland, Martin (1995) “Bridging the Capability–Expectations Gap: A Case Study of the CFSP Joint Action on South Africa,” Journal of Common Market Studies, vol. 33, 4: 555–572. Hurrell, Andrew (1995) “Regionalism in Theoretical Perspective,” in Louise Fawcett and Andrew Hurrell (eds) Regionalism in World Politics: Regional Organization and International Order, Oxford: Oxford University Press. Jupille, Joseph and James Caporaso (1998) “States, Agency, and Rules: The European Union in Global Environmental Politics,” in Carolyn Rhodes (ed.) The European Union in the World Community, London: Lynne Rienner Publishers. Kraft, Herman Joseph S. (2000) “ASEAN and Intra-ASEAN Relations: Weathering the Storm?,” The Pacific Review, vol. 13, 3: 453–472. Kupchan, Charles A. (1997) “Regionalizing Europe’s Security: The Case for a New Mitteleuropa,” in Edward D. Mansfield and Helen V. Milner (eds) The Political Economy of Regionalism, New York: Columbia University Press. Maull, Hanns W. and Akihiko Tanaka (1997) The Geopolitical Dimension, in Council for Asia-Europe Cooperation, The Rationale and Common Agenda for Asia-Europe Cooperation, CAEC Taskforce Reports, London: Council for Asia-Europe Cooperation. Mittelman, James H. and Richard Falk (2000) “Global Hegemony and Regionalism,” in James H. Mittelman (ed.) The Globalization Syndrome: Transformation and Resistance, Princeton: Princeton University Press. Neuwahl, Nanette A.E.M. (1998) “A Partner With a Troubled Personality: EU TreatyMaking in Matters of CFSP and JHA after Amsterdam,” European Foreign Affairs Review, vol. 3, 2: 177–195. Ohmae, Kenichi (1993) “The Rise of the Region State,” Foreign Affairs, vol. 72, 2: 78–87. Ruggie, John Gerard (1998) “What Makes the World Hang Together? Neo-utilitarianism and the Social Constructivist Challenge,” International Organization, vol. 52, 4: 855–885. Rüland, Jürgen (2001) ASEAN and the European Union: A Bumpy Interregional Relationship, Bonn: Zentrum für Europäische Integrationsforschung, Rheinische FriedrichWilhelms-Universität. Sjöstedt, Gunnar (1977) The External Role of the European Community, Swedish Studies in International Relations No. 7, Farnborough: Saxon House. Snitwongse, Kusuma (1989) “Interaction and Collaboration of the EC and ASEAN in the UN System and International Conferences,” in Giuseppe Schiavone (ed.) Western Europe and South-East Asia: Co-operation or Competition?, Houndmills: Macmillan. Telò, Mario (2001) “Between Trade Regionalization and Deep Integration,” in Mario Telò (ed.) European Union and New Regionalism: Regional Actors and Global Governance in a Post-hegemonic Era, Aldershot: Ashgate. Thio, Li-ann (1997) “Human Rights and Asia Value: At the Periphery of ASEAN–EU Relations,” Journal of European Studies Chulalongkorn University, vol. 5, 2: 27–70. Tsakaloyannis, Panos (1991) “The EC, EPC and the Decline of Bipolarity,” in Martin

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Holland (ed.) The Future of European Political Cooperation: Essays on Theory and Practice, New York: St. Martin’s Press. Whitman, Richard G. (1998) From Civilian Power to Superpower? The International Identity of the European Union, London: Macmillan. Wyatt-Walter, Andrew (1995) “Regionalism, Globalization, and World Economic Order,” in Louise Fawcett and Andrew Hurrell (eds) Regionalism in World Politics: Regional Organization and International Order, Oxford: Oxford University Press. Young, Oran R. (1972) “The Actors in World Politics,” in James N. Rosenau, Vincent Davis and Maurice A. East (eds) The Analysis of International Politics, New York: The Free Press.

Part II

Case studies of Asian–European interregional relations involving government actors

3

Governance, Asian–European relations and regional trade agreements Doris Fischer

Introduction In the last decade of the old century, the process and the consequences of “globalization” were the subject of much attention. Although a “global” definition of “globalization” does not exist as yet, the growing mobility of goods, capital and labor across borders and around the world, with its strong relationship to the development of transport and communication networks, is generally considered to be the most obvious indicator of the globalization process (Held et al. 1999). A similar degree of factor mobility and network development within the borders of a single nation state would represent a great challenge for the respective national government, but it would receive less international attention. In such a case we would expect the national government to come up with appropriate legislative and political strategies to cope with the changes and potential conflicts, as well as new definitions of its own role. If the national government failed in this respect, we would expect a negative impact on the development of that country and we would, ultimately, expect the government to be replaced as a result of a general election, for example. The key characteristic of globalization is its transnational nature. Globalization has not resulted in the establishment of a global government, thus no single government can be held responsible for managing the process of globalization. Yet globalization has been accompanied by a constant evolution of global rules and institutions. Historically, as earlier periods of growth in global trade and financial flows resulted in serious conflicts, organizations and institutions were created after World War II to avoid such troubles in the future. With respect to economic issues, the most prominent of these organizations are the so-called “Bretton Woods institutions,” notably the International Monetary Fund and the World Bank. The World Trade Organization was not established until 1995. Until then, the General Agreement in Tariffs and Trade (GATT) served as the basic instrument with which to achieve trade liberalization and avoid trade disputes. Even critics of the globalization process generally do not question the overall trend of globalization, but criticize the characteristics of current global governance, especially the role of the Bretton Woods institutions.

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Globalization is not the only trend observable in today’s international economics; another trend is regional and interregional cooperation. This trend can partly be explained as a result of globalization, but at the same time it raises questions concerning the specific role of regional and transregional economic cooperation as a means of supporting global governance. How does regional cooperation fit into the general picture of globalization? Does regional integration and cooperation enhance or limit global governance? Are regional integration agreements building blocks or stumbling blocks with regard to global governance? Answers to these questions may be important for economic policy decisions. For example, would it be beneficial for the European Commission to enter into interregional trade cooperation negotiations with individual Asian countries or with the Association of Southeast Asian Nations (ASEAN), or should the EC stick to the multilateral WTO negotiations? This chapter attempts to answer some of these questions and is structured as follows: the first section analyzes different concepts of governance and some specific aspects of global governance. Following a description of recent trends in regionalism, the second section characterizes the relationship between global and regional cooperation. In section three it is argued that multiple regional and interregional agreements may support the process of establishing global governance in some aspects, but they add to the costs of global governance at the same time. The chapter ends with some conclusions concerning the possibility of European–Asian cooperation in trade facilitation, which would be a stepping stone on the way to strengthening global governance. The chapter concentrates on economic aspects of the topic in two ways: first, the basic argument presented is a cost–benefit analysis based on new institutional economics, and second, the argument focuses on trade facilitation as a major element of agreements on economic cooperation between nations and regions.

Governance and global governance Governance has become a concept with a similar degree of popularity in political and economic science. Despite – or perhaps precisely because of – this popularity, no single definition of governance exists. In its basic meaning, governance is related to “govern” and “government” and describes the action or manner of governing. As such it is naturally a topic relating to political science. The Asian Development Bank, for example, describes governance as “the manner in which power is exercised in the management of a country’s social and economic resources for development” (Wescott 2003: 52). The most important difference between the concept of governance used in political and economic science is the object of interest, i.e. governments versus enterprises. Cornelius, for example, understands corporate governance as follows: The stewardship responsibility of corporate directors to provide oversight for the goals and strategies of a company and to foster their implementation.

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[It] may thus be perceived as the set of interlocking rules by which corporations, shareholders and management govern their behaviour.” (Cornelius 2004: 2) In its “World Development Report 2002,” the World Bank defines corporate governance as being “. . . largely a matter of the allocation and exercise of control over resources within firms” (2002: 55). Apart from the different objects of interest, though, the understanding of governance within political and economic science converges on the idea that governance is related to the ability to allocate resources. The difference in the perception of governance in political and economic science blurs even further when we consider that the rules that influence the allocation and exercise of control over resources within firms are not independently set by corporations, shareholders and management, but are embedded in a legal and institutional framework that is at least partly defined by the relevant government. It is for this reason that the World Bank includes not only the ownership structure of firms, but also the institutions that provide legal protection and information for investors in its concept of “corporate governance institutions” (2002: 56). Thus governance refers to “sets of implicit or explicit principles, norms, rules, and decision making procedures around which actor expectations converge” (Krasner 1983). This definition of governance comes very close to the general definition of institutions as used in New Institutional Economics: an institution consists, fundamentally, of informal constraints, formal rules, and the enforcement characteristics of both. Institutions are, of course, crucial to economic development because they regulate, even if imperfectly, the social behaviour of individual citizens. (Furubotn and Richter 1991: 3) It should be noted that the concept of (global) governance is often used in a normative way. First, governance is understood as a prerequisite for human beings to live together; the absence of governance, i.e. of rules of any kind, unrealistic as it may seem, would mean anarchy and chaos. Second, and of greater relevance, governance is implicitly or explicitly used as a synonym for “good governance,” with the latter referring to rules that ensure the functioning of markets and favor liberalization. Global governance in the sense of “good global governance” is supposed to enhance global welfare due to successful liberalization. It is expected to limit transaction costs, as global rules and transparency reduce the risks of international trade and investment. Global governance is said to reduce discrimination against single countries or regions, as it aims at the harmonization of rules. Some observers expect it to support sustainable ecological and social development, since global rules might be implemented for ecological and social standards and should thus limit the possibility of ecological and social “dumping.”

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Global governance and regional integration Economic literature on regional integration distinguishes real economic integration on the one hand and institutional cooperation as well as institutional integration on the other.1 While real integration focuses on integration via the exchange of goods and factors, i.e. trade and investment flows as well as factor mobility, institutional cooperation describes all forms of cooperation that do not limit the sovereignty of the countries involved and are generally less legally binding, but which still aim at cooperative activities with other countries or regions. Possible examples of institutional cooperation are cooperative participation in trade fairs, alignment of standards, trade policy alliances, etc. Institutional cooperation is not necessarily practiced at the level of governments; more often it is actually based on initiatives taken by enterprises or economic associations. Regional institutional integration goes further than institutional cooperation. The classic forms of regional institutional integration or regional trade agreements (RTA) are free trade areas (FTA), customs unions, single markets, and economic and currency unions, with the degree of institutional integration being lowest for FTAs and highest within an economic and currency union (Balassa 1961: 5).2 These three forms of regional economic integration are interrelated (OECD 1995: 25). Real integration may enhance institutional cooperation, as growing flows of goods and factors between two or more countries raise the possible benefits of coordination and may lead to common interests. Institutional cooperation can help prepare institutional integration as it establishes forums for communication. Institutional integration, on the other hand, will normally enhance real market integration, as it lowers barriers to trade and investment. One important feature of regional economic integration is reciprocity, i.e. unilateral liberalization by one country or region towards others is not counted as regional integration (World Bank 2005: 28). Given this classification of regional integration, the concept of governance pertains to institutional cooperation and institutional integration (see Figure 3.1). Both institutional cooperation and integration establish “principles, norms, rules, and decision making procedures around which actor expectations converge” (Krasner 1983), though governance by institutional integration certainly has deeper impact. Global governance has many parallels to regional cooperation and integration as it is the result of multilateral institutional cooperation. The difference between global governance and regional governance is principally one of scope. By definition, global governance is based on rules that have a global reach, whereas regional governance is limited to a certain region and a smaller number of countries. But does regional integration enhance global governance?3 At first glance, this seems to be the case. Let’s assume that two regions, A and B, both establish institutions of cooperation, i.e. both engage in some kind of trade facilitation. Region A agrees to lower the average tariff rate to a certain level among member countries and region B does the same for the countries of region B. This could make it easier in the next round of multilateral negotiations for trade facil-


Institutional integration

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Governance

Institutional cooperation

Real economic integration

Figure 3.1 Transnational governance concepts.

itation to globally lower the tariff rate to the level already reached in A and B. Or if A arrives at establishing a common standard for certain types of goods and region B does the same, then it could be easier to establish the same standard at a global level. Regional integration within region A and within region B could enhance global integration as long as the two regions pursue the same goal. The regional integration processes would somehow prepare the establishment of rules on a broader basis (see Figure 3.2). If everyone agrees that global governance, i.e. liberalization and trade facilitation at the global level, is the ultimate goal, one would expect regional integration to be favorable for global integration and global governance. This is, in fact, the basis on which the WTO tolerates regional economic agreements.4 The above example of regional integration in region A and region B clearly enhances global integration and global governance. This seems rather too simplistic, however. First of all, the question is not just whether integration within two regions is helpful for global governance. In reality, we are facing multiple processes of institutional integration between different regional entities at the same time (see Table 3.1). Furthermore, the example ignores the complexity of institutional integration, both ex ante (the negotiation process) and ex post (the implementation). In particular, it neither takes into account the transaction costs, nor the political economy of bargaining related to integration.

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Global governance

A

B

Real economic globalization

Figure 3.2 Regional integration and global governance. Table 3.1 Examples of multiple regionalism Examples

Institutional cooperation

Institutional integration

Global Interregional Intra-regional

G 7/G 8, G 20 ASEM ASEAN, ASEAN + 3, SAARC China–ASEAN Japan–ASEAN, India–ASEAN EU–Japan regulatory reform dialogue China–Australia

WTO, IMF, World Bank APEC EU 12, EU 15, AFTA, ADB, Chiang Mai China–AFTA

Region – Single country

Bilateral

Singapore–US Singapore–Australia Singapore–Japan China–Hong Kong

Source: author’s own compilation.

Multiple regionalism and global governance The current interest in regional economic integration is strongly related to the rapidly growing number of regional trade agreements that have been signed since the beginning of the 1990s (see Figure 3.3). This boom started after the collapse of the Soviet Union when Eastern European countries entered into bilateral agreements with Western European countries and with each other.


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180 160

Number of RTAs

140 120 100 80 60 40 20

04

00

20

96

20

92

19

88

19

84

19

19

80 19

76 19

72 19

68 19

64 19

60

56

19

52

19

19

19

48

0

Year

Figure 3.3 Expansion of RTAs (source: WTO, www.wto.org/english/tratop_e/region_e/ summary_ e.xls).

Some of these agreements were signed in preparation for the Eastern European countries’ accession to the EU. This process raised the number of RTAs, but did not change the general pattern of regional economic integration. The continuing boom in RTAs since the second half of the 1990s has different origins and appears to be more important in terms of global governance (World Bank 2000). One factor that has triggered regional economic integration since the late 1990s was the Asian financial crisis. After the crisis, countries within the region felt a growing urge to cooperate more closely in order to avoid similar difficulties in the future. Since the crisis showed that the region’s economies were already interdependent in real terms, closer policy coordination seemed a logical step. In addition, the handling of the crisis by the IMF was criticized throughout the region, resulting in discussions about whether Asia needed an Asian Monetary Fund. The latter has not materialized, but the continuing endeavor to further institutional cooperation and integration within Asia, as documented by the Chiang Mai Initiative (Park and Wang 2005: 91) and the agreements made by ASEAN with China, Japan and India, show the continuing impact of the Asian financial crisis on the political attitudes to regionalism among Asian countries. At the same time, global confidence in the chances of a new multilateral negotiation round between the members of the WTO receded following the failed ministerials of Seattle, Doha and Cancun. In the face of protracted multilateral negotiations, bilateral and regional agreements have gained in attractiveness. Economic literature has pointed to two new characteristics of the recent boom in regional cooperation and integration.5 First, the concept of a “new” regionalism argues that recent regional economic integration is a result of successful

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global liberalization (i.e. global governance). While “old” regionalism was primarily regarded as a means of enhancing real economic integration, new regionalism tries to handle the consequences of deepened integration and interdependence within the real economy. Growth in regional flows of goods and factors can occur because global liberalization has reduced the importance of transaction costs resulting from trade barriers. As soon as artificial barriers to trade become less important, geographical vicinity, cultural similarities, etc. gain more importance as determinants of trade and investment. This characterization of “new” regionalism strongly corresponds to what we can observe in Asia (Langhammer 2003: 250). A second feature of recent regionalism is the development of a pattern described as “hubs and spokes” (Pangestu and Gooptu 2003: 90; Lloyd and MacLaren 2003). This metaphor refers to the fact that a growing number of countries (regions) are willing to sign multiple regional trade agreements (RTAs), whereas in the past countries were generally only involved in one regional agreement. Multiple agreements put the respective country in the position of a hub: it benefits from the advantages of a number of RTAs, while so-called “spoke” countries have only agreed upon institutional integration with one “hub” (see Figure 3.4). Countries that are neither hubs nor spokes form the rest of the world. This pattern creates two levels of discrimination, with the spokes being in a somewhat better position than the rest of the world, but still in an inferior position relative to the hubs. Taking the development of RTAs, the different types and new patterns of regional integration into account, the interrelation between regional integration and global integration, i.e. global governance, is obviously more complex than the example of regional integration in region A and region B reflects (i.e. they

Country 1: Hub

Country 1

RTA 2 RTA

RTA 1

RoW Country 2

Country 2: Spoke

Old

New

Figure 3.4 Old versus new regionalism.

RoW

Country 3: Spoke


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add up to “better global governance”). In fact, regional agreements often overlap and are sometimes even contradictory. As a result, their function in terms of global governance is far more difficult to assess. Global governance through regionalism One major argument in favor of regional trade agreements as a stepping stone on the path to global governance is the reduced number of participants in negotiations. It would seem to be easier for ten countries to reach a consensus than for one or two hundred countries to do so, for example, as it ought to take less time for them to find a common denominator in terms of liberalization goals. And due to the higher degree of transparency, it might be easier to achieve a compromise on disputed issues as well. This may be especially true if we assume that countries negotiating regional trade agreements select their negotiating partners on the basis of presumed similarity of goals due to the fact that they belong to one geographic region or that they already have strong economic ties based on trade and investment. The possibility of producing results in a shorter time might also be important to ensure the interest of politicians and the support of the public vis-à-vis the integration process. Politicians subject to re-election tend to favor projects that produce results within a certain time frame and that will be conducive to their re-election (Downs 1968; Blinder 2005). Thus they might prefer regional agreements to – for example – WTO negotiation rounds, which according to past experience could easily extend over long periods of time. In addition, shorter and more transparent negotiations on a regional level are potentially easier to explain to the public than more complex global negotiation processes. Apart from these advantages accruing from the political reality of negotiations, regional trade agreements have further positive influences in that they build institutional capacity, particularly know-how needed for bargaining purposes. This is especially true for countries that are less experienced in negotiating international agreements. If each trade agreement is understood as a process of learning, negotiations for regional trade agreements produce a learning curve for the administration, thus reducing the cost of participating in future (global) negotiations. A final argument in favor of regional agreements being building blocks for multilateral agreements is the possibility to set the agenda for future negotiations. For example, if countries within a certain region are able to reach a consensus on how to deal with the specific problems of developing countries in the process of liberalization, this consensus might define the baseline for further negotiations on a global level (Shams 2001: 7). In sum, the arguments in favor of regional trade agreements as a means to support global governance are mainly process-orientated.

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Global governance versus regionalism In contrast, skepticism concerning the positive impact of regional trade agreements on global governance focuses more on the results of regional trade liberalization and its impact on global governance. Technically speaking, regional trade agreements contradict the “most favored nation” principle of the WTO. Theoretically at least, WTO members have agreed to apply favorable trade conditions to all their WTO trading partners in a non-discriminative way. As such, regional trade agreements fall short of the global governance standards for trade as established by the WTO. The WTO tolerates RTAs on the assumption that they are conducive to global negotiations in the long run. Nevertheless, regional trade agreements create an insider–outsider problem, as some countries may remain outside a specific regional agreement. The regional agreements may have negative outcomes for these outsider countries due to diversion effects on trade and investments brought about by these agreements. Though regional trade agreements may seem more attractive due to a shorter negotiation time, they do not necessarily lessen the overall time required for global negotiations, nor reduce the costs involved. Regional trade agreements are not trivial two- or three page documents,6 but are generally complex contracts that specify the conditions of cooperation in detail (tariffs, rules of origin, special conditions, etc.). Any alignment of a greater number of these agreements for the purpose of multilateral agreements might be more complicated than negotiating from scratch.7 First, the hub-and-spoke pattern (or “spaghetti bowl” pattern) of recent RTAs reduces transparency. Anecdotal evidence shows that even within the administration of one country, individual governmental departments involved in trade negotiations are sometimes not familiar with the details of agreements already reached with other countries or regions. Regarding the argument that regional trade agreements contribute to institutional capacity-building, the exact opposite might actually be the case as soon as countries enter into a larger number of RTAs and are involved in numerous parallel negotiations and agreements. Second, a given government administration only has limited personnel resources qualified to take part in trade negotiations. Therefore, pursuing negotiations and implementing more than one integration process at any given time might turn out to be a difficult undertaking (Asian Development Bank 2006). The number of integration processes that could be handled successfully by a given number of staff would be limited at least. Thus it seems realistic to assume that a government or a politician responsible for (regional and global) integration processes would carefully weigh up the expected costs and benefits of possible RTAs and only enter into those negotiation processes that seem viable and promise high net benefits.8 Two arguments arise from this perspective. First, if only the real economic effects of trade liberalization are taken into account, the gross benefit of any RTA would be the overall degree of liberalization reached. The net benefit from the perspective of a single negotiating country would be the


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Net benefit

Accessible net benefit

Accessible benefit curve

Benefit

Gross

Transfer

Number of transnational governance projects

Figure 3.5 Benefits from transnational governance projects (source: Petri 2002, adjusted).

residual remaining after deducting the transfer costs, i.e. the concessions made to other countries. Depending on the expected transfer costs, the agreement with the highest possible gross benefit would not necessarily be the agreement with the highest net benefit. Second, if political and personal factors are included in the calculation, the expected net benefit might deviate even more from the expected gross benefit in real economic terms. In any case, while evaluating the benefits of possible regional governance projects, the respective government or negotiator would line up the possible agreements according to their expected net benefit (see Figure 3.5) and start by negotiating the most promising one. Parallel negotiations for further agreements or for progress in global governance would either raise the governance costs (additional personnel, additional transaction costs of internal cooperation and strategy alignment) or they would have to be postponed due to capacity constraints.9 It is certainly difficult to assess exactly how many RTAs a government can handle at a time, but it seems plausible to assume that even if learning processes lower the cost of entering into an additional negotiation process to some degree, the governance costs due to an expanding number of negotiators and the loss of transparency limit the possible number of RTAs that can be negotiated at any given time. As a result, the government will only enter into negotiations for a

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Cumulative net benefit/costs

Negotiation cost curve

Cumulative accessible benefit curve

G*

Number of trans-regional governance projects

Figure 3.6 Optimal degree of multiple regionalism (source: Petri 2002, adjusted).

new regional trade agreement if the expected net benefit of trade liberalization is higher than the expected governance costs. This also holds true for multilateral negotiations: the more governments are involved in regional trade agreements, the less capacity they will have left for the multilateral process (World Bank 2000: 104). This argument might not have been as important in earlier times, but seems to gain in importance with the proliferation of regional agreements and, especially, with the expansion of the huband-spoke patterns of bilateral trade agreements evident in recent years. Just as RTA negotiations might divert a government’s interest and capacity from other (multilateral) agreements, the implementation of RTAs also produces additional costs, the most prominent example being the “rules of origin” that define which goods are classified as goods produced in a country included in the RTA. This clarification is necessary to avoid third countries or regions profiting from the RTA by channeling their products through a country within the RTA, but without actually producing them there. The act of defining rules of origin might not seem to be too complicated, but each new RTA definitely complicates the work of the customs authorities, who have to determine the country of origin and the relevant tariff for goods crossing national borders. In short, the advantages of regional trade agreements as far as the overall target of global governance is concerned are less obvious than sometimes assumed. The willingness of the negotiating partners to enhance global liberalization and global governance notwithstanding, in reality problems such as the


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loss of transparency, the costs of aligning the results of different agreements and the strains on a government’s capacity will limit the possibilities that governments have to join the multilateral process with equal motivation and resources. The question then arises as to why RTAs proliferate even though everyone stresses the importance of multilateral negotiations and despite the fact that the above-mentioned arguments raise doubts concerning the rationality of regional integration as long as global governance is perceived as a common goal. One problem might be that the “opportunity costs” of regional agreements, i.e. the time and capacity diverted from the multilateral process, are very difficult to calculate, while the benefits of RTAs are easier to quantify.

Regional integration between Asia and Europe? Europe is probably the region with the longest tradition of close institutional integration. Regional cooperation in Asia can also be traced back to the 1960s, although the level of institutional integration used to be low. ASEAN, for a long time the most important forum of regional cooperation in Asia, has often been described as being weak because of a lack of institutional integration. Instead, integration was mostly based on real economic integration and institutional cooperation (OECD 1995: 29). The former became even more important as the success of global trade liberalization was conducive to the development of regional trade in goods and factors. Europe, on the other hand, started with institutional integration, which then resulted in ever-closer real economic relations between the member countries. In the past the EU has signed bilateral FTAs with quite a number of countries, especially with countries in Eastern Europe, but so far the EU has refrained from jumping on the bandwagon of new regionalism and has supported the multilateral process instead. Several interregional agreements with other economically integrated areas are being prepared by the EU, though (UNCTAD 2004). An important feature of the EU is that individual EU member countries are not entitled to negotiate or sign bilateral agreements. Recent developments in economic integration and cooperation in Asia are being observed with a degree of uneasiness by the EU. On the one hand, an interregional economic cooperation seems to be in progress within ASEAN that – at least in some respects – takes EU history as its example. Furthermore, the establishment of a huge FTA including the ASEAN member states and China at the very least is in preparation. This raises the question of whether the time has come for signing an interregional agreement with Asia, which, for lack of alternatives, would necessarily be an interregional agreement with ASEAN. Such an agreement would fit into the pattern of international cooperation the EU has followed in recent years and it would give the EU the reassurance of being somehow involved in the regional processes taking place in Asia. Such an agreement could also have an agenda-setting function for multilateral negotiations (WTO negotiation rounds), as countries at different stages of economic development would be involved.

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On the other hand, individual Asian countries currently seem to favor bilateral agreements that will most likely create a “hub and spoke” pattern of institutional integration and that transgress the boundaries of ASEAN and even Asia (Lloyd 2002). This development is having a deep impact on the overall transparency of Asian regional integration. It raises questions concerning the relevance of ASEAN and the usefulness of the Asian integration process in terms of multilateral integration. In addition, it is not quite clear how the different hubs and spokes would influence the negotiation process for an interregional agreement (Daquila and Le 2003). Given the multitude of agreements related to Asian countries, the regional networks of production and the patterns of division of labor along the value chain across Asian country borders, negotiations of the terms of trade facilitation, especially rules of origin, for an interregional agreement with ASEAN would necessarily be complicated. Would it be more suitable for the EU to enter into region-single country negotiations then?10 Given the above analysis of the costs of proliferating bilateral agreements in terms of multilateralism, this would probably be the least favorable alternative. It would be a costly process, the advantages of which are far from obvious, especially if compared to successful multilateralism. So far, the official policy of the EU towards economic integration with Asia seems to reflect the above rationale: while multilateralism is still officially preferred, an interregional trade facilitation agreement is not ruled out in principle. Yet, at the same time, the European Commission has recently emphasized the possibility of signing bilateral “region-one country” agreements (EC 2003; Financial Times September 18, 2006). It remains to be seen whether such treaties will become reality and what impact they will have on interregional relations and multilateralism.

Notes 1 Real market integration is often named “market-led integration,” whereas institutional cooperation and integration are summarized as “policy-led integration” (OECD 1995). 2 In practice, RTAs often include provisions that go beyond trade facilitation. At the same time many exclude certain categories of goods (World Bank 2005: 28). 3 The ongoing debate among economists as to whether regional trade agreements are building blocks or stumbling blocks for multilateral liberalization was originally triggered by Bhagwati (1991). For a recent overview of the debate and the various positions held, see Limao (2005). 4 Article XXIV of the GATT allows an exception to the general principle of nondiscrimination for customs unions and free trade areas as long as they go all the way to elimination. 5 For an analysis of former waves of regionalism see Bhagwati (1992). 6 See Koh and Liu (2004) for an insight into the process of RTA negotiations and capacities involved. 7 This is especially true if regional integration develops into a strategic coalition to “realize common economic goals and enforce them against possible opposition from other world economic agents” (Shams 2001: 13). 8 This argument is based on Petri (2002: 282ff.), who argues similarly to assess the chances for successful WTO negotiation rounds.


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9 Rodrik (1998) has explained the phenomenon of growing government expenditures in the cause of trade liberalization due to the need to provide social insurance. It would be of interest to calculate how the size of government correlates with countries’ involvement in regional integration processes and agreements. 10 Due to political factors the EU prefers to exclude Myanmar from a possible agreement. This may imply the necessity to negotiate bilateral agreements with ASEAN members. See International Herald Tribune, October 9, 2006.

Bibliography Asian Development Bank (2006) Regional Co-operation and Integration Strategy. Available online at: www.asiandevbank.org/documents/policies/RCI-strategy/final-RCIstrategy-paper.pdf. Balassa, B. (1961) “Towards a Theory of Economic Integration,” Kyklos, vol. XIV: 1–17. Bhagwati, J. (1991) The World Trading System at Risk, Princeton, N.J.: Princeton University Press. Bhagwati, J. (1992) “Regionalism versus Multilateralism,” The World Economy, vol. 15, 5: 535–555. Blinder, A. S. (2005) Economic Advice and Political Decisions: A Clash of Civilizations? (CEPS Working Paper No. 112), Princeton: Princeton University. Cornelius, P. (2004) “Corporate Practices and National Governance Systems: What do Country Rankings Tell Us?,” in Deutsche Bank Research, Research Notes, Working Paper Series No. 16. Daquila, T. C. and Le, Huu Huy (2003) “Singapore and ASEAN in the Global Economy – The Case of Free Trade Agreements,” Asian Survey, vol. 6, Nov/Dec: 908–928. Downs, A. (1968) An Economic Theory of Democracy, New York: Harper. European Commission (2003) Communication from the Commission: A New Partnership with South East Asia, COM (2003) 399/4. Available online at: http://europa.eu.int/ comm/external_relations/asia/doc/com03_sea.pdf. Furubotn, Eirik G. and Richter, Rudolf (1991) “The New Institutional Economics: An Assessment,” in Furubotn, Eirik G. and Richter, Rudolf (eds) The New Institutional Economics (A Collection of Articles from the Journal of Institutional and Theoretical Economics (JITE), Texa A. and University Press, pp. 1–34. Held, D., McGrew, A., Goldblatt, D. and Perraton, J. (1999) Global Transformations, Cambridge: Polity Press. Koh, T. and Liu, Li Chang (eds) (2004) The United States Singapore Free Trade Agreement – Highlights and Insights, Singapore: Singapore Institute for Policy Studies. Krasner, Stephen D. (1983) International Regimes, Ithaca: Cornell University Press. Langhammer, R. J. (2003) “Alternative Integrationskonzepte: Theoretische Begründung, empirische Befunde und pragmatische Implikationen,” in D. Cassel and P. Welfens (eds) Regionale Integration und Osterweiterung der Europäischen Union (Schriften zu Ordnungsfragen der Wirtschaft Bd. 72), Stuttgart: Lucius & Lucius. Limao, N. (2005) “The Clash of Liberalizations: Preferential Trade Agreements as a Stumbling Block to Multilateral Liberalization,” comments prepared for the conference in honor of Jagdish Bhagwati’s 70th birthday, New York, Columbia University, August 5–6, 2005. Lloyd, P. (2002) New Regionalism and New Bilateralism in the Asia-Pacific, ISEAS Visiting Researchers Series Paper No. 3, Singapore. Available online at: www.iseas.edu. sg/vr32002.pdf.

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Lloyd, P. J. and MacLaren, D. (2003) “The Case for Free Trade and the Role of RTAs,” Paper presented at a Seminar on Regional Trade Agreements and the WTO, Geneva, January 14, 2003. Available online at: www.wto.org/english/tratop_e/region_e/ sem_nov03_e/maclaren_paper_e.pdf. OECD (1995) Regional Integration and the Multilateral Trading System – Synergy and Divergence, Paris: OECD. Pangestu, M. and Gooptu, S. (2003) “New Regionalism: Options for China and East Asia,” in K. Krumm and H. Kharas (eds) East Asia Integrates: A Trade Policy Agenda for Shared Growth, Washington, DC: World Bank. Park, Y. C. and Wang, Y. (2005) “The Chiang Mai Initiative and Beyond,” The World Economy, vol. 28, 1: 91–101. Petri, P. A. (2002) “Globalization on the Rocks,” in K. T. Lee (ed.) Globalization and the Asia Pacific Economy, Pacific Trade and Development Conference Series, London and New York: Routledge. Rodrik, D. (1998) “Why Do More Open Economies Have Bigger Governments?,” Journal of Political Economy, vol. 106, 5: 997–1032. Shams, R. (2001) Why Do Countries Form Regions? The Political Economy of Regional Integration, HWWA Discussion Paper 169, Hamburg: Hamburg Institute for International Economics. UNCTAD (2004) World Investment Report 2004. Available online at: www.unctad.org. Wescott, C. G. (2003) “Measuring Governance in the Asia-Pacific Region and its Relevance for Tax Administrators,” Asia-Pacific Tax Bulletin, vol. 9, 2: 51–57. World Bank (2000), Trade Blocs, Washington, DC: World Bank. World Bank (2002), World Development Report – Building Institutions for Markets, Washington, DC: World Bank. World Bank (2005) Global Economic Prospects – Trade, Regionalism, and Development, Washington, DC: World Bank.

4

Interregional trade and investment between Asia and Europe An empirical investigation Hanns Günther Hilpert and Klaus-Jochem Kecker

Since both Asia and Europe maintain a well-developed and important political and security relationship with the United States and have rather weak political and security ties with each other, some observers rashly conclude that Asia–Europe trade and investment ties are also secondary when compared to transpacific and transatlantic relations. Asia–Europe interregional economic relations are thus considered the weak link in the global economic triangle between North America, Europe and Asia. As will be shown in the following, the empirical reality is rather differentiated and less negative. The following analysis investigates the status of the Asian–European relationship in economic terms and takes both regions’ relations to the US or to the North American Free Trade Agreement (NAFTA, i.e. the US, Canada and Mexico) as a benchmark. On the Asian side, the analysis will focus on Japan, China, India, the NIEs-4 (Hong Kong, Korea, Singapore and Taiwan) and the ASEAN-6 (Brunei, Indonesia, Malaysia, the Philippines, Thailand and Vietnam), which will collectively be referred to as “Asia”; and on the European side, it will focus on the EU-25, the EFTA-2 (Norway and Switzerland) and Russia, which together will be referred to as “Europe.” Asia and Europe also include other countries in a geographical sense, of course, but their small shares in international trade and investment may be neglected for the purpose of the present analysis. Because of lack of data, the subsequent analysis of interregional investment considers an even smaller set of countries. Having discussed the quantitative importance of Asia–Europe economic links, we attempt to classify the countries in our sample into regional and sub-regional groups on the basis of their trade relations, comparing groups for 1988, 1995 and 2005. By so doing, we aim to shed light on de facto as opposed to formal trade relationships both within the regions and interregionally.

Trade between Asia and Europe Our investigation on Asia–Europe trade and investment starts from the assumption that international trade is generally welfare-enhancing and economically advantageous for the parties involved. As a result of foreign trade, industrial

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specialization is increased, the international division of labor is deepened, resource allocation is optimized and subsequently domestic growth and development can be propelled. This foreign trade theorem is almost unanimously shared among economists. As a logical consequence of this assumption, foreign trade policy should promote international trade through import liberalization and export promotion. Export relations are seen as especially important for trade policy incentives because they determine a country’s international revenues to a significant extent and thus influence a number of other important economic policies as well. The position of Asia and Europe in world trade With respect to total world trade (exports and imports) amounting to about US$21 trillion in 2005, Europe had a share of 41.1 percent, Asia 25.9 percent and North America 17.3 percent (see Table 4.1) respectively.1 If intracommunity trade is removed, however, the relative weights of the three large trade regions are more evenly distributed. Then Europe’s dominance as the world’s most important trading region is reduced and Asia comes out on top with a share of 34.3 percent, followed by North America (22.9 percent) and Europe (22.0 percent). In comparison with the year 1994, both Europe’s and North America’s share in world trade have shrunk, whereas the share held by Asia has expanded. Asia–Europe trade volumes in absolute values Judged by the large size which the trading regions of Asia and Europe represent, the two regions’ interregional trade still looks rather small (see Figure 4.1). The Table 4.1 Share of world trade of the three largest world economic regions in 1994, 2002 and 2005

Europea Asiab North Americac

1994 2002 2005 1994 2002 2005 1994 2002 2005

Including intra-community trade, in percent

Excluding intra-community trade, in percent

42.8 41.0 41.1 25.6 24.7 25.9 19.4 20.4 17.3

28.9 25.8 22.0 31.5 31.5 34.3 24.0 26.1 22.9

Source: Our own calculations based on IMF, Direction of Trade Statistics. Notes a Europe (2002 and 2005): EU-25, EFTA-2, Russia. Europe (1994): EU-15, EFTA-2, Visegrad-4 (Czech Republic, Hungary, Poland, Slovakia), Russia. b Asia: Japan, China, India, NIEs-4, ASEAN-6. c North America: US, Canada, Mexico.

Asia–Europe trade and investment

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total volume of intraregional trade both within Asia and within Europe is much higher. Intraregional trade in both regions even increased during the 1990s and in the first years of the new century due to the re-integration of Central and Eastern Europe within the European division of labor, the intensification of the transnational industrialization process in East Asia and partly because of intraregional trade preferences (thus causing trade diversion). Moreover, the volume of both regions’ export trade with North America has grown, too. However, both regions’ mutual imports, i.e. Asia’s imports from Europe and Europe’s imports from Asia are higher than both regions’ respective imports from North America. Furthermore, it is notable that Asia maintains a large – and constantly increasing – trade surplus with both Europe and North America. Compared to North America’s deficit, however, Europe’s trade deficit with Asia is smaller. From a global perspective, transpacific trade is by far the strongest interregional trade link. In comparison, the total turnover of both Asia–Europe and transatlantic trade is much smaller. Historically speaking, Asian–European trade grew very strongly in the 1980s and 1990s from a low starting level. In fact, the year 1991 marked a historic turning point in international trade relations. For the first time, trade between Europe and Asia surpassed transatlantic trade.2 In other words, within less than two decades, trade across the Atlantic was not only overtaken by trade across the Pacific, but became the weakest link in triadic trade relations. Asian–European trade has become the most dynamic interregional trade in the global economy. Only in the period from the mid-1990s to 2002 transatlantic trade again grew more rapidly than both Europe’s and North America’s trade with Asia. The main driving forces behind the rebound of

Europe

US$

n

illio

.6 b

4 $ 23

US

US$

6 bi

.

399

US$

llion

430

294

.4 b

.8 b

illio

n

illio

n

US$ 575.2 billion North America

Asia US$ 246.4 billion

Figure 4.1 Trade flows (export values) between Asia, Europe and North America in 2005 (source: calculations based on IMF statistics: Direction of Trade Statistics).

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transatlantic trade were the long-sustained economic boom in the United States and Canada (1993–2001) and the Asian financial and economic crisis (1997–1999). Relative shares in Asia–Europe trade What is the relative importance of Asian–European trade from the European and from the Asian perspective? Table 4.2 shows the percentage shares for the years 1994, 2002 and 2005. As can be seen, as a trading partner Europe has been growing overall more important for Asia. Continuing a trend that started in the early 1980s, Europe’s share in Asia’s import market grew slightly from 14 percent in 1994 to 14.6 percent in 2002, but fell back to 12.7 percent in 2005. However, it’s still higher than North America’s share, which fell from 18 percent to 11.8 percent. Meanwhile, Europe has become more important as a market for Asian exporters: its share (in Asia’s exports) expanded from 13.9 percent (1994) to 15.8 percent (2002) and 16.2 percent (2005) and thus reversed the formerly dominant trend of declining European shares in Asia’s exports. In comparison, North America’s share fell from 1994 (28.5 percent) to 2002 (24.6 percent) and to 2005 (21.7 percent), but the latter region still remains Asia’s most important export market. However, Asia has become less important as a supplier of imports from a European perspective. Although Asia’s import share rose from 10.9 percent (1994) to 11.9 percent (2002), it fell back to 10 percent in 2005. Nevertheless it is substantially more important than North America’s share, which has conTable 4.2 Relative importance of Asia–Europe trade in 1994 and 2002 as a percentage of total Asian/European exports/imports

Asian exports – to Europe – to North America Asian imports – from Europe – from North America European exports* – to Asia – to North America European imports* – from Asia – from North America

1994

2002

2005

13.9 28.5

16.1 24.5

16.2 21.7

14.0 18.0

14.8 13.7

12.7 11.8

8.1 (17.8) 8.1 (18.0)

7.0 (17.9) 10.3 (26.3)

7.0 (17.1) 8.9 (22.0)

10.9 (23.5) 8.4 (18.1)

11.9 (21.6) 7.8 (14.1)

10.0 (23.8) 6.2 (14.6)

Source: Our own calculations based on IMF, Direction of Trade Statistics. Note * The values for European exports and imports are calculated including intra-community trade in the denominator, i.e. total European exports or total European imports. The values in parentheses exclude intra-community trade.


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tinued to fall. Furthermore Asia’s low 1994 share of Europe’s exports (8.1 percent) shrank even further until 2005 (7 percent). In contrast, Europe’s exports to North America and, above all, to Eastern Europe and Turkey increased. Obviously in the 1990s Europe was more occupied with integrating the Western and Eastern part of the continent, and with exporting its products to the booming North American markets than with Asia, which was hit by a severe financial and economic crisis towards the end of the decade (1997–1999). The higher shares Europe has in Asia’s trade, especially in export trade, compared with Asia in Europe’s trade imply that Europe is far more important for Asia than Asia is for Europe with respect to bilateral trade. These discrepancies are virtually reversed, however, if intracommunity trade is excluded in the share calculations (see values in parentheses). Then the respective Asian and European export shares become about equal. And the Asian share in Europe’s imports is definitely larger than Europe’s share in Asia’s imports. Thus Europe may be even more trade-dependent on Asia than vice versa. To be sure, the latter assumption only holds true if intra-community trade is filtered out from Europe’s foreign trade. This procedure seems justified since the single market is complete, the acquis communitaire is in force, and an EU-wide common trade policy applies to the external trade relations of all member states. However, in the perceptions of European business and the European public, intra-EU exports and imports are still widely regarded as foreign trade. Interregional trade interdependence Absolute values and relative shares are good measures of trade dependence and the resulting political influence, for example when bargaining over market access or negotiating in international trade politics. However, both trade volumes and relative trade shares are rather poor indicators for an assessment of Asia–Europe interregional trade interdependence; they are always dependent on the world market share of the other region. Since Asia and Europe are the two largest trading regions worldwide, one can safely expect them to assume a prominent role in the other region’s export and import trade. Nevertheless, their shares in the other region’s trade may not be proportional to the relative share that the other region has in world trade. So-called trade intensity indices are a more appropriate indicator of the two regions’ bilateral trade interdependence, as these quantitatively measure the relationship between a trading share and the world market share of the trading partner.3 The value of the index is unity if the trade relationship is just average. An index value exceeding unity indicates the existence of a positive trade bias. Falling below unity indicates a negative trade bias. In the following analysis we will focus on export intensity. Table 4.3 shows Asia’s export intensity in its trade with Europe and Europe’s export intensity in its trade with Asia. For means of comparison North America is also included. Generally speaking, bilateral trade interdependence between Asia and Europe is low. All calculated values are below unity. In other words, bilateral interregional

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Table 4.3 Interregional interdependence in comparison: Asian, European and North American export intensity in bilateral trade in 1994 and in 2002 Intensity of:

1994

2002

2005

Asian exports to Europe Asian exports to North America European exports to Asia European exports to North America North American exports to Asia North American exports to Europe

0.57 1.02 0.57 0.64 0.69 0.41

0.41 0.84 0.48 0.62 0.44 0.39

0.32 0.73 0.55 0.75 0.54 0.31

Source: Our own calculations based on IMF, Direction of Trade Statistics. Note In general terms the Export Trade Intensity Index (= Iab) is defined as: Iab = EXa/IMb, in which EXa = The share of region B in region A’s exports; Imb = the share of region B in total world imports.

trade is of a smaller scale than the weight of the other region in world imports would imply. Admittedly, such a negative trade bias is quite normal in interregional trade because intraregional trade among industrial countries is usually both quantitatively larger and relatively more important. This objection notwithstanding, bilateral trade interdependence between Asia and Europe can be assessed as unusually low, since both Asia and Europe attain markedly higher values in their export trade with North America. As can be seen, the 2005 intensity index value for Europe’s export trade with Asia amounts to 0.55, showing a stable relative share of Asia in Europe’s exports since 1994. From the European point of view, this must be quite problematic. Europe is exporting to Asia only half as much as could be expected from the size of Asia’s import demand. In all years under observation (1994, 2002, 2005) Europe’s Asia export intensity value was lower than North America’s. Apparently, European businesses are still exploiting the opportunities presented by Asia’s markets less successfully than their competitors from Canada and the United States. The comparison with North America also shows that Europe’s weak position cannot be explained by potential Asian import barriers to extra-regional importers unless such barriers had been established to especially discriminate against Europe. This, however, is a rather unlikely assumption. Therefore, it must be concluded that Europe’s weak export performance in Asia must have particular European causes – possibly a lack of European competitiveness or an inward-looking tendency in Europe’s foreign trade as a result of the reintegration of the continent following the fall of the Iron Curtain. Evidently there is analytical evidence for the widely held belief that European business and foreign trade policy still lack a focus with regard to Asia’s booming markets. There is still a need for initiative, imagination and the will to capitalize on the available opportunities. Europe should not forget that efforts at good positioning within the growth markets of Asia are part of the process of securing its own future. The 2005 intensity index value for Asia’s export trade with Europe amounted


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to 0.32, having fallen drastically from 0.41 (2002) and 0.57 (1994). There was a similar drop in Asia’s export trade with North America (1994: 1.02, 2002: 0.84, 2005: 0.73). Apparently in the period of study Asia’s intraregional trade increased relatively at the expense of its exports to external world regions. However the intensity index for North America’s export trade with Europe is also showing similar low values and a similar dynamic from 1994 to 2005. Therefore Asia’s weak performance in Europe must have European as well as Asian causes. Increasing intraregional trade in both regions is driving out interregional trade. Some differentiated observations Both Asia and Europe are heterogeneous regions consisting of countries of differing economic size, resource endowments and progress in industrial development. As might be expected, Asia’s and Europe’s larger economies are responsible for the majority of trade between the two regions, and Asia’s and Europe’s industrialized countries trade with each other the most. However, a closer look may reveal specific differences and even a few surprises. In the year 2003 China surpassed Japan as Europe’s most important trading partner in Asia. In the year 2005 China already held a 1.8 percent share of Europe’s total exports and a 4.9 percent share of its total import market, thus contributing the most to Europe’s large trade deficit with Asia. With a share of 1.4 percent in Europe’s exports and a share of 2.5 percent in Europe imports Japan plays a markedly less significant role in Europe’s 2005 trade. Apart from the two heavyweights Japan and China, Europe’s trade with the other Asian countries, such as Korea, India, Hong Kong, Taiwan, Singapore, Malaysia and Thailand (in the order of importance as Europe’s trading partner) is significantly smaller. From 1994 to 2005 Europe’s exports to Asia grew at lower rates than Europe’s total exports. The main driver of Europe’s export growth to Asia has been its booming exports to China, which more than tripled in that period of time. Besides this, especially Europe’s exports to India, Vietnam and more recently to Korea showed high rates of growth in recent years. All other European export trade with Asia developed less dynamically than Europe’s export total. In contrast, Europe’s imports from Asia grew at higher rates than Europe’s total import trade between 1994 and 2005. Again, supplies from China and Vietnam showed the highest growth rates. But Europe’s imports from India and Korea also increased by higher-than-average rates. Although Germany’s trade with Asia grew somewhat less vigorously than the European average from 1994 to 2005, Germany remains the most important European trading partner for all of the Asian countries except Brunei and the Philippines. Export and import trade with Asia makes up a higher share of Germany’s foreign trade than of the foreign trade of Europe as a whole. The dynamic development of German–Sino trade is particularly noteworthy.

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Furthering its development is an explicit policy target for both countries, which are aiming for a level of 100 billion euros by 2010.4 Asia’s second most important trading partner in Europe is the United Kingdom. Like Germany, the UK undertakes more trade with Asia on average than the rest of Europe does. British trade is especially strong with India and the Newly Industrializing Economies (NIEs). Furthermore, Asia’s exports to Belgium, the Netherlands and to Spain grew at higher-than-European-average rates between 1994 and 2005. Based on its function as a logistics and distribution centre, the Netherlands is a highly important export target for Asia. For most Asian countries, e.g. Japan, India, Taiwan and the Association of Southeast Asian Nations (ASEAN) taken together, trade dependency with Europe decreased from 1994 to 2005. All these economies lost market shares in Europe and Europe lost market shares in their respective import markets – in most cases a reversal of former trends (of rising export and import shares in trade with Europe). However, in the case of China and to a lesser degree Korea, trade dependency with Europe increased. In 2005, China directed 21 percent of its total exports to Europe and received 14.3 percent of its imports from Europe. As a result, Europe is assuming a more prominent role in China’s foreign trade than in most other Asian economies. In the case of India, trade dependency with Europe decreased. Nevertheless with a 23.6 percent share in India’s exports and a 22.6 percent share in India’s imports, Europe is still the most important trading partner for the subcontinent. Furthermore, it is noteworthy that European exporters are performing somewhat better in Asia’s larger import markets, as the 13.8 percent share in Japan, the 14.3 percent in Korea and the 13.8 percent share in Singapore shows.

Cluster analysis In the next step of our analysis, we examine the trade data of our sample for groups of countries with regard to their export relationships, using a statistical procedure that has come to be known as cluster analysis. Our aim here is to classify countries according to their main export markets, resulting in groups that have similar export profiles across countries. Similar export dependencies can be assumed to translate to similar policy incentives, both for intraregional and interregional cooperation. We thus take a step beyond the export intensity approach of the last section, which used broad averages across regions. Comparing clusters for 1988, 1995 and 2005 we focus on the broad developments in the resulting classification. These years were chosen because we know of no important disturbance to world trade that might unduly influence our results (such as happened, for example, during and after the Asian financial crisis in 1997–1999). Data points are far enough apart to allow for significant change. This seems especially warranted in light of the uneven developments documented in the last section. Cluster analysis serves to detect patterns in data sets that are too large to be


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scrutinized by more informal methods of analysis. It can be thought of as a method of classification (Everitt 1993), separating the input data into its constituent groups or clusters according to an iterative algorithm. A general characteristic of the resulting clusters may be described as stronger internal (within-cluster) than external (between-cluster) similarity. Thinking of a graphical exposition, distances (i.e. dissimilarity) between data points belonging to the same group are smaller than between those of different groups. Hierarchical cluster analysis starts with each element as its own cluster and proceeds to join them into progressively more encompassing, mutually exclusive groups, using some pre-defined similarity/dissimilarity measure, such as correlation or Euclidean distance. In the process, a raw data matrix of K objects measured on H variables first needs to be transformed into a K K matrix of similarities or distances between each of the K objects and all the others. This matrix serves as the direct input into the clustering algorithm. For the purpose of the present analysis, the similarity matrix consists of a country’s shares of its total exports to its partner countries. We use the Ward clustering method (Ward 1963) with Euclidean distance as a measure of (dis)similarity. The Ward algorithm minimizes information loss stemming from combining elements into groups, interpreted as the within-group error sum of squares (for details on this method, see Ward 1963 or Everitt 1993). This means that in our case, countries get clustered together if they export similar shares of their overall exports to similar destinations. Thus, joining a country to an existing group does not add to the error sum of squares of that cluster too much. If export destinations and/or export shares differ markedly, countries will be allocated to different groups. As Aldenderfer and Blashfield (1984) point out, Ward’s method has proved one of the most reliable clustering algorithms. It tends to join objects to existing clusters rather than starting new ones. Sudden jumps in the similarity measure can then be used to judge whether joining two clusters or an object to an existing cluster seems appropriate. We use jumps to delineate groups as given in Tables 4.4, 4.5 and 4.6, eschewing the usual (and comparatively confusing) dendrogram, making the presentation more tractable but accepting a loss of some detailed information in turn. It must be emphasized that the final number of clusters is to a large extent a modeling choice based on prior information, and not some fact that can be distilled from the data alone. Clusters in the 1988 trade data Proceeding in a top-down fashion, we can find six distinctive clusters in the 1988 data. These can be termed the European cluster (interestingly including the then still existing USSR), the Asian cluster, the “Communist Europe” cluster (i.e. the smaller Eastern bloc nations), and the “Communist Asia” cluster (consisting only of China and Vietnam), a peculiar Indonesia–Brunei group, for whom Japan is the single most important export market,5 plus Canada and Mexico, which stand apart because of their singularly strong dependence on the United States as an export market. We discuss the bigger clusters in turn.

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The Asian sample consists of Australia, Hong Kong, India, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand and the United States. It comprises four clusters, the first consisting of Japan, the NIEs-4 and the Philippines, here termed the Asian diversified traders. These economies share extensive and quite diversified trade ties with each other and exhibit a strong dependence on the US market. They have also established interregional export relations, which seems to come with a certain level of development. The Philippines is clearly a sort of outlier with regard to its overall development level. Colonial ties and security cooperation with the United States come to mind here. The presence of the United States in this group is probably due to the strength of some of the bilateral relationships. It should nevertheless be viewed with caution. The second cluster consists of Australia, India, Malaysia, New Zealand and Thailand. The members can be characterized – as of 1988 – as largely resourcebased economies with a relatively small presence in international trade, strong trade ties with the United States and Japan, but little in the way of European export markets except for the United Kingdom, perhaps because of lingering colonial and Commonwealth effects. This analysis squares nicely with the findings of Poon and Pandit (1996), namely that Japan is an important export destination for most Asian countries on the one hand, but is itself very much dependent on the United States as a market on the other.6 The European sample consists of Austria, Belgium-Luxembourg, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the USSR. We divide it into five clusters, the first consisting of globally diversified traders, the next three characterized by the importance of export ties to one of Europe’s big economies, i.e. France, Germany and the United Kingdom. The first cluster Table 4.4 Clusters in the 1988 export data Region

Cluster

Member countries

Asia

Asian diversified traders

Hong Kong, Japan, Korea, Philippines, Singapore, Taiwan, US Australia, India, Malaysia, New Zealand, Thailand China, Vietnam Brunei, Indonesia Denmark, Finland, Germany, Sweden, UK, USSR Belgium-Luxembourg, Italy, Portugal, Spain Austria, France, Greece, the Netherlands, Switzerland Ireland, Norway Hungary, Poland, Czechoslovakia Canada, Mexico

Asian regional traders

Europe

Communist Asia Japan-dependent European diversified traders France-oriented Germany-oriented

Americas

UK-oriented Communist Europe US-dependent


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comprises Denmark, Finland, Germany, Sweden, the UK and the USSR. These countries not only maintain diversified trade relations with each other, but also strong transatlantic and moderate Asia–Europe ties and may therefore be characterized as the European diversified traders. The members of the second cluster made up of Belgium–Luxembourg7 Italy, Portugal and Spain share strong ties with each other, have France as an important (but not necessarily the most important) export market, but only exhibit moderate ties to countries outside Europe. They may be characterized as “France-oriented.” Third, Austria, France, Greece, the Netherlands and Switzerland have extensive relations with each other and with Germany, their most important export market, but only moderate relationships extra-regionally. Ireland and Norway, whose most important export market is the UK, with Germany and France or Sweden respectively assuming about equal shares as the next most important. They have very little in the way of extra-regional trade relations, not even with the United States, and therefore stand apart. Furthermore, the smaller Eastern bloc nations of Hungary, Poland and Czechoslovakia only join the European cluster at a rather low level of similarity. Their export relations are primarily with each other and with the USSR, so we classify them as the “Communist Europe” cluster. Canada and Mexico, which join the Asia cluster at a very low level of similarity, are primarily dependent on the United States for their exports. We thus find a clear division between the European and Asian regions, and along Cold War lines. Political allegiances seem to have lost some of their influence with the end of the Cold War, however. Clusters in the 1995 trade data The change from 1988, the last year of the Cold War, to 1995, the middle of a decade of rising prosperity and liberalization, is remarkable. Not only have a number of the old clusters vanished and new ones emerged, but the overall similarity level has become higher, indicating a convergence of export profiles across countries. This seems to have been brought about by a diversification of trade relationships, especially for those countries with previously planned economies. We find three regionally delimited clusters in the 1995 trade data. These may be called the Asia-Pacific cluster, the European group, and a US-dependent group, the latter consisting only of Canada and Mexico, for whom the United States seems to have assumed even more importance as an export market, something that can perhaps be attributed to the North American Free Trade Agreement (NAFTA) that was formally agreed in 1994. Finding regionally delimited clusters is not too surprising given the fact that most countries trade overwhelmingly in their direct neighborhood, as measured above using trade intensity indices. There are several clusters in the Asian and European samples, and it is in these that the most interesting changes have taken place. The Asia-Pacific sample consists of Australia, Brunei, China, Hong Kong,

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India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand, the United States and Vietnam. This means that the former Communist Asia and Japan-dependent economies have partially joined the mainstream.8 For example, China and Taiwan now share similar export profiles and form what we term the “Greater China” cluster. Most countries have diversified their trade relationships. Level of development (as measured by per capita income) and export diversification now seem more independent of each other. For example, Japan and the Philippines have highly correlated trade profiles, both being primarily dependent on the US market, but otherwise with welldiversified export destinations. Other highly similar country pairs include Malaysia and Thailand, and India and Korea, which form the group of diversified Asian traders together with Singapore, Japan and the Philippines. The Pacific regional exporters’ group including Australia, Indonesia and Vietnam, later joined by New Zealand, may be considered resource-based exporting economies. Because of similar export destinations, the United States is allocated to this group, too. From casual observation, international specialization according to industry (for example, electronics for Malaysia and Thailand or resource-based and extractive industries for Australia and Indonesia) would now seem to exert a more important influence than political orientation. Brunei and Hong Kong may be considered outliers. The Asian diversified traders cluster countries trade extensively among each other, tend to have their most important export markets in Japan and the United States, while their most important European destinations are Germany, the United Kingdom and the Netherlands. Australia, Indonesia, Vietnam and New Zealand lack the relationship with Germany and have weaker export levels to Europe overall. Their single most important export market is Japan. This relationship also applies for the United States. Taiwan and China share a number of Table 4.5 Clusters in the 1995 export data Region

Cluster

Member countries

Asian diversified traders

India, Japan, Korea, Malaysia, Philippines, Singapore, Thailand Australia, Indonesia, New Zealand, US, Vietnam China, Taiwan Brunei, Hong Kong Denmark, Finland, France, Germany, Russia, Sweden, UK Ireland, Norway Belgium-Luxembourg, Italy, Portugal, Spain Austria, Czech Republic, Greece, Hungary, Netherlands, Poland, Slovakia, Switzerland Canada, Mexico

Asia

Pacific regional exporters

Europe

Greater China Special cases European diversified traders UK-oriented Euro-Atlanticists Germany-oriented

Americas

US-dependent


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export markets, namely the United States as the most important destination, and Japan, which is the second most important, plus extensive trade with a number of other Southeast Asian and European countries. Because of the similarity of their export profiles, they are classified in their own “Greater China” cluster. New trade relationships are discernible in Europe as well. At its most encompassing, the European cluster comprises Austria, Belgium-Luxembourg, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, the Netherlands, Norway, Poland, Portugal, Russia, Slovakia, Spain, Sweden, Switzerland and the United Kingdom, and can be subdivided into four intraregional clusters. The group comprising Austria, the Czech Republic and Poland has Germany as their most important export market. It is clustered together with a second sub-group with slightly more diversified trade relations, in which Germany nevertheless figures prominently. This group consists of Greece, Hungary, the Netherlands, and Switzerland. Finally, Slovakia is attached to the Germany-oriented cluster. Slovakia is an outlier here that trades mostly with the Czech Republic, while Germany is its second most important export market. Since this may be accounted for by the recent breakup of Czechoslovakia into the Czech Republic and Slovakia, we nevertheless classify the country as belonging to the Germany-oriented group. Ireland and Norway, outliers in 1988, have greatly diversified their trade relations, developing strong transatlantic ties and exporting to Asia as well, mainly to Japan and Korea. They are nevertheless classified as their own group here because of the strength of their transatlantic links and links to the UK. The European diversified traders cluster consisting of Denmark, Finland, France, Germany, Russia, Sweden and the United Kingdom exhibit well-diversified trade relations and strong interregional relations, especially to China, Japan and Korea. Belgium-Luxembourg, Italy, Portugal, and Spain, termed here the “Euro-Atlanticists” cluster, maintain their strongest trade relations with Germany, France and the UK, as well as among themselves, and now have strong ties to the United States and modest volumes of exports to Asian countries. Clusters in the 2005 trade data The 2005 sample comprises the EU-25 plus Norway, Russia and Switzerland on the European side and Australia, Brunei, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand and Vietnam on the Asia-Pacific side. The United States, Canada and Mexico are included in the analysis of both the Asian and the European subsample. As was pointed out above, there is a clear trend to more intraregional trade, so it should come as no surprise that the three top-level clusters of USdependent, European and Asian countries show up in the cluster analysis as well. Canada and Mexico again stand apart because of their singularly strong orientation to the US market. There are several country pairs that show very similar export profiles in the Asian sub-sample. Hong Kong and Taiwan, which share the Chinese mainland

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as their most important export destination, the Philippines and Thailand, Australia and Indonesia, India and Japan, and Hong Kong and Taiwan are joined at low distances into country pair clusters, before further amalgamation. Brunei exhibits the most idiosyncratic export profile and is therefore classified in its own cluster, and likewise for the United States and New Zealand, which trades mainly with Australia. Since the turn of the century, Indonesia and Australia have both shown strong increases in exports in the fuels and minerals categories as well as in transport equipment. They mainly export to the Asian diversified traders cluster members, namely India, Japan, Korea, and Singapore, and in addition to China the United States and each other. Trade volumes with European destinations are at most modest and there seems to be an influence of former colonial ties. This is in contrast to the Hong Kong plus Taiwan cluster that can be characterized as Chinadependent with the US and Japan as additional important export targets. Even in Taiwan’s case, China’s mainland absorbs more than twice as many exports as the next most important trading partner, the United States. The cluster consisting of Vietnam, Thailand, the Philippines, Malaysia and China can be characterized as diversified traders. While Japan, China and/or Hong Kong figure big in their export relations, they also have major European partners, especially the Netherlands, Germany and the United Kingdom. They are not too different from the Asian globally diversified traders cluster of India, Japan, Korea and Singapore, countries that feature still more diversified export relations, especially with respect to European partners. Both groups would be joined into one cluster in the next amalgamation step. Table 4.6 Clusters in the 2005 export data Region

Cluster

Member countries

Asia

China-oriented Brunei Asian globally diversified traders Resource-based exporters Asian regionally diversified traders

Taiwan, Hong Kong Brunei India, Japan, Korea, Singapore Australia, Indonesia China, Malaysia, Philippines, Thailand, Vietnam New Zealand France, Germany, Greece, Ireland, Russia, Slovenia, Sweden, Switzerland, UK Belgium, Cyprus, Italy, Malta, Luxembourg, Netherlands, Norway Portugal, Spain Austria, Czech Republic, Hungary, Poland, Slovakia Denmark, Estonia, Finland, Latvia, Lithonia US Canada, Mexico

Europe

Australia-oriented European diversified traders Intra-European diversified traders Germany-oriented Baltic Sea exporters

United States United States US-oriented


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On the European side, four large clusters can be identified. One closely knit group initially consists of Hungary and Poland, which are then clustered together with Austria and the Czech Republic. They are later joined by Slovakia to form a cluster that can, as before, be called Germany-centric after the countries’ dominant export market. Switzerland, Greece and the Netherlands have diversified their export markets and left the Germany-oriented cluster to join the European diversified traders and the intra-European diversified traders, respectively. Other countries exhibiting similar export profiles are France and Greece, Slovenia and Switzerland, Luxembourg and the Netherlands, Italy and Malta, Finland and Lithuania, and Sweden and the UK. The European diversified traders cluster can be sub-divided into Germany, Ireland, Sweden and the UK on one side and France, Greece, Russia, Slovenia and Switzerland on the other. All members can nevertheless be characterized as having well-diversified intraregional and interregional export relations and therefore are classified into one cluster. Belgium, Spain, Italy, Malta, Luxembourg, the Netherlands, Portugal, Norway and Cyprus, form the next cluster, termed the “intra-European diversified traders” to reflect the fact that these countries have diversified export destinations in Europe, but only modest extra-regional linkages. Usually only one country in Asia and one in the Americas figure comparatively big in their trade relations. Finally, Denmark, Estonia, Finland, Latvia, Lithuania form the “Baltic Sea” cluster, exporting mainly among each other, to Germany, the United Kingdom and Russia, with very modest extra-regional links. Trade trends from 1988–2005 To sum up, our cluster analysis of export data for 1988, 1995 and 2005 has resulted in a number of insights. Overall, basically all the countries in our sample diversified their export markets during the period under study. This is borne out in the cluster analysis by higher similarity levels and less clear-cut clusters. This diversification process, however, seems to have had mostly an intraregional orientation in the Asian sample. There are fewer globally diversified exporters in the 2005 sample than in 1995. Nevertheless, this finding must be viewed with some caution, as the presence of a global trade powerhouses like China in the regionally diversified cluster suggests. Here, shares in total exports may mask the importance of absolute numbers. Taiwan and Hong Kong, while overwhelmingly exporting to the Chinese mainland, retain a considerable presence in global trade, too. In Europe, Cold War divisions in trade have vanished. Countries’ trading profiles have become more similar, which most of the time means more diversified. The increased membership in the intraregionally diversified cluster and the reduced importance of single countries for clusters of partners is evidence of this process. In contrast to the Pacific region, our analysis has found more exporters with extra-regionally diversified relations in the 2005 European sample than in 1995. This is a notable contrast to the Asian sample.

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European investment in Asia In addition to trade, it is also important to focus on the investment side of the Asia–Europe relationship. Empirical investigations have shown in convincing terms that foreign direct investment (FDI) is complementary to international trade and not a substitute for it.9 Many multinational enterprises (MNEs) expand their global reach by investing in foreign markets and systematically internationalize their marketing, purchasing, manufacturing and research and development. Foreign invested companies are generally prone to supply more from foreign sources and sell more in foreign markets. Such trade-expanding effects of FDI seem to be particularly pronounced in developing Asia: domestic markets are rather small, and the local supply of sophisticated machinery, production parts and material is poor. As a consequence, MNEs have built up region-wide production networks in Asia. On the other hand, many Asian host countries have eagerly supported this process with policy measures to attract internationally mobile production factors and set up an attractive business environment. From this general perspective, the following analysis focuses on European and international investment in Asia. It has long been recognized that European investors only play a minor role in the East Asian investment boom. However, a kind of upward change in European FDI in Asia has been detected for the mid-1990s.10 A closer look at recent FDI data indicates that the assumed change has evolved into a sustained trend. Subsequently European investor-country statistics will be analyzed (cf. Table 4.4). The analysis has to be preceded by a word of caution: in marked contrast to trade data, data on international direct investment is not compatible across countries. Although the OECD has undertaken great efforts to standardize the member countries’ FDI data, the recorded volumes are only roughly comparable. Limitations still exist because of differences in statistical definitions, recording methods, coverage and practice. The investor-country perspective is best reflected in the FDI data compilation of OECD member countries.11 The OECD data shows that the UK and Germany were the main European investor countries in Asia, followed by Switzerland, the Netherlands and France in 2002, the most recent year under review. The total investment volumes of these five countries increased during the 1990s. In the case of France, Germany, the Netherlands and Switzerland, the relative Asia share in their outward FDI total went up, too. Only the UK’s Asia share declined. It is particularly notable that investors from France, Germany and Switzerland increased their Asia share in the latter half of the 1990s when East Asia was severely hit by a financial and economic crisis. In contrast, British, Dutch, Japanese and American FDI in Asia fell off relative to the (outward) FDI total of these countries. However, the marked improvement in Europe’s FDI to Asia cannot hide the fact that Europe’s Asia investment in absolute terms, as listed in the official European FDI statistics, is still below that of Asian investments made by the United States and Japan. Moreover, the relative shares that Asia has in the total investments of European countries are comparatively low,


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consisting of 8.7 percent for Switzerland, 5.9 percent for Germany, 5.3 percent for the Netherlands, 4.7 percent for the UK and 3.9 percent for France. These relative shares are not only lower than the corresponding shares of Japan (16.9 percent) and the US (14.3 percent), they are also not in line with the importance of Asia as a market for European exports. Seen from the European investors’ perspective, four characteristics mark the distribution of Europe’s FDI in Asia (in 2002). First, there is still a tendency to concentrate investment in the commercial and financial centers of Hong Kong and Singapore. Second, relative to the huge size of Japan’s domestic market, Europe’s investment position in Japan is still rather small. Over the 1990s, only French FDI in Japan increased substantially. Third, there was a marked increase in European investment in China in the 1990s. Fourth, Europe’s investment in the other Asian markets, i.e. India, Korea, Taiwan and Southeast Asia, is generally still rather small. A closer look at European direct investment in Asia may be provided from the Asian recipient-country perspective.12 From this viewpoint it is evident, that nowadays European investors are indeed playing a more prominent role than they did in the early 1990s. In the past decade the European share in Asia’s investment inflows have increased in Japan, China, Korea, Malaysia and Thailand, while they have fallen in Indonesia and the Philippines. Whereas in the early 1990s, European shares were in most cases below the shares of Japanese and US investment in Asia, in the early twenty-first century Europe holds the number one or number two investor position in most Asian host countries. The more important role that European FDI plays in Asia is all the more surprising in view of the EU’s recent expansion process, which has stimulated considerable European investment both within the former EU-15 and towards the ten EU accession countries in Central and Eastern Europe. A widely held assumption states that Europe’s FDI in its southern or eastern periphery is occurring at the expense of Europe’s FDI in Asia. Admittedly, each business unit has limited financial and human capacity for use in foreign investment, but investment motives are different for each region. Europe’s FDI in Eastern Europe is mainly cost-orientated and is directed at low-wage and low-tax locations in order to shift labor-intensive manufacturing. Europe’s FDI in Asia, however, is mainly market-orientated and targets either Asian or global markets. Thus, increasing European FDI both in Eastern Europe and in Asia is not at all contradictory. This conclusion does not explain why European investment in Asia has risen both in absolute and in relative terms, however. There are four possible explanations for this.13 First, China proved to be a highly attractive investment location for Europe’s medium-sized businesses in the course of the 1990s. Traditionally, small and medium enterprise-based economies on the Continent such as Germany, Italy, Austria and Switzerland’s have always shown a high exports-to-foreigninvestment ratio. Because of their lack of financial and managerial resources, small and medium-sized companies in continental Europe have preferred direct exports to FDI. In their foreign investment outside the EU, they either look for

2002

2.8 3.8 3.9 – 6.7 15.2 10.8

2.3 4.9 6.1 5.7 8.8 23.2 13.4

3.7 5.4 5.3 7.6 3.8 10.5 12.8

3.9 5.9 5.3 8.7 4.7 16.9 14.3

,22.0 bn EUR ,34.7 bn EUR ,20.0 bn EUR ,35.3 bn EUR ,26.7 bn EUR 6,331.8 bn JPY ,228.7 bn USD

2002

2000

1990

1995

Investment stock in national currency

Share of investment total in percent

Note *Investment stocks and shares (of total investment stock) refer to the total of Asia. For data comparability, see text.

Source: OECD, International Direct Investment Statistics Yearbook: 1990–2000 Edition 2001; OECD, International Direct Investment Statistics Yearbook: 1992–2003 Edition 2006; own calculations.

France Germany Netherlands Switzerland UK Japan US

Investor country

Table 4.7 FDI outflows of the principal investor countries to Asia in the 1990s*


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large domestic markets (such as the US or Brazil) or they follow their Europebased customers. FDI in China now seems to have become lucrative for such companies: China represents a huge, rapidly growing market and European industrial powerhouses such as ABB, Ericsson, Siemens and Volkswagen have established a strong presence here. They are also luring their suppliers over in order to build up manufacturing capacity locally. Second, the financial and economic crises in Japan, Korea and Southeast Asia in the late 1990s presented a golden opportunity for European businesses to expand their presence in Asia. Quite a number of European companies seized the chance and exchanged their unpopular former minority equity share positions for a majority. Others acquired a foundering Asian company in order to expand their manufacturing capacity and local market share. Thus, the fundamental changes of the market and regulatory environment from 1998 onwards made a sizeable increase in European FDI possible in Asia. Third, the successful industrialization and economic maturing of an increasing number of East Asian countries resulted in a marked improvement in supply conditions for European products in Asia, both in the consumer and in the industrial market. For example, rising middle-class incomes and the differentiation of consumer demand in East Asia especially favored European suppliers of textiles and apparel, cosmetics and furniture as well as European car manufacturers. A favorable change in the market environment occurred in the industrial machinery sector, too. Whereas robust, low-cost industrial machinery tends to be employed in the early stages of industrialization, in later stages the demand for sophisticated machinery or for customized engineering will grow, these two fields representing supply segments in which European competitiveness is especially high. Other examples of European competitiveness include infrastructure investment goods, machinery and automotive parts, telecommunications equipment, plant construction, aircraft, high-speed trains as well as various business services (e.g. engineering, design, architecture, utilities, telecommunications, transport and logistics). Fourth, European business and European governments seem to have woken up to the challenge of Asian dynamism at last and started to tackle the region with strategic determination in the 1990s. European business seems to have understood that success in Asia needs a comprehensive concept, the employment of their best managerial resources, locally adjusted marketing efforts, sufficient investment and a special focus by high-ranking managers. European governments voluntarily supported the increasing business efforts. Asia in general and China in particular became the focus of Europe’s national export and investment promotion agendas.

Summary and conclusion Although our analysis is far from exhaustive, there are a number of results that are noteworthy. Most importantly, compared with the political and the security dimension of the Asia–Europe relationship, economic relations are well

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developed. The empirical analysis shows strong trade and investment ties, albeit a decreasing trade interdependence: 1

2

3

4

5

6

Although transpacific trade flows are by far the strongest, trade between Asia and Europe cannot be regarded as a weak link in the global triangle between North America, Europe and Asia any more, being roughly on a par with transatlantic trade. In the last year under review (2005), Asia and Europe were more important sources of imports for each other than North America was for both regions. However, North America was still the most important extra-regional export region for Asia and Europe. From the Asian point of view, Europe became more important as an export market, but fell back as a source of imports from 1994 to 2005. In contrast, North America’s role as an import source and as an export market for Asia reported a seven percentage-point drop. From the European perspective, imports from Asia decreased slightly from 1994 to 2005 in relative terms. Furthermore the importance of Asia as an export market for European products declined further in this period. Bilateral trade interdependence between Asia and Europe is low, i.e. bilateral trade is of a smaller scale than the weight of the other region in world trade would imply. In particular, the low and declining 2005 intensity value for Europe’s export trade with Asia is problematic. Apparently, European businesses are still exploiting the opportunities of Asia’s markets less successfully than their competitors from Canada and the United States. The cluster analysis shows a marked change in trade relations in the AsiaPacific and in Europe. In both regions, the former Cold War divisions have vanished. Within the regions, the countries’ trade profiles have grown more similar overall, with a tendency to have an increasing number of trading partners. At the same time, there are groups of countries that exhibit stronger interregional trade relations and others showing stronger intraregional ones. Interregional trade is mainly carried out through the bigger national economies. It seems clear that for an interregional trade agenda to be advanced, these countries will have to lead the way. The five principal European investor countries, i.e. France, Germany, the Netherlands, Switzerland and the UK, increased their Asian investment in the 1990s. As a result, their relative position as foreign investors in Asian recipient countries improved. However, Europe’s investment stock in Asia still remains below that of the Asian investments of the US and of Japan in absolute terms.

The growing trade and investment interdependence notwithstanding, Asia and Europe could do more to intensify their interregional relationship to enhance production efficiency and economic welfare. Both indiscriminate import liberalization and export promotion remain the crucial tasks in both regions’ foreign trade policy agenda.


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Notes 1 All trade figures cited are taken from the IMF Direction of Trade Statistics Yearbooks unless otherwise stated. The latest 2005 trade figures are occasionally compared with 1994 figures, thereby occasionally going back to a former analysis of Asia–Europe trade, see Hilpert (1998: 55–66). 2 For the first consideration of this historic development, see Kirchbach (1992: 245–250), who even employed the narrower geographic concept of Western Europe (i.e. excluding Central and Eastern Europe) and of Pacific Asia (i.e. excluding India, Brunei and Vietnam) in his calculations. 3 For a detailed discussion of the use of the trade intensity index in bilateral trade analysis, see Anderson and Norheim (1993: 23–24, 47–48); Drysdale and Garnaut (1982: 62–84). 4 See Frankfurter Allgemeine Zeitung (2005), November 12, 2005, p. 16. 5 This could be a result of poor data availability for these two countries. 6 Poon and Pandit (1996) conduct a principal components analysis of trade relationship in the Asia-Pacific and the Americas for 1965 and 1990. They find a hierarchy of trade relationships for their sample, with the United States at the apex. 7 For 1988 and 1995, the data report Belgium and Luxembourg together as one statistical entity. 8 This could be an effect of improved data availability for Indonesia and Brunei: while both find their most important export market in Japan, statistics now show a number of other destinations that were not present in the 1988 data. 9 See, for example, Borrmann et al. (1995); Petri (1994). 10 For example Langhammer (1998: 238–240). 11 OECD (2006). 12 The following analysis is based on our look at the Asian host country transaction statistics. For a comparison of data, see Hilpert (1998: 64). 13 For details see Langhammer (1998: 238–241); Lehmann (1998: 74–84); Molteni (2000: 100–119).

Bibliography Aldenderfer, M.S. and Blashfield, R.K. (1984) Cluster Analysis, Sage University Paper Series on Quantitative Applications in the Social Sciences, No. 07–044. Beverly Hills and London: Sage. Anderson, K. and Norheim, H. (1993) “History, Geography and Regional Economic Integration,” in K. Anderson and R. Blackhurst (eds) Regional Integration and the Global Trading System, New York and London: Harvester-Wheatsheaf. Borrmann, A., Fischer, B., Jungnickel, R. and Koopmann (1995) Regionalismustendenzen im Welthandel. Erscheinungsformen, Ursachen und Bedeutung für Richtung und Struktur des internationalen Handels, Baden-Baden: Nomos. Drysdale, P. and Garnaut, R. (1982) “Trade Intensities and the Analysis of Bilateral Trade Flows in a Many-Country World,” Hitotsubashi Journal of Economics, vol. 22, 2: 62–84. Everitt, B.S. (1993) Cluster Analysis, London: Edward Arnold. Frankfurter Allgemeine Zeitung (FAZ) (2004) “Der Handel mit China soll bis 2010 verdoppelt werden” (“Trade with China to be doubled by 2010”), No. 104, May 5, 2004: 16. Hilpert, H.G. (1998) “Economic Interactions,” in H. Maull, G. Segal and J. Wanandi (eds) Europe and the Asia Pacific, London and New York: Routledge.

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International Monetary Fund (IMF) (ed.) IMF Direction of Trade Statistics Yearbook, Washington, DC: IMF, current issues. Kirchbach, F.v., (1992) “Europe-Asian Trade: The Stepchild in Triadic Relations Takes Over,” Intereconomics 26, 5: 245–250. Langhammer, R.J. (1998) “Europe’s Trade, Investment and Strategic Policy Interests in Asia and APEC,” in P. Drysdale and D. Vines (eds) Europe, East Asia and APEC. A Shared Global Agenda?, Cambridge: Cambridge University Press. Lehmann, J.P. (1998) “Economic Interactions,” in H. Maull, G. Segal and J. Wanandi (eds) Europe and the Asia Pacific, London and New York: Routledge. Molteni, C. (2000) “Production Strategies of European Firms: Between Retrenchment and Expansion Opportunities,” in J. Legewie and H. Meyer-Ohle (eds) Corporate Strategies for Southeast Asia after the Crisis. A Comparison of Multinational Firms from Japan and Europe, Basingstoke and New York: Palgrave. OECD (ed.) (2001) International Direct Investment Statistics Yearbook: 1980–2000 – Edition 2001, Paris: OECD. OECD (ed.) (2006) International Direct Investment Statistics Yearbook: 1992–2003 – Edition 2006, Paris: OECD. Petri, P.A. (1994) “Trade and Investment Interdependence in the Pacific,” in E.K. Chen and P. Drysdale (eds) Corporate Links and Foreign Direct Investment in Asia and in the Pacific, Pymble: Harper Australia. Poon, J.P. and Pandit, K. (1996) “Pacific Trade and Regionalization, 1965–1990,” The International Trade Journal, vol. 10, 2: 199–221. Ward, J.H. (1963) “Hierarchical Grouping to Optimize an Objective Function,” Journal of the American Statistical Association, vol. 58: 236–244.

5

The Asia–Europe Meeting (ASEM) and its contribution to the political management of globalization Howard Loewen and Dirk Nabers

Introduction The argument When German Chancellor Gerhard Schröder and 40 representatives of major German companies traveled to China in December 2003, the strengthening of trade and investment relations between the two countries was at the centre of bilateral talks – for a good reason. After two decades of state-controlled economic liberalization, the People’s Republic of China is reaping what it has sown. Take Guandong Province, for instance. This industrial area is now the largest and fastest-growing of its kind in the world. The gross economic output of this province alone is equivalent to the gross national product of Russia, yet German and other European companies are underrepresented in the fastest- and biggestgrowing market of the world economy. A case in point is the German foreign direct investment in China, which amounts to only 2 percent of total FDI in China in 2006. On the whole, European trade and investment relations with East Asian countries are the weak link in the world economic triangle consisting of Europe, East Asia and North America. Thus, the strengthening of this frail economic link in absolute and in relative terms – compared to transatlantic and transpacific exchanges – lies at the heart of the contemporary interest shown both by European and East Asian heads of state and governments with regard to cooperation. This explains why Asia–Europe economic relations are also complemented by a longstanding tradition of political interaction, which – apart from the various bilateral relations – has basically taken on two institutional forms: 1

2

inter-organizational cooperation (EU–ASEAN) between the European Union (EU) and the Association of Southeast Asian Nations (ASEAN) dating back to the early 1970s; the Asia–Europe Meeting (ASEM) established in 1996.

The institutional interaction between Asia and Europe is an element of a worldwide process of institution building as a reaction to the growing political

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demands to manage the process of economic globalization in the policy fields of global finance, investment and trade. The array of international institutions on the global, regional and now interregional policy level is commonly referred to as the system of global governance. Interregional institutions like ASEM, the Asia-Pacific Economic Cooperation (APEC), the Forum for East Asia Latin America Cooperation (FEALAC) and the New Transatlantic Agenda (NTA) link the three regions of the world economic triad; Europe, North America and East Asia. Moreover, interregional institutions are a novelty in international relations; they establish a new policy level in the multilayered system of global governance, to which we will turn later in greater detail (Hänggi et al. 2006). In this chapter we will try to answer the following questions: • •

•

How do interregional institutions like the Asia–Europe Meeting (ASEM) contribute to the emergent structure of global governance? Were Asian and European leaders able to speak with one voice regarding global discussions on trade, finance and investment issues? Were they likewise capable of successfully implementing their ideas? Can factors like different historical and cultural traditions in the European and East Asian regions and thus regional organizations like the EU and ASEAN account for the outcomes of interregional negotiations under the institutional umbrella of ASEM, or do we have to rely on material interest explanations?

Our analysis will show that political cooperation between Asia and Europe regarding the management of global cooperation problems in the issue areas of trade, finance and investment is far from achieving its full potential. We will argue that this can be explained not only by the clash of incongruous cooperation cultures, i.e. Asian and European norms and principles of regional state-tostate interaction, but also by a clash of material interests that can be traced back to the different economic positions of First World and developing countries and the ongoing nation-building processes in the latter. In the following analysis we will develop the argument as follows: we shall first explain some key concepts that we consider vital to our argument, such as globalization, interregional cooperation, transregional cooperation and global governance. Then hypotheses on the function of interregional and transregional institutions as agents or mediators in the political management process of global issues such as trade, investment and finance are theoretically deduced. The next is devoted to empirical evidence. After a short description of the development of EU–East Asia relations, namely the Asia–Europe Meeting (ASEM), we test the contribution made by Asia–Europe cooperation to the management of global issues by examining ASEM’s role in the debate on global investment and trade rules in the Organization for Economic Cooperation and Development (OECD) and the World Trade Organization (WTO) and in the reform debate on the international financial architecture after the Asian crisis. In the last section several empirical and theoretical conclusions will be

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drawn. Here we will try to explain why ASEM states do not speak with one voice at the global level of cooperation. In other words, we will attempt to answer the question of whether cultural factors or merely factors of pure material interest are able to explain this phenomenon. Conceptual and theoretical foundations The structure of the international system after the end of the Cold War has been strongly influenced by the process of globalization. According to Holm and Sorensen, globalization can be defined as the intensification of economical, political and socio-cultural relations between states and societies in an increasingly borderless world (Holm and Sorensen 1995: 1). Decisive innovations in transport, communication and information systems since the mid-1970s have been important influencing factors in this dynamic process, which is without precedence in the history of international relations (Diekheuer 2001: 27; Beck 1997; Seitz 1995). Despite all the theoretical and empirical considerations of the social, cultural and religious aspects and effects of globalization, we will primarily consider its material side, that is, the growth of trade, foreign investment and financial transactions. A few tables will serve to illustrate our starting point. The average growth rate of world trade per annum in the period from 1984 to 2004 amounted to 5.1 percent. This implies that the value of worldwide traded goods and services grew twice as fast as the world gross national product, which only grew at an average of roughly 2.2 percent in the same period. Since 1970 world trade has quadrupled (UNCTAD 2004; WTO 2006). Global foreign direct investment (FDI) flows have also grown progressively since the beginning of the 1980s, with only temporary declines (5.2). For example, global outflows in 2005 showed a different picture than did inflows, declining by 4 percent to $779 billion (UNCTAD 2006). Similar developments can be observed on the financial markets: daily foreign exchange turnovers moved up from US$150 billion in 1985 to US$600 billion in 1990 and up to US$2,000 billion in 1998, while the stock of global financial assets quintupled (UNCTAD 2003). As mentioned above, globalization stimulated the development of an interdependent and multilayered governance structure in the international system, called the system of global governance. Global governance is generally defined as a process involving both states and non-state actors with formal as well as informal rules and regulations to advance a common goal (Sending and Neumann 2006; Held and McGrew 2002). In a system of global governance five levels of international policy-making beyond the confines of nation states may be identified: a global level, an interregional level, a regional level, a subregional level, and a level of bilateral state-to-state relations (Rüland 1999: 133; 2006). Interregional institutions establish a new policy level in the system of global governance and basically assume two forms: bilateral interregionalism like

2,826.6 +12 +9

3,425.1 +12 +5

1990 3,685.6 +7 +4

1992 4,240.1 +14 +9

1994 5,257.2 +4 +6

1996 5,238.4 –1 +4

1998 6,048.3 +11 +13

2000

5,815.2 –4 –1

2001

5,904.7 +2 ±0

2002

8,150 +13.8 +9

2004

Note * = Changes of nominal and real figures compared to the preceding year.

Source: UNCTAD (2004): Development and Globalization: Facts and Figures, New York; WTO (2006): International Trade Statistics 2006. Selected long-term trends (www.wto.org).

Vol. Nom.* Real*

1988

Table 5.1 World trade 1988–2004 (vol. in billion US dollars, nom. and real in percent)


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Table 5.2 Global foreign direct investment 1982–2005 (in billion US dollars)

FDI inflows FDI outflows FDI inward stock FDI outward stock

1982

1990

2004

2005

59 28 647 600

202 230 1.789 1.791

711 813 9.545 10.325

916 779 10.130 10.672

Source: UNCTAD (2006).

EU–ASEAN dating back to the 1970s and the new interregionalism or transregionalism that manifested itself in the establishment of APEC, ASEM and FEALAC, which include member states from more than two regions and thus do not necessarily correspond with regional organizations. In comparison to old forms of interregionalism and due to their rapid institutional development, the new institutions gradually assume the status of independent actors in the international system. Furthermore, cooperation in these institutions not only covers economic, but also political and cultural issues (Rüland 2001: 6).

The multilayered system of global governance • • • • •

Global, multilateral level (UN, WTO, IMF, G-8, global regimes like the Law of the Sea, etc.). Interregional level (EU–ASEAN, EU–MERCOSUR, ASEAN–MERCOSUR, APEC, ASEM, FEALAC). Regional level (EU, ASEAN, SAARC, NAFTA, MERCOSUR). Sub-regional level (the euro region, Mekong Region). Bilateral level of state-to-state interactions.

What does International Relations (IR) theory tell us about the functions of interregional institutions in the multilayered system of global governance? To start with, institutionalists maintain that growing international interdependence makes cooperation possible, and that empirical evidence exists to underline this argument (Keohane and Nye 2001; Schirm 2002). Institutionalist research over the last three decades has provided a fruitful way to think about international institutions such as ASEM as helpful tools for states to overcome problems of collective action, high transaction costs or information deficits. Rational behavior of individual actors does, however, not always lead to sustainable cooperation even if this leads to the satisfaction of these actors’ interests. In the 1980s, it was Keohane’s After Hegemony (1984) and Stephen Krasner’s edited volume on international regimes (1983) that compellingly showed how individually rational action by states could impede mutually beneficial cooperation. Moreover, these scholars argued, states that interact with each other develop norms that shape collective standards of behavior. Keohane included the notions of “bounded rationality” and normative expectations in his work; yet, he neglected one

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important question that seems to be crucial for informal processes like ASEM, that is, how one can think of policy coordination without considering the communicative processes that occur during the negotiations between states? The deficit applies to liberal theories in general, which consider institutionbuilding as the result of a convergence of benevolent, cooperation-prone national interests, promoted by domestic coalitions for which such cooperation might bring gains. Choosing a special kind of institution then resembles the “loyalty a consumer might give to the store with the most competitive rates on its charged card” (Sterling-Folker 2000: 102). This would mean that certain nonstate actors, such as multinational corporations and NGOs, are of significance in the initiation and institutionalization of ASEM. A third theoretical strand to be considered in the explanation of international institutions like ASEM, constructivism, differs from the approaches mentioned before because in these theories collective interest is assumed as pre-given and hence exogenous to social interaction (see the critique in Wendt 1994: 389; Ruggie 1998: 118–119). In contrast, constructivism argues that social interaction ultimately does have transformative effects on interests and identity, because continuous cooperation is likely to influence intersubjective meanings.1 Of central importance to this branch of IR theorizing is the concept of culture. The term refers to socially shared knowledge or “intersubjective understandings,” incorporated in norms, rules, institutions and so on; identity also has an intersubjective quality, since it is always constituted by two kinds of ideas: those held by the Self and those held by the Other (Wendt 1999: 224). Positive representations of the Other usually emerge from mutual respect and cooperation. In international relations, this means that a state’s identity will often depend on notions of a group of states of which it is a member. In our case, it is representations of regions, the question of how deeply culture is internalized within the institutional context that helps us explain the practice of cooperation between Europe and Asia. Finally, the growing literature on global governance adds further crucial insights to the issue of international institutions as elements in a global institutional order. The question of how interregional institutions like ASEM can contribute to the realization of goals in the economic, political, social or environmental field, or how they can prove their “multilateral utility” (Dent 2004) stands at the centre of this debate. While the economic, social, environmental and political issues of globalization are pressing, the decision making process in a multifaceted system of global governance normally ensues through the acceptance of structural heterogeneity and inequality, which requires that policies are regularly self-enforced and compliance is often voluntary (Krahmann 2005: 536; Halabi 2004). Voluntarism, however, does not preclude that institutions like ASEM are created to advance common international activities of different actors – states, multinational corporations (MNCs), non-governmental organizations (NGOs). One of the key claims in the global governance literature holds that international cooperation must be conceptualized as a process, not an institution (e.g. McGrew 2002; Sending and Neumann 2006). This leaves room


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for an analytical move that focuses on hierarchy and sovereignty to horizontal, network-based modes of governing. Summarizing the governance literature, three elements seem to be of importance when it comes to the interplay of different actors in the global sphere (Hay 2007; Sending and Neumann 2006): 1 2 3

The sovereignty of nation states is increasingly compromised by steadily growing interconnectedness. The number and intricacy of issues that states have to deal with is growing (e.g. climate change, global pandemics, global economic interdependence). Transnationality has led to an increase of actors and a fundamental change of the character of world politics.

What role does sovereignty play in the ASEM process? Has the agenda of international politics indeed shifted from matters of “high politics” (military security) to those of “low politics” (social, environmental, economic)? And is this just another example for the fact that we have arrived in a new era of world politics, taking us beyond the age of the nation state, towards an epoch of denationalization and, perhaps, depoliticization? Finally, are we best served by discretely analyzing material and ideational (cultural) phenomena, or do we have to conceptualize them as one? Before assessing these questions on the basis of three case studies: 1 2 3

ASEM’s Contribution to the Debate on the Reform of the International Financial System in the Aftermath of the Asian Crisis; ASEM’s Contribution to the Multilateral Dialogue on Investment (OECD, WTO); ASEM’s Contribution to the Multilateral Dialogue on Trade (WTO) – we will have a brief look at the origins of the meeting.

Europe–East Asia and the management of globalization: the empirical record The origins of the Asia–Europe meeting On March 1, 1996 25 heads of state and government and the President of the European Commission met in Bangkok on the occasion of the first Asia–Europe Summit Meeting. The participating states from East Asia were China, Japan and Korea as well as seven ASEAN members, namely Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Europeans and Asians alike considered this summit a success, with some observers even speaking of a “historical turning point in relations between the two regions” (Serradell 1996). This enthusiasm concerning the possibility of an intensified cooperation process between Europe and Asia proved to be right: in addition to the summit meetings that were held biannually, foreign, economic and finance ministers of the ASEM member states convened annually. The second ASEM summit was hosted by the

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United Kingdom in 1998 and addressed the Asian financial crisis. The third ASEM summit was held in Seoul in 2000. In the course of this meeting the Asia–Europe Cooperation Framework 2000 and the Seoul Declaration on interKorean peace were adopted. The fight against international terrorism loomed large on the agenda of the fourth summit meeting, which took place in Copenhagen in 2002. The enlargement of the EU resulted in the expansion of ASEM on the occasion of the its fifth summit-level meeting in 2004 in Hanoi: admitted were ten new members on the European side and Cambodia, Laos and Myanmar on the Asian side. The latest summit meeting took place in 2006 in Helsinki commemorating the tenth anniversary of ASEM. With the accession of Romania, Bulgaria, India, Mongolia, Pakistan and the ASEAN secretariat membership increased to 44 states. The Asia–Europe Meeting is an informal forum for dialogue on economic, political and cultural matters pertaining to both regions. The factor that triggered the initiation of ASEM most was the recognition that the economic relationship between the two regions needed to be intensified, indicating the economic possibilities existing within the triad comprising Europe, the Americas and East Asia (Rüland 1996; Forster 1999: 753; Loewen 2003: 83–85). The fact that economic aspects featured prominently on the agenda of the first meetings strengthens the long-held view by institutionalist theorists that globalization and interdependence are best characterized by an “absence of hierarchy among issues” (Keohane and Nye 1977). Let us now take a look at some figures that confirm the “weak link” thesis of 1996. In the period from 1980 to 1996 the value of goods and services traded between the EU and East Asia grew from US$68.3 billion to US$386.8 billion (which signifies an increase of 566.3 percent) compared to EU–North America trade, which “only” increased from $131.6 billion in 1980 to $317 billion in 1996. This development clearly indicates that EU–East Asia trade grew faster than the trade relations between the EU and North America. Yet in absolute terms, East Asia-North America trade relations are the most powerful in interregional trade relations ($533 billion) (cf. Table 5.3). In relative terms (interregional trade shares to world trade) this observation is confirmed: East Asia–North America trade shares amounts to 4.8 percent, EU–East Asia 3.5 percent and EU–North America 2.9 percent (Table 5.4). Table 5.5 indicates that in the field of foreign direct investments (FDI) EU–East Asia FDI is, in fact, the weakest (3.4 percent) in comparison to East Asia–North America (6 percent) and EU–North America (12.4 percent). These figures illustrate significantly the weak position of the EU–East Asia link in interregional economic relations. Nevertheless, EU–East Asia relations have the greatest growth potential, since Europe and East Asia are the two most powerful economic regions of the world. On the basis of intra- and interregional trade interactions, Europe takes the lead with 41.6 percent of total world trade, followed by East Asia (24.9 percent) and North America (19.4 percent) (Dent 1999: 376). It is precisely this growth or welfare potential that lies at the heart of political initiatives to improve on EU–East Asia relations: in 1994, the European Com-


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Table 5.3 Interregional trade relations (billion US dollars)

1960 1980 1996

EU–East Asia

EU–North America

East Asia–North America

3.9 68.3 386.8

12.7 131.6 317.3

5 109.2 533.7

Source: International Monetary Fund, Direction of Trade Statistics, various editions; Dent (1999: 376).

Table 5.4 Interregional trade shares to world trade

1960 1980 1996

EU–East Asia

EU–North America

East Asia–North America

1.5 1.8 3.5

4.7 3.5 2.9

1.8 2.9 4.8

Source: International Monetary Fund, Direction of Trade Statistics, various editions; Dent (1999: 377).

Table 5.5 Interregional foreign direct investments (FDI) 1996

EU–North America East Asia–North America EU–East Asia

Cumulative FDI (bill. $)

Share in FDI (global) in percent

772 371.1 208.9

12.4 6 3.4

Source: UNCTAD (1996), Division on Transnational Cooperations and Investment Database; Dent (1999: 377).

mission issued its “New Strategy for Asia,” thereby emphasizing the significance of revising the relationship with East Asia, and taking into account its economic, political and cultural importance. Subsequent to a Singaporean proposal to hold an EU–Asia summit meeting, the first ASEM Summit was held in Bangkok in March 1996, thereby initiating a biannual summit routine (Roloff 2001: 273). The aim of cooperation is laid down in the Asia–Europe Cooperation Framework (AECF). According to this agreement, political, economic and cultural dialogue is to be promoted within the relationship between Asia and Europe. The process of interaction supported or made possible the institutionalization of the Eurasian cooperation through multiple channels: the initiation of the Asia–Europe Foundation (ASEF), which aims at the intercultural perspectives of cooperation, and the Asia–Europe Business Forum (AEBF) that encourages the cooperation of business leaders from both regions are cases in point. Furthermore, an interlocking network of international and national nongovernmental organizations evolved that links ASEM to the international civil society (Loewen 2003: 141–147).2

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ASEM’s contribution to the debate on the reform of the international financial system in the aftermath of the Asian Crisis The Asian Crisis, which hit Southeast Asia in 1997, led to the temporary collapse of the national economies involved. In the case of Indonesia the economic crisis even caused social upheaval and political transformation. The crisis was not simply the consequence of structural economic difficulties in Asian economies – a lack of transparency in the banking sector, which led to the uncontrolled placing of credits, exchange rates fixed to the dollar, etc. – but was also closely connected to structural weaknesses in the international financial system, which allows for the uncontrolled flow of extremely speculative shortterm capital (Koch 1998: 222). This development corresponds to the theoretical finding that economic globalization is increasing the mobility of the capital, which in turn leads to a depoliticization of international financial flows. Under these conditions, national reserve banks have no effective means of implementing fiscal countermeasures in order to prevent speculation by hedge funds against their own currencies. Devaluation is the inevitable consequence, along with the decoupling of currencies from the dollar. A case in point is the development of the currency crisis in Thailand, the first country to be affected. Although Thailand had quite a sound economy, rumors that the Thai currency was under pressure to devaluate led to massive international speculation against the baht and consequently to the withdrawal of private capital. In the end the national reserve bank of Thailand had to decouple the baht from the US dollar (Dieter 1998: 44). The consequences were disastrous: the exchange loss of the Thai currency in the period from July to September 1998 amounted to 36.7 percent of its former value (Lee 2000: 39). In the months to come, speculative attacks against dollar-fixed exchange rates led to devaluations of the respective currencies in Indonesia, Malaysia, the Philippines and South Korea. The currency crisis turned into a stock-market and then an economic crisis, which not only hit Asia, but also Brazil and Russia one year later. For this reason we may conceive of the Asian crisis as a crisis of globalization (OECD 1999: 9). The first institution to extend financial aid to the affected countries was the International Monetary Fund (IMF), which coupled its aid to the initiation of radical macroeconomic stabilizing measures in the most affected countries, such as the fundamental increase of interest rates. This caused an even more rapid downfall of the economies in question, since capital turned out to be more expensive for local entrepreneurs, many of whom were subsequently forced to give up their businesses (Rüland 1999: 63). In the light of these events, reform measures on how to avoid similar financial and economic crises in the future were discussed. Here are the two most important ones: 1

The liberal argumentation states that speculative attacks only occur when national economies show significant signs of weakness. If markets were in equilibrium, no such attacks would take place. In other words, the “invisible


2

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hand” of the liberalized international economic system – like financial speculation – forces nation states to initiate economic reform programs and restructuring measures in the malfunctioning financial sector. According to this line of argument, a reform of the international financial architecture would not have any effect since the crisis was caused by dysfunctional economic management at the national level. The other position calls for intervention. Reforms are considered necessary not only at the national level, but also at the international level. The international finance system and its short-term and therefore speculative capital flows, in particular, have to be put under institutionalized control. One quite radical proposition even calls for the abolition of the IMF and the World Bank, thus considering the decentralization and regionalization of financial conflict management as vital.

At this point we would like to draw your attention to the test of the hypothesis stating that ASEM may contribute to this global dialogue on the restructuring of the financial architecture. In the financial statement of the final communiqué of the Second ASEM Summit (ASEM 2) in London in 1998, a convergence of interests was reached: liberal positions – taken by the Europeans – were connected in innovative ways to interventionist concepts proposed by Asian ASEM countries. Let us quote from this communiqué: “[The Ministers] affirmed that they remained committed to addressing potential problems associated with international volatile capital movement.” This rationalizing process regarding the reform of the financial architecture was only short-lived, however: in the period between the ASEM 2 and ASEM 3 summit meetings no common position on the important question of controlling short-term capital flows or the reform of the IMF could be achieved. Hence, there was no rationalizing effect as a result of this debate under the institutional umbrella of ASEM and no agenda-setting effect on the discussion going on in the IMF. On the contrary, the crisis triggered a move back from the global and interregional level of governance to the regional one (Nabers 2003, 2004). Soon after the crisis moved from Thailand to other regional economies, it was widely conceded that the IMF is generally unable to contribute to the strengthening of the supply side of the countries it supports, while its major task is stabilizing the macroeconomic environment. The common view was that it can help by providing liquidity; yet, it fails when asked for support for real economic activities such as export financing or buttressing banks’ lending capability. Moreover, the financial resources of the IMF are rather limited since it is an institution with global responsibilities. Topics such as capital flows, investment and the creation of a self-help support mechanism reducing dependence on funds of the traditional international financial institutions were soon discussed in a new institutional framework, which was henceforth called the ASEAN+3 process and includes the members of ASEAN plus China, Japan and South Korea. The objective of the new forum was seen in the reduction of dependence on institutions such as the IMF

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and the World Bank for monetary and fiscal assistance and development needs. ASEM played no role in this process. On the other hand, it was evident that most of the ASEM states were eventually going to pursue a liberal or conservative course towards a reform of the international financial system, therefore conforming to the discussion that had already taken place on the level of the IMF and within ASEAN+3. Thus there was no impetus from ASEM, and the discussion undertaken by European and Asian experts on this issue made no difference. In this respect the Filipino political scientist Alfredo Robles remarks appropriately: Even more distressing for ASEM is the fact that the inability to promote convergence on this matter did not prevent it from being taken up at the IMF, which suggests that there is no harm in circumventing ASEM as a forum before engaging [in] discussions in a multilateral forum. (Robles 2001: 17) ASEM’s contribution to the multilateral dialogue on investment A negotiation process can be identified at the global level of governance that aims at the creation of global investment rules. These negotiations primarily took place in the Organization for Economic Cooperation and Development (OECD) and in the World Trade Organization (WTO). In the OECD’s negotiation process, which was initiated in 1995 and terminated in 1998, the participating ASEM member states were incapable of rationalizing and hence influencing the agenda of the so-called Multilateral Agreement on Investment (MAI) through a common voice. The main critique of the Asian states concerning MAI concerned the equal treatment of foreign and local investors and the limited capacity of Third World countries to adopt regulation laws if the agreement actually became effective (Rüland 1996: 40). After the negotiations were declared a failure, new talks – initiated by the EU – started at the level of the WTO. The EU pushes for a global accord under the institutional umbrella of the WTO to liberalize cross-border investments, while Asian states like Indonesia and Malaysia argue against the inclusion of investments issues into the WTO regime. Like other Asian countries they fear that a global investment accord tailored to the developed states interests will not take into account the specific needs of developing economies. This is why until now ASEM states could only agree on the smallest common denominator regarding this issue by stating that “ASEM would provide a useful forum to enhance mutual understanding on WTO investment related issues” (ASEM 2002). Taking into account that global talks on investment are moving along at a painstaking pace it is thus questionable if ASEM will produce a forceful common agenda on global investment issues in the near future.


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ASEM’s contribution to the multilateral dialogue on trade The objective of the WTO is to organize international trade relations on the basis of binding agreements in order to control the practice of global trade and settlement of trade disagreements. This involves all measures that facilitate the elimination of barriers impeding the free flow of goods, capital and human resources. These measures encompass tariff reduction and the application of the most favored nation clause (Neuschwander 2000: 546). How did the 25 European and Asian states contribute to negotiations on the global trade accords? At first sight Asia and Europe seemed to converge on finance and investment issues. As the WTO Ministerial Conference in Singapore (1996) approached, the ASEM states spoke with one voice concerning a delicate topic that divided Firstand Third World countries, namely whether or not to include the issue of labor rights in the general negotiations on trade-related issues. All of the Asian and European countries that participated agreed to continue the discussion of this topical issue in the International Labor Organization (ILO), not in the WTO. The ASEM position can be identified in the WTO Singapore Ministerial Declaration (WTO 1996: Point 4): We renew our commitment to the observance of internationally recognized core labor standards. The ILO is the competent body to set and deal with these standards, and we affirm our support for its work in promoting them. . . . We reject the use of labor standards for projectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question. Three years after relocating the labor standards issue to the ILO, it emerged again on the WTO agenda, pushed by Western states that were eager to include the standards in an appropriate regulation scheme. As a consequence Asians and Europeans started to argue along well-known lines all over again (ASEM 1999: Point 20): “Some Ministers proposed the need for further analytical work in conjunction with the ILO relationship of trade and core labor rights. A number of Ministers expressed real difficulties [italics by the authors] with this issue.” These disagreements acquired some structural quality and eventually led to the complete inability of the EU and the Asian ASEM states to agree upon a position of mutual interest in the run-up to the WTO Ministerial Conference in Seattle in 1999. Along with other developing countries, Asian states in particular kept on pushing for a controlled liberalization round based on the Uruguay Agreements, which stood in stark contrast to the sectoral liberalization favored by the United States and other developed countries (WTO, MT/MIN 1999, ST/33). These case studies clearly illustrate the obvious failure of the Asian and European member states of the ASEM to arrive at common positions on global issues in the areas of finance, investment and trade. Now, how can we explain the inability of the Asian and European member states to come to terms on these important issues of global governance?

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Explaining the empirical record of Europe–Asia cooperation on global issues The existence of diverse political and economic systems along with the consensus-based and informal decision-making style obviously make it difficult for ASEM to play an adequate role in a system of global governance, as farreaching regulations cannot be imposed or monitored. What is more, prevailing differences in political cultures impede institutional development according to Western, rule-based models of organization. Starting with the question of why ASEM was founded, neo-institutionalists offer intriguing arguments. According to this theory, international institutions are able to reduce transaction costs among parties by opening up communication channels and providing relevant information. In a nutshell, a primary goal cherished by many governments in the two regions seems to be the wish “to get to know each other better.” ASEM could provide a new mechanism for the member countries to promote understanding and resolve contradictions through negotiations. In the past, the grouping has spawned many cooperation projects at the non-governmental “track-two” level, meaning interaction between think tanks, journalists, scholars, and even the private sector. Yet at the political level, it has not managed to escape from the stage of being a talk shop. By offering concepts like culture, norms and identity, constructivism might be well equipped to explain this development. While the high density of socialcommunicative processes between East Asia and the United States – within the bilateral alliances of the United States and Japan and Korea respectively, but also in the context of the Asia-Pacific Economic Cooperation (APEC) – affect and shape the identities and interests of the states in the region to a rising extent and certain qualitative new features of solidarity seem to be emerging, the level of communication between East Asia and Europe is still low. Certain interestshaping norms, such as the protection of human rights (i.e. the Myanmar question), are still hampering deeper cooperation. European and East Asian countries differ in terms of history and socioeconomic development, types of political systems and especially cultural values and norms. Culture, indeed, constitutes human behavior on the international, national and societal level, and it certainly influences the way states behave towards each other. Formal and informal principles or norms of state-to-state interaction do exist and they take on different forms in different world regions like Europe and Asia. Let us take at look at the basic differences between European and East Asian cooperation cultures (Loewen 2004): 1

2

Europeans focus state-to-state cooperation on aims and outputs. Cooperation is conceived of as a formal, rational and problem-solving sequence of necessary steps to reach a well-defined goal. Moreover, the European states are willing to surrender parts of their sovereignty to the most formalized and rule-based supranational organization in the world, the EU. East Asians, on the other hand, tend to emphasize the process of coopera-


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tion and do not necessarily regard the outputs as being important. Informal meetings, non-binding agreements and intergovernmentalism therefore lie at the heart of cooperation principles embodied in the Association of Southeast Asian Nations (ASEAN). Hence, one possible explanation for the insufficient results of Asia–Europe cooperation is that ASEM is marred by a clash of European and Asian cooperation cultures. Antagonistic cooperation principles collide when the Asian states have to decide upon binding rules, which stand in complete contrast to their own cooperation culture that favors informal and thus non-binding agreements. This was exactly the case when the ASEM member states were trying to find common positions on the formalization of global investment, finance and trade issues. This, in turn, sheds light on the entanglement of identities and interests. Several Asian member states of the Asia–Europe Meeting are comparatively young states in the midst of nation-building processes that – in the eyes of social and political elites – do not allow for the erosion of sovereignty through membership of a supranational institution. National resources are more likely to be pooled in order to build the basis for a sound economy, strong enough to face the tough competition on the world markets. This explains the intergovernmental nature of the ASEAN, which leaves all the decision-making to its member states, in sharp contrast to the supranational features of the EU. An explanation might then be that some Asian countries are Third World countries or at least take-off countries, which definitely have other interests than the First World countries of the EU and North America. Established economies of Europe for example do not fear global competition because they are strong enough to cope with it and therefore push the issue of liberalization to a maximum in global negotiations, e.g. in the WTO. Third World countries like the Philippines, or take-off countries like Malaysia, tend to only partially open up their economies in order to control or protect their comparatively weak economic and financial systems. Concerning the overall question of whether Asian and European states – assembled in the Asia–Europe Meeting – were able to find common positions on global issues like finance, trade and investment, thereby contributing to the stability of the global governance system, empirical evidence signifies that ASEM was not, in fact, capable of acting as a rationalize or agenda-setter in global organizations. Thus, ASEM made no contribution to the stability of the global governance system. Although the policy-making capacity of nation states is severely compromised in times of continuing globalization, national sovereignty remains an obstacle to substantial cooperation. The same is true for the issues addressed at ASEM meetings and the question of transnationality. While the relative salience of matters of “low politics” has increased in ASEM meetings, no binding decisions are agreed on. ASEM thematic declarations include the Seoul Declaration for Peace on the Korean Peninsula (ASEM 3), the Political Declaration for Peace on the Korean Peninsula

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(ASEM 4), the Declaration on Cooperation against International Terrorism (ASEM 4) and the Declaration on Climate Change (ASEM 6). Moreover, ASEM is engaged in dialogue on global issues ranging from the welfare of women and children to transnational crime. As in the case studies on trade and finance discussed in this chapter, ASEM’s substantial contribution to a system of global governance remains slim. One reason is the underdeveloped link between governmental and nongovernmental activities. An often quoted cliché says that the nation state is no longer the principal actor in world politics. Within ASEM, it remains the sole significant actor. Its high-level focus, stemming from the summits themselves, remains the dominant characteristic of the forum. All other meetings, be it in the AEBF or one of the diverse activities initiated by the ASEF, have only complementary character. Differentiating, with Rosenau (2002), two dimensions of global governance, i.e., the degree of formal authority and the degree of authority flows in vertical or horizontal directions, ASEM is a paradigmatic example of a process where both supranationality and the interplay between the governmental and the non-governmental level are still immature. The ASEM process has therefore been called an “elitist project” (Yeo 2002: 108).3 The explanation of why this is so seems to be convincing if we apply the concept of cooperation cultures to this case: Asian states and societies have different historical and cultural traits compared with European ones. Therefore the standards of international cooperation differ fundamentally. A clash of informal Asian cooperation principles with rule-based European concepts of cooperation appears inevitable if formal accords on global rules have to be negotiated as exemplified. Yet this argument only gathers momentum if we accept that interests and identities are intertwined in social reality and can therefore not be analyzed separately. We strongly believe that regional cooperation norms and informal rules constitute material interests, which, in the case of the Asian states, is their position as young states in the midst of nation-building and their status as developing countries that tend to clash with the material interest of First World countries like those in the European Union. In summary it may be said that variables like cooperation culture and material interest are not be analyzed discretely. As exemplified they are linked empirically and are therefore both relevant factors to account for the interregional cooperation problems that Asia and Europe face in the era of globalization. Future research on culture in the context of interregional relations should hence aim at the analytical integration of both variables.

Notes 1 The term “intersubjectivity,” frequently used by constructivists, is equivalent to that of “common knowledge,” which is used in everyday language. Both refer to the beliefs held by individuals about each other. 2 See also Bersick’s contribution to this volume (Chapter 11). 3 See also Bersick’s contribution to this volume (Chapter 11).


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Loewen, H. (2003) Theorie und Empirie transregionaler Kooperation am Beispiel des Asia-Europe Meeting (ASEM), Hamburg: Dr. Kovac. —— (2004) “Cooperation Culture – Notions on the Significance of Cultural Norms and Principles in Regional and Interregional Cooperation Processes,” Studia Universitatis Babes-Bolyai, Studia Europaea, vol. XLIX, 1–2: 91–102. McGrew, A. (2002) “Liberal Internationalism: Between Realism and Cosmopolitanism,” in D. Held and A. McGrew (eds) Governing Globalization, Oxford: Blackwell, pp. 267–289. Martin, L. (1992) “Interests, Power, and Multilateralism,” International Organization, vol. 46, 4: 765–792. Nabers, D. (2003) “The Social Construction of International Institutions: The Case of ASEAN+3,” International Relations of the Asia-Pacific, 1/2003: 111–134. —— (2004) “ASEAN+3: The Failure of Global Governance and the Construction of Regional Institutions,” in: S. A. Schirm (ed.) New Rules for Global Markets. Public and Private Governance in the World Economy, New York: Palgrave Macmillan. Neuschwander, T. (2000) “WTO/GATT,” in W. Woyke (ed.) Handwörterbuch Internationale Politik, Opladen: Leske und Budrich. OECD (1999) Asia and the Global Crisis, Paris: OECD. Pou Serradell, V. (1996) “The Asia-Europe Meeting (ASEM): A Historical Turning Point in Relations between the Two Regions,” European Foreign Affairs, vol. 2: 185–210. Rittberger, V. (1990) International Regimes in East-West Politics, London and New York: Pinter Publishers. Robles, A. (2001) ASEM and Asia-Europe Relations. Between Investment Promotion and the Financial Crisis, Observatori de Politica Exterior Europa, Working Paper, 9:10. Roloff, R. (2001) Europa, Amerika und Asien zwischen Globalisierung und Regionalisierung, Paderborn: Schöningh. Rosenau, J. T. (2002) “Governance in a New Global Order,” in D. Held and A. McGrew (eds) Governing Globalization: Power, Authority and Global Governance, Cambridge: Polity Press. Ruggie, J.G. (1998) Constructing the World Polity: Essays on International Institutionalization, London and New York: Routledge. Rüland, J. (1996) The Asia-Europe Meeting (ASEM), Towards a New Euro-Asian Relationship?, Rostock: Universität Rostock. —— (1999) “The Future of the ASEM Process,” in W. Stockhof and P. v.d.Velde (eds) ASEM. A Window of Opportunity, London and New York: Kegan Paul International. —— (2001) “ASEAN and the European Union: A Bumpy Interregional Relationship,” Bonn: Rheinische Friedrich-Wilhelms-Universität, Zentrum für Europäische Integrationsforschung, Discussion Paper, C 95. Schirm, S.A. (2002) Globalization and the New Regionalism. Global Markets, Domestic Politics and Regional Cooperation, Cambridge: Polity. Seitz, K. (1995) “Die neue Welt der Geo-Ökonomie: Das globale Ringen um die technologische Vorherrschaft,” in K. Kaiser and H.-P. Schwarz (eds) Die neue Weltpolitik, Bonn: Bundeszentrale für politische Bildung. Sending, O.J. and Neumann, I. (2006) “Governance to Governmentality: Analyzing NGOs, States, and Power,” International Studies Quarterly, vol. 50: 651–672. Serradell, V. (1996) “The Asia–Europe Meeting (ASEM): A Historical Turning Point in Relations Between the Two Regions,” European Foreign Affairs Review, vol. 2: 185–210. Simmons, B.A. and Martin, L.L. (2002) “International Organizations and Institutions,” in


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6

Asian–European relations More security through inter- and transregional relations? Frank Umbach

Introduction: the gradual evolution of the EU’s CFSP and its security cooperation in the Asia-Pacific region since the mid-1990s Since 1993/1994, the EU and its member states have been in the regional security cooperation of the Asia-Pacific region. The EU is a member of the multilateral security activities of the ASEAN Regional Forum (ARF)1 and the Council for Security Cooperation in the Asia-Pacific (CSCAP).2 In 1996, the Asia–Europe Meeting (ASEM) process was initiated, with the Council for Asia–Europe Cooperation (CAEC) functioning as a track-II body. The ASEM process involves a multilateral security dialogue between Europe and Asia held at various levels.3 Finally, in September 1997, the EU – through its Commission – became a member of the Korean Energy Development Organization (KEDO), created to implement nuclear disarmament objectives in North Korea.4 Furthermore, although Europe has had no permanent military forces deployed in East Asia since the return of Hong Kong to the People’s Republic of China (PRC), Great Britain is still a member of the Five-Power Defence Arrangements (FPDA) – a military consultation agreement with Australia, Malaysia, New Zealand and Singapore. This is the most important hard security network involving a major EU power and has intensified its anti-terrorist exercises since the Madrid terrorist attacks of March 11, 2004. Moreover, France has an operational military presence in the Indian Ocean and the South Pacific, totaling almost 9,000 troops at the end of 2004, which can be made available in East Asia too in a relative short time. Since their establishment in the mid-1990s, all of these interregional security cooperation activities have been widened and deepened, bolstered by bilateral security and military cooperation between European and Asian countries, and accompanied by a gradual convergence of their respective “security cultures.”5 They are the result of the quickening interdependence processes of economic and political ties as well as of the “globalization of security policies.”6 If the various regional and sub-regional concept papers of the EU and its member states since 1994 are compared, one will find that the European Commission (EC) repeatedly admitted that the growing inter-regional trade between

Asian–European security relations

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Europe and Asia had become increasingly dependent on the future national and regional political stability in East Asia. The new EU–Asia concept paper of September 2001 goes even further as it has apparently changed its priorities. Setting the economic bias aside, it placed the political and security dialogue ahead of economic cooperation for the very first time. The EU’s new Comprehensive Strategy for Future Relations with Southeast Asia of July 2003 has specified the European security interests in Southeast Asia, particularly in the light of the new terrorist challenges since September 2001.7 However, due to the unresolved flaws in the Union’s Common Foreign and Security Policy (CFSP), implementation of EU policies is often at odds with the concept papers.8 Moreover, the EU’s security engagement in the Asia-Pacific region is not well understood by the general public in the EU states and is underestimated in regard to its strategic importance for Europe’s own security. As an enlarged union of 25 states with over 450 million people producing a quarter of the world’s gross national product (GNP), and with a wide range of instruments at its disposal, the EU is inevitably becoming a global player. In December 2003, the EU adopted its first-ever global security concept (“European Security Strategy”)9 in which it specified five key security threats to Europe: 1 2 3 4 5

international terrorism; proliferation of weapons of mass destruction (WMD); regional conflicts; state failure; organized crime.

Accordingly, the EU has also announced a global “non-proliferation strategy,”10 which has important implications for its CFSP and the European Security and Defence Policy (ESDP). Furthermore, EU officials do not support the role of a “civilian power” for the EU’s CFSP, modeled after the German post-World War II foreign policy approach (Cooper 2003). However, the EU’s security engagement with the Asia-Pacific region is still challenged by the overriding economic interests of its main member states, which often compromise the Union’s long-term security interests in the region. At present, these contradictory and ambiguous trends have been criticized in the framework of the China policies as manifested in the controversial proposal of lifting the 1989 arms embargo on Beijing and reluctance to deal with the conflict in the Taiwan Strait.11 Nevertheless, the awareness of global security interests and their impact on national security and regional stability are growing in Europe as well as in the Asia-Pacific region. Furthermore, both sides strongly favor multilateral approaches for regional security. The following analysis will start by considering the EU’s security engagement in Northeast Asia. It will review its role on the Korean Peninsula and its relationship with the PRC as the rising economic, political and military power in the Asia-Pacific region. In this context, I will also address the recent debate on

UK (FPDA), UK (Brunei) UK (Brunei, Indian Ocean) France (Indian Ocean, South Pacific) UK, France, Germany, Netherlands, Sweden UK, France, Sweden (Japan), France (China) EU (ARF/PMC/CSCAP), EU (KEDO) EU (Cambodia, East Timor) EU (Cambodia, East Timor)

Defense commitments

Force deployments

Arms transfers/defense cooperation

Bilateral security dialogues

Multilateral security dialogues

Participation in peace support operations

Participation in post-conflict reconstruction

Japan, Malaysia (Bosnia)

Malaysia (Bosnia)

Japan, South Korea, Thailand (OSCE)

Japan (UK, France, Sweden) China (France)

Asia in Europe

Source: Bertrand Fort “The Asia–Europe Foundation,” in: Dialogue & Cooperation, Security Dialogue Asia-Europe. Occasional Papers Southeast Asia-Europe, 3/2003 (ed. by the Friedrich Ebert Foundation, Singapore), pp. 65–71 (67).

Europe in Asia

Type of involvement

Table 6.1 Asian and European participation in regional security cooperation


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lifting the EU arms embargo on China and the increasing relevance of the EU’s CFSP towards China for the future transatlantic relationship. Finally I will take a detailed look at the EU’s security role in Southeast Asia within ASEAN and the ARF. In this context, I will highlight the prospects of the extension and deepening of processes of interregional security cooperation between Europe and Southeast Asia.

Europe’s security engagement in Northeast Asia and the Korean Peninsula Although the economic interdependencies in Northeast Asia are constantly increasing, the region is still perceived as highly volatile. The most dangerous hotspots are the conflict in the Taiwan Strait and the nuclear impasse on the Korean Peninsula. These conflicts could evolve into ones that also involve external powers like the United States, which has military alliances with Japan, South Korea and a special security commitment with Taiwan. Any military involvement on the part of the US could also lead to a stronger security engagement by the EU. Given that both the EU and NATO have adopted a global security concept, the EU can no longer exclude the possibility of even a supporting military role. Furthermore, the nuclear issues on the Korean Peninsula are directly linked with the future of the global arms control regimes (in particular the nuclear Nonproliferation Treaty, or NPT) and the EU’s security engagement with Iran. Hence the present and future regional stability on the Korean Peninsula and in the Taiwan Strait will have much greater implications for the security of the EU than in the past. The Korean Peninsula Given North Korea’s command economy and the lack of economic and political interdependencies with the rest of the world, Pyongyang has no major stake in the maintenance of a stable regional environment for pursuing economic progress and development in the near future comparable to other regional states. Yet due to its missiles, nuclear technology and material proliferation to Pakistan, Libya, Iran and other states in the Middle East, North Korea’s nuclear ambitions make the country extremely important to peace and stability in Northeast Asia and even the rest of the world, including the EU. The crisis on the Korean Peninsula began in 1993/1994 amid signs that a known North Korean civilian plutonium program was being used to develop nuclear weapons. When the International Atomic Energy Agency (IAEA) discovered significant discrepancies in the North Korean data of its two plutonium storage facilities and demanded inspections at the Yongbyon nuclear complex, Pyongyang threatened to withdraw from the NPT. After the Clinton Administration considered a preventive military option that would destroy the Yongbyon nuclear facilities (Sigal 1998: 162), it finally returned to the negotiation table, where it formulated the Geneva Agreed Framework in October 1994 and established KEDO for the nuclear disarmament of North Korea.

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The EU became a member of the KEDO Executive Board in September 1997. Since 90 percent of the costs of KEDO are covered by South Korea and Japan, the EU was obliged to finance only 2 percent. Despite the EU’s political dialogue, which started at the end of the 1990s, its diplomatic recognition of North Korea in 2000–2001 by eight of its member states and its humanitarian assistance, food aid and technical assistance, the EU’s policy of “quiet diplomacy” has been limited in its objectives and is characterized by a lack of a coherent, comprehensive long-term strategy (Sigal 1998; Frank 2002). Given the lack of declared strategic interests that the EU had on the Korean Peninsula until 2001, and then being confronted by member states that had different priorities and strategies for global nonproliferation efforts, the EU was both unwilling and unable to play the role of a mediator. Moreover, North Korea was unwilling to accept the mediating role of the EU. Indeed, it was Pyongyang that insisted on bilateral negotiations with the US, preventing any substantial multilateral discussions of hard security issues, and the involvement of neutral players, such as the EU and even Russia, who was a former close military ally. In this case, it was the Bush Administration that was calling for multilateral talks concerning North Korea’s proclaimed nuclear weapon program. In Pyongyang, the EU has been seen as a “soft power” and not a military one. From their point of view, only a military power could have a significant influence on a US strategy that does not exclude pre-emptive military strikes against “rogue states” – an important prerequisite for its own “regime survival.” Hence the EU failed to produce any substantial results when it wanted to become more involved during the Swedish presidency in the first half of 2001. This situation clearly demonstrated the limits of a stronger EU role on the Korean Peninsula. However, the EU’s limited role in this region of Asia is now at odds with its declared global security interests and its global efforts concerning the nonproliferation of WMDs and maintenance of multilateral arms control regimes. In the US, many foreign policy experts remained suspicious after the signing of the Agreed Framework of 1994 and the creation of KEDO as to whether North Korea had really stopped working on the development of nuclear, biological and chemical weapons. In the US Congress, the Agreed Framework and KEDO were contested at every stage of their implementation programs. During recent years, the situation on the Korean Peninsula has become even more complicated. The emerging secret proliferation network between North Korea, Pakistan and Iran – revealed by Abdul Qadeer Khan (the “father” of Pakistan’s nuclear bomb) – explains why North Korea made much more substantial progress in its missile and nuclear weapons programs during the 1990s. The current crisis began in October 2002, when North Korean negotiators admitted to American counterparts that the Democratic People’s Republic of Korea (DPRK) had a secret nuclear weapons program based on highly-enriched uranium (HEU). North Korea had already nullified the Agreed Framework at the end of 2002. In January 2003, it became the only state ever to leave the NPT. It expelled the inspectors from the IAEA and had all electronic and other monitoring devices removed from its known nuclear installations. In July and October


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2003, Pyongyang declared that it had long since succeeded in reprocessing its 8,000 nuclear fuel rods, an operation that would have yielded enough plutonium to produce several warheads. In exchange for giving up its nuclear ambitions, North Korea’s leadership has demanded the establishment of diplomatic relations and a bilateral non-aggression treaty with Washington, along with substantial economic subsidies. On November 14, 2004, KEDO – with the support of the EU – decided to suspend the delivery of heavy fuel oil until Pyongyang had convinced the KEDO member states it was taking concrete and credible action to dismantle its HEU program completely. The political options of the international community, including the EU and even the US, are limited. Trying to force regime change from outside would seem doomed to failure; it may increase regional instability and trigger unintended and unwanted consequences. Even a renewal of economic sanctions does not seem very promising. Given the harsh living conditions in the DPRK, sanctions could easily lead to a rapid collapse of the regime and uncontrolled streams of refugees. The only remaining option is lengthy and patient negotiations (Umbach 2004). The United States has still favored multilateral talks, while North Korea insisted on bilateral talks with the US until 2003. Since the sixparty talks started in August 2003 between the two Koreas, the United States, Japan, Russia and China, Washington has demanded a “complete, verifiable, and irreversible dismantlement (CVID)” of all North Korean activities aimed at producing nuclear weapons. However, American flexibility notwithstanding (even if one assumes that the United States is extremely flexible and given even the greatest optimism for the six-way talks), it seems rather unrealistic to expect an effective agreement on verification for the time being. The reason is not so much that North Korea might not be willing to renounce nuclear weapons – Pyongyang would still retain effective weapons (especially chemical weapons) for a retaliatory strike against Seoul – but for an effective verification regime, the same IAEA conditions would have to apply to North Korea, Iran and other nuclear threshold states. In contrast to the last deal in the 1990s, North Korea would not only be required to open up self-designated installations for IAEA inspections, but would also have to agree to the Additional Protocols that would give the IAEA access to any suspicious installations for verification without prior notice. Almost overnight, North Korea would have to transform itself from one of the most closed political systems to an almost entirely transparent country. Given the EU’s newly announced strategy against the proliferation of WMDs, its insistence on the inclusion of the “Nonproliferation Clause” in all kinds of agreements with Third World countries and its active negotiations with Iran to persuade it to give up its nuclear ambitions and accept the Additional Protocol, the EU would lose its political credibility if it were to side-step the nuclear issues in its relations with North Korea. So far, Colonel Muhammar Qaddafi’s surprising shift in giving up Libya’s nuclear weapons program and inviting United Nations (UN) inspectors into Libya to verify the cessation of activities had no impact on Pyongyang until the

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end of 2006. Although the Libyan model offers major economic benefits in the form of lifted sanctions and increased trade, the US not only demands its nuclear disarmament, but also the restriction of its illicit activities, the transformation of its economy and the monitoring of food assistance for it to become a “normal” country. Nonetheless, the only hope seemed to rest on a quid pro quo strategy for lengthy negotiations that might ultimately lead either to a radical change of views and policies on Pyongyang’s side or to the kind of regime change from within that the Bush Administration would like to see. With the continuing conventional military modernization of South Korea’s armed forces and the re-deployment of US troops in South Korea to reduce the latter’s vulnerability to a potential first strike by North Korea, Pyongyang may be relying more than ever on asymmetric warfare strategies and corresponding capabilities, such as ABC weapons. For the other five members of the six-party talks, Pyongyang’s most likely favored option – preserving a few nuclear weapons, while accepting limits on its nuclear program and receiving economic and political benefits in exchange – is not acceptable. Under these circumstances, it comes as little surprise that no breakthroughs in the six-party talks had been achieved in 2006 and that Pyongyang has not offered any prospects for reducing its own conventional arms threats and offensive capabilities to hold Seoul hostage to the threat of a massive, short-warning invasion of South Korea. Even limited Confidence and Security Building Measures (CSBMs) between both Korean states over the last few years have had no real success and have even produced opposite effects such as increased maritime incidents.12 Until North Korea radically changes its thinking and policies along the lines of the Libyan model, the prospects for nuclear disarmament of the Korean Peninsula looked rather poor. Against this background, it remains highly doubtful that EU membership in the six-party talks would produce more positive results, although a more active and visible role on the part of the EU on the Korean Peninsula would reflect a greater EU security engagement in Asia. If substantial progress could be made in disarming North Korea, the EU could step in and provide conditional financial and economic assistance. However, an independent and unilateral EU strategy without the US’s involvement or even against its will would undermine the already fragile relationship between the six-party members. Ultimately, it would play into the hands of Pyongyang, which seeks to play one member against the others. Hence, a more engaged and coherent EU policy on the Korean Peninsula does not automatically mean the EU also has to become a full member of the six-party negotiations. Any future EU policy still needs to be conducted in close coordination with the US, South Korea, Japan and China. After Pyongyang’s nuclear test on October 9, 2006 and the UN Security Council Resolution 1718, which called on Pyongyang to return “without condition” to the six-party talks (stalled since November 2005), North Korea and the United States have reached an imperfect agreement to shut nuclear facilities in return for oil and food on February 13, 2007. By the third session of the fifth round of six-party talks, the parties agreed to freeze plutonium production and


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processing at Yongbyon within two months, let IAEA inspectors return to the DPRK to monitor and verify this freeze, establish five working groups on denuclearization of the Korean Peninsula, US–DPRK relations, US–Japan relations, economic and energy cooperation as well as a Northeast Asia Peace and Security Mechanism. But this agreement, that is, “to take coordinated steps to implement the Joint Statement in a phased manner in line with the principle ‘action for action’ ”13 is neither an agreed denuclearization grand bargain and a US negotiation victory nor has the DPRK already won the “nuclear game.” Both sides only agreed to overcome the diplomatic standstill and to negotiate further a series of quid pro quos for an ultimate dismantling of its nuclear weapons capabilities. On this way, a future role and stronger engagement of the EU on the Korean Peninsula will still be limited to an information exchange with its Asian partners and the US, joint inter-regional declarations in frameworks such as ASEM14 and the ARF, and economic assistance and aid programs to North Korea. EU–China relations: a “comprehensive strategic partnership” emerging? The evolving EU–China relations since the mid-1990s EU–China relations are at a crossroads at a time when the EU and its member states are seeking ways to overcome the rifts of the Iraq conflict with the United States. Partly as a result of the enlargement processes, the EU became the largest trading partner of the PRC in 2004 (more than 19 percent of China’s external trade) and China became the second-largest trade partner of the EU (second only to the US) and Europe’s largest source of imports.15 Since 1978, the bilateral trade volume increased 30-fold until 2003 and doubled between 2000–2005, much faster than its exports to the rest of the world. The total bilateral trade reached 210 billion Euro in 2005, but with an increasing deficit of 106 billion Euro in China’s favor. Germany is by far the largest EU exporter to China, conducting no less than 44 percent of the EU’s total trade with China. But although the expansion of the bilateral trade is a success story in its own right, it simultaneously also undermined the implementation of a more effective CFSP towards China, both in a material and a normative context.16 The growing economic ties and interdependency have strategic consequences for the political relationship between the EU and China, and also for the transatlantic relationship. They will eventually have to address more potentially divisive transnational and regional issues outside Europe, including the relationship with Asia and China. While China is still vying for a “multi-polar world,”17 the EU and its member states are implementing their CFSP step-by-step, as well as their ESDP. Yet despite the European Security Concept, the main member states of the EU (notably France and Germany) are still defining their policies on China largely by their economic and trade interests. Therefore, they have often ignored the EU’s long-term security interests in the Asia-Pacific as outlined in numerous EU and national foreign policy documents on China.18

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Since the promulgation of its guidelines for a Comprehensive Partnership with China on June 29, 199819 and its Asia Strategy Paper of September 2001,20 the EU has struggled for a coherent, comprehensive and balanced China policy based on a long-term strategy that reflects China’s growing economic and political weight at the regional and global level, as well as the EU’s interest to implement its own CFSP. Since the year 2000, the EU’s assistance programs for China have also included its accession to the World Trade Organization (WTO), the fight against illegal immigration and trafficking in human beings, social security reform, the telecommunication/information society, the environment, energy, and human resource development. In contrast to the European Commission, the European Parliament (EP) has repeatedly criticized the EU’s official and unofficial policies on Taiwan and Tibet. In the 2002 Implementation Report on the EC’s China Strategy Paper of 1998, the EP had already criticized the statement: “China reserves the right to use military force in its disputes with Taiwan.” The EP has also expressed concern over China’s identification of the US as its principal threat in its defense white paper of October 2000 and over the fact that it “has supported regional groupings which exclude the US, rather than pan-Pacific ones, even setting up its own version of Davos at Bao on Hainan Island, to which no Americans were invited.”21 In the future, EU–China relations will increasingly be affected by global policy challenges arising outside China and Europe. Hence the EU, as well as China, will have to assume more responsibilities for global political and economic stability, such as an increasing engagement in regional security in the Middle East and Central Asia. However, the national interests of both sides may grow further apart, given China’s and the EU’s growing energy demands and, subsequently, their increasing economic dependence on these politically highly volatile regions. The strategic interests of both the EU and China concerning their access to energy resources make them more interested in the maintenance of political stability in these regions. Consequently, the growing inter-regional energy interdependencies between Europe and China require common EU–China strategies vis-à-vis this “arc of instability” (Umbach 2003, 2004). But so far, China’s neo-mercantilist energy and raw material diplomacies are guided rather by short-term objectives, reflecting the importance of the energy and raw material imports for China’s high annual GDP increases and its political regime stability. But these policies are threatening the EU’s foreign and development strategies such as in Africa. As the result of economic and foreign policy globalization on both sides, China’s energy diplomacy in the Middle East and Africa has become one of the new controversial issues of an increasingly ambivalent and complex EU–China relationship of regional and global cooperation, competition and diplomatic conflicts (Umbach 2007). Hardly surprising, the Commission’s new strategy paper of October 2006, titled “EU–China: Closer Partners, Growing Responsibilities,” sounds much more critical in comparison with the last EU China Strategy Paper back in December 2003. Besides China’s energy, Africa-policies and other issues, the Commission has also increased its


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numerous complaints about China’s trade and business practices which clearly contradict a declared “comprehensive strategic partnership” with Beijing.22 Meanwhile, in the process of a newly emerging “strategic triangle” between the US, the EU and China (Shambaugh 2004a, 2005), Beijing has also tried to deepen the rift in the transatlantic relations by demanding that the EU lift its 1989 arms embargo. The debate over lifting the EU arms embargo on China and its implication for the Taiwan Strait conflict23 In October 2003, China published an official strategy paper on EU–China relations for the very first time.24 This is interesting because Beijing did not publish a similar paper on its relationship with ASEAN, the US or any other regional grouping or great power. In this paper, Beijing declared that it seeks to lift the EU ban on arms exports to China “at an early date” in order to “remove barriers to greater cooperation on defence industry and technologies.” Understandably, China wants to end the arms embargo at a time when both sides see each other increasingly as strategic partners in an era of global uncertainties. Indeed, similar formal embargos by the EU have only been adopted against Sudan, Myanmar and Zimbabwe. China does not want to belong to the same questionable category of “rogue states.” While China has become one of the fastest-growing economies worldwide, it has also developed what is probably the third-largest defense budget (after the US and Russia). During the six years between 1997 and 2003, Chinese defense expenditure increased by more than 140 percent. In 2004, official defense spending increased 11.6 percent to $25 billion (C20.8 billion), in 2005 it increased by another 12.6 percent to around $29.5 billion – and in 2006 by 14.7 percent to around $35.3 billion – again outpacing the 2005 GDP increase of 10.7 percent. However, the Pentagon, the International Institute for Strategic Studies (IISS, London) and international military experts believe that in real terms the Chinese defense budget is somewhere between $45–122 billion if it includes all relevant defense related resources hidden in other state budgets and by taking into account the problem of exchange rates (purchasing power parity/PPP – the cost of purchasing a common basket of goods and services in one country compared with another) (Umbach 2005a). Since 2000, China has become the world’s largest arms importer, with a heavy dependence on Russian high-tech weaponry exports due to its insufficient national arms industry output and the Western arms embargo. It has signed new arms agreements worth more than $11 billion since 1999.25 During the last two years, the transparency of its defense expenditure has also deteriorated, probably as the result of unwanted Western and Asian attention.26 To understand Beijing’s interest in lifting the EU arms embargo imposed in 1989, one needs to bear in mind that President Vladimir Putin has placed constraints on Russia’s weapon exports and technology transfers to China. In contrast to its growing military technology cooperation with India, Moscow is not

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willing to develop new high-tech weaponry generations together with Beijing or to lease nuclear bombers and deliver supersonic missiles with a range of more than 300–500 km to China (Umbach 2003a: 79; 2004a: 56). Thus China is looking for alternatives to speed up its military modernization and to diversify its arms imports and technology transfers. Within the EU, France has clearly taken the lead in pushing for the lifting of the 15-year-old embargo, which it considers to be “outdated.”27 This push reflects Paris’ and Beijing’s hopes for a “multi-polar world,” as well as their intentions to strengthen the French and European arms industry by selling more weapons systems and particularly dual-use technologies to China. Furthermore, French President Jacques Chirac has officially condemned Taiwan’s referendum of 2004 as “irresponsible” and a threat to Asia, enshrined in a joint declaration signed by him and visiting PRC President Hu Jintao. On March 16, 2004, Paris even held joint naval exercises in the vicinity of Taiwan for the first time, just four days before Taiwan’s presidential elections. Beijing called these “the most comprehensive military exercise ever held between China and a foreign country.” In February 2005, the French defense minister, Michèle Alliot-Marie, argued in favor of expanding weapons exports to China over the next five years before Beijing is able to produce them itself. According to her arguments, lifting the embargo and expanded weapons sales to China could slow Beijing’s own capabilities to produce high-tech weaponry. Hence lifting the embargo is better than maintaining it (Spiegel and Thornhill 2005). In April 2005, French Prime Minister Jean-Pierre Raffarin stated during his visit to China that Beijing’s new anti-secession law was “completely compatible with the position of France.” Finally, in the same month, China’s Air Force Chief of Staff, Lieutenant General Peng Sheng-chu, declared “that his service felt considerable pressure with the People’s Liberation Army (PLA) planning to purchase 210 advanced Mirage 2000–9CS” fighters and 1,200 Mica air-to-air missiles, worth 12 billion euros.28 In recent years, French President Jacques Chirac and Germany’s then Chancellor Gerhard Schröder argued that China had made sufficient progress in reforming its government and economy since 1989 to justify lifting the arms embargo. Moreover, the European arms industry (including the European Aeronautic Defence and Space Company, EADS) has begun to shift its business strategies towards the Asian markets, and particularly the Chinese one.29 Although the European industry often overestimates the prospects of China’s willingness and capacity to buy large amounts of high-tech weaponry, it is indeed very interested in acquiring specific niche technologies and minor weapon systems, such as radar, air-to-air missiles, sonar equipment, torpedoes and other important force multipliers to increase the fighting capabilities of both its old and new weapons systems. Germany and the EU have denied that the lifting of the arms embargo would lead to a significant rise in the sale of high-tech weaponry to China because arms sales would still be barred under a new, more efficient EU Code of Conduct aimed at preventing sales to repressive states or instable areas.30 Furthermore, Germany’s national regulations on arms exports are considered to be stricter than those of


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France and the United Kingdom. Yet the German national export controls do not play an important role any more for the weapons technology that China is looking for. Moreover, the EU regulations did not keep it from exporting naval ships and other military equipment to Indonesia during the 1990s when Jakarta occupied East Timor (a former Portuguese colony) with brutal force. During the last few years, other EU member states have also adopted their own interpretations of the Code of Conduct in general and the arms embargo vis-à-vis China in particular. These have resulted in an increase in the number of approved licenses to sell military equipment to China. Between 2002 and 2003, military exports to China doubled from 210 to 416 million euros and increased eight times within a two-year period (2001–2003). As is hardly surprising, France was the largest weapons exporter in 2003 with sales to the value of 171 million euros (Hill 2004: 54). Unlike the embargo, the existing code is not legally binding and its political restraints have become insufficient. Also, the EU member states (including France and Germany) did not address the question of whether the Code of Conduct was really effective enough to prevent the export not only of major weaponry, but also of increasingly important dual-use technologies. These dualuse technologies, which often do not meet the export-blocking criteria of being “lethal,” nonetheless significantly augment China’s military modernization and power projection. In contrast to the past, no major high-tech weapons system today exists exclusively as a result of purely military technologies. Since the beginning of 2004, the US has launched a diplomatic campaign against the EU as well as its main EU and NATO partners, in order to pressure them into not lifting the arms embargo on China.31 The US is taking this action for four basic reasons, which have found support across the entire US political spectrum: 1 2

3 4

If the EU lifted the embargo, it would put the US in a precarious position to maintain its own sanctions imposed in 1989. Although the human rights situation in China has undeniably improved since 1989, China’s human rights record is still questionable by US standards. The Bush Administration, for instance, sponsored a resolution at the UN Commission on Human Rights in Geneva in February 2004, condemning Beijing’s human rights record for the first time in three years. In the US view, China made commitments in 2002 which had not been fulfilled, such as granting the International Committee of the Red Cross access to its prisons – a promise made on the eve of President’s Bill Clinton’s first meeting with China’s President Jiang Zemin over a decade ago.32 It would increase China’s military capabilities and consequently destabilize the military balance, which is already eroding in favor of the PLA. Any weapons exports and technology transfers may increase the proliferation risks due to China’s inefficient export-control system.

On February 2, 2005, the US House of Representatives approved a resolution condemning the EU plan with an overwhelming 411 votes to three. Furthermore,

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the US Congress has threatened to vote against any future transatlantic defense cooperation as well as future access to US defense technology for the EU and participation in US defense projects if the embargo is lifted (Bowley 2005: 1, 7). Although the US House of Representatives rejected legislation that would have given the President the authority to sanction EU companies that sell arms to China on July 14, 2005,33 it may change its mind if the EU lifts its arms ban in the future. Originally, China feared that with the new Eastern European members being politically more closely allied with the US, it would be even more difficult to lift the arms embargo. However, the EU did not make a final decision prior to its enlargement on May 1, 2004. Meanwhile, the EU itself has demanded that China should take more concrete steps towards the improvement of human rights, such as ratifying the International Covenant on Civil and Political Rights, which China signed in 1998. The European Parliament already passed a resolution on December 18, 2003, appealing to the European Council and the EU member states not to lift the EU embargo on arms sales to China by an overwhelming majority of 373 to 32 with 29 abstentions. It has also argued that China has not made enough progress in its human rights record. The European Parliament also reiterated its belief that in view of China’s military threats against Taiwan and by its unwillingness to dismantle its more than 500 missiles (meanwhile 900 missiles) that target the country, it would be a bad idea to lift the arms embargo in the near future. Moreover, on June 3, 2004, the West European Union (WEU) Assembly and the Interparliamentary European Security and Defence Assembly also issued a warning against lifting the EU embargo on arms exports to China until Beijing makes significant progress on arms export controls and human rights. It has criticized the human rights situation in China, saying that it is worsening and that the Chinese space programs lack transparency in their objectives. It has also demanded that China ratify the UN Covenant on Civil and Political Rights and formally join the Missile Technology Control Regime (MTCR). Beijing, however, made clear that it will not bow to the demands of the EU for any political concessions. As the result of growing criticism and political opposition, a new, more rigorous EU Code of Conduct on arms sales is expected that will stop any weapons exports that could be used by China for “external aggression or internal repression.” For the first time, the revised code will also govern licenses and a “tool box” that will oblige all member states to reveal what licenses they have approved and denied. However, it remains uncertain whether the new Code of Conduct for European arms exports would be effective enough to close the loopholes for sensitive dual-use technology exports. On March 14, 2005, China adopted a new “anti-separation law” authorizing the use of military force against Taiwan if the island moves towards formal independence or “should all other means for a peaceful reunification be exhausted.”34 Although this threat is not really a new addition to Beijing’s policies towards Taiwan, it is now enshrined in an official national law that limits


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the political room for maneuver that Beijing’s political leaders will have in any escalating future crisis with Taiwan even more. It also contradicts Western concepts of crisis stability. With the British presidency in the first half of 2006 and the EU’s criticism of China’s new anti-separatist law,35 any EU decision (which needs the agreement of all 25 EU member states) concerning the lifting of the 1989 arms embargo has been shelved for the time being. Since the summer of 2006, only France and recently Italy are supporting the removing of the arms embargo any longer, whereas the rest of the EU makes it dependent on China’s progress on human rights, rule of law, and democracy issues in the country. Furthermore, the new EU–China Strategy Paper of the Commission stated that it has “a significant stake in the maintenance of the cross-straits peace and stability.” Accordingly, the EU declared its: opposition to any measure which would amount to a unilateral change of the status quo; strong opposition to the use of force; encouragement for pragmatic solutions and confidence building measures; support for dialogue between all parties; and, continuing strong economic and trade links with Taiwan. While Beijing expected much less criticism and “interference in internal affairs” in this new strategy paper, the Commission’s “strong opposition” to the use of force in the Taiwan caught Beijing by surprise. Irritating for Beijing was also the paper’s demand for “transparency on Chinese military expenditure and objectives” and the recommendation to its member states to “improve its analytical capacity on China’s military development,” which is completely underdeveloped at present.36 In summary, the intra-European and transatlantic discussions on lifting the EU arms embargo on China, the French–German unilateral initiative made without consulting their own foreign ministries or major EU partners in advance, have clearly demonstrated the short-sighted commercial temptations wrapped up in the embargo politics. For any final decision concerning the lifting of the arms embargo, the German government should take into account that it would also be politically responsible for any arms exports of other EU members, notably France, to China.37 Moreover, opening the door for intended or unintended EU military technology supplies to China might also remove the existing restrictions on high-tech arms exports from Russia, Israel and other nations to China. In the medium term, however, the question to lift the 1989 EU embargo has been shelved for the time being. As the new EU–China Strategy Paper of October 2006 has highlighted, the Commission followed the European Parliament’s policies to link the removal of the arms embargo not only with substantial Chinese concessions in the area of human rights, but with progress on the cross-strait relationship (being concerned about Beijing’s authorized right to use military means to “solve” the Taiwan question) and China’s transparency on its defence policies and military modernization. Moreover, the EU has become

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more aware about China’s “seduction strategy” of “divide and rule” by playing off the US against the EU because it can only weaken the EU’s CFSP vis-à-vis China and disrupt transatlantic relations in ways that transcend this dispute over the arms ban itself.38

The EU’s security cooperation with Southeast Asia The EU and the “ASEAN Way” of multilateral security cooperation At first glance, it seems that the EU has much better opportunities to enhance its security engagement in the Asia-Pacific than in Northeast Asia due to the existence of regional security institutions and the presence of Southeast Asian Nations (ASEAN) preference for regionalism and multilateralism. As the driving force behind the regional and multilateral security discourse in the framework of the ARF and CSCAP, ASEAN’s security culture is based on informal processes and a consensus-based way of managing regional security.39 Yet despite the gradual convergence of Asian and European security cultures, the security policy of the EU is hampered by its own insufficiencies as well as by the development of regional conditions in East Asia. While ASEAN’s security culture is based on the concepts of “co-operative security” and “comprehensive security,” it is still very much based on a state-centered approach. Even at the beginning of the twenty-first century, ASEAN member states have great difficulty opening up their policies to the numerous transnational security challenges in the region and in implementing corresponding joint strategies. Moreover, ASEAN’s invitation to India and Myanmar to join the ARF, pushed forward by Singapore and Indonesia in the hope of countering China’s rising influence, proved to be unrealistic due to ASEAN’s lack of political cohesion. In particular, Myanmar’s full membership has produced continuing political friction both within ASEAN itself and with its cooperation partners such as the US, the EU and Japan. At the same time, ASEAN’s attempts at mediation during the Cambodian crisis provoked a need for the clarification of ASEAN’s traditional core principle of non-interference. The discussion on accepting a “flexible engagement” instead of giving up its non-interference policy, however, was widely rejected and dismissed as opening up a Pandora’s box, and sowing mistrust and resentment within the Association.40 In this context, “humanitarian intervention” and “peace-enforcement,” practiced by the EU in Europe and outside the European continent, have remained anathema for most of the Asia-Pacific states right up to today. ASEAN countries, such as Indonesia and the Philippines, lack important political, diplomatic and military capabilities to cope with armed separatist rebellions in Aceh and Mindanao. Furthermore, border clashes between Thailand and Myanmar in February 2001, a major breakdown in relations between Thailand and Cambodia, new tensions between Malaysia and Singapore,41 a maritime conflict between Malaysia and Brunei, as well as the distrust in ASEAN’s High Council have all tested ASEAN’s political credibility at the beginning of the new century.


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The 9/11 attacks and the US’s global campaign against Islamic terrorism around the globe have created new outside pressure and a sense of urgency for the Association to implement a more cohesive collective security structure. Its failing timely response and its rather disappointing contribution to the international peacekeeping force of INTERFET in the East Timor crisis following Indonesia’s “crimes against humanity” (UN Secretary-General Kofi Annan) in 1998/1999 have highlighted its incapacity to address those regional security challenges, however. The new formula of “enhanced interaction,” which includes the activation of an “ASEAN troika” and the creation of the longdormant High Council (as provided by ASEAN’s Treaty of Amity and Cooperation, or TAC, of 1976) to adjudicate bilateral disputes, has relaxed some of its core principles by internalizing new – and endorsing re-interpretations of existing – norms associated with the “ASEAN Way.” They did not radically change ASEAN’s traditional diplomatic and security culture, though.42 Recently, more far-reaching proposals have been made such as the establishment of an “ASEAN Security Community (ASC)” by 2020. These appear to be more ambitious initiatives that may eventually lead to deepening integration. Yet even in 2020 the ASC should still be based on ASEAN’s traditional core principles such as noninterference, consensus-based decision-making and respect for national sovereignty. Moreover, ASEAN has explicitly ruled out the threat or use of force, becoming a defense pact or military alliance, or even adopting a common foreign and security policy based on the EU model. Despite a “crying need” for greater action, ASEAN has so far also shelved Indonesia’s proposal to create a regional peacekeeping force with a “deployment mechanism” by 2012 (and an ASEAN Peacekeeping Centre by 2010) as part of an action plan for its future ASC (Wain 2004: 19; Caballero-Anthony 2003). In light of this, if no substantial changes are made on ASEAN’s part, it will not only impair intra-regional, but also inter-regional security cooperation with the EU, as well as with the US and the UN. The EU’s security engagement in the ARF and its limits Since 9/11 and the Iraq war, “effective multilateralism” has not just been debated in the United States, but also in Europe. For the EU and its member states, nonproliferation and anti-terrorist strategies now play a fundamental role in the EU’s CFSP, including its relations with the Asia-Pacific. The record of the ARF in coping with new transnational security policies such as international terrorism, transnational crime and regional as well as global nonproliferation of WMDs is mixed, if not blatantly inadequate with regard to timely responses and preventive countermeasures. Despite ASEAN’s Declaration on Joint Action to Counter Terrorism in November 2001,43 ASEAN has only slowly developed and expanded its intra- and inter-regional cooperation on international terrorism. Similarly, only since 2003 has the ARF strengthened its regional cooperation on nonproliferation of WMDs and export control of related materials.44 Nonetheless, since July 2002, the ARF has encouraged the

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Table 6.2 The structure and members of the ARF Formation

Membership and organization

23 members

Ten ASEAN states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam 13 ASEAN dialogue partners: Australia, Canada, China, India, Japan, Mongolia, New Zealand, North Korea, South Korea, Russia, the European Union and the United States ASEAN’s observers: Papua New Guinea (and the ASEAN Secretary-General)

Primary objectives: a three-step approach

• To promote confidence-building measures (CBMs) • To develop preventive diplomacy (PD) • To elaborate approaches to conflict resolution (CR)

Institutionalized security dialogue fora

Annual Ministerial Meeting (AMM) Senior Officials Meeting (SOM) Three Intersessional Support Groups (ISG) ISG on Confidence-building Measures (CBMs) ISG on Peace-Keeping Operations (PKO) ISG on Search and Rescue (SAR) No permanent secretariat

publication of “Annual Security Outlooks” as a confidence-building measure (CBM) and increased the involvement of defense experts by holding regular ARF Defense Officials Meetings. It has also enhanced the linkages between track-I and track-II processes (CSCAP), implemented an “Enhanced Role of the ARF Chair” (adopted in July 2001) and drafted guidelines for an ARF Register of Experts/Eminent Persons (ARF-EEPs). Finally, in January 2003, the EU and ASEAN also adopted a “Joint Declaration on Cooperation to Combat Terrorism.” This envisages a comprehensive approach comprising political, economic, diplomatic, military and legal norms and has called for strengthening interregional links between law enforcement agencies on both sides as well as with EUROPOL and ASEANAPOL (Annual Conferences of ASEAN Chiefs of Police) to promote cooperation on counter-terrorism and transnational crime.45 On the practical and operational level of intra-, inter-regional and global security cooperation, however, the ARF has made scant progress.46 While a stronger multilateral security engagement in the ARF is urgently needed in the EU’s own strategic interests, the EU and its member states are facing a number of problems with their security partners in the Asia-Pacific to operationalize and implement a deepening inter-regional security cooperation between Europe and Asia-Pacific due to: 1 2 3

ASEAN’s traditional security culture; China’s present policies; the insufficiencies of the EU’s CFSP towards Asia.47


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ASEAN Even with the establishment of the ARF in 1994 primarily as a transparency and reassurance measure through the assurance of continued US involvement in the region and the encouragement of China to get involved in an extended security dialogue, ASEAN was only able to defuse rather than resolve intra-regional disputes and potential conflicts. It has remained dependent on the political cohesion and unity of ASEAN as well as on the stability of the strategic triangle (China, the USA and Japan) in the Asia-Pacific region. From this perspective, the ARF can only complement rather than replace the traditional focus of regional states on bilateral security and military alliances.48 In the view of its critics, the ARF is merely a “talk shop,” “built on sand” and is doing little more than giving China opportunities to divide and rule (Lim 1998). From the very beginning, the low level of institutionalization of the ARF with its non-intrusive agenda was both the result of the traditional “ASEAN Way” and of the lack of consensus within ASEAN and between the other regional states of the ARF. It impeded the ARF, preventing it from coming forward with timely preventive strategies and concrete responses to immediate security challenges. Initially, the ARF’s concept paper from 1995 suggested a gradual evolutionary approach involving three steps: 1 2 2 3

the promotion of confidence-building measures (CBMs); the development of preventive diplomacy (PD) mechanisms; the development of conflict resolution.

Yet after ten years of existence, the ARF still has to move beyond the first two stages. Moreover, it has proved much more effective in tying Northeast Asian powers (i.e. China and Japan) to Southeast Asia than it has been in tying Southeast Asia to the manifold security dynamics of Northeast Asia. This security asymmetry in sub-regional interdependence is particularly troubling because Southeast Asia has moved from “conflict formation” to building a sub-regional security regime, whereas Northeast Asia largely seems to remain prone to conflict formation (Buzan 2003: 156, 163). In the future, the ARF needs a deepening of institutionalization, enforcement and sanctioning mechanisms for more ambitious agreements, which are currently absent in its strategic vision for the future development of the ARF security agenda. China The EU policies face even more problems concerning a greater security engagement in the ARF when China’s present policies are analyzed in detail. Despite China’s successful integration into the ARF in 1994 and its more flexible, pragmatic and pro-active foreign policies, Beijing has often taken the opportunity to

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use the ARF to promote its concept of multipolarity, which counters the influence of the US and constrains Japan. For its ARF and CSCAP entries, for instance, China made the conditions that no discussion of Taiwan or disputed sovereignty claims in the South China Sea would take place. Thus two of the most important regional security challenges have been excluded from any multilateral discussions in the ARF and to some extent even in the track-II diplomacy of CSCAP, CAEC and other fora. Beijing’s intention to control all security dialogues at the track-II level from above has also indicated that it prefers to follow the CSCAP in what track-I has already initiated rather than leave the CSCAP to stimulate more controversial and sensitive debates. Moreover, despite its greater pragmatism and diplomatic flexibility, China is still concerned about Western and, in particular, US “soft power” abilities to influence and even determine the agendas, scope and objectives of regional security cooperation within in the ARF and CSCAP. By blocking these or at least controlling the processes from the inside, China has also hindered CSCAP studies and proposals for a regional arms register, zones of cooperation in the South China Sea, arms control, and the institutionalization of conflict resolution mechanisms – all issues which Beijing still sees as violating its national sovereignty and strategic interests. Furthermore, China is even more suspicious about the Shangri-La Dialogue Annual Security Forum. This event is organized by the International Institute of Strategic Studies (IISS) in London as the Asia-Pacific version of the prestigious annual Munich Conference on Security Policy. The Shangri-La Dialogue brings together some 15 defense ministers and over 120 senior officials, parliamentarians and experts from more than 18 countries. Since the beginning of 2002, the IISS has also invited Taiwanese representatives for regional security discussions. However, this is not the only reason why Beijing did not send representatives to the forum in 2004, as it did in the two former ones. In the Chinese view, its agenda is far too influenced by the US, although Singapore both hosted and co-sponsored the annual forum.49 China also did not send any representatives to the last Asia-Pacific Round Tables in Kuala Lumpur due to the presence of Taiwanese delegations. In the summer of 2004, Beijing instead proposed to organize another security forum in 2005 with the participation of defense officials under the auspices of the ARF as a supposed alternative to the Shangri-La Dialogue.50 Moreover, the Chinese proposals do not usually include the US, Australia, the EU or even Japan. Preventive diplomacy has been another important subject of discussion in the ARF and in the CSCAP since the end of the 1990s.51 While China was willing to discuss this matter, the necessary level of trust for implementing preventive diplomacy initiatives has hampered any application of these initiatives to the South China Sea conflicts. Despite the “Declaration of a Code of Conduct for the South China Sea” of November 2002,52 neither the operation nor the implementation of the non-binding Declaration into a real “Code of Conduct” has made significant progress, although China is not the only one to blame for the lack of progress. New unilateral activities bolstered by controversial military


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movements by the Philippines, the PRC, Taiwan and Vietnam in the South China Sea during the first quarter of 2004 signaled that the declaration has not really changed the behavior of the conflicting parties. Even the Chairman of the ARF Meeting held in July 2004 felt obliged to again warn “that the parties concerned exercise self-restrain in the conduct of activities that would affect peace and stability in the region.”53 While the ARF has stimulated more frequent military contacts and visits by naval vessels belonging to its regional members as a long-term CBM, it has neither changed China’s behavior and objectives in the Asian waters, nor has it debated China’s increased military capabilities and its implications for regional stability. In this respect, deferring conflict resolution about the territorial claims in the South China Sea seems rather a recipe for disaster. As almost all empirical studies of regional conflicts during the last decade have found (including those in former Yugoslavia or the Middle East), the longer the international community waits for timely, preventive diplomacy and conflict resolution, the higher the political and material costs will be afterwards. In other words, those conflicts will not become any easier to resolve in the future; in fact, they risk escalating to more violent levels, particularly when assertive and nationalist policies are backed by rapidly increasing military capabilities. Whilst China’s attempts to increase its influence in regional military and security affairs, like it has in the ARF, are understandable, by proposing and initiating new regional security conferences and institutions, Beijing is duplicating existing ones. In so doing, they are also hindering the ARF, CSCAP and other regional fora in evolving further into more effective regional security organizations. The Chinese policy might have defensive motivations vis-à-vis the United States’ role in the region, but it may also create insurmountable barriers to more effective intra- and inter-regional security cooperation. EU-CFSP Given the fact that the EU is an economic global player with worldwide export interests, particularly in East Asia, free shipping in international waters is of great strategic importance for Europe. Up to now, the EU and its member states, however, have not taken a clear position on the unilateral activities of China and other claimant states that contradict the UNCLOS. In addition to the EU’s political coherency problem, the EU seems to be often deterred by China, which has strongly objected to its proposals to commence open discussions on regional security concerns (Islam 2000). In this context, it is important for the EU as a “traditional soft power” to understand the role of hard military power in the twenty-first century (Garofono 1999: 82). Despite the progress of the CFSP and ESDP, the EU’s policies are still best described as intergovernmental cooperation and coordination. This results in policy inconsistencies between the European troika (i.e. the European Presidency, the EC and the High Representative for the CFSP) and its main member states, Germany, France and the United Kingdom. Their different priorities and

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the insufficient continuity caused by the rotating EU presidency and the enlargement to 25 member states in May 2004 have further complicated the coherence and the implementation of the CFSP and ESDP.

Conclusions and perspectives: the rising interregional economic–security nexus between Europe and the AsiaPacific region As the terror strikes of 9/11 and the Madrid bombings on March 11, 2004, have shown, the globalization of economics and security has drastically shortened the geographic and psychological distance between Europe and Asia. The proliferation of weapons of mass destruction, ballistic missiles and the existence of secret inter-regional proliferation networks have made Europe increasingly vulnerable to religious fundamentalism, international terrorism, political crises and military conflict originating beyond Europe’s outer borders. Since the mid-1990s, the EU and its main member states France, the UK and Germany have recognized the strategic importance of the Asia-Pacific as the rising economic powerhouse with political and strategic implications for regional and global stability. The EU’s security engagement in the Asia-Pacific region has focused primarily on discussions of regional and global security challenges. Since the mid-1990s, the EU and its member states have also been helpful at a practical level by supporting Asia and the ARF in implementing CBMs and sharing their experiences in peacekeeping missions. With the increasing global outlook and the first-ever global foreign and security policy strategy as part of the implementation of the CFSP and ESDP, the EU’s strategic interests in regional stability and security challenges in the AsiaPacific will inevitably grow further – a strategic trend which is unstoppable, as the recent developments in coordination against international terrorism have highlighted. The traditional self-perception of being “distant” and a “soft power” with limited strategic interests in Asia is clearly contradicting the EU’s newly proclaimed global “European Security Concept” and Nonproliferation Strategy, both adopted in December 2003, as well as its growing economic interests with Asia. They translate the growing EU–Asia interdependencies into an interregional economic–security nexus with Asia-Pacific. All security discussions in the ARF have hitherto focused primarily on threat perceptions and CBMs rather than on the concrete management of regional security conflicts and conflict resolution mechanisms involving legal obligations. More concrete initiatives in the direction of track-II processes have often only been partly transformed into formal governmental ones due to key countries’ unwillingness or hesitance to do so. However, new forms of multilateral and interregional security cooperation have improved state-to-state relations and state building in East Asia. They have also created “epistemic communities” (networks of experts) with the US and Europe within this region and beyond. Yet they have not significantly contributed to the creation of wider civil societies, neither at the domestic nor at the regional level.


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While ASEAN and the ARF are focusing at present on regional identity, network- and consensus-building, which are rather long-term processes, both organizations are ill-prepared to cope with irresistible short- and medium-term strategic trends, such as China’s growing soft and hard (military) power. On one hand, China has become much more supportive of the existing multilateral security institutions such as the ARF and CSCAP, but on the other, the main problem in Asia-Pacific is no longer the lack of multilateral security fora, but: 1 2

the Chinese duplication of existing ones with new security institutions; the need to deepen the institutionalization and integration of existing multilateral fora such as the ARF.

Moreover, the unwillingness and inability of ASEAN to substantially redefine the “ASEAN Way” as the embodiment of its security culture are jeopardizing its role as the driving force behind the most important regional security organization of the Asia-Pacific. The ARF may also become increasingly irrelevant for coping with East Asia’s traditional and new transnational security challenges. Whether new forms of informal ad hoc cooperation (such as the Proliferation Security Initiative/PSI54) will only complement or replace the ARF with its 23 member states in the future depends very much on the political willingness of ASEAN to enable the institution to respond more efficiently to the challenges it meets in the Asia-Pacific region. Seen against this background, the European security engagement in AsiaPacific will become even more important in the years ahead. Moreover, both sides of the inter-regional security cooperation also need to ensure that the US remains honestly committed at multilateral and interregional security fora. European and Asian states therefore also need to address the shortcomings and the ineffective circumstances and pre-conditions of regional and global multilateral security cooperation more self-critically. Hence more “effective multilateralism” needs to be discussed and utilized within ASEAN, the ARF and in interregional security cooperation between the EU and Asia. Given the complex and rapidly changing nature of East Asia’s strategic chessboard, crisis management and conflict prevention have become urgent requirements for East Asia. Against this background, closer cooperation between Europe and Asia should also include the experiences of the OSCE in managing ethnic-religious and separatist conflicts and its record of agreed CSBMs in Eurasia.55 In this wider context, the main problem of the EU’s security engagement in Asia and its inter-regional security cooperation is associated with China. The EU’s short-sighted commercial temptations (in regard to lifting the arms embargo of the EU) have undermined its long-term security interests in the Asia-Pacific and threatened the transatlantic relationship. Predictably, the French and German proposal, supported by the EU Commission, to lift the 1989 arms embargo on Beijing has provoked harsh criticism in the US across the political spectrum. Washington disagrees with the EU in its assessment of human rights

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violations in China and is particularly concerned that China may hasten its impressive military modernization with the help of European technologies. It would undermine regional stability in the Asia-Pacific region in general and the Taiwan Strait in particular. While the US and the EU often possess similar general visions for dealing with the rise of China and its implications, both sides are often guided by different strategies or adopt varying priorities in pursuit of their policy goals vis-à-vis China. Despite many positive developments, the EU and its member states still have difficulty striking the right balance between economic and security interests in their respective policies towards China. In the future, while the EU and China will further increase their bilateral trade and economic cooperation, they will also become greater economic competitors on a regional and global level. These changing conditions may complicate the EU’s future China policies as well as the inter-regional security cooperation with the Asia-Pacific region. Meanwhile, the EU and Germany have already re-balanced their Asia policies in a way which takes the views and interests of the other Asian countries (notably the democracies in the Asia-Pacific such as Japan, South Korea, Australia, New Zealand and India) much more into account and which is no longer so dominated by the China factor as in the past. While ambivalence has always characterized the complex US–China relations, increasing frictions in a number of political and economic fields is rather a new development within the EU–China relations during the last two years. In the future, a more realistic and balanced EU–China relationship needs to take into account not only the common objectives, but also increasing different interests, attitudes, policies and underlying values.

Notes 1 For a detailed assessment of the ARF’s security cooperation see Umbach, 2002: 170–256; and Leifer, 1996. 2 On CSCAP, see Ball, 2000; Simon 2002; Kraft 2000 and Rüland 2002. 3 This chapter will not analyse the security engagement of the EU in the ASEM framework in detail – see Sebastian Bersick, Chapter 11, in this book instead. 4 See Maull et al. 1998; Bersick 2004; Pareira 2003 and Gu 2002. 5 “Security cultures” can be defined as a “shared body of ideas, norms and practices that serves to enhance the security of social actors, not least states” (Haacke 2003). On the convergence of security cultures, see Dosch 2003. 6 See also Hughes 2001 and Buzan 2003. 7 See also European Commission 2003. 8 See also Algieri, 1999; Möller 2002 and Sandschneider 2002. 9 See European Council 2003. 10 See European Council 2003a. 11 See also Umbach 2002a; Umbach and Fulda 2003b and Schubert 2003. 12 See also Greenlees 2004. 13 See “Initial Actions for the Implementation of the Joint Statement. Joint Statement from the Third Session of the Fifth Round of the Six-Party Talks,” NAPSNETSpecial Report, February 13, 2007. 14 See, for instance, ASEM 2003. 15 See “EU Becomes China’s Largest Trade Partner,” Xinhua, January 10, 2005. 16 On the background, see also Schubert 2002 and Möller 2002.

Asian–European security relations 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

50 51 52 53

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See also Umbach 2006. See, for instance, Auswärtiges Amt 2002. European Commission 1998. See European Commission 2001. European Parliament/Committee on Foreign Affairs, Human Rights, Common Security and Defence Policy 2002. See European Commission 2006. This chapter is based on three previous analyses by the author which have been revised and updated – see Umbach 2004a, 2004f and 2005. See Chinese Government 2003. See Bitzinger, The Asia-Pacific Arms Market; here p. 2; IISS 2007: 341, 346. See Mulvenon 2004. See also Smith 2004 and Berkovsky 2004. Quoted following “PLA Purchase of French Fights Concerns Taiwan, Military Says,” Taiwan News, April 12, 2005. See also “China to Buy 210 Fighter Jets if EU Ends Arms Ban,” Strait Times, April 12, 2005. See “EADS will auf Asiens Rüstungsmarkt Fuß fassen,” Frankfurter Allgemeine Zeitung (FAZ), February 26, 2004, p. 20; Bonsignore and Kogan 2005 and Hill 2004. See also Shambaugh 2004. See Spiegel 2004; Pan 2004; Glaser 2004; Bork 2004; Lawrence and Lague 2004; Tsang 2004 and Cliff and Medeiros 2004. See Mann 2004 and Glaser 2004b: 3f. See “EU Arms Sales to China Escape U.S. Sanctions,” FT, July 15, 2005, p. 4. See law published in China Daily, March 14, 2005 (Internet version); see also Kahn 2005: pp. 1 and 6M. ‘Europe’s Shift on Embargo Places Taiwan at Center Stage,’ NYT, March 23, 2005 (Internet version). Moreover, “China’s National Defence in 2004.” Information of the State Council of PR China, Beijing, December 2004, here p. 6 had already declared the “sacred responsibility” of its armed forces to prevent a Taiwanese independence by whatever means. See European Council 2005. See European Council 2006. See also Shin and Segal 2004. See also Cabestan 2004. See Haacke 2003; Umbach 2002; Acharya 2001 and Dosch 1997. See also Rüland 2002. See also Saywell and Jayasankaran 2002. See Haacke 1999 and 2003a. This and other ASEAN declarations on terrorism. Available online at: www.aseansec.org/4719.htm (accessed May 30, 2004). See, for instance, ASEAN Regional Forum 2004. Joint Declaration on Cooperation to Combat Terrorism 2003. See Umbach 2004 and 2004c. See also Berkofsky 2003. See also Umbach 2002: 253ff. Over the few last years, Singapore has strengthened its security and military ties with the US, Japan and India. It is also training its armed forces in Taiwan. Most recently, the Singaporean–Chinese relationship escalated diplomatically with Beijing when Singapore’s new prime minister made an unofficial visit to Taiwan in July 2004 – see Wain 2004a. See also IISS 2004: 226. See Pacific Forum CSIS 2002 and Ball and Acharya 1999. On the controversial positions and difficult negotiations leading up to this declaration, see Umbach 2002: 241–248. See ASEAN Regional Forum 2004a.

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54 See Pacific Forum CSIS 2004. 55 See also Krause 2003 and OSCE 2003.

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in Amorim, J., Avelar, M. and Niemann, U. (eds) Lectures from the Fifth ASEF University, Singapore: 49–65. —— (2003) “Future impacts of Chinese and Asian dependency upon energy imports from the Middle East and central Asia,” in Reiter, E. and Hazdra, P. (eds) The Impact of Asian Powers on Global Developments, Heidelberg: Physica Verlag: 143–163. —— (2003a) “Bring China into the game,” Transatlantic Internationale Politik, 4: 77–81. —— (2004) “EU-ASEAN political and security dialogue at the beginning of the 21st century: prospects for interregional cooperation on international terrorism,” Panorama, 1: 9–22. —— (2004a) “EU’s links with China pose new threat to transatlantic relations,” European Affairs, vol. 5, 2: 38–47. —— (2004b) “The wounded bear and the rising dragon: the Sino-Russian relationship at the beginning of the 21st century: a view from Europe,” Asia-Europe Journal, 2: 43–62. —— (2004c) “International co-operation and its new challenges in fighting the new security threats,” in Japanese–German Center Berlin (ed.) Global Terrorist Threats: New Security Challenges: Implications for European-Japanese Security Co-operation. Conference organized by JDZB, the Friedrich Ebert Foundation (FES) and the German Council on Foreign Relations (DGAP), November 5–6, 2003, Berlin, Series 3, vol. 22 (PB894): 11–30. —— (2004d) “Global energy supply and geopolitical challenges,” in Godement, F, Nicolas, F. and Yakushiji, T. (eds) Asia and Europe: Cooperating for Energy Security. A Council for Asia-Europe Cooperation Task Force Report, Paris: 137–168. —— (2004e) “The North Korean nuclear state,” Transatlantic Internationale Politik: 79–83. —— (2004f) “Perspectives on EU–China security relations, the arms embargo and Taiwan,” prepared Statement in US–China Economic and Security Review Commission (ed.) Symposia on Transatlantic Perspectives on Economic and Security Relations with China. One Hundred Eighth Congress, Second Session, Brussels, November 30 and Prague, Czech Republic, December 2, 2004, Washington: US Government Printing Office. Available online at: www.uscc.gov/hearings/2004hearings/transcripts/04_11_30_transcript.pdf. —— (2005) “Strategische Partnerschaft oder multilateraler Kotau? Die EU-ChinaBeziehungen und die Aufhebung des Embargos,” Internationale Politik, March 2005: 70–77. —— (2005a) “East Asian arms races and cooperation,” Transatlantic Internationale Politik, vol. 5: 38–43. —— (2006) “Multipolarität gestalten? Kritische Anmerkungen zur asiatischen und europäischen De-batte und die Notwendigkeit der Stärkung eines ‘effektiven Multilateralismus’,” KAS-Auslandsinformationen, 7: 80–101. —— (2007) “China’s Energie und Roshtoffdiplomatie und die Auswirkungen auf die EU–China–Beziehungen,” China aktuell, 1: 39–56. —— (2003b) and Fulda, A. “Zur Zukunft der EU-China-Beziehungen im 21. Jahrhundert,” Asien, October 2003: 47–56. Wain, B. (2004) “ASEAN apathy,” Far Eastern Economic Review, May 6, 2004: 19. —— (2004a) “A David-and-Goliath tussle,” Far Eastern Economic Review, August 5, 2004: 20–21.

7

EU–Asia human rights policy Pursuing the path of institutionalism Martina Timmermann1

Introduction Although a variety of European human rights policies toward Asia have been formulated, serious questions exist as to their quality and coherence. On the one hand, European governments demand from Asian countries – especially China and Burma/Myanmar – a greater commitment to human rights standards as manifested in the UN human rights mechanism. On the other hand, however, the same governments turn a blind eye to abuses (however blatant) if they believe an Asian country may be of specific economic interest to them. This criticism especially applies to the People’s Republic of China (PRC); the debate on ending the EU weapon export embargo to China is only one of the most recent examples of this seemingly contradictory policy. The EU first implemented its arms embargo on China after the bloody crackdown on student opposition in Tiananmen Square on June 4, 1989. Since then, however, certain European governments, particularly of France and Germany (under Chancellor Gerhard Schröder), have shown a strong inclination to lift the ban. In opposition to this suggestion, human rights groups such as Human Rights Watch (HRW) have strongly advocated to “not let business interests trump [the EU’s] longstanding proclaimed commitment to human rights in China.”2 China, for its part, has repeatedly claimed that human rights issues are completely unrelated to the arms embargo. The suggestions made by France and Germany (until Angela Merkel took over), which belong to the top five arms-exporting countries in the world, indeed seem to be mainly guided by economic interests and not by the human rights concerns enshrined in numerous European human rights documents, such as the European Convention of Human Rights (1948) and the more recent Charter of Fundamental Rights (2003). In a time when the form and content of the EU’s policies are being thoroughly discussed, this example raises the question of which values and political strategies underlie EU human rights policies toward Asia. This chapter will focus on the EU–China and EU–ASIAN human rights policies, which are particularly illustrative of the EU’s pursued path of institutionalism.

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Institutions, regimes and human rights The debate on EU–Asia human rights politics has been highly controversial and emotional, as might be expected when values are at stake. For a sound discussion of EU–Asian policies in the field of human rights, a sober approach is necessary in order to be able to analyze the situation appropriately. The analytic approach offered by institutional theory provides such necessary emotional distance and helps move the debate away from mere thinking about interests and power politics to thinking about consonance and cooperation (Peters 1999: 139). Institutions can be understood as: persistent and . . . connected sets of rules and practices that prescribe roles, constrain activity, and shape the expectations of actors . . . [and] may include organizations, bureaucratic agencies, treaties and agreements, and informal practices that states [and non-state-actors; MT] accept as binding. (Lamy 2001: 189) “Institutionalization” thus implies the process of building such institutions. Theories of institutionalization have flourished in the political sciences (Peters 1999). With regard to EU–Asian human rights politics, the debate about institutions within the discipline of international relations, i.e., via regime theory, is of utmost interest. One of the most popular definitions has been provided by Krasner (1983: 2) who explained regimes as “implicit or explicit principles, norms, rules and decision-making procedures around which actors’ expectations converge in a given area of international relations.” Keohane (1989: 4) provided another more specific definition of regimes six years later. According to him, regimes are “institutions with specific rules, agreed upon by governments, that pertain to particular sets of issues in international politics.” These definitions, coupled with my own reflections on the value and function of regimes, shall serve as a frame of reference for analysis. According to regime theory, a general prerequisite for regime-building must be an acceptance of a common definition of a policy area or a repetitive pattern of interaction among the participants in a regime that is governed by rules, whether formal or informal (Peters 1999: 133). In this context, the discussion has been circulating around the issue of when behaviors become sufficiently common, and sufficiently governed by rules, that one can actually speak of a regime. A convincing common ground on any of the measurements suggested is lacking, however, as Peters noted (Peters 1999: 133). Starting from these basic assumptions from regime theory, we turn to the specific issue area of human rights. The common global understanding on human rights is laid down in the norms, rules and procedures of the Universal Declaration of Human Rights (1948) and numerous documents including the two Covenants on Civil and Political Rights (ICCPR) and Social, Economic and Cultural Rights (ICSECR). This global regime has also served as a framework for three regional human rights

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regimes, in Europe, the Americas and Africa. These regional human rights regimes have their very particular institutional structures, norms and procedures which reply to the histories and needs of the people of the specific region (Kobila 2003). The only region still lacking any form of such human rights mechanisms is Asia. Among the three existing regimes, the European mechanism reflects the latest human rights developments, as can be observed in its most recent human rights document, the EU Charter of Fundamental Rights (2003).3 The Charter was drafted by a commission headed by former German Federal President Roman Herzog. Based on the previous international human rights documents, it encompasses both the latest human rights developments and the contemporary socioeconomic, political and cultural situation of the EU. Its enactment, however, was supposed to go hand in hand with the ratification of the European Constitution.4 The picture is a very different one in Asia. There is no regional or even subregional human rights mechanism, and substantial efforts to lobby for such a regional human rights regime only began in 1993 with the Second World Conference on Human Rights in Vienna. Within this context, the Working Group for an ASEAN Human Rights Mechanism was founded in 1996. As the name indicates, the group’s primary goal is to set up a regional human rights mechanism among ASEAN countries, a first manageable step in a region that encompasses a range of about 40 countries with such a multitude of cultures, religions and levels of development that it seems too heterogeneous to grasp in its entirety. Grounded on its declared devotion to actively promote human rights, the EU has been supporting those efforts and has tried to provide some plausible answers to the question as to how a regime-building process in Asia could be initiated and supported. EU suggestions, however, have to avoid giving the impression of interfering with national politics, an acutely sensitive problem given the number of former European colonies in South and Southeast Asia. Equally difficult, the EU has had to find ways of convincingly (but not obtrusively) conveying its human rights values – individual rights and liberties, as well as its opposition to the death penalty – to countries which have repeatedly distinguished Asian and Western values in the so-called “Asian values debate.”5 Facing these challenges, one major EU strategy has been to initiate different forms of dialogue at various levels: from the top international and bilateral governmental level down to that of transnational civil society. The academic community has also played a substantial role in preparing and running those dialogues at quasi-non-governmental6 level. Regime theory seems to have provided some major ideas for this European strategy. One of those assumptions is that the “expectations” of actors involved in a regime-building process will converge through their interactions over time, with the effect that there will be substantially less variance in values and behavior afterwards. The attempt to form and converge norms in international politics via expert dialogue, moreover, recalls theoretical reflections on the impact of “epistemic communities”7 (Adler 1992; Haas 1992). At this point, it is essential to have a closer look at those norms and values which are reflected in the EU human rights documents and underpin what we might call

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“software institutions.” Then, we need to turn to the “hardware institutions,” which buttress such efforts and form the actual skeleton of EU human rights politics.

EU human rights: the institutional framework EU human rights: “software” institutions Human rights norms and values are reflected in a number of EU documents. They are based on the most important global human rights documents, i.e., the Universal Declaration on Human Rights, its complementary International Covenants on Civil and Political Rights and on Economic, Social and Cultural Rights (both 1966) as well as the regional European Convention on Human Rights. Other important reference documents are the declarations and Programs of Action of the Second World Conference on Human Rights (Vienna, 1993), the International Conference on Population and Development (Cairo, 1994), the World Summit for Social Development (Copenhagen, 1995) and the Fourth World Conference on Women (Beijing, 1995). The Treaty of Amsterdam (1997)8 marked a significant step forward in integrating human rights into the legal order of the European Union. This Treaty inserted a new article 6 into the Treaty on European Union (1992),9 which reaffirms that the European Union is founded on the principles of “liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law” (TEU Art. 6.1). After specific consideration of the most pressing problems within the EU, a general clause on combating discrimination was included, accompanied by a provision on measures concerning asylum, refugees and immigration. Finally, regulations in the field of employment, working conditions and social protection were added. The next steps in the institutionalization of human rights “software” came in the new millennium. In 2000 the drafting process of the EU Charter of Fundamental Rights was launched and conducted under the leadership of former German Federal President Roman Herzog, in 2003. The final draft was accepted by the European Parliament and subsequently included as the second chapter of the European Constitution. However, only if and when the Constitution is ratified, the Charter of Fundamental Rights will have direct effect. The European Union Charter of Fundamental Rights is derived from the existing European human rights framework, in particular, from the fundamental rights and freedoms recognized by the European Convention on Human Rights, the constitutional traditions of the EU member states, the Council of Europe’s Social Charter, the Community Charter of Fundamental Social Rights of Workers and other international conventions to which the European Union or its member states are parties. For the first time in the European Union’s history, the Charter sets out the whole range of civil, political, economic and social rights of European citizens and all persons resident in the EU in a single text. Following a preamble, these rights are divided into six major sections: Dignity, Freedoms, Equality, Solidarity, Citizens’ Rights, and Justice.


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The Charter is the most recent core document mirroring European values as well as current problems and needs. Articles 37 and 38 on environmental and consumer protection, for instance, reflect current norms and values of Europeans. Some rights discussed in the Charter also illustrate the general development of human rights themselves. One example of this development is Article 41’s right to good administration, a direct reflection of current international discussion on good governance. Some of the standards will no doubt cause debates with Asian countries: the right to life (Art. 2), the prohibition of torture (Art. 4), freedom of thought, conscience and religion (Art. 10); freedom of expression and information (Art. 11); freedom of assembly and association (Art. 12); prohibition of child labor and protection of young people at work (Art. 32); and the right to an effective remedy and to a fair trial (Art. 47), for instance. The Charter underlines the EU’s self-perception as a value-based community and aims to connect internal EU human rights standards with EU foreign policy.10 The implementation, however, is strongly dependent on the efficiency and effectiveness of EU’s “hardware” institutions. EU human rights: “hardware” institutions The number of institutions involved in European human rights politics is extraordinarily high, since the EU has not managed to create a central institution with a clear and exclusive human rights mandate yet. In order to at least present a framework for all European Union activities in the area of human rights, the Commission started issuing a series of communications to the Council and the Parliament in 1995. The goal has been to improve the consistency and raise the effectiveness of the human rights and democratization approach of the European Union. The number of different institutions should not come as a surprise, however. Human rights themselves, involving political, economic, social and cultural rights, are very complex. To actually implement them, to raise awareness and to improve the social, judicial and economic environment for adequate human rights practice, it therefore requires an equally comprehensive variety of actors in different policy areas. In the European Parliament, it is the Committee for Fundamental Rights and Internal Affairs, and the Committee for Petitions that are responsible for human rights issues. The European Court of Human Rights in Strasbourg and the EU Ombudsman watch the compliance of EU politics with human rights and control the executive. The EU Commission and the European Council are in charge of developing the political guidelines for human rights issues and control their implementation. Within the European Council the so-called Working Party on Human Rights (COHOM) coordinates opinions and publishes the EU human rights report. Since the EU has no competencies in the areas of law and home affairs, the European Council in Vienna (1998) concluded an Action Plan for the EU

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Commission to build a space of freedom, security and justice. A major goal of this plan is to increase the protection against threats by third actors and strengthen the cooperation in the areas of criminal and civil law. Here, again, the competence lies with the Council for Justice and Home Affairs. The year 1999 was decisive in the field of EU development and cooperation. In order to provide a legal basis for all of its human rights and democratization activities,11 the Council adopted two Regulations on democracy, the rule of law and respect for human rights.12 Moreover, the General Directorate for External Relations (RELEX)13 and the Human Rights and Democracy Committee were founded. The Committee14 deals with human rights issues worldwide and coordinates affairs within the Commission. The next important step in EU institution-building followed in 2001 with the creation of the European Initiative for Democracy and Human Rights (EIDHR),15 an institution that aims at emphasizing democracy and human rights more strongly in EU foreign policy and which brought together a series of budget headings specifically dealing with the promotion of human rights. Of a more general nature, but still touching upon human rights issues within the framework of EU foreign policy, is the General Affairs and External Relations Council. Cooperation with African–Caribbean–Pacific states (ACP) is another topic being dealt with by the Directorate-General for Development,16 which also hosts an separate office for human rights. This office is responsible for the programming of external assistance. In support of this office, the EuropeAid Cooperation Office manages the organization and implementation of the various projects. These institutions base their policy implementation on the norms and values reflected in the EU Charter and preceding EU human rights documents, among others.

Human rights in common EU foreign and security policy The first considerable step in integrating human rights and democratic principles into EU foreign policy was made with the conclusion of the Treaty on European Union (TEU), where the development and consolidation of “democracy and the rule of law, and respect for human rights and fundamental freedoms” (Art. 6.1) were named as central objectives of the Common Foreign and Security Policy of the European Union. The second direct reference to human rights and democratization was included in the new title on development cooperation, which says that “Community policy in this area shall contribute to the general objective of developing and consolidating democracy and the rule of law and to that of respecting human rights and fundamental freedoms.” In 1995, the European Council decided to take up a clause in treaties with third countries to promote human rights and democracy. Even so, the application of this clause depends on the countries concerned. The standard clause reads that human rights and democracy are “essential elements” of the treaties, but refer-


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ences for suspension, for instance, depend on the country (Heinz 2003). The reactions of the partner countries regarding this clause vary widely. China and the ASEAN countries rejected the clause, as did the Arab countries, whereas the African and Latin American countries did not object to it. With regard to arms exports, the EU launched the “European Union Code of Conduct on Arms Export” in 1998. The Code obliges the member states not to give export permission if there is any risk that weapons could be used for internal repression in those countries to which the arms are to be exported. This especially applies in cases where the United Nations, the European Council and/or the EU have identified severe human rights violations. Since 2001, when the European Initiative for Democracy and Human Rights (EIDHR) came into being, funding activities to promote human rights and democracy have gained in importance. After extensive criticism that EU human rights policies had been far from coherent, the EU has increasingly focused its activities on the fight against poverty. With regard to the best method for implementation, the EU has come to realize that not only international and regional organizations, but also non-governmental bodies are decisively contributing to the development of a democracy that upholds political, civil, economic, social and cultural rights. Accordingly, the EIDHR’s funding activities have been shifted17 to provide more support for the activities of Non-Governmental Organizations (NGOs). Beyond such funding activities, which are clearly intended as human rights incentives for the partner countries (“carrots” as it were), a central instrument of EU foreign policy has been to set up and cultivate dialogues with governments, opposition groups, elites and civil society to build an intricate network of cooperation. There are three different kinds of dialogues the EU is pursuing: 1

2

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Dialogues of a rather general nature based on regional or bilateral treaties, but dealing systematically with human rights issues. This kind of dialogue with partner countries such as the US or Canada is conducted every six months. The dialogue is mostly led within the framework of the troika of present, former and future EU presidencies and complemented by expert meetings before the annual meetings of the UN Human Rights Commission and UN General Assembly. Ad hoc dialogues which are run within the framework of talks on Common EU Foreign and Security Policy (CFSP); here, human rights issues are included in general political discussions on a case-by-case basis. Such issues include the signing, ratification and implementation of international human rights procedures and mechanisms, combating the death penalty and torture, fighting all forms of discrimination, improving children’s rights, women’s rights, freedom of expression, the role of civil society, international cooperation in the field of justice, promoting the processes of democratization and good governance, and the prevention of conflict.18 The third kind of dialogue regards dialogues in the context of special

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With regard to EU–Asia human rights politics, this third kind of dialogue is of special interest.

Human rights in EU–Asia policies EU–Asia human rights policies are substantially determined by two fundamental EU–Asia strategy papers: “Towards a New Asia Strategy” (1994)20 and “Europe and Asia: A Strategic Framework for Enhanced Partnerships” (2001).21 The criteria mentioned in those documents are to be included in all negotiations, trade, economic and cultural relations between the EU and its Asian partners. The role of human rights in these documents has received varying degrees of attention and shifted from a basic underlying idea to a clear point of priority. Thus, in 1994, the official EU policy strategy toward Asia still clearly focused on economic cooperation. Human rights were referred to only in one paragraph, entitled “Subjects for Political Discussion.” Here it is stated that “The development and consolidation of democracy and the rule of law and respect for human rights and fundamental freedoms together form a major objective of the external policy of the European Union.”22 The actual EU strategy toward Asia embraced several goals which had been of central concern during the Second World Conference on Human Rights. One of the EU’s central goals has been to lobby for the Asian countries’ endorsement of existing international standards. In compliance with this goal, the EU strives “to encourage all countries to become signatories of and to fully implement all relevant international instruments . . . inter alia, through dialogue guided by the Vienna Declaration and Programme of Action of the 1993 UN World Conference on Human Rights.”23 There is a precise definition of the strategy, including a clear indication of the dialogue levels to be used in the future. Thus the “dialogue on human rights will predominantly be dealt with in its context and in appropriate forums both bilateral and multilateral, such as the UN Commission on Human Rights where the governments of the countries concerned are most likely to be under scrutiny.”24 In addition to the role of economic development and the advancement of civil society, it is pointed out that “emphasis should also be given to facilitating legislative and institutional reform, and, in this respect, technical training and granting of scholarships as well as visits and seminars could be envisaged.”25 The EU reinforced this strategy seven years later. In its new strategic paper, “Europe and Asia: A Strategic Framework for Enhanced Partnerships” (2001), human rights advanced to the top page of the EU’s list of priorities, which include:

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strengthening the EU’s relations with Asia in the political and security fields; further strengthening mutual trade and investment flows with the region; demonstrating the EU’s effectiveness as a partner in reducing poverty in Asia; promoting respect for human rights, democracy, good governance and the rule of law (my own emphasis; MT); building global alliances with key Asian partners (to address global challenges and within international organizations); strengthening mutual awareness between the EU and Asia.

Since the beginning of the new millennium, China has gradually turned into the fourth largest economy in the world and became the world’s third largest exporter. The EU as its main trading partner has therefore emphasized the relationship between the EU and China as most eminent and agreed to a strategic partnership in 2003. Its latest “Communication From The Commission To The Council And The European Parliament: EU–China: Closer partners, Growing Responsibilities”26 from October 24, 2006 was accompanied by a trade policy paper entitled “Competition and Partnership.”27 Whereas the importance of a deepened bilateral partnership between China and the EU is emphasized, human rights are only mentioned in one rather short sub-chapter (3.1) headlined “Supporting China’s transition towards a more open and plural society.”28 Still, the EU continues to adhere to its general policy guidelines: cooperation between Asia and Europe, encouragement of democracy, good governance and the rule of law, and promotion of civil society. This is more obvious, however, in its communication of January 25, 2006 “Thematic Programme for the Promotion of Democracy and Human Rights Worldwide under the Future Financial Perspectives (2007–2013).” This communication and the communication on “EU–China: Closer Partners, Growing Responsibilities” reveal the EU’s major priorities: trade, respectively setting economic incentives, and dialogue.

EU–Asia human rights dialogues The dialogues on human rights take place within very different institutional frameworks. They are conducted at global, regional, transregional, transnational, bilateral, governmental, as well as on quasi-non-governmental and nongovernmental levels. Dialogue at the global level The annual meeting of the Human Rights Commission (HRC) of the UN has been of special importance at the global level. This international dialogue, however, has been severely hampered by the strong politicization that exists in the HRC: the discussions highlight the North–South divide, and mostly reflect

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national and regional interests instead of objectively analyzing the human rights situation.29 The Commission membership of countries who are criticized for human rights violations is another major reason for the ineffectiveness of this dialogue at the global level. It remains to be seen as to what extend the new Human Rights Council, which in June 2006 replaced the HRC, will be able to eliminate these deficiencies. The EU tries to harmonize its positions before the meetings, but as a result, critical resolutions are often watered down to the lowest common denominator. On the other hand, one has to note that the EU’s statement on the situation of human rights is often the most detailed one of all, referring to almost 30 countries. Dialogues at regional and transregional levels Human rights dialogues at the regional level take place on a governmental as well as transregional level. The most notable dialogues at governmental level are conducted during the summit meetings between Europe and Asia, i.e., at the Asia–Europe Meeting (ASEM). Within the framework of the Asia–Europe Meeting, the issue of human rights has enjoyed varying degrees of priority. One rather critical confrontation occurred within ASEM 5, which took place in Hanoi in October 2004. When the government of Myanmar/Burma, excluded from former meetings because of its extraordinarily negative human rights records, announced its participation, the EU almost canceled the conference.30 In the beginning, the EU insisted that Myanmar be excluded from the meeting, but finally softened its stance and agreed to allow Myanmar’s participation on the condition that only a representative below the usual level of heads of state would be sent to the conference. Beyond that, the EU announced its intention to strengthen the existing sanctions against the Burmese regime if there was no movement by the authorities in Myanmar by the time of the summit. Specific requests were made regarding the release of opposition leader Daw Aung San Suu Kyi and the holding of a genuine and open National Convention. Finally, the EU required the opportunity at the Summit to discuss the human rights situation and the need for democratic reforms in Myanmar with its Asian partners, especially the Burmese representative present. In compliance with its foreign policy strategy to promote non-governmental activities more strongly, the EU has also been supporting quasi-nongovernmental and non-governmental human rights groups. One special example among the numerous activities is the support of the Working Group for an ASEAN Human Rights Mechanism, which was founded in 1996.31 The Working Group’s activities lie at the nexus of those EU foreign policy principles outlined above and the Second World Conference on Human Rights, where it was underlined that there was “the need to consider the possibility of establishing regional and sub-regional arrangements for the promotion and protection of human rights where they do not already exist.”32 The EU has played a


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major role as an advisor, setting up conferences on regional human rights mechanisms and sending experts to conferences organized by the Working Group. Vitit Muntarbhorn, one of the key protagonists of the ASEAN Working Group, stressed the value of this dialogue:33 further impetus was provided for the concretization of ideas for an ASEAN human rights mechanism when in a parallel tri-partite manner, representatives from ASEAN Governments, national human rights institutions and the Working Group for an ASEAN Human Rights Mechanism, in addition to other civil society groups, met up with counterparts from other regions of the world to learn and share experiences in Strasbourg in October 2002 at the Conference on Regional Systems for the Protection of Human Rights.34 The conference took place at the European Court of Human Rights and was supported by the German quasi-non-governmental Friedrich Naumann Foundation, illustrating the complexity of channels in which such dialogues take part, which means that aside from the regional EU–ASEAN dialogue forum there are also numerous bilateral dialogues between European and Asian countries on governmental as well as quasi- and non-governmental levels. The only really bilateral dialogue on human rights that falls in the third category of the EU’s definition of “dialogue” is the bilateral human rights dialogue with China. Bilateral EU–China dialogue(s) The EU–China human rights dialogue is – in addition to the overall EU–Asia strategy – embedded in the special strategic partnership between the EU and the PRC which is legally based on the 1985 Trade and Co-operation Agreement.35 The value of this relationship has been repeatedly underlined, most recently during the ninth EU–China Summit where the leaders agreed to launch negotiations on a new, extended Partnership and Cooperation Agreement (PCA) that is to serve as update for the EU–China co-operation. Within this context, the role of dialogues has been vital to EU–China relations, at least until 2005 and most obvious during the seventh Annual EU–China Summit in The Hague 2004. The Summit reflected a wide range of some 20 dialogues going on between the EU and China. Human rights have been discussed as part of their political dialogue as well as in a specific dialogue. This human rights dialogue between the EU and China is unique. Governmental dialogue Different kinds of dialogues take place at the governmental level, including bilateral and multilateral talks. The bilateral EU–China dialogue on human rights was initiated in January 1995, but was interrupted by China following a critical resolution during the 1996 session of the UN Commission on Human

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Rights.36 In December 1997, China decided to resume the dialogue. Since then, no substantial resolutions have been passed against China, and the dialogue continues to be held twice a year. The primary participants in this governmental dialogue are senior human rights officials. The first meeting takes place in the first half of the year in the capital of the EU Presidency, while the second takes place in the second half of the year in Beijing. During these meetings, the EU can put forward its issues of concern, the most important ones being the cooperation with UN human rights mechanisms, individual cases of alleged human rights abuses, torture, the death penalty, conditions of detention, freedom of religion or belief, freedom of expression, and the situation in Tibet, all of which are held in an open, informal atmosphere where China is committed to responding.37 Despite this particular bilateral approach, the EU has been stressing that “the existence of the dialogue does not preclude the EU from expressing publicly its concerns about human rights violations in China.” Such expressions are usually brought up at a multilateral level, such as by the EU Presidency in its opening statements to the annual UNCHR sessions. The guidelines for the EU delegation at the UNCHR are spelled out in the Council Conclusions, which, among other things, touch upon the human rights situation in specific countries. Three Council Conclusions on China dating from January 22, 2001, March 11, 200238 and March 18, 2003 illustrate the EU’s position.39 In March 22, 2004 the Council referred to the importance of the dialogue with the government of China on human rights issues but (only) underlined that such dialogue does “not preclude appropriate consideration by the CHR of the human rights situation” in the country.40 The same was repeated in the Council Conclusions of March 16, 2005, this time supplemented by the statement that “The Council will continue to keep a close watch on the situation in those countries [China, Iran, Russia].”41 Coupled with the twice-yearly political meetings on human rights are the “Dialogue Seminars,” which are held among nongovernmental and/or quasi-non-governmental epistemic communities. Quasi-non-governmental dialogue among epistemic communities Another interesting facet of the EU approach to fostering human rights institutions in China is the human rights dialogue on the quasi-non-governmental academic level. The first step was done in February 1998, when the EU began a seminar series among academics on human rights matters to complement the official EU–China human rights dialogue. The seminars were co-hosted by the EU Presidency and the European Commission. On December 13, 2001 the Commission further institutionalized this organization by founding the “EU–China Network for the Ratification and Implementation of the UN Human Rights Covenants” which took up its work soon after this, in 2002. This cooperative project aims to assist China in bringing its laws into compliance with international standards while advancing the protection of substantive rights guaranteed by the UN Covenants.42 The Network is financed by the European


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Commission as part of its effort to promote the ratification and implementation of the international human rights covenants in China.43 At the time of writing, the Network is composed of 15 European and 15 Chinese universities. On the European side, the Irish Centre for Human Rights is responsible for coordinating and directing the network, with a full-time project secretariat based at the National University of Ireland, Galway. Three other European institutions, Paris II, Milan and Essex, are co-partners and make up the remaining European members of the Steering Committee. On the Chinese side, the Chinese Academy of Social Sciences (CASS) is the lead organizer. One major responsibility of the EU–China Human Rights Network is the organization of the “Dialogue Seminars,” which are held twice a year. On behalf of the co-hosts, the European Commission, the Chinese Ministry of Foreign Affairs and the Presidency of the European Union, the network has been supposed to feed substance, outcomes and recommendations of the network research and seminars into the governmental dialogues. By doing this, the network is supposed to contribute to the success of the EU–China human rights dialogue by ensuring expertise and a greater degree of continuity and “institutional memory” in the process. Until December 31, 2004,44 the expiration date of the contracts between the EU and the Irish Center for Human Rights at the University of Galway, the productivity of the Network was quite impressive. In 2004 there were four seminars: the EU–China Human Rights Network Seminar on Health and Social Security was held in Colchester, UK on April 27–28, 2004; the seminar on Defense and Corporate Social Responsibility took place in Beijing on June 28–29, 2004; a third EU–China Human Rights Network Seminar on Gender and Law was held in Beijing on September 26–27, 2004; and another Seminar on Ratification and Implementation of the ICCPR and Right to Health was organized in The Hague on November 8–9, 2004 under the Dutch Presidency of the European Union. In addition to staging seminars, the network conducted training workshops whose main purpose was to provide human rights training to legal practitioners working in China. To this end, the network also developed its own set of training materials. In order to ensure the effectiveness of the dialogues, the EU provided additional economic and development incentives such as Joint Cooperation Programs. Economic incentives support the dialogues The Joint Cooperation Programs were intended to make the academic dialogues more result-oriented and better connected to decision-making in China. The cooperation started in 1997 and included several projects such as one on village governance. The project strove to empower citizens by educating them about civil rights, promoting social and economic rights at the grass-roots level, supporting legal cooperation, advancing women’s rights, and creating a research network on human rights covenants. One of the most important projects for the Commission is the EU–China Legal and Judicial Cooperation Program, which aimed at supporting the process of strengthening the rule of law in China.

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This program was in line with the European Commission’s “Country Strategy Paper 2002–2006” for China. The paper included a “National Indicative Program 2002–2004” that identified three priorities during the period concerned: 1 2 3

support for China’s economic and social reforms; environmental and sustainable development; good governance and strengthening the rule of law.

The cooperation portfolio in 2004 included 40 projects with a total value of approximately 260 million euros. The budget was committed in support of general EU policies toward China. Other intended major efforts were to include support for China’s WTO membership, support regarding the information society, social security reform, and assistance in the fight against illegal immigration. The cooperation program was expected to amount to around 250 million euros over the 2002–2006 period. In 2004, five projects in China also benefited from Community support through the EU Human Rights and Democracy program. Beyond that, the EU Human Rights Small Projects Facility was seeking to offer support for setting up innovative small-scale projects in the field of human rights since 2002.45 In addition, emergency aid was provided by the European Community Humanitarian Aid Office (ECHO), and a few projects also received funding from the Community’s NGO budget. Science and technology initiatives received support under the Commission’s sixth Framework Program.46 The Communication from the Commission on the relationship between the EU and China of October 2006 focuses on five major future priorities for the EU with regard to China: 1 2 3 4 5

support for China’s transition towards a more open and plural society; strengthening sustainable development and energy security; improving trade and economic relations; strengthening areas and visibility of bilateral relations; strengthening international and regional cooperation.47

Policies related to such priorities could (but do not necessarily have to) be interlinked with the “Thematic Programme for the Promotion of Democracy and Human Rights Worldwide Under the Future Financial Perspectives (2007–2013).”48

Human rights dialogues and their impact The precise impact the dialogues have on policy implementation in ASEAN countries and in China are difficult to measure, as are the exact results.49 Besides such methodological problems, however, certain developments suggest that the dialogues have had some indirect impact.


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Transregional dialogues – the indirect impact on hardware institution-building With regard to the EU–ASEAN transregional dialogues, the impact of the dialogues is only visible at second glance. There was substantial support for the activities of the Working Group for an ASEAN Human Rights Mechanism from the German quasi-non-governmental Friedrich Naumann Foundation, which contributed to the financing and organizing of the workshops as well as to the exchange of expertise with EU human rights officials. The results of the discussions of the EU–ASEAN Working Group meetings, have been successfully forwarded to the ASEAN governmental level. In 1996 the Working Group representatives met with ASEAN foreign ministers in Jakarta, with senior officials in 1997 in Kuala Lumpur, and again in 1998 in Manila to discuss the possibility of creating a regional human rights mechanism. The answer of the ministers was encouraging. The Joint Communiqué of the 31st ASEAN conference in Manila (July 25, 1998) stated: The Foreign Ministers recalled the decision of the 26th ASEAN Ministerial Meeting held on July 23–24, 1993 in Singapore to consider the establishment of an appropriate mechanism on human rights and noted the establishment of the informal non-governmental Working Group for an ASEAN Human Rights Mechanism. The Foreign Ministers noted further the dialogues held between the Working Group and ASEAN officials in Jakarta during the 29th ASEAN Ministerial Meeting and in Kuala Lumpur during the 30th ASEAN Ministerial Meeting. They recognized the importance of continuing these dialogues and took note of the proposals made by the Working Group during its dialogue with ASEAN held in Manila on July 22, 1998.50 Within the framework of the 32nd ASEAN conference on July 22, 1999, a meeting with senior officials took place wherein the group made a more substantial proposal in terms of the steps to be taken. It seems, however, that the proposal was too demanding. The reaction was reportedly frosty, and it took roughly one year for activities to resume their previous dynamism. The dialogue was taken up again in July 2000 within the scope of the ASEAN conference in Bangkok. The group was advised to concentrate on the grassroots level and to establish national working groups. This was a step forward, as previously it had been expected that national commissions on human rights would have to be set up as they had been in the Philippines – a process which would have been much more complicated and time-consuming. Another step forward was made on June 5–6, 2001, when a national government – the government of Indonesia – invited the members of all the national working groups (from Thailand, Cambodia, Malaysia and the Philippines) as well as advisors from other regions to lecture on other regional human rights mechanisms for the first time. On this occasion the Indonesian government once

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again took up its traditional role as a catalyst in ASEAN regional communitybuilding. The next meeting took place during the 34th ASEAN conference in Hanoi, July 23–24, 2001. The expectations were high, but the group was advised to cooperate more closely with the ASEAN Institute of Security and International Studies (ASEAN-ISIS) for evaluating the implications from the security perspective. The same year, however, the terrorist attacks in New York on September 11, 2001 changed the whole scenario. The attention of ASEAN governments shifted away from thinking about options for a regional human rights mechanism to developing means and measures for protection and security in the war against terrorism. As a consequence, a smaller intermediary step was decided upon during the Conference on Regional Systems for the Protection of Human Rights at the European Court of Human Rights in Strasbourg in 2002: the setting-up of an ASEAN Commission for the Promotion and Protection of the Rights of Women and Children. The Working Group’s continuous and persistent efforts to initiate such a regional commission were rewarded on November 29, 2004 during the tenth ASEAN Heads of State Summit Meeting in Laos. The “Vientiane Action Programme 2004–2010,” as it came to be known, saw the establishment of an ASEAN Commission on the Promotion and Protection of the Rights of Women and Children.51 The approach of strengthening civil society organizations (albeit or because the members often include former – as well as potential future – high caliber politicians) seems to have been considered as paying off by the EU, which is reflected in its Communication to the Council and the European Parliament from January 25, 2006. The “Thematic Programme for the Promotion of Democracy and Human Rights Worldwide under the Future Financial Perspectives (2007–2013)”52 emphasizes as a general objective “to contribute to the development and consolidation of democracy and respect for human rights in third countries, in accordance with EU policies and guidelines. . . .” And it proceeds by saying that “It would place emphasis on supporting civil society in becoming an effective force for dialogue and reform, contributing to national ownership of this process.”53 One of the strategic objectives of the program would be to strengthen the role of civil society in promoting human rights and democratic reform, in supporting conflict prevention and in developing political participation and representation.54 Taking a look at the ASEAN side between December 2005 and December 2006, it seems that – just in time – the governmental side, in their efforts to meet the challenges caused by rising China and India and in order to strengthen ASEAN, has also come to newly stress human rights, democracy and civil society. The 11th ASEAN Summit in Kuala Lumpur in December 2005, entrusted a group of eminent persons to explore the options for further institutionalization of ASEAN and start drafting a new ASEAN Charter. Such ASEAN Charter should


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reflect and respond to the present-day political, economic and sociocultural situation, its needs and challenges. Malaysian Prime Minister Badawi even urged in his letter to the Eminent Persons Group (EPG) to “be bold and visionary” in proposing major steps that could be taken to achieve an ASEAN Community as envisaged in the Declaration of ASEAN Concord II (2003) and its plans of action, the Vientiane Action Programme (2004–2010), as well as the Vision 2020 (1997). The EPG actively involved various parties and stakeholders from politics, business but also civil society and human rights. In July 2006, they also made a visit to Brussels “to study the integration experience and problems in the European Union (EU).”55 In December 2006, finally, they published their report, just in time before the 12th ASEAN Summit in Cebu, January 2007. Among many policy recommendations human rights, the rule of law and democracy had found their ways into several paragraphs in their report. In para. 23 for instance, it is recommended that: Beyond ASEAN Community, Member States should ultimately advance to form an ASEAN Union comprising the three pillars of security, economic, and socio-cultural integration, that are closely intertwined and mutually reinforcing, in which human rights and fundamental freedoms of all shall be protected by the rule of law and regional integration, and human security is guaranteed to every ASEAN citizen. In para. 26 it reads that “The Charter should include, among ASEANs objectives, the strengthening of democratic values, ensuring good governance, upholding the rule of law, respect for human rights and international humanitarian law, and achieving sustainable development.” In order to strengthen ASEAN, the members suggest in paras 46–49 to pursue a more “people-oriented” policy, more strongly including civil society, human rights groups and academic institutions.56 Particularly in para. 47, the EPG refers to an ASEAN Human Rights Mechanism, the very topic that has been pursued by the Working Group for an ASEAN Human Rights Mechanism and in cooperation with the EU since 1996: The EPG believes that ASEAN should continue to develop democracy, promote good governance and uphold human rights and the rule of law. The EPG discussed the possibility of setting up of an ASEAN human rights mechanism, and noted that this worthy idea should be pursued further, especially in clarifying how such a regional mechanism can contribute to ensuring the respect for and protection of human rights of every individual in every Member State.57 The transregional dialogues between the EU and the (so-called) civil society groups like the ASEAN Working Group, or the EPG, although difficult to measure, might therefore (and with due caution) be considered to have had an

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indirect impact on the strengthening of the “software” institution and may, supported by economic incentives, ultimately contribute to the development of a “hardware” regional human rights institution for ASEAN. EU–China bilateral dialogues: direct impact on “software” institution-building? The results of the bilateral EU–China human rights dialogue(s) are even more difficult to measure. On several occasions, the EU has stressed that its human rights dialogue with China must tangibly improve the human rights situation on the ground.58 In 2000, European governments critically reviewed the fruits of the human rights dialogue. They were particularly dissatisfied with the discussions on civil and political rights. The first meeting of the human rights dialogue in 2000 was acknowledged to have been the most tense and least productive one of all; the Commission had even thought about suspending the dialogue. The personal influence of Commissioner Chris Patten, former Governor of Hong Kong, was evident. Patten wanted a tougher EU line, and it “was agreed that concrete benchmarks for human rights improvements would be established as a means of gaining a degree of critical purchase on China within the political dialogue.”59 In January 2001, the Council decided to assess the progress achieved in China based on the following benchmarks: 1 2

3

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5 6 7 8

Ratification and implementation of the two covenants. Cooperation with Human Rights mechanisms (visit by the rapporteur on torture, invitation to other rapporteurs, follow-up to recommendations from conventional mechanisms and rapporteurs, implementation of the agreement with the Office of the High Commissioner for Human Rights). Compliance with the UN’s Economic and Social Commission’s (ECOSOC) guarantees for the protection of those sentenced to death and provision of statistics on the use of the death penalty. Reform of administrative detention, introduction of judicial supervision of procedures, respect for the right to a fair trial and the right to a legal defense. Respect for the fundamental rights of all prisoners, progress on access to prisoners, and constructive response to individual cases raised by the EU. Freedom of religion and belief, both public and private. Respect for the right to organize. Respect for cultural rights and religious freedoms in Tibet and Xinjiang, taking account of the recommendations of the UN treaty bodies, halting the “patriotic education” campaign in Tibet, access for an independent delegation to the young Panchen Lama recognized by the Dalai Lama.

Since the outset of the dialogues, the European Council has commended the Chinese government for its willingness to address “sensitive issues of common


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concern in the framework of the dialogue,” ratification of the UN International Covenant on Social, Economic and Cultural Rights (ICESCR) and greater cooperation with UN human rights mechanisms, and the steps taken to institute rule of law, legal and social reforms. Nevertheless, with regard to the benchmarks, the Council has concluded year after year that no fundamental progress has actually been made. Most Council Conclusions brought up at the beginning of the dialogue still address the same violations and a lack of progress in the human rights situation on the ground.60 And also in the latest Communication of October 24, 2006, “EU–China: Closer Partners, Growing Responsibilities,” it is concluded that “The twice-yearly human rights dialogue was conceived at an earlier stage in EU–China relations. It remains fit for purpose, but the EU’s expectations – which have increased in line with the quality of our partnership – are increasingly not being met.”61 Such benchmarks, however, only provide a partial view of the situation. There have been obvious developments in China with regard to its adoption of existing human rights mechanisms and legal reform. An approach is therefore needed that provides (at least) a more comprehensive picture of those developments where the EU–China human rights dialogue might have had some impact. One approach could be to take a closer look at the developments in the legal sector, thereby more closely exploring the developments in “software” institution-building.62 Progress in cooperation with human rights mechanisms Since the first EU–China human rights dialogues took place in 1995, there have been several developments in “software” institution-building. In 1997, the Working Group on Arbitrary Detention was given permission to visit China.63 China also signed the UN International Covenant on Social, Economic and Cultural Rights (ICESCR) on October 27, 1997, and requested advice from the European Commission on framing its legislation in preparation for signing the International Covenant on Civil and Political Rights (ICCPR). In 1998, China signed the ICCPR64 and permitted an EU troika visit to Tibet.65 The same year, the UN High Commissioner for Human Rights (UNHCHR) visited China at the invitation of the Chinese government.66 A Memorandum of Intent (MOI) was signed between the Chinese government and the UNHCHR, spelling out both sides’ willingness to cooperate with each other. As a result, China agreed to unconditional invitations to the UN Special Rapporteur on Religious Intolerance and the UN Working Group on Arbitrary Detention.67 In the margin of the EU–China human rights dialogue, the Chinese delegates met with the UN Special Rapporteur on Torture, Nigel Rodley. Still, no invitation to the special rapporteur has been issued yet. In 1999, an expert mission from the Office of the UNHCHR was invited to China as a follow-up to the visit in 1998. During this trip, China and the UNHCHR exchanged views on the implementation of a Memorandum of Intent (MOI).68 One year later, in 2000, the Council stated that China had demonstrated

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its willingness to discuss a number of sensitive issues of common concern in the framework of the dialogue. During that dialogue the Council urged China to ratify the ICCPR and to cooperate more closely with UN human rights mechanisms.69 In February 2001, China ratified the ICESCR, with a declaration regarding article 8.1(a) to the effect that Chinese legislation takes precedence over the article which guarantees the right to form and join a trade union of one’s choice. China also stated its intention to cooperate more closely with the UN human rights mechanisms, namely through implementation of the MOI agreed upon with the UNHCHR and visits by the special rapporteurs and working groups.70 On November 14, 2002 the Chinese government invited the Special Rapporteur on the Right to Education to visit the country. The letter of invitation originated from the Human Rights Dialogue between the European Union and China and was forwarded to the Special Rapporteur by the Danish EU Presidency.71 The Special Rapporteur visited China in September 2003 and subsequently handed in a report to the Human Rights Commission, which was accompanied by a highly critical response from the Chinese government. 2003 also saw two more important developments related to human rights: China’s ratification of the Covenant on the Rights of the Child, and its abolition of “Custody and Repatriation” (C&R) measures with the stated intention to convert C&R detention centers into “welfare service centers.”72 China has also complied with its reporting obligations under the various treaties, even if there has been criticism that “the vast majority of the recommendations formulated by the UN treaty bodies have not been implemented by China.”73 The initial report under the ICESCR Covenant to the UN Committee was submitted in June 2003.74 In 2004, the Working Group on Arbitrary Detention (WGAD) visited China for the first time since its initial visit in 1997.75 Also, China extended an invitation to the UN Special Rapporteur on Torture, but two weeks before the June 2004 visit was to take place, the government postponed it indefinitely. Apparently, China was unwilling to agree to the standard UN terms for such a visit, which include unannounced visits to prisons and confidential interviews with prisoners.76 The same year, the All China Lawyers Association Constitutional and Human Rights Committee77 was founded to work on the implications and development of human rights laws within the scope of the existing constitution. From November 20 to December 2, 2005 the Special Rapporteur on Torture (and other cruel, inhuman or degrading treatment or punishment) was allowed to visit China at the invitation of the Chinese government. In his report of March 10, 200678 he summarized progress in terms of a decline of torture in urban areas and contributed this to “the willingness of the Government to acknowledge the pervasiveness of torture in the criminal justice system and the various efforts undertaken in recent years at the central and provincial levels to combat torture and illtreatment.” Critically, however, he commented on the criminal justice system with its strong focus on admission of culpability, confessions and re-education which he considers “particularly disturbing in relation to political crimes and the administrative detention system of ‘Re-education through Labour’.”79


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Progress on legal reform In 1996, China reformed its Criminal Procedure Law and Administrative Punishment Law (CCPL), which had been enacted in 1979. The 1996 reform of the CCPL is considered a major step in China’s transition toward the rule of law. Still, there is criticism regarding the imperfection of specific legal rules, there are difficulties in changing the traditional ideology, and there is a severe shortage of professionally qualified judges, prosecutors and lawyers.80 These reforms provided improvements with respect to the legal treatment of criminal suspects.81 In its 1999 World Report, Human Rights Watch (HRW) noted that legal reform continued in spite of the high politicization of the legal system. In the interest of transparency, trials were announced to be open and verdicts to be made public, except for cases involving state secrets. In April 1999 Supreme Court President Xiao Yang announced plans to curb government interference with the legal process.82 For 2000, HRW noted in its World Report 2001 that “Chinese authorities continued to reform the legal system, seeking international expertise to help design new legal structures, train judicial and legal personnel, and help disseminate information on the reforms to the public, the courts and the police.”83 In 2002, the EU Council positively noted progress in relation to the establishment of the rule of law, democratic principles and human rights, the economic and social reform process, the opening of society, and the development of the legal system. The Council also highly valued the amendments made by China to its trade union law.84 In 2003, the Council again welcomed a certain degree of progress in relation to the establishment of the rule of law, democratic principles, including the economic and social reform process, the opening of society, and the development of the legal system, including the submission of the first-ever draft civil code to the NPC Standing Committee and the strengthening of the legal training provided for judges. Furthermore, China announced reforms relating to capital punishment. Human Rights Watch concluded also in its 2004 World Report that “Chinese authorities continued to reform the legal system and professionalize judicial personnel, and agreed to include human rights training for law enforcement officials as part of a technical cooperation program with the U.N.”85 HRW moreover referred to more specific changes in 2002, which included new disciplinary measures for corrupt or incompetent judges; new educational and competency standards for potential judges, prosecutors and lawyers; a code of ethics for prosecutors; the introduction of a chief prosecutor for each case rather than a prosecution committee; a prohibition against firing judges without proper legal procedures; and annual internal disciplinary court inspections as part of the effort to eliminate corruption.86 The year 2004 was important with respect to legal institution-building. China amended its constitution to include a promise to ensure human rights and

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announced its intention to adopt new legislation on re-education through labor in order to introduce more judicial guarantees in the system. The government also outlined the different stages which would be followed domestically to ratify the ICCPR. HRW noted in its 2005 World Report that “China has begun to hold qualifying examinations for judges and has signaled its intent to amend laws to better protect suspects in detention.”87 Despite this deluge of legal developments, some observers have questioned their actual efficacy. In June 2005, Minxin Pei, Director of the China Program at the Carnegie Endowment for International Peace in Washington, did in-depth research on the development of the legal system in China. In a statement to the Senate Foreign Relations Committee, he reported on the state of the legal system in China and pointed out the progress that had been made as well as the limits. Although the Chinese government has made obvious progress in many areas of legal reform, Pei pointed out that “the legal system itself remains structurally flawed and ineffective.” He admitted that: the progress in legal reform since the end of the Mao era has been unprecedented in Chinese history, as reflected in the passage of a large number of new laws, the increasing use of the courts to resolve economic disputes, social and state-society conflicts, the development of a professional legal community, and improvements of judicial procedures. In contrast to this, he declared that “the overall level of professional legal qualification remains relatively low, especially measured by Western standards,” and added that “the rapid growth of the legal profession has not led to the emergence of a genuinely independent bar or a well-trained judiciary. The government maintains tight restrictions on lawyers in their representations of their clients” (pp. 5–6f.). Pei subsequently stated that “as a judicial institution, Chinese courts are heavily politicized and deprived of the independence crucial to their role as guardians of justice and adjudicators of disputes” (p. 7). And since “judicial independence is compromised by local governments which wield enormous influence over the courts through their control of judicial appointments and court finances,” Pei drew the conclusion that “inevitably, the politicization and administrative control of the courts corrupts judicial integrity” (p. 8). Moreover, “the control by the party and local governments of the judiciary has contributed to the fragmentation of judicial authority, undermined its effectiveness and undercut its authority” (p. 9). What’s interesting here with regard to the institutional approach is Pei’s recommendations to the US Senate. He suggested that if dialogue was to play a role in promoting the rule of law in China, it needed to be accompanied by financial and technical support, as well as consistent diplomatic pressure (p. 10). He also recommended that the US should “facilitate and support the efforts of American non-governmental organizations that are implementing various programs inside China that are designed to promote legal reform” (p. 10). Thus, his suggestions are in complete accordance with the existing EU approach of promoting human rights institution-building via dialogues and economic cooperation programs.


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Conclusion The efforts of the EU and various Asian nations show that “software” and “hardware” institutionalization is considered to be a key instrument for embedding human rights in Southeast Asia and China. The conviction of the value of institutionalization can be detected in the focus on legal institution-building as well in the dialogue and the joint cooperation programs. Thus, the numerous dialogues held at both governmental and non-governmental levels indicate the conviction on both sides that institutions can influence the values of their participants and – in the long run – also their behavior. The cooperation between governments and quasi-non-governmental groups such as the ASEAN Working Group or the EU–China Human Rights Network moreover illustrate the shared belief in the value of the work and impact of epistemic communities. The year 1995 was something of an inaugural year for the political dialogue on human rights between the EU and China on the governmental level and between the EU and ASEAN on the non-governmental level. Since then, human rights have advanced to an issue area of mutual concern, being tackled in repetitive procedures governed by formal rules. Formally, the regional dialogue between the EU and ASEAN has not reached the same level of institutionalization as the EU–China dialogue. Human rights are only one of many issues in the regular summit meetings. Repetitive patterns on a track-II level do not have the same structural quality compared with the EU–China human rights network dialogue. And still, the suggestions of the Eminent People’s Group in December 2006 which have found their way into the new ASEAN Charter accepted during the last ASEAN Summit in November 2007 indicate that former human rights dialogues and financial incentives seem to have had a shaping impact on the process of further institutionalizing ASEAN. In the case of the EU–China human rights dialogue, the government-level institution was extended to the non- or quasi-non-governmental level in 2002 by setting up the Human Rights Network and involving the epistemic community. Until December 2004, the Human Rights Network was working on a regular basis with repetitive patterns. Four academic seminars and the staging of the political dialogue seminars once every six months are the structures in which expert-level exchange took place. It seemed that a level of institution-building was reached that displayed criteria that could have been (as in Krasner´s definition on p. 3) regarded as being characteristic of regimes. Here again, the future development remains to be seen, because in 2004 the Fédération Internationale des Droits de l’Homme (FIDH) criticized the fact that with the involvement of the epistemic communities, some kind of disconnection had been taking place. According to them, the Council did not seem to be politically in charge of the seminar which was a contradiction to the goal of bringing in expertise and institutional memory to the political human rights dialogues.88 This might be one reason why the EU let the contract with Galway University as main European coordinator of the network expire in December 2004.

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Finally, why is it that EU human rights policy seems to be incoherent when it comes to issues of economic or security concern? Peters (1999) suggested that Keohane’s definition for governments to agree upon a set of rules is a condition that may not be satisfied in many policy areas that appear to have operational regimes. And even if its criteria are met, the rules may be understood and accepted only by the segment of a government directly concerned with the policy, rather than the government as a collective identity. This explains why economic issues advanced by EU agencies are dominant – at least at first glance. A closer look reveals that a more complex picture exists in reality. In spite of numerous (and often justified) complaints about the lack of progress that has been made on human rights, the human rights dialogues between the EU and the PRC seem to have developed some leverage in advancing the national human rights institutionalization process in China. This might also explain why the Commission – in spite of substantial criticism regarding the effectiveness of the dialogue – has called this instrument still “fit for purpose”89 in 2006. It therefore remains to be seen, how the EU and China will proceed. The enthusiastic atmosphere in preparation of the Olympic Games in China 2008 might provide some extra potential for progress on the EU’s policy path of institutionalism.

Notes 1 I would like to express my sincere gratitude to Jasja van der Zijde and Timothy Webster for their critical remarks on the first drafts as well as their valuable support in tracking down the materials on the results of the dialogues. I am also very grateful to Seiichiro Takagi and Takashi Oshimura from Aoyama Gakuin University for their very helpful comments while discussing the first draft of this paper at Aoyama Gakuin University. Finally, I would like to thank the anonymous referees for their most valuable suggestions. 2 Human Rights Watch’s Director in Asia, Brad Adams, pointed out in December 2004 that China made human rights the issue in 1989 when it deployed the army to kill unarmed protestors and jail hundreds, if not thousands, to preserve the power of the party . . . When people still risk imprisonment for simply speaking their minds or reporting the news, human rights is still very much the issue.

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See http://hrw.org/English/docs/2004/12/06/china9769_txt.htm; accessed on February 7, 2005. In this context Human Rights Watch also praised the action of the German Parliament in insisting that the embargo be retained despite the objections of Chancellor Gerhard Schröder, who favored lifting the ban in order to allow German companies to win more contracts in China. www.europarl.eu.int/charter/pdf/text_en.pdf. The process has been put on hold after the negative result of the plebiscite in France and the Netherlands in June 2005 and the following overall stop of the ratification process. On the Asian values debate, see Timmermann (2001, 2006). Quasi-non-governmental actors include political foundations such as the German Friedrich Ebert Foundation (FES) of the Social Democratic Party (SPD), and the Friedrich Naumann Foundation (FNS) of the Liberal Party (FDP). Epistemic communities are conceptualized as agreements on certain fundamental


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bodies of knowledge that can then function as a mechanism for pressing those professional and scientific views onto government. They involve the idea that there is a common agreement among the participants in a range of countries that leads to relatively similar reactions on the part of national governments. This common reaction depends in part, however, on the ability of scientists and other professionals to influence their own governments. http://europa.eu.int/eur-lex/lex/en/treaties/dat/11997D/htm/11997D.html; accessed June 30, 2005. http://europa.eu.int/eur-lex/lex/en/treaties/dat/11992M/htm/11992M.html; accessed June 30, 2005. For further information, see http://europa.eu.int/comm/justice_home/unit/charte/ index_en.html. Chapter B7–70. (975/1999 and 976/1999). DG RELEX created in 1999 is responsible for the Commission’s relations with international organizations, such as the United Nations, the OSCE, and the Council of Europe, as well as the Commission’s participation in the Common Foreign and Security Policy (CFSP), and the administration of more than 120 Commission delegations in third countries. The External Relations Directorate General manages bilateral relations with European countries which are not members of the European Union or part of the wider enlargement process, i.e., Iceland, Liechtenstein, Norway, Switzerland, including the EEA Agreement with the countries of Eastern Europe and Central Asia, the countries of the Middle East and the Southern Mediterranean, North America, Latin America, Australia, Asia, Japan and Korea. The Human Rights and Democracy Committee which started its work in July 1999 is composed of the 15 member states and chaired by the Commission. The Committee may examine any issue concerning Community aid in these fields and should also play a useful role as a means for improving the coherence of the human rights and democratization activities of the EC toward third countries. Once a year, it examines planning for the following financial year or discusses general guidelines for operations under the Regulations to be undertaken in the year ahead. Its task is also to assist the Commission in the implementation of Chapter B7–7 by delivering opinions on projects worth over one million euros. The Committee is also systematically notified of projects below one million euros. http://europa.eu.int/comm/europeaid/projects/eidhr/index_en.htm; accessed April 14, 2005. The Directorate General for Development (DG DEV) works on policy formulation at a global and sector level. DG DEV formulates the development policy applicable to all developing countries and conducts forward studies to this end. The main thematic and sector areas covered (sub-activities) are those on which the development policy focuses: linking trade with development, regional integration and cooperation, support for macroeconomic policies, and promoting equitable access to social services in coherence with the macroeconomic framework, supporting transport, promoting food security and sustainable rural development, and support for institutional capacity-building. The special budget rose from 200,000 euros to one million euros between 1987 and 1999 (Heinz 2003: 11). European Union guidelines on human rights dialogues, http://europa.eu.int/comm/ external_relations/human_rights/doc/ghd12_01.htm; accessed February 15, 2005. The EU underlines the fact that if such specific dialogue exists, the discussion of human rights issue at any other level of the political dialogue is not excluded. http://europa.eu.int/comm/external_relations/asem/asem_process/com94.htm#0; accessed July 1, 2005. http://europa.eu.int/comm/external_relations/asem/asem_process/com94.htm#0;

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accessed July 1, 2005. the document is accessible at http://europa.eu.int/comm/external_relations/asia/doc/com01_469_en.pdf. http://europa.eu.int/comm/external_relations/asem/asem_process/com94.htm#0; accessed July 1, 2005. http://europa.eu.int/comm/external_relations/asem/asem_process/com94.htm#0; accessed July 1, 2005. http://europa.eu.int/comm/external_relations/asem/asem_process/com94.htm#0; accessed July 1, 2005. http://europa.eu.int/comm/external_relations/asem/asem_process/com94.htm#0; accessed July 1, 2005. Commission of the European Communities, Communication From The Commission To The Council And The European Parliament: EU–China: Closer partners, growing responsibilities (COM(2006)631 final), October 24, 2006. http://trade.ec.europa.eu/doclib/docs/2006/november/tradoc_131234.pdf.; accessed April 26, 2007. In the whole document “human rights “are mentioned only five times and only in subchapter 3.1. It is therefore no wonder that Kofi Annan suggested in his report “In Larger Freedom” to substitute the Commission by a smaller but more legitimized Human Rights Council. One argument from the Asian side for including Myanmar was the size of the European delegation, which was enlarged to 25 participants because of its new member states. The LAW ASIA human rights committee organized several meetings joined by national human rights institutions, parliamentary committee, and human rights NGOs to develop proposals for a human rights mechanism in Asia. Those meetings were formalized with the official founding of the Working Group for an ASEAN Human Rights Mechanism. The regional working group consists of representatives from NGOs and academia who at the same time represent national working groups. In 2004 there were five national working groups – Thailand, Cambodia, Indonesia, Malaysia and the Philippines. National Human Rights Institutions in the Asia-Pacific: A Source Book, published by the Working Group for an ASEAN Human Rights Mechanism, 2001, p. v. Vitit Muntarbhorn, Professor at the Faculty of Law, Chulalongkorn University, Bangkok; Co-Chairperson of the Working Group for an ASEAN Human Rights Mechanism; Special Rapporteur on the Situation of Human Rights in the Democratic People’s Republic of Korea. This study was prepared for the third Workshop on the ASEAN Regional Mechanism on Human Rights, May 27–29, 2003, Bangkok. www.aseanhrmech.org/WGPages/Database%20Files/Roadmap.doc; accessed June 15, 2005. www.aseanhrmech.org/WGPages/Database%20Files/Roadmap.doc; accessed June 15, 2005 http://europa.eu.int/comm/external_relations/china/intro/index.htm; accessed July 1, 2005. Denmark initiated the resolution, followed by the nine other EU Member States. http://foreignaffairs.gov.ie/Press_Releases/20040226/1452.htm. In 2002, for instance, the Council decided that at the UN Commission on Human Rights the EU would convey its deep concern at the serious violations of human rights in China and the lack of progress made in a number of areas. The EU was to urge China to take the following steps to improve the situation on the ground: early ratification of the ICCPR and full implementation of both the ICCPR and the ICESCR, enhanced cooperation with the UN human rights mechanisms, limitations on the use of the death penalty with a view to its abolition, putting an end to the “strike hard” campaign, reform of the system of administrative detention, respect for


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the human rights of all prisoners, including the right not to be subjected to torture, respect for freedom of expression, religion and belief and for the right of association, including free trade unions, as well as respect for cultural rights and religious freedom in Tibet and Xinjiang. http://europa.eu.int/comm/external_relations/human_rights/ gac.htm#hr110302c; accessed April 28, 2004. The Tibet question is also a continuous issue. The European Union has regularly addressed – and will continue to address – the issue of Tibet in the scope of the EU–China human rights dialogue, at the highest political level, such as bilateral Summits. In the context of this dialogue, the EU has regularly brought to the attention of the Chinese authorities the cases of persons who have been sentenced for having expressed their opinion or their belief. The European Union has been calling for the establishment of a direct dialogue between the Dalai Lama and the Chinese authorities for years as the only realistic way to find a lasting solution to the question of Tibet. March 22, 2004: UN Commission on Human Rights – Council Conclusions, para. 5. http://ec.europa.eu/comm/external_relations/human_rights/gac.htm#hr230204; accessed April 25, 2007. Press Release, 2649th Council Meeting, General Affairs and External Relations, General Affairs, Brussels, March 16, 2005. Human rights – Council Conclusion, para. 9. http://ec.europa.eu/comm/external_relations/gac/date/2005/03_160305_ga.pdf#hr; accessed April 25, 2007. www.nuigalway.ie/human_rights/Projects/eu_china.html; accessed April 14, 2005. The first period of two years lasted from 2001–2003. www.humanrights.dk/upload/ application/d35cac93/1dpdf.pdf, accessed April 14, 2005. Since 2005, the activities have been less consistently documented. Insiders mentioned, however, that the organization of workshops were shifted to a professional event organizer. www.delchn.cec.eu.int/en/Political/Human_Rights.htm. http://europa.eu.int/comm/external_relations/china/intro/index.htm; accessed April 27, 2004. On the Northeast Asian context, see Timmermann and Tsuchiyama (2008). Communication from the Commission to the Council and the European Parliament. Thematic Programme for the promotion of democracy and human rights worldwide under the future Financial Perspectives (2007–2013). Brussels, 25.1.2006. [COM(2006)23]. Anna Würth and Frauke Lisa Seidensticker who looked at the case of the EU-Iran dialogue discussed this challenge in greater detail in their 2005 study. Medina 1999, p. iv. www.aseanhrmech.org/WGPages/Database%20Files/Roadmap.doc; accessed June 15, 2005. http://ec.europa.eu/comm/external_relations/human_rights/doc/2006com_23_en.pdf; accessed February 23, 2007. EC Communication, para. 3.1. Scope and objectives. http://ec.europa.eu/comm/external_relations/human_rights/doc/2006com_23_en.pdf; accessed April 25, 2007. Ibid., p. 7. Report of the Eminent Persons Group on the ASEAN Charter, December 2006, para 4. www.aseansec.org/19247.pdf; accessed April 25, 2007. Report of the Eminent Persons Group on the ASEAN Charter, December 2006, para 9. www.aseansec.org/19247.pdf; accessed April 25, 2007. Ibid., para. 47. A first step towards such mechanism might be their suggested “Consultative Process with the ASEAN Council” which includes parliamentarians, human rights groups, private business, civil society and other stakeholders (see ANNEX B of the report). EU General Affairs Council (2001) The EU–China Dialogue on Human Rights,

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2,327th Council meeting, Brussels, January 22–23, 2001, http://europa.eu.int/comm/ external_relations/human_rights/news/gac_jan_01.htm, accessed April 1, 2005. Youngs 2001, p. 184. FIDH/HRIC 2004, p. 4; Human Rights Watch World Reports 1998–2004; see also Freedom House Report 2005, The Worst of The Worst, The World’s Most Repressive Societies 2005, A Special Report to the 61st Session of the United Nations Commission on Human Rights, Geneva. Communication from the Commission to the Council and the European Parliament. Thematic Programme for the Promotion of Democracy and Human Rights Worldwide under the Future Financial Perspectives (2007–2013). Brussels, 25.1.2006, para. 3.1 [COM(2006)23] The following results are taken from a study by FIDH (Federation International de Droits de l’Hommes) and HRIC (Human Rights in China), who decided to undertake a more in-depth analysis of the development of the human rights situation in China. The starting point of their study was the year 1998. Their findings, entitled “Preliminary Assessment of the EU–China Human Rights Dialogue,” were presented at the EU–China Human Rights Dialogue meeting in February 2004. FIDH’s and HRIC’s analysis was not only based on the Council’s benchmarks but also on indicators of progress developed by UN and other multilateral bodies as well as international NGOs. Additional frameworks of reference were the Human Development Index (HDI) and the Gender Related Development Index (GDI) provided by the United Nations Development Program (UNDP), and the Worldwide Press Freedom Index by Reporters without Borders. www.fidh.org/rubrique.php3?id_rubrique=350, accessed June 30, 2005. UN Economic and Social Council (1997), Question of the Human Rights of all persons subjected to any form of detention or imprisonment: Report: p. 3. [E/CN.4/1998/44/Add.2]. The ratification is still pending. While agreeing to a new aid program of the European Commission of nearly 1 million euros for human rights projects and additional resources for village-level democracy initiatives. Youngs 2001, p.179. High Commissioner for Human Rights to visit China from 7 to 15 September 1998. UN Press Release – September 4, 1998 [HR/98/65]. High Commissioner for Human Rights and Chinese government sign Memorandum of Intent on Technical Cooperation. UN Press Release – September 7, 1998 [HR/98/67]. http://genevamissiontoun.fmprc.gov.cn/eng/5147.html; accessed June 30, 2005. FIDH/HRIC 2004, p. 21. FIDH/HRIC 2004, p. 20. UN Economic and Social Council (2003) Economic, Social and Cultural Rights: The Right to Education, p. 3. [E/CN.4/2004/45/Add.1]. The C&R allowed the arbitrary detention of people considered undesirable by urban authorities, because their household registration is not located in the city where they are living or working. Amnesty International, Report 2004 – http://web.amnesty.org/ report2004/chn-summary-eng. FIDH/HRIC 2004, p. 12. FIDH/HRIC 2004, p. 9. It was presented at the 34th session of the Committee in 2005. Since 1997 the WGAD has been constantly urging China to bring its national law into compliance with international human rights standards. http://hrw.org/english/docs/2005/01/13/china9809.htm; accessed April 4, 2005. Beijing News, November 18, 2004. www.cecc.gov/pages/virtualAcad/index.phpd? showsingle=3442; accessed April 4, 2005; see also Council of the European Union (2004) Draft Council Conclusions on EU–China Human Rights Dialogue, pp. 2–3 [13216/04].


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78 Civil and Political Rights, Including the Question of Torture and Detention. Report of the Special Rapporteur on Torture and other cruel, inhuman or degrading treatment or punishment, Manfred Nowak. Mission to China[E/CN.4/2006/6/Add.6] March 10, 2006, Summary, p. 2. 79 With regard to the criminal justice system the rapporteur concluded in his summary that The combination of deprivation of liberty as a sanction for the peaceful exercise of freedom of expression, assembly and religion, with measures of re-education through coercion, humiliation and punishment aimed at admission of guilt and altering the personality of detainees up to the point of breaking their will, constitutes a form of inhuman or degrading treatment or punishment, which is incompatible with the core values of any democratic society based upon a culture of human rights. (ibid, Summary, p. 2) 80 Xiong Qiuhong, The Reform of the Chinese Criminal Procedure Law in a Human Rights Perspective. Norwegian Centre of Human Rights, University of Oslo. Human Rights Report 01/2003, Conclusion. 81 Human Rights Watch, World Report 1997: China. 82 www.hrw.org/wr2k/Asia-03.htm; accessed April 4, 2005. 83 www.hrw.org/wr2k1/asia/China.html; accessed April 4, 2005. 84 FIDH and Human Rights China, 2004, Human Rights Watch, World Report 2003. 85 http://hrw.org.wr2k3/asia4.html; accessed April 4, 2005. 86 http://hrw.org.wr2k3/asia4.html; accessed April 4, 2005. 87 http://hrw.org/english/docs/2005/01/13/china9809.htm; accessed April 4, 2005. 88 FIDH and Human Rights China, 2004, Human Rights Watch, World Report 2003, p. 15. 89 Commission of the European Communities, Communication From The Commission To The Council And The European Parliament: EU–China: Closer Partners, Growing Responsibilities (COM(2006)631 final), October 24, 2006, pp. 4–5.

Bibliography Adler, E. (1992) “The Emergence of Cooperation: National Epistemic Communities and the International Evolution of the Idea of Arms Control,” International Organization, 46: 101–146. Baylis, J. and Smith, S. (eds) (2001) The Globalization of World Politics, Oxford: Oxford University Press. Brown, C. (2001) “Human Rights,” in J. Baylis and S. Smith (eds) The Globalization of World Politics, Oxford: Oxford University Press, pp. 599–616. Christiansen, T. (2001) “European and Regional Integration,” in J. Baylis and S. Smith (eds) The Globalization of World Politics, Oxford: Oxford University Press, pp. 494–518. Coicaud, J.M, Doyle, M. and Gardner, A.M. (2003) The Globalization of Human Rights, Tokyo: The United Nations University Press. Gavison, R. (2003) “On the Relationships between Civil and Political Rights, and Social and Economic Rights,” in J.M. Coicaud, M. Doyle and A.M. Gardner (eds) The Globalization of Human Rights, Tokyo: The United Nations University Press, pp. 23–55. Haas, P.M. (1992) “Introduction: Epistemic Communities and International Policy Coordination,” International Organization, 46: 1–35. Heinz, W.S. (2003) Menschenrechtsschutz in der Europäischen Union. Der (lange) Weg

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zu einem effektiven Menschenrechtsschutz, Reihe Eurokolleg 47, Berlin: Friedrich Ebert Stiftung. Keohane, R.O. (1989) International Institutions and State Power: Essays in International Relations Theory, Boulder: Westview Press. Kobila, J.M. (2003) “Comparative Practice on Human Rights: North–South,” in J.M. Coicaud, M. Doyle and A.M. Gardner (eds) The Globalization of Human Rights, Tokyo: The United Nations University Press, pp. 89–115. Krasner, S. (1983) International Regimes, Ithaca: Cornell UP. Lamy, S.L. (2001) “Neo-Realism and Neo-Liberalism,” in J. Baylis and S. Smith (eds) The Globalization of World Politics, Oxford: Oxford University Press, pp. 182–199. Little, R. (2001) “International Regimes,” in J. Baylis and S. Smith (eds) The Globalization of World Politics, Oxford: Oxford University Press, pp. 299–316. Medina, C. (1999) “Foreword,” in Working Group for an ASEAN Human Rights Mechanism (ed.) Towards an ASEAN Human Rights Mechanism. Proposals, Declarations and Related Documents, Makati City: Human Rights Center, Ateneo de Manila University, pp. i–iv. Peters, B.G. (1999) Institutional Theory in Political Science. The “New Institutionalism,” London and New York: Continuum. Timmermann, M. (2001) “Regionale Identitätsbildung in Südostasien? Auf dem Weg zu einem ASEAN-Menschenrechtsmechanismus” [Regional Identity-Building in Southeast Asia? Towards an ASEAN Human Rights Mechanism], Südostasien aktuell, Vol. XX, 4: 388–395 and 428–431. Timmermann, M. (2006) “Regional Community-Building in Asia? Transnational Discourses, Identity- and Institution-Building in the Fields of Human and Women’s Rights,” in T. Heberer and C. Derichs (eds) The Power of Ideas. Intellectual Input and Political Change in East and Southeast Asia, Copenhagen: NIAS, pp. 202–220. Timmermann, M. and Tsuchiyama, J. (eds) (2008) Institutionalising Northeast Asia: Regional Responses for Global Governance, Tokyo: United Nations University Press. Working Group for an ASEAN Human Rights Mechanism (2001) National Human Rights Institutions in the Asia-Pacific: A Source Book, Makati City: Human Rights Center, Ateneo de Manila University. Würth, A. and Seidensticker, F.L. (2005) Indices, Benchmarks, and Indicators: Planning and Evaluating Human Rights Dialogues, Berlin: German Institute for Human Rights. Youngs, R. (2001) The European Union and the Promotion of Democracy. Europe’s Mediterranean and Asian Policies, Oxford: Oxford University Press (Oxford Studies in Democratization).

8

On the potentials of interregional policy cooperation The case of Europe’s participation in the Asian Development Bank Werner Pascha1

Introduction Discussing the role of European countries in the Asian Development Bank (ADB) may seem rather peripheral at first sight, much less “sexy” than dealing with well publicized endeavours like the multi-track ASEM process. However, there are at least four reasons to take a closer look at Europe and the ADB. First, while interregional cooperation between Europe and Asia seems a rather new idea with little experience to draw on, the regional development banks (RDB) look back on a history spanning several decades. During their first half-century of existence, the RDBs – which include the ADB – provided loans of more than US$250 billion to developing countries. The question of whether and how to integrate non-regional members has accompanied those organizations since their formation. This also concerns the ADB, and its case is particularly relevant because it relates to the most dynamic region of the world economy. At the same time, the region has to overcome serious ideological, political, social and ecological challenges. Incidentally, the ADB will soon celebrate its 40th anniversary, and this is an interesting point to look back – and forward. Second, while some international organizations are geared at “soft” instruments like non-binding consensus-building with the objective of achieving some degree of policy coordination – less benevolent observers would consider them “talk shops;” RDBs like the ADB actually distribute significant amounts of money supplied or at least guaranteed by their member countries. They really mean business. While the World Bank is still the dominant provider of development banking, the RDBs are far from insignificant (Table 8.1),2 in some countries – including certain states in Asia – actually surpassing the amount of loans from the World Bank.3 In this respect, Asia and the ADB seem to be rather typical for other RDBs.4 Third, European countries have to take an active interest in their approach to multilateral development banking. This applies to dynamic Asia with its challenging problems in particular. A simple “business as usual” approach will not do. European economies agreed to participate with a fair share in the ninth

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Table 8.1 Cumulative loan approvals from the (multilateral) World Bank Group and from RDBs by region, through 1995 (incl. hard/soft loans, in billion US dollars)

World Bank Group Inter-American Development Bank Group ADB Group African Development Bank Group RDB/World Bank in %

Latin America Caribbean

Asia

Africa

90.7 78.2c – – 86.2

143.5a – 56.7 – 39.5

78.1b – – 29.9 38.4

Source: Culpeper 1997: 39, modified. Notes a Excludes Central Asia. b Includes the Middle East. c Includes US$1.5 billion in funds administered by the IDB.

replenishment of the Asian Development Fund (ADF) in 2004. At US$7 billion, ADF IX is considerably larger than its predecessor and a noticeable burden for member economies – which would want to make sure that their money is well spent. This is not only an issue for those countries which entered the ADB decades ago. In 2004, Luxembourg became the 62nd member of the ADB (next to Palau). Finally, there is a debate on whether to set up yet another regional bank in the area, a Northeast Asian development bank (for instance, Cho 2002), so European countries will have to form a stance vis-à-vis such ideas.5 Fourth, the question of whether regional banks like the ADB are a helpful complementary device vis-à-vis globally operating development banks is part of the wider issue of regional versus global institutions or organizations. In trade, and limiting the examples to Asia, we find the problem of whether the Malaysian proposal of an East Asian Economic Caucus, the trade agenda of the Asian Pacific Cooperation (APEC) or the Association of Southeast Asian Nations (ASEAN), or the recently evolving net of bilateral trade agreements are “a stepping stone or a stumbling block” for trade liberalization and facilitation if one compares them to the World Trade Organization (WTO) process. With respect to governing the international financial markets, there is a similar issue as to whether the global framework with the International Monetary Fund (IMF) at its core should be complemented by Asian mechanisms like an “Asian Monetary Fund” or swap agreements under the Chiang Mai Initiative and the recent moves towards an Asian bond market, which are steps to closer regional monetary cooperation. In this chapter, we will first look at the rationality of RDBs in general and that of the ADB in particular. We will continue by discussing the case for the participation of non-regional members, concentrating on European interests in particular. As it is an example of a member from Europe, we will deal with Germany somewhat more closely. We conclude with a proposal to organize Europe’s voice more effectively.

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Two remarks on how this chapter fits into the wider context of Asia–Europe interregional relations may be appropriate. The definition of “Europe” and particularly of “Asia” is a pragmatic one, based on the organizational framing of the entities involved. “Asia” in particular is understood as covering the regional membership of ADB, which also covers most of the Pacific island nations, for instance. With respect to the varieties of interregionalism discussed in Chapter 1, the concept has a peculiar twist as used here that I have recently started to call “cross-regionalism” (Pascha 2007). In this case, non-regional (state) actors from Europe take part in a scheme set up for regional issues elsewhere (in Asia), whereas interregionalism is usually preoccupied with common concerns.

Multilateral development banks in the world economy Before taking up the discussion properly, we should first introduce the type of organizations that have been studied. The primary rationality of multilateral development banks (MDBs) is to channel funds into developing economies which would not have been put to that use under market conditions. The principal reason is that the full social returns of global investment may not be reflected in the interest and risk profile available to the investor, so there would be an underinvestment from a welfare perspective. This is an accepted case for public action. Achieving the extra benefits through multilateral action can be founded on perceived economies of scale or scope. While there may be market imperfections in terms of unincorporated development goals that legitimize public action, it is less clear which type of (multilateral) activity is warranted. One question is how to intervene. Development finance with development bank-administered loans is not the only solution. Another option is, for example, to hand out subsidies or to participate in private sector projects. A second question is governance. While there are market imperfections to be corrected, they always have to be weighted against the possibility of government failure. In multilateral development financing, avoiding such deficiencies is particularly tricky. The “true” principals, the world citizens, are shielded from actual policy-making by several layers of agent relationships: through their national representatives (parliament, government and ministerial bureaucracy), the governance mechanisms of the multilateral organizations, and finally the executive and administrative staff of the multilateral organization. To make things even more complicated, not only the self-interest of the agents has to be accounted for, but also the principals will have different agendas. The most obvious distinction exists between the citizens in a net borrower position and those in a lending country environment. A third issue of possible government failure is related to size. There are at least two options: multilateral development banks acting on a global scale (MDBs in a narrow sense) or regional development banks (RDBs). Like globally operating MDBs, the classical RDBs are usually engaged in several activities, and these are often organized in different units. The mainstay is loans at market conditions through the capital supplied by the lending members (so-called

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ordinary capital resources) and through borrowings from the world markets. Why would developing economies not borrow from the global market directly? The logic is threefold. First, there may be a bottleneck problem. If financial markets are shallow, developing economies have a simple problem of appropriate access or of formidable transaction costs. Second, RDBs can realize more favourable, i.e. lower interest rates when borrowing than developing economies. So even if they charge those market rates (plus a small administrative fee) to developing member economies, the interest rate will be lower than in the case of unilateral borrowing. One reason is that the management of RDBs typically enjoys a higher reputation than the average developing economy. More importantly, though, the RDB loans are guaranteed by the capital of the developed member economies, so their (usually good or very good) credit rating underlies RDB loans. Consequently, RDBs usually obtain the highest AAA (or a comparable) ranking from the leading rating agencies and can pass this advantage on to their customers. Third, this set-up is attractive for the lending member economies as well, because they do not have to frontload the whole capital subscription promised to the RDB. Rather, only a minor part will actually be paid-in capital and will turn up in the fiscal budget of the member. The rest is callable capital, promised by the lending member economy, and it serves to guarantee RDB loans. Incidentally, no callable capital ever had to be activated, so members can feel quite at ease. While this is attractive for administrators and politicians authorizing such capital guarantees, one should not overlook the somewhat dubious consequences for incentives, as the actors may become overly complacent when asked to provide additional capital. In addition to ordinary lending facilities RDBs, like the ADB, have another wing that makes funds available to particularly poor economies, which cannot be expected to repay their debt on the basis of the regular RDB rates. Special funds are set up with a large grant element for them (hard loans vs. soft loans). In the case of the ADB, this is the task of the Asian Development Fund (ADF). According to the nature of soft loans, often implying a grant element of some 80 or 90 percent with low, even zero, interest rates and long grace periods, the Fund has to be replenished once in a while. As for the ADB, the ninth replenishment took place in 2004 with a total of some US$7 billion. Replenishments of the ADB’s ordinary capital resources (OCR) occur less frequently. Apart from the regular soft-loan funds, there are some additional funds set-up for specific purposes and/or financed by selected member countries under special programmes. In the case of the ADB, Japan in particular has made use of this mechanism. A third pillar in development finance is cooperation with the private sector. Due to its special nature – for all other purposes, the “clients” of RDBs are governments – such activities are frequently organized in a separate organizational unit. The ADB has been quite active to promote private-sector operations. Each RDB usually follows some other activities. In this context, there is an important distinction between financial assistance (FA) and technical assistance


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(TA). RDBs were clearly set up FA agencies. This is already reflected in their having been named development banks. TA does play an increasing role, though, because the widening and deepening of global financial markets has diminished their traditional raison d’être, as we have already seen. While shifting to new tasks can be seen critically, the ADB has earned a rather good reputation in its provision of TA. A noticeable share of ADF IX is used to finance the TA fund of the ADB. Another step of acquiring know-how was taken by establishing an Asian Development Bank Institute (ADBI) in Tokyo with the task of researching issues of regional concern.

The rationality of regional development banks Given the choice between globally operating MDBs and more narrow RDBs, we should now consider why the more complicated set-up involving MDBs and RDBs might make sense, despite the fact that there will almost certainly be additional costs involved because of duplicated administrative structures. RDBs are a brainchild of the 1950s and 1960s. With the successful reconstruction of the Western economies and the newly found independence of many so-called “Third World” economies, the challenge of successful development became ever more pronounced. One major issue perceived by the world community was the savings gap between funds needed and funds available for global development. While the World Bank (International Bank for Reconstruction and Development, IBRD) was already making a major contribution to supplying additional funds to developing economies, this was not considered enough, and additional organizations were requested to step in. Another issue was the allocation of support. A global organization like the IBRD with its limited funds and manpower could not but set certain priorities for its activities. With respect to Asia, for instance, East Asian governments felt that the IBRD was putting too much emphasis on South Asia (India, Pakistan), somewhat neglecting Southeast and East Asia. Behind this concern, there is the wider issue of whether multilateral support from a global organization like the IBRD may have been biased in favour of the interests of leading Western economies – and of the US in particular. RDBs were thus seen as a chance of empowering regional interests and giving them a voice in development policy. Right from the start, there was thus tension regarding the best way to deal with non-regional countries. On the one hand, their support was indispensable for mobilizing funds – North America and Western Europe were the only economies able to finance the RDB programs – yet on the other, they were outsiders vis-à-vis the developing regions and were actually meant to be so. This tension somehow had to be reflected in the governance structure of RDBs. Indeed, different RDBs tried to deal with this conflict in different ways, some being more successful than others. The African Development Bank (AfDB), for instance, excluded non-regional countries right from the beginning. The result was predictable. On the one hand, it always had difficulty attracting enough funds. On the other, the members – all of whom were potential borrowers – had a short-term

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interest in collaborating, namely that of trying to talk outsiders into providing money and maximizing their income from the RDB without applying strict criteria with regard to effectiveness or efficiency. Later on, the AfDB had to accept non-regional members, giving them a voice in governing its activities and entering a painful process of intense restructuring. The Asian Development Bank took a different approach right from the start; it encouraged non-regional countries to become members, while limiting their voting shares to 40 percent of the total. Given such governance problems and before turning to some possible solutions from a European point of view, one should now ask why European countries should want to participate in RDBs, namely the ADB, under such circumstances.

The interest of European countries in the ADB The most straightforward answer to the question of why Europe would wish to participate is to refer to the perceived benefits for global development. This reasoning implicitly assumes altruistic motives on the part of European governments. The premier objective of the European states would be to make a positive contribution to the Millennium Development Goals of the United Nations, to which they have subscribed. Doing so through RDBs, among them the ADB, implies that they see a specific comparative advantage for regional development banks and that they assume the RDBs are doing a good job. Alternatively and possibly simultaneously with more altruistic motives, the European countries might follow national motives. For instance, ADB membership enables them to apply for ADB projects. As the amount of paid-in capital is quite small, one can expect it to be rather easy for national industry to lobby the government to join an RDB, the costs being borne by the taxpayer anyway. One should realize that seemingly “national” interests are sometimes only a camouflage for special interest groups, while there may even be a net negative effect. Finally, the motive for joining and staying in the ADB might also be related to the self-interest of politicians and bureaucrats. They may enjoy travelling and rubbing shoulders with colleagues from all over the world. While there is little risk of being personally associated with any mistake made by the MDB, there is a chance of influencing policy-making and then boasting about it at home. It is hard to verify this point empirically. Probably, one should not overestimate it. For a politician, the benefits of enjoyable travelling may frequently be outweighed by the pressure of tight schedules. Let us now discuss the evidence with respect to the three sets of motives introduced above. When the RDBs, including the ADB, were founded in the 1960s, one could indeed make a case for RDBs helping to overcome the global savings gap and immature international financial markets. Development finance from MDBs like the World Bank was so thinly spread that one could easily argue in favour of more regional efforts. It is not difficult to understand why


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European countries were easily convinced to join when taking possible altruism into account. In more recent years, the story has been more complicated. First and foremost, international financial markets have matured considerably. For feasible projects, it is much easier to tap the financial market, undermining the case for MDBs and RDBs. A case for such development banks on the basis of altruistic, welfare-enhancing arguments can still be made, but it has to rest on positive answers to two questions: • •

Does the MDB/RDB provide its support effectively and efficiently? Does support for Asia in a regional framework prove superior to an MDBonly approach?

We will turn to effectiveness and efficiency considerations later on and concentrate on the second aspect here. Like other RDBs, the ADB has subscribed to the goals laid down in the 2002 United Nations Millennium Declaration. These Millennium goals envision a reduction of extreme poverty by 2015 to half the 1990 level, as well as significant improvements with respect to education, health, gender equality and environmental sustainability. According to the Bank, these concerns are “clearly reflected” in its 2001–2015 Long-Term Strategic Framework (ADB 2004: 37). They encompass more than 20 goals such as the eradication of extreme poverty, universal primary education, gender equality, reduction of child mortality, improvement of maternal health, combating HIV, environmental stability, etc. Few would doubt their relevance, but they offer little guidance in terms of setting priorities for different levels of development bankers. Observers find it extremely difficult to substantiate what contribution a regional organization can actually make.6 One idea is to view the RDBs as part of a wider framework. Actually, this is close to the idea behind the Monterrey Consensus to which the global community has subscribed: its goal is a coordinated framework encompassing state and market, lenders/advanced nations and borrowers/developing nations, as well as globally operating and regional organizations. Recent letters of agreement between the World Bank and a couple of RDBs including the ADB aim in this direction. The global MDBs – the World Bank group in particular – would take the lead with respect to overarching issues like basic development strategies, while the regional level might optimize it in terms of micro or sectoral approaches. As the Chinese ADB Governor put it quite succinctly in his address to the 2004 Annual Meeting on Jeju Island/Republic of Korea, the ADB would be the family doctor for the regional economies (Renqing 2004). Still, putting these ideas into practice is far from obvious, even excluding self-interested reservations about cooperating. As for the ADB, the approach presupposes a “regional competence” and “know-how,” based on regional peculiarities of development. This might lead to superior effectiveness and efficiency on the “family doctor’s” part with respect

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to the ordinary diseases of the “patients” he is supposed to know so well. Incidentally, though, “Asia-Pacific” is arguably the most diverse major world region, so it is difficult to see common ground. One can distinguish several subregions with distinctive development problems, for which specific policies would have to be defined:7 • • • • •

South Asia, with its problems of over-populated, low-income economies and the large role played by agriculture. Southeast Asia, with its rapidly growing industrialization and production networks with Northeast Asia. Central Asia, with its challenge to overcome its Soviet heritage and transform the newly independent republics into functioning market economies. Pacific island states, with their fragile, resource-poor economies. China, to the extent that it is still treated as a borrowing member economy.

Another argument put forward in favour of a regional framework of support against an MDB-only approach is that borrowers identify more strongly with a regional organization not dominated by (rich) outsiders. This would make it easier to get even tough policies accepted and executed. However, this argument is tricky as well. The reason is that a regionally governed development bank might find (more) acceptance for two quite different reasons: • •

because it is more perceptive of regional needs and sensitivities (which is welcome for both lenders and borrowers), or; because it is more easy-going in terms of the conditions attached to loans, screening of results, etc. (which would not be welcome, at least for lenders).

Hence, the incentive effects of regional governance are not clear. If there is a pure version of regional majority and all regional members are borrowers, the organization may easily degenerate, as has happened with the AfDB in former decades. In the case of the ADB, this possibility is somewhat reduced because of the significant overlap of the regional/non-regional and the lender/borrower groups (Japan, Australia). In this case, the behaviour of the “overlapping” members (lender + regional) plays a key role, particularly that of Japan as one of the two dominant members of the ADB (together with the US). The political interests of Japan and of the premier global financial power, the US, have been somewhat different with respect to the ADB and indeed still are. (For instance, the US was not much in favour of setting up an ADB in the first place.) However, the interests of both powers converged in making the ADB sensitive to lending country interests and safeguarding basic virtues of “good housekeeping.” In effect, the ADB is usually credited to be the most prudent RDB, with a conservative approach to spreading its goods over the region.8 Quite another approach to raise development effectiveness and overcome the governance problems would be to let different organizations compete with each other. However, one should take note that the demand side is made up of bor-


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rower governments. These are not only “shopping” for effective development banking in terms of contributing to their development goals. Rather, they will also be interested in loose conditions, low interest rates and long grace periods. Given the usual short-term horizon and self-interest of politicians and bureaucrats, it may frequently happen that they rather demand less effective, but “cheap” development banking. A unifying framework for MDBs/RDBs and competition among them are frequently mentioned together, as if they were simply compatible. There is a clear conflict, however: the more spelled-out the distribution of labour is between global MDBs and more narrow RDBs, the less room there is for competition in overlapping fields. European countries do pay lip service to the arguments defending RDBs, but more in the sense of demanding change and clarification than in terms of convincingly legitimizing participation. The German government, for example (BMZ 2003), sees RDBs as an “integral part” of its development policy, in tune with the United Nations Millennium Declaration. It stresses their role of “conceptual leadership” for regional issues, for instance, but also notices quite plainly that the “division of labour and competition between the RDBs and the World Bank should be further developed” (ibid.: 5–6, emphasis left out). Given such qualifications in official papers (and they are much more outspoken in informal communication), there is little evidence that European countries participate in the ADB simply because they consider it an ideal mechanism by which to achieve the Millennium Development Goals. While criticism of the MDBs was somewhat subdued during the years of the Cold War, it has intensified since then. Following the Wapenhans Report (1993) on the World Bank Group, there have been waves of critical appraisals with respect to the regional MDBs as well. The G7 group, for instance, has started to include calls for reform of the MDBs since the late 1990s (Santiso 2002b). An additional problem that MDBs and RDBs frequently face is the “pipeline problem:” they have difficulty allocating all their available funds sensibly. For bureaucrats, there is an incentive to spend money unwisely in such circumstances because officials can assume career benefits from handling large projects, while they can also assume they will not be made personally accountable for possible failures. This will make competition even less workable. Given the long RDB history of trying to channel funds into their client economies, there is a deeply ingrained tendency to continue doing so. It is very difficult to overcome this mindset, as the RDB bureaucrats and borrower governments can so easily agree on spending someone else’s money. Should one rather turn to national self-interest to explain why Europe still participates? What national interests do European countries actually have with respect to Asia? The most straightforward one is the wish to gain access to business opportunities in the region.9 The ADB offers considerable contracts, which might also function as a door-opener for additional business. Traditionally, European countries – like those of other developed OECD economies – were awarded a large percentage of ADB contracts. During the first decade of the

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ADB, for instance, Japan held the lion’s share, but even Germany contributed 7.6 percent of ADB supplies, far exceeding its own capital share. More recently, the situation has changed dramatically (BMZ 2003: 25). Germany’s share has shrunk below its capital contribution, making the “deal” of ADB membership seem much less beneficial for German business interests. A major reason for the change is the growing economic capabilities of the region itself. Compared to 11 percent during the first decade, the share of supplies from the Asian developing region has soared to almost 60 percent (for 1997–2001). The biggest loser seems to be Japan, but one has to take into consideration that a noteworthy share of developing region supplies will probably be contributed by Japanese subsidiaries in the region. This is a factor European companies will be able to make much less use of. Still, even if Germany’s share and those of other European and OECD countries have declined, applying for and executing ADB contracts is a mechanism by which one can keep in touch with the region and convince its planners of the suitability of European business solutions. As the EU does not even have observer status in the APEC and is only a spectator as regards the recent bilateral activism in the region, the ADB is not to be underestimated as a “foot in the door.” There are few instruments the European aid bureaucracy can employ to influence the flow of business opportunities for European firms. (If European enterprises are not the most competitive ones, it is a doubtful aim in the first place. But as Asian firms may have non-merit-based advantages of proximity when competing for contracts, it may be legitimate to contemplate a countervailing force.) Frequently, it is supposed that a large number of MDB staff members with one’s own nationality may have a positive impact. Table 8.2 shows that in recent years, Germany has hardly been able to complain about underrepresentation. Is nationality really important, although any staff member should, of course, work for the common objectives of the ADB? In the German case, there are half-yearly regular meetings between German-nationality staff members and the German ADB executive director (apart from more informal contacts). They could be interpreted as a channel of influence. It is often argued, though, also with respect to other international organizations, that it is very difficult to get German professionals to support a common cause “as patriots,” for instance in comparison with French international bureaucrats, bonded together by a corps d’ésprit that is reinforced by a common background in the famous national grandes ecoles. Still, ordinary staff members may be expected to have rather little influence on the awarding of contracts even if they are professionals. It is notable, therefore, that there are still only a few senior staff members. (Incidentally, according to Table 8.2, Japan is under-represented, but this is certainly more than offset by its nationals occupying some of the most senior posts.) Some other European countries are more effectively represented, such as the (rather small) Netherlands. The reasons are not totally clear; they may to some extent be related to a colonial past in the region and to “collective experiences.” As a consequence, though, a common spirit between representatives from Europe has difficulty


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Table 8.2 Personnel representation among senior-level ADB staff (five major stockholders plus Germany, as of December 2003; in percent)

Japan US PR China India Australia Germany

Capital share

Senior-level staff share

15.8 15.8 6.5 6.4 5.9 4.4

13.2 13.1 5.8 6.9 4.3 4.6

Source: Internal German memorandum of March 4, 2004.

evolving, as their interests, their image of themselves, the state of information and the potential to act may diverge significantly. Another national (or region-based) interest European countries may have in the ADB is to help stabilize the region in an economic growth scenario. In the “post 9/11” age, such an argument has gained importance. The Bali bombing of October 2002, for instance, has clearly shown that Pacific Asia is not immune to the threats of terrorism. Unfortunately, “stability” can lead to a serious conflict with development goals if incompetent or even rent-seeking borrower governments are supported in the interest of quietening down illegitimate (or legitimate?) opposition.

Making an impact: voice and (the threat of) exit Even if we assume that European countries have a clear and sensible agenda about why they participate in the ADB, what are their prospects of seeing this agenda implemented as non-regional members? Studying “impact,” it is natural to turn to Europe’s shareholder rights in the ADB first. Voting shares are an unsuitable indicator of actual voting power, though. For the sake of illustration, suppose a country holds 51 percent of the voting shares and there is a 50 percent + x majority rule. In that case, the voting power of any other member country would effectively be zero. There are several approaches to constructing meaningful power indices in the context of international organizations like the EU and, indeed, MDBs, whose usefulness depends on the circumstances studied (with respect to the InterAmerican Development Bank, see Strand 2003). We will use Johnston’s “power index” here, which argues that the power of a member country depends on it being a critical member of “winning coalitions.” A winning coalition is any combination of members for whom the (combined) number of votes surpasses the required (simple or special) majority. Such a winning coalition is considered vulnerable if there is at least one member whose support is critical to achieve a majority. The fewer members that are critical in a given vulnerable coalition, the more powerful the member is considered to be. To calculate the overall power of a member, one adds up its “criticality” in

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all vulnerable coalitions. More specifically, the Johnston Power JPi for any member i is calculated as 1 JPi = SV(i) c(S) where S is a vulnerable coalition, V(i) is a coalition in which i is critical, and c(S) is the number of critical members in a vulnerable coalition S.10 To standardize the power values, one divides the JPi for each member i by the sum of all JP values, i.e., the JP values for all members i combined. This leads to the power index JPIi as an indicator of the relative power of each member within the organization. It should be noted that JPIi has a value between 0 and 1 and that the sum of all the JPIi values is equal to 1. While this property is similar to that of the voting shares of members, which also range from 0 to 1 and add up to 1, the transformation to a power index is not trivial as it may lead to surprising, counterintuitive results. There can, indeed, be circumstances in which “swing” members with a small number of shares can have a disproportionately large effect on making a coalition a winning or a losing one. This would be reflected in Johnston’s power index and has been found to be empirically relevant.11 We will first take a look at the basic situation, distinguishing the various voting groups (Table 8.3, scenario Sc. I). The US and Japan hold the largest amount of voting shares, with around 13 percent each. Looking at voting power, their situation appears even stronger. Each has a JPI (Johnston Power Index) of close to 20 percent. This is a reflection of the difficulty in constructing any winning majority against either of the two big ADB shareholders. For almost all other voting groups, their power is smaller than signalled by their voting shares. This also holds for the voting groups with European participation. There is thus a significant incentive to formulate a joint European position to overcome this weakness. We now turn to other scenarios under the assumption of a unified European approach. First, we assume that the European member countries can form a binding alliance with other members of their respective voting groups. This would give them a voting power of almost one half (Table 8.3, scenario Sc. II). It would be extremely difficult to overcome such a force, even though the percentage of voting shares would still only be around one-quarter. Still, such a domineering coalition seems rather unlikely. Could countries like Canada or Turkey really be convinced to become members of a stable, European-led coalition, for instance? Another scenario is to give up the assumption that voting groups deliver single votes – which is not prescribed by the ADB statutes anyway.12 In Table 8.4 (left side, scenario Sc. III), we have assumed a unified vote for all the EU members belonging to the ADB, while the other ADB members vote individually. In such a case, the voting power of the EU countries is one-third, achieved with only 16 percent of the voting shares, while the voting power of the US and Japan would be only 20 percent each. Again, we find that there are significant incentives to formulate a unified European position on the ADB.


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Table 8.3 Voting shares and voting power in the ADB: two scenarios on the assumption of unitary voting group behavior Sc. I: individual voting groups

Germany; United Kingdom; Austria; Luxembourg; Turkey France; Italy; Switzerland; Belgium; Portugal; Spain Canada; Netherlands; Denmark; Finland; Norway; Sweden Voting groups with EU participation United States Japan People’s Republic of China India; Bangladesh; Tajikistan; Lao PDR; Bhutan Australia; Hong Kong, China; Azerbaijan; Cambodia; Salomon Islands; Kiribati; Federated States of Micronesia; Nauru; Palau; Tuvalu Indonesia; New Zealand; Kyrgyz Republic; Fiji Islands; Tonga; Samoa; Cook Islands Republic of Korea; Taipei, China; Uzbekistan; Sri Lanka; Vietnam; Papua New Guinea; Vanuatu Malaysia; Thailand; Myanmar; Singapore; Nepal Philippines; Pakistan; Kazakhstan; Mongolia; Maldives; Marshall Islands Total

Sc. II: alliance of voting groups with EU participation ■ voting voting share power (%) (%)

voting share (%)

voting power (%)

7.7

5.8

6.6

4.9

8.2

6.8

13.1 13.1 5.6 7.9

19.8 19.8 3.5 6.4

22.4 13.1 13.1 5.6 7.9

48.5 10.0 10.0 2.5 4.6

8.8

9.1

8.8

6.4

8.3

7.4

8.3

5.2

8.7

8.4

8.7

5.6

5.8

3.7

5.8

2.9

6.3

4.4

6.3

4.1

100

100

100

100

Source: Our own calculations.

If the influence on the ADB could increase so significantly, why do the EU member countries not move closer together? There are at least three reasons why this does not happen. A first point is that our calculation was, of course, rather abstract. In particular, we disregarded reactions by other ADB members. If nonregional members like the EU really tried to form a stable alliance to dominate ADB policy-making, it’s likely that other countries would react. For instance, while there are certainly differences between the interests of the US and Japan, it is quite conceivable that they might vote uniformly to weaken the position of an aspiring “third” party. In the event of a unified US/Japanese vote and everything else remaining the same as in scenario III (scenario IV, right-hand side of Table 8.4), the US/Japanese JPI voting power would be two-thirds, whereas Europe’s

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Table 8.4 Two other scenarios for voting power, assuming the EU to be a united body Sc. III: alliance of EU members, others individually ■ voting share in percent

Sc. IV: alliance of EU members, alliance of the US and Japan, others individually

voting power in percent

voting share in percent

voting power in percent

EU 15.7 United States 12.9 Japan 12.9 United States/Japan People’s Republic of China 5.5 India 5.4 Australia 5.0 Republic of Korea 4.4

33.2 19.9 19.9

15.7

11.4

3.8 3.7 3.1 2.5

25.9 5.5 5.4 5.0 4.4

68.3 3.0 2.9 2.4 1.9

Total

86.3

61.9

90.0

62.0

Source: Our own calculations. Note For calculation purposes, small members with fewer than 15,000 votes were combined into regional sub-groups. This has no noticeable consequence for the results of the large members cited here.

would only be 11 percent, which is less than its voting shares of 16 percent. It would be extremely difficult for the EU to achieve a majority in such a case, and the possible beneficial effects of a unified EU position would actually be significantly reduced. Would it be an option to seek a unified G7 approach? In terms of Johnston’s power index, according to our calculation G7 could muster a formidable voting power of more than 0.99 with its 40 percent of voting shares. Still, there are two reasons why the impact of G7 is bound to remain quite limited. One issue is that G7 can only concentrate on the highest-level issues effectively. There has indeed been a reform agenda on MDBs in consecutive G7 meetings since the 1990s, but it has focussed on how globally operating organizations (IMF, World Bank) can effectively and efficiently influence crisis-prone economies;13 reforming the RDBs, given the regional idiosyncrasies, has remained a side issue. Moreover, a stronger G7 involvement would be understood in the region as a domineering move by the “rich” countries. This would totally undermine the idea of empowering the regional RDB members and giving them a constructive sense of ownership in “their” regional development bank. A country like Japan, which tries to sell itself as an agent for the whole region – an idea which became even more important when China started to become a noteworthy competitor for regional leadership –, would hardly endorse such a stance anyway. Turning back to the issue of a joint EU position in the ADB, a second problem is related to the high transaction and agency costs involved. The positions of the various EU countries would have to be coordinated – not only in


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Manila, led by the representatives based there, but also in Europe itself. We will return to such organizational issues below. A third point involves different interests. As we saw earlier, there can be different development agendas, national interests, and bureaucratic interests. As the goals of the Millennium Development Agenda are so complex, there can easily be different opinions about sensible policy preferences. Even though such differences may only be small, some countries might reckon that they can promote them better by joining hands with other partners than by trying to convince their fellow Europeans. Based on such reasoning, Nordic countries have often collaborated because their development policy preferences are rather similar.14 As long as there are different (national) interests and foreign policies, they will affect the behaviour of ADB members, even if their preferences regarding development policy are rather similar. For example, the “special relationships” that European powers have with their former colonies have to be taken into consideration. It is said, for instance, that the UK was very keen to put India into a group of borrowing economies with very benevolent financing conditions, despite its size and recent progress as an emerging economy. Only when China made a commitment as a lender was this position more or less shelved. Another interesting case is the recent appointment of a new ADB VicePresident for knowledge management and sustainable development activities (ADB 2003). According to an informal tradition, this position was to be filled by a European citizen. ADB President Chino nominated a 54-year-old Dutch national who had served in the ADB for 24 years. He is reputed to be a loyal supporter of the ADB President. Due to this background, many European countries were quite unhappy about this nomination, as he cannot really be regarded as a representative with a European frame of mind. Of course, the Netherlands saw the process in a rather different light, and no common European reaction was noticeable. It is revealing that the ADB President felt strong enough to make such a nomination, reflecting his own preferences, without fearing a strong European countermove. If voice does not work well, then exit might be an option (employing Hirschman’s famous categories). Can the European countries deliver a credible threat to leave the ADB? Probably not – for political reasons. Regional borrowers would ill receive it if a rich, non-regional economy truly left the ADB, leading to a shrinkage of its capital base, a reduction of usable funds and fewer additional funds on the next replenishment. Such a threat might be feasible if the country threatening to leave did not wish to withdraw altogether, but promised to spend its money through another channel. Under current circumstances, such an alternative does not exist. Setting up a special fund for the region at the World Bank, for instance, only seems a theoretical possibility. Using bilateral (or EU-level) aid will encounter a serious pipeline problem because it is not easy to administer large amounts of aid efficiently in a distant region. There are serious doubts about the efficiency of EU aid, anyway (see, for instance, Santiso 2002a). Moreover, the advantages of multilateralism, such as engaging the receiving country and making aid more acceptable, would have to be forsaken.

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As all the players know that exiting the ADB is hardly a viable option, this reduces the power of voice even further. To sum up, even if the effectiveness and efficiency of a regional MDB like the ADB with respect to development are not very impressive, there are nevertheless various incentives not to leave it. First, given altruistic motives to provide aid, there are few, if any, superior alternatives. Second, given foreignpolicy interests, exit would be a disastrous signal to the region.

Organizational problems Apart from the possible confusion of goals and the difficulties of making an impact through membership rights, there are plain organizational problems connected with the effective representation of European interests in the ADB. The chain of command (or influence) is extremely long, ranging from • • • • • • • •

the European voter as sovereign; via parliament to; national government; national aid bureaucracy; the national representation at the seat of the ADB (ideally an executive director, but possibly less direct); the board structure of the ADB; the chief executive of the ADB (the President with his Vice-Presidents) and; ADB administrative staff.

To make it even more complicated, there are several auxiliary influences or “loops” as well: •

• • • •

Coordination of the national agency for providing (multilateral) development aid with other state agencies like the Ministries of Finance or of Foreign Affairs. Coordination among European partners both in the national capitals, in Brussels, and in Manila. Influence of European organs like the Commission. Cooperation between the ADB and other multilateral organizations. Influence or cooperation of (or with) other ADB borrowing and lending countries.

This leads to the usual dysfunctionality of international organizations so well described by the Public Choice literature (e.g. Vaubel and Willett 1991): there are considerable information asymmetries, allocated funds are too small to overcome this, it is difficult to make the agents follow the will of the principals, there is no effective control, cooperation, feedback, etc. As the EU is not a member of ADB, there have been few, if any, formal channels of communication between the EU and ADB – notwithstanding infor-


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mal meetings on joint interests and projects on various levels. In January 2007, though, there has been a first meeting of senior Commission officials with the Executive and Alternate Executive Directors of the regional development banks, including ADB. The Directorate General for Economic and Financial Affairs (DG EcFin) has proposed to repeat this every two years.15 While this is a sensible exercise, it seems clear that such a meeting, even if it is a high-level one, can only have a limited impact on governance and policy. Turning to the national level, one can illustrate the concerns spelled out above with respect to two focal points: the “ADB Desk” in the national aid bureaucracy, and the organization of the relevant voting groups in the ADB Board set-up. As an example, we shall take a look at the German situation. While this might be considered somewhat eclectic, other “middle powers” like Canada (Culpeper and Clark 1994) or Sweden (Rudengren et al. 1995) have realized and discussed similar issues, with compatible results. Even the US, which may be supposed to have a stronger strategic interest in effective mechanisms, has noticed these kinds of dysfunctionalities in its own aid administration (Upton 2000). The principal organizational unit in the German government in charge of the ADB is a section of the Federal Ministry for Economic Cooperation and Development (BMZ) that is still located in Bonn, the former West German capital: Referat 302. Only one senior service (Höherer Dienst) member of staff is in charge of the ADB, while the section head has to cover all of the regional development banks. The highest-ranking Ministry official directly concerned with the ADB is the Parliamentary State Secretary, a politician from the Green Party. She serves as ADB Governor, but has to give her attention to the other regional banks as well, in which she also represents Germany as a governor. Obviously, this is rather little manpower – or womanpower – to seriously study, let alone oversee, the activities of the ADB. It seems that there are few, if any, funds available for staff members to travel to the ADB once in a while to keep in touch with regional developments. The BMZ section in question coordinates the interests of other government agencies in the ADB. Principally, this is the Foreign Office, with a section covering the whole BMZ (AA 401), and the Finance Ministry, which has a section dealing with MDBs (BMF VII C 3) and is primarily interested in financial matters, including budget allocations through its budget wing (BMF II D 4). The central bank (Bundesbank) is concerned where legal matters are involved. Typically, the BMZ section will distribute materials forwarded from the executive director of the voting group in Manila to relevant units in other agencies, form an opinion and communicate it to Manila. There are regular and informal meetings for coordination purposes on various levels, including so-called coherence talks among the department heads of various ministries, but it is obvious that the prospects for forceful moves vis-à-vis Manila are very limited. For instance, the BMZ section is supposed to have quarterly meetings with the Parliamentary State Secretary on MDB matters, but I understand that actual meetings take place somewhat less regularly.

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From various discussions, we got the impression that the coordination among various agencies rarely involves matters of substance, e.g., an ADB policy with respect to a particular borrower country. Apart from budget matters, those in charge seem to be most interested in personnel affairs. One could cynically interpret this as evidence of the expectation of the public choice literature that bureaucrats will be concerned with their career, power and influence most of all. However, one can also offer a more benign interpretation. Given the high degree of opacity and indirectness in influencing Manila, decision-makers “at home” are less concerned with discussing actual ADB policies. They will not be able to rely on formal mechanisms of governing the distant bank, and thus choose trustworthy, reliable persons to act as their agents. As they cannot effectively control those agents, having trust in them is extremely important. This forces them to look for persons who share a similar world view, who have had similar experiences and whose behavior has been observed for a long time, for instance as a colleague. Of course, such a preoccupation on the part of decision-makers not only allows for more effectiveness in a difficult environment with severe information asymmetries, but it also raises the possibility of collusion among bureaucrats. Turning to the Manila side of the organizational set-up,16 Germany (4.8 percent of the voting shares) is involved in a voting group (constituency) also encompassing the UK (2.1 percent) and the much smaller members Austria, Luxembourg (since 2003) and Turkey (the latter three 0.3 percent each). As mentioned above, according to the “Agreement Establishing the ADB” it is not necessary for all members to vote uniformly. Still, they will usually collaborate and, more importantly, are represented by the same executive director at board level. Again, this leads to a strong emphasis on personnel issues, and an elaborate agreement on rotation covering the forthcoming decade has evolved (cf. Table 8.5). Quite recently, there has been a change with respect to the director’s position. While the former distribution was two years for Germany and one year for the UK, it is now three to one. This is said to have been the outcome of some disagreements over how the smaller countries should be represented among the executive director’s staff. This episode shows the delicate and rather unreliable relationship between narrow national interests (or of the self-interest of the different bureaucratic hierarchies) and the need to cooperate. A Joint Strategy for 2006–2008 has been agreed upon for the constituency, but there is always a danger that voting constituencies are “captured” by more influential members: agreements to overcome this are costly and may still lack full credibility. Such difficulties are even more pronounced when it comes to coordinating a joint position with other members as part of other voting groups. There is a more or less regular exchange among the voting groups involving European participation, but it would be too much to speak of a coordinated development of joint positions. The executive directors of the three voting groups involving Europe also meet, but it might easily happen that Canada, for instance, is in charge of one of the constituencies, so a “European” representation is indeed difficult. The current constituency system in which European countries and “outsiders” like

G A UK TUR

Executive Director Alternative Exec. Dir. Director’s Assistant Director’s Assistant

G UK TUR LUX

2004 G UK TUR LUX

2005 UK G TUR LUX

2006 G TUR UK LUX

2007

Notes A = Austria, G = Germany, LUX = Luxembourg, TUR = Turkey, UK = United Kingdom.

Source: Internal German BMZ memorandum of April 2004.

2003

From 1 July

Table 8.5 Constituency rotation in the voting group involving Germany

G UK LUX A

2008 G UK LUX A

2009 UK G LUX A

2010

G LUX UK A

2011

G UK A TUR

2012

G UK A TUR

2013

UK G A TUR

2014

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Canada or Turkey are put together makes it very tiresome – and almost impossible, in fact – to collaborate in a stable manner. European member countries have been quite vocal towards other members like the US when calling for organizational reforms. We have already mentioned the organizational review of 2001, trying to bring the set-up in line with the new Long-Term Strategic Framework for 2001–2015. It led to a number of noteworthy changes (ADB 2001), but desiderata still remain. (This is hardly surprising, as the ADB President himself was in charge of “guiding” the review, and clashes of interest between effective governance and presidential leeway could hardly be avoided.)17 One current organizational issue, for instance, relates to the Board Procedures (Blank 2004: 3), which date back to the early period of the Bank in the late 1960s, and to their treatment of strategy papers. When the ADB was concerned with individual projects, such papers involved mainly technical aspects; they were written by the staff and then presented to the Board for a decision. More recently, however, sectoral or even country programs have become much more important, after having learned that projects will often need to be embedded in a meaningful wider framework. Once a draft paper on a country strategy, for instance, has been prepared by the staff and is presented to the Board, it is highly embarrassing for Board members to refute it. Several lender countries have therefore asked for a change of Procedures, with the goal of involving the Board at an earlier stage. Members, particularly lending members from Europe and elsewhere, constantly struggle to reform governance. While there is incremental progress, it is obvious that it is almost impossible to overcome the serious information asymmetries and formidable control costs sufficiently. One gets the impression that after one and a half decades of reforming the MDBs and producing multitudes of pages of analysis and proposals, most changes have been more cosmetic than substantial.18

Does European participation in the ADB make sense? Summing up our discussion, we have found there are some serious problems in involving European countries in a non-regional environment, namely in the ADB. The first set of problems identified relates to confusion about the goals. The objectives of a regional development bank are less than clear. This has to do with the opacity of the Millennium Development Goals and also with the unclear distribution of labour between global organizations like the World Bank and regional ones like the ADB. Moreover, while RDBs had to shift away from their traditional, simple goal of shuffling vast sums of money into their poorer member economies, it is not obvious what their “unique sales proposition” should be in the future – apart from the empty formula of “more quality.” It should be noted in passing that our skeptical views are well in line with equally skeptical evaluations on regional trade mechanisms and regional monetary mechanisms for the Asian region.19


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Even if the goals of regional development banking in Asia were clear, Europe’s interests would only partly be related to contributing to the effectiveness and efficiency of the bank: there is a noticeable variety of diplomatic interests, business interests and policy preferences among European members. A second group of problems refers to the question of how Europe or European members can promote their strategy. Put bluntly, an impact can either be made through voice or through threatening with an exit. If the EU members in the ADB spoke with a unified voice, they would have a voting power of onethird with voting shares of only some one-quarter, and the voting power would be larger than Japan’s or the US’s. Incidentally, this would not be realistic. A domineering posture would not be accepted by the two strong parties with considerable vested interests in the region (i.e. the US and Japan) and it would not be accepted by the regional borrowers either. As for an exit, such a threat would hardly be credible, as it would imply a major political affront for the whole region. Europe is thus stuck in a sub-optimal policy mechanism with few means to intervene or, if that fails, to leave. Even if the region allowed Europe to make its voice felt, any influence would be mitigated by organizational complications, the third layer of problems. On the part of member states, representation in a regional MDB will typically only occupy minimal policy awareness. Staff size is too small. More importantly, the principal-agent chain from the European sovereign, the voter, through the various layers of national policy-making and bureaucracy, possibly by way of passing through EU policy mechanisms, to the governance mechanism in Manila is far too complex to make any forceful impact.

A proposal Given this rather sobering appraisal, what can one do? We accept it as a fact of life that for political reasons the current European members will not be willing to threaten with the exit-option (or to actually leave) the ADB. As a minimum strategy, other European states should at least seriously reconsider whether it really makes sense for them to join the ADB and get locked in as well.20 Similarly, Europe would be well advised to look carefully at proposals to form new MDBs. Currently, a discussion is going on about forming a sub-regional Northeast Asian Development Bank with the specific task of providing capital for infrastructure development in this promising region (see, for instance, Cho 2002). While this idea is worthy of careful consideration, non-regional members like those from the EU can hardly make any reasonable contribution – either for themselves or for the task at hand – under the traditional organizational mechanisms of RDBs. If new and innovative mechanisms with a clear focus and a reasonable governance mechanism are proposed, however, they may well be in Europe’s interest. What else can one do about the three major problem areas: opaque goals, an ineffective voice and a dysfunctional organization? As regards the opacity of goals, there is no way around defining strategies and functions of an RDB like the ADB more clearly. It is understandable that

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given the interconnectivity of development issues, this task has become more difficult in recent years. The international development policy dialogue has concentrated on governance issues and thus on the appropriate functions of the IMF and the World Bank, following incidences of financial crisis and the imminent threat of global contagion. Given the financial importance of regional development banking, though, more stress on RDBs in the international dialogue would be desirable. On the European level, one might want to consider a stricter functional distribution of labour between the EU level and the national level of development aid policies. For discussion, we propose to concentrate the EU efforts on multilateral aid – including responsibility for RDBs – and the national efforts on bilateral aid. Such a differentiation would have several advantages:21 • •

•

•

• • •

It would help to make the voice of Europe more effective in a non-regional environment like the ADB. A unified European representation could also be more professional in terms of manpower allocated, quality of analysis and a leaner principal-agent chain than a multitude of small national units. As it is difficult to find areas for a common foreign policy, this would offer an arena which should be less controversial than more traditional foreign policy fields like security. The inefficient EU bilateral development aid could be phased out with less opposition from vested interests in the European bureaucracy, because a new policy area would be opened simultaneously. The EU bureaucracy could offer its expertise and experience on handling multilateral decision-making. The member states could follow different bilateral aid policies, entering a competition for superior solutions. Giving member states a monopoly on bilateral aid should also make it easier for them to accept leaving the multilateral level to the Union.

Of course, this would imply a far-reaching rearrangement of mechanisms and responsibilities – and would be quite controversial, if only for this reason. Still, such a reconfiguration of responsibility would be well in line with what Europe can offer to the world in the twenty-first century: it is Europe’s experience in overcoming national, ideological boundaries by means of workable – if less than perfect – multilateral mechanisms. While we have taken a realist position above in assessing the European representation in the ADB, discussing voice, exit or the exercise of voting power, one could also appreciate Europe’s role from a more idealistic perspective. Europe can offer its experience as being the grandest experiment of multilateralism known in history to the world at large. This would support cooperative efforts elsewhere, including the Asian region, and it would enable Europe to help shape the evolving twenty-first century multilateralism in a manner compatible with its own development path. To put Europe’s intellectual contribution in the words of the American author Jeremy Rifkin:


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The European Dream emphasizes community relationships over individual autonomy, cultural diversity over assimilation, quality of life over the accumulation of wealth, sustainable development over unlimited material growth, deep play over unrelenting toil, universal human rights and the rights of nature over property rights, and global cooperation over the unilateral exercise of power. (Rifkin 2004: 3)

Notes 1 The author gratefully acknowledges helpful material from the German Ministry for Economic Cooperation and Development (BMZ) and discussions with staff members from various relevant organizations, as well as indispensable research assistance from Manja Jonas, Norifumi Kawai and the Duisburg Campus Computer Centre (HRZ). Helpful comments from Cornelia Storz are also acknowledged. 2 Table 8.1 is taken from a major comparative study on regional development banks. Unfortunately, it only covers approvals up to 1995. Due to the limits of data availability and comparability between the various regional organizations and the World Bank group, including the various hard and soft loan windows, we were unable the update the figures. There is no obvious reason why the situation should have markedly changed, however. 3 There are three major RDBs, namely, the African Development Bank (AfDB), the Asian Development Bank (ADB) and the Inter-American Development Bank (IADB). Apart from these, there are a number of sub-regional institutes like the Caribbean Development Bank. Other agencies also bear the title of a “development bank,” but are actually more limited in scope. The European Bank for Reconstruction and Development, for instance, was set up in 1989 to support private-sector projects with the goal of contributing to the market-orientated transformation and catching-up of newly liberated Central and Eastern European economies. 4 There are some peculiarities, of course, like the distribution of labour between the ADB and European Bank for Reconstruction and Development (EBRD) in the Asian states formerly belonging to the USSR. 5 For an early, rather superficial statement by the EU Commission on this matter, see European Parliament 2002. 6 I have dealt with these issues elsewhere (Pascha 2000, 2003). 7 A major Canadian study of the ADB has made a similar case for the four groups of the newly industrializing economies, resource-endowed Southeast Asia, China plus Mongolia and Indochina as a separate group, and Pacific islands. The author suggests a different agenda for each of these groups (Kappagoda 1995: 8). 8 See, for instance, Culpeper (1997: 17), also quoting such a statement by the US Department of the Treasury. 9 Consider Luxembourg as a case in point. Why did it become a new member as late as 2003? One has to stretch one’s imagination to suppose that the tiny state really hoped to make a significant impact on the development of the Asia-Pacific region by joining the ADB. It seems much more plausible that the government tried to support Luxembourg’s stance as an important European banking centre. While the opposition criticized spending so much money on such a distant cause, the government left it open in its official transcript of activities whether altruistic or national business interests were more important (Luxembourg 2003). 10 The term 1/c(S) implies that it is highest and equals 1 if there is only one critical member. In case there a two, the value is already reduced to one half, etc. 11 See, for instance, Johnston 1995, who found that the voting power of tiny Luxembourg

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13 14 15 16 17

18

19

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in the EU Council of Ministers in an enlarged EU of 23 or 27 members would be larger than that of the four major members Germany, France, Italy and the UK, although Luxembourg would only have three votes compared to the ten votes for each member of the “Big Four.” To apply this reasoning to the ADB, we have to introduce a technical simplification. The number of members in the ADB is very high (63). There are technical problems in counting all of the possible vulnerable coalitions and critical members, as the number of calculations rises in a non-linear manner by i. Therefore, we have put the smallest members into synthetic voting units according to similarities of perceived interests. Doing some simulations, we found that taking a small country from such a unit and treating it as an individual member has a negligible impact on the results. For a helpful survey on the evolution of G7’s activities in this context, see Santiso 2002b. For instance, Nordic countries seem to have gained a reputation for being particularly concerned about gender issues, a preoccupation not necessarily shared by (all) the other ADB members from Europe. This information is based on an e-mail exchange with the Directorate General for Foreign Relations – DG RELEX, H1 (Asia, Horizontal Matters) – in February 2007. It should be noted in passing that the European Representative Office of the ADB, recently opened in Frankfurt, does not play a significant part. Its main purpose is public relations and organizing events. Incidentally, the working group of the Bank in charge of the more detailed work was chaired by the same Dutch individual who later lost his position as a Director General due to pressure from some member countries, was made a Special Advisor to the President, and was than nominated by him to a Vice-Presidency as of 2003 (ADB 2003), against the ineffectual opposition of certain member countries. A recent example of the lack of transparency still characterizing the ADB is the question of whether the current President of the Bank, Tadao Chino from Japan, will remain in his position in 2005. During the Annual Meeting of the ADB in early 2004, Mr Chino emphatically denied his return to Tokyo. There were continuous rumours, though, that he would be asked to do exactly that in the near future by the Japanese government, which traditionally nominates the ADB presidents. Actually, the person considered to be his potential successor was already a member of the Japanese delegation to the Meeting. Other delegations were at a loss as to what was going on. The literature on these issues is both wide-ranging and controversial, which is why it can not be adequately summarized here. I have attempted to deal with it in Pascha 2000, 2003, though. While I do not deny the potential benefits of an intensified regional cooperation in Asia – and sometimes, I agree, such benefits have, indeed, emerged – the dangers of collusion and organizational failure are immense. Ireland has become the 66th ADB member in 2006, with a capital share of below 0.4 percent. The question whether more European countries might want to join is thus politically relevant. Of course, we are aware that a serious consideration of this idea would involve different viewpoints and cannot only be based on a study of the experience with European participation in the ADB. For instance, one would have to take a much closer look at the problems, the past and the prospects of the common EU development policy.

Bibliography ADB (Asian Development Bank) (2001) Reorganization of the Asian Development Bank. Available online at www.adb.org/Documents/Policies/Reorganization_ADB/reorganization_ADB.pdf (accessed in August 2004). —— (2003) ADB Appoints Geert van der Linden As Fourth Vice-President, News


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Release No. 102/03 of July 31, 2003. Available online at www.adb.org/Documents/ News/2003/nr2003102.asp (accessed in August 2004). —— (2004) Annual Report 2003, Manila: ADB. Blank, B. (2004) Address of the Head of the German Delegation to the Thirty Seventh Annual Meeting of the Board of Governors of ADB, GS-22, May 15–17, 2004. BMZ (Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung) (2003) Combating Poverty – Our Goals in the Regional Development Banks, BMZ Spezial No. 076, Bonn: BMZ. Buiter, W. and Fries, S. (2002) What should Multilateral Development Banks do?, European Bank for Reconstruction and Development Working Paper No. 74, London: EBRD. Cho, L.-J. (2002) Regional Economic Cooperation and the Proposal for a Northeast Asian Development Bank, Proceedings of a Symposium on Northeast Asian Economy, Northeast Asian Economic Summit, 2002, Available online at www.ecdc.net.cn/ newindex/chinese/page/northeast/2002_economy_english/02.htm (accessed in August 2004). Culpeper, R. (1997) The Multilateral Development Banks Vol. 5: Titans or Behemoths? Boulder: Lynne Rienner. Culpeper, R. and Clark A. (1994) High Stakes and Low Incomes: Canada and the Development Banks, Ottawa: The North-South Institute. European Parliament (2002) Debates of the European Parliament, Sitting of Thursday, April 11, 2002, Annex, Questions to the Commission, Question no 74 by Glyn Ford (H-0189/02), Subject: North East Asian Development Bank, 2002, Available online at www2.europarl.eu.int/registre/seance_pleniere/compte_rendu/traduit/2002/04-11a/P5_ CRE(2002)04-11A(ANN1)_EN.doc (accessed in September 2004). Johnston, R.J. (1995) “The Conflict over Qualified Majority Voting in the European Union Council of Ministers: An Analysis of the UK Negotiating Stance Using Power Indices,” British Journal of Political Science, vol. 25: 245–254. Kappagoda, N. (1995) The Multilateral Development Banks Vol. 2: The Asian Development Bank, Boulder: Lynne Rienner. Luxembourg, Conseil de gouvernement (2003) Résumé des travaux du 7 février 2003, Available online at www.gouvernement.lu/salle_presse/conseils_de_gouvernement/ 2003/02/07conseil/index.html (accessed in July 2004). Pascha, W. (2000) “Financial Cooperation and Integration in Pacific Asia: The Role of Multilateral and Regional Organizations,” in Verena Blechinger and Jochen Legewie (eds) Facing Asia – Japan’s Role in the Political and Economic Dynamism of Regional Cooperation, Munich: iudicium. —— (2003) “Asiatisch-Pazifische Integration: APEC als offener Regionalismus,” in D. Cassel and P. Welfens (eds) Regionale Integration und Osterweiterung der Europäischen Union, Schriften zu Ordnungsfragen der Wirtschaft Vol. 72, Stuttgart: Lucius & Lucius. —— (2007) In Favour of Cross-Regionalism. Available online at the website of the Korea Institute of International Economic Policy (KIEP), www.kiep.go.kr/publication/kiep_column_view.asp?num=177557, (accessed February 27, 2007). Renqing, J., (2004) Address of the Governor of the People’s Republic of China to the Thirty Seventh Annual Meeting of the Board of Governors of ADB, GS-14, May 15–17, 2004. Rifkin, J. (2004) The European Dream. How Europe’s Vision of the Future Is Quietly Eclipsing the American Dream, New York: Jeremy P. Tarcher/Penguin.

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Rudengren, J. Gisle, P. and Brann, K. (1995) Middle Power Clout: Sweden and the Development Banks, Ottawa: The North–South Institute. Santiso, C. (2002a) Improving the Governance of European Foreign Aid: Development Co-Operation as an Element of Foreign Policy, CEPS Working Document No. 189, Brussels: Centre for European Policy Studies. —— (2002b) Governance Conditionality and the Reform of Multilateral Development Finance: The Role of the Group of Eight, G8 Governance Working Paper No. 7. Available online at www.g7.utoronto.ca/governance/santiso2002-gov7.pdf (accessed in July 2004). Strand, J.R. (2003) “Measuring Voting Power in an International Institution: the United States and the Inter-American Development Bank,” Economics of Governance, vol. 4, 1: 19–36. Upton, B. (2000) The Multilateral Development Banks. Improving U. S. Leadership, Westport and London: Praeger. Vaubel, R. and Willett T.D. (eds) (1991) The Political Economy of International Organizations. A Public Choice Approach, Boulder: Westview Press. Wapenhans, W. (1993) Efficiency and Effectiveness: Is the World Bank Group Prepared for the Task Ahead? Washington: World Bank.

Part III

The non-state dimension of Asia–Europe interregionalism

9

Merger and acquisition between Japanese and European enterprises How to integrate different institutional regimes1 Andreas Moerke

Introduction The internationalization of Japanese companies, mainly achieved at the end of the 1980s and beginning of the 1990s through the creation of wholly owned subsidiaries and joint ventures, as well as through the acquisition of foreign companies, changed qualitatively at the end of the 1990s. In the late 1980s, Japanese corporations seemed to buy everything that was precious and expensive. In 1988, Bridgestone bought its rival Firestone for about JPY333 billion, Sony purchased Columbia at JPY644 billion, and Matsushita joined the bandwagon by acquiring MCA for the remarkable price of JPY780 billion. Some 15 years later, however, the picture had changed significantly, and foreign firms instead went shopping in Japan. US financial giant Citigroup announced a tender offer for Nikko Cordial, Swedish AB Volvo bought Nissan Diesel. Some time before that, GE Capital purchased Hera, a subsidiary of Fuji Bank, and Renault was buying stakes in Nissan, followed by DaimlerChrysler investing in Mitsubishi Motors (Recof 2003).2 Despite these acquisitions and takeovers, Japan is far from being an open merger-and-acquisition (M&A)-friendly system. A closer look at some data proves this statement: even between 1987 and 1994 – prime time for Japanese acquisitions overseas – these transactions accounted for only 7 percent of the volume of all cross-country mergers and acquisitions (M&A). This number is significantly lower than the ratio of, for instance, Great Britain or the US (20.6 percent and 23.6 percent respectively) (Schatz 2003), and the ratio has even been decreasing since 1995. In addition, the “merger intensity,” measured as the volume of transactions over the Gross Domestic Product, leads to the same result. If one measures inbound transactions in relation to GDP, Japan in 2005 reached a value of 0.08 percent, while outbound transactions account for 0.26 percent (Nomura 2006 and OECD database). With these ratios, Japan is even behind Italy (0.54 percent and 0.5 percent), Germany (1.28 percent and 1.49 percent), and plays in another league when compared with Great Britain

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(5.15 percent and 2.39 percent), the Netherlands (3.98 percent and 3.02 percent) or Sweden (3.03 percent and 3.85 percent) (Schatz 2003).3 The picture looks different if one takes cross-border and national M&A into account. According to a study by the Nomura Research Institute, the volume of all transactions accounted for about JPY15 trillion in 2005 (Nomura 2006), that corresponds to a ratio of about 3 percent of the GDP.4 These numbers should not be underestimated: In absolute terms, the volume exceeds the GDP of some smaller national economies in the EU, for instance Hungary or the Czech Republic (OECD 2007). Some questions remain: Why is the Japanese market for M&A – despite all changes in the industrial infrastructure – still so different from economies like Great Britain and the US? How are the relevant institutions5 – markets and organizations – characterized? This contribution shows the real development of M&A in Japan; highlights the reasons for Japan’s distinctiveness; and provides information based on case studies about how transactions are conducted. Conclusions are drawn and links to the M&A in other Asian countries are drawn in the final part.

The M&A arena in Japan: scale and kinds of transactions The numbers First, the quantitative development of mergers and acquisitions in Japan shall be shown. Chart 1 clarifies different types of M&A with respect to their directions, following the definitions of standard references (Recof 2003a, 2007) and research (for instance Menkhaus and Schmitt 2000). The definitions are as follows: • • • •

“in–in transactions:” transactions between two Japanese companies within Japan; “in–out transactions:” a Japanese corporation partly or completely purchases a foreign entity outside Japan; “out–in transactions:” a foreign company partly or completely acquires a Japanese corporation within Japan; “out–out transactions:” mergers or acquisitions between two foreign entities, where at least one is linked to or is a subsidiary of a Japanese company.

A look at Figure 9.1 reveals an overwhelming majority of local transactions – a fact that is also confirmed by other data (Nomura 2006). This can be seen as a clear signal that mergers and acquisitions are quite common in Japan – among Japanese corporations (DBJ 2007). In fact, the ratio of in-in transactions has been increasing from 62 percent in 1985 to 81 percent in 2005. This number is even bigger if one includes in-group transactions which were not counted by Recof. These in-group M&A were also rising quickly – reaching 992 transactions in 2002, thus almost nine times the value of 1990.

M&A between Japanese and European enterprises

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Number of transactions

3,000 IN–IN IN–OUT

2,500

OUT–IN OUT-OUT

2,000 1,500 1,000 500

19

8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 96 19 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 06

0

Year

Figure 9.1 Development of M&A according to direction (sources: Recof 2003a: 7; 2004: 6; 2007).

Obviously, cross-border transactions play a less dominant role. While the number of in–out transactions at the end of the 1980s was higher than that of domestic M&A,6 it clearly decreased afterwards. The reasons behind the decline can be seen in the necessity for restructuring in Japan, and in the loss of the financial cushions for acquiring foreign firms due to the long-lasting crisis. A look at the (declining) flow of Japanese foreign direct investment supports the argument.7 It is obvious, however, that the reluctance to engage in cross-border acquisitions diminished with successful restructuring and improved performance after 2004. The number of out–in transactions is even lower and varies (depending on the data source) between 4.4 percent of all mergers and acquisitions in 2005 (Nomura 2006: 1) and 6 percent in 2006 (Recof 2007) – and is thus not even half of the ratio of in-out transactions. This imbalance is found in other statistics as well. According to data provided by the Ministry of Finance (MoF), the amount of foreign direct investment in Japan for the fiscal year 2005 is about half of what Japan invested abroad (MoF 2007). To put it another way, Japan is still not an open market for corporate mergers and acquisitions. But this is not only due to institutional conditions, which are, as was shown above, in the process of changing. Another very important reason is the behavior of Japanese corporations themselves. Mergers with and acquisitions by foreign companies are still avoided. Acceptance of selling to a foreign investor and including foreign know-how only gains momentum when there is no other solution to the problem, when no potential Japanese partner is found, and when the ability to restructure successfully is obviously lacking (Moerke 2003). However, where there is shadow, there is also light. A comparison of the – albeit low – number of out–in transactions in 1985 and 2006 reveals that their

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absolute number, as well as their proportion of the total number of mergers and acquisitions, increased. Fiscal year 2006 (April 1, 2006 until March 31, 2007) saw record levels for numbers and value of takeover bids both from Japanese and foreign companies. For the first time, the value reached JPY3 trillion. The three largest offers from foreign firms together exceeded JPY1 trillion. They are: • • •

Citigroup’s announcement to buy Nikko Cordial Swedish AB Volvo’s acquisition of Nissan Diesel, and General Electric’s tender offer for Sanyo Electric Credit Co.8

These examples show that entrance to the Japanese market through massive onetime investment is now also possible (instead of purchasing piece after piece, as Bosch was forced to do). Which kinds of transactions? At least as important as the direction of a transaction is the way it is conducted. According to Recof, an eminent consultancy for M&A in Japan, one has to distinguish between the following kinds of transactions (Recof 2003a: 740): • •

•

• •

merger (gappei): the merger of two or more companies on the basis of contracts; acquisition (baishu): the purchase of more than 50 percent of the shares of a company in the form of a purchase of (issued) shares, an increase in stock capital or stock swaps (this definition includes management buy-outs); business transfer (eigyo yuzuriwatashi): the amalgamation of a business division of one company (including all assets, employees and trading rights) with the existing business division of another company; minority interest (shihon sanka): the purchase of shares up to 50 percent, realized by stock swaps or increases in stock capital; increase of investment (shusshi kakudai): the increase of the existing ownership ratio without exceeding 50 percent of the issued shares.

The following chart shows how the ratio of these kinds of transactions developed. A quick look reveals that “real” mergers count only for a minority of the transactions. Acquisitions and minority interest count for almost two-thirds of the transactions, for almost the entire timespan investigated. The question as to why minority interest acquisitions play such an important role can be answered when one takes trade and accounting laws into account. Until recently, it was impossible to purchase the majority of shares of a corporation without complete consolidation (in terms of balance sheet, profit and loss statement, etc.). However, this was seen as a danger from the point of foreign investors, since lots of (endangered) Japanese corporations struggle with enormous debt. Accordingly, most foreign companies first acquired about 34 percent


% Ratio of all transactions, in column numbers

100

80

4

4

91

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2

1

1

6

201

236

270

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7

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11

3

120

181

267

160

7

20

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213

30

28

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51

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361

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57 42

66 101 78

102

84

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473

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59 44

66

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40 97

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186

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44

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0

596

Year Merger

Acquisition

Business transfer

Minority interest

Increased interest

Figure 9.2 Development of M&A according to ownership features (sources: Recof 2003: 8; 2004: 7).

of the shares of their Japanese target company, which – without consolidating them – secured decision rights and influence over management (Musahl 2002). Renault’s acquisition of Nissan’s shares, as well as DaimlerChrysler’s investment at Mitsubishi Motors, followed this pattern, with the result that in both cases a foreign chief executive officer (CEO) was appointed to restructure the company. The amendment of the Commercial Code mentioned above changed the situation and allowed direct purchase. From May 2007 on, triangular mergers became possible in Japan – and it is expected that the ratio of direct acquisitions will increase in the future.9 In order to understand how Japan’s economy is changing, one should have a look at the changes in the ratio of “business transfer.” This ratio is a good indicator of the restructuring processes of the corporations. In terms of the theory: the analysis of “make or buy” decisions is changing, and the results are changing structures. This may demand disinvestment of peripheral or unprofitable business units – a process that is taking place and is mirrored in the data.

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The background: why and where is Japan different? The fact that the number of mergers and acquisitions in Japan – especially crossborder M&A – is so low refers to differences in the institutional setting and in the way in which the actors in certain markets and other institutions behave and influence each other. A view on the relation of the state (bureaucracy and policy institutions) and the capital market underlines this. M&A have been tolerated or even used as a means of industrial policy by the Japanese bureaucracy, but were hardly accepted as parts of capital markets mechanisms. A glimpse at the banking sector reveals how this functioned. This sector was considered to be highly important for Japan’s economy, and was highly regulated in order to prevent “excessive competition” (kato kyoso). Banks, as well as other market players, were encouraged to accept and incorporate the advice given by the ministerial bureaucracy. In return, the Ministry of Finance and the Bank of Japan secured the survival even of weak banks in the so-called “convoy system.” Mergers were seen as a way to safe weak institutes (kyusai gappei, saving mergers, cf. Nabor 1999: 200). And even at present, protectionist tendencies cannot be neglected: the Ministry of Economy, Trade and Industry was reported to plan adding six industries (among them: high-tech materials and machine tools) to the list of sectors in which foreign firms are required to alert the government before acquiring Japanese companies.10 So what are the distinct features, the institutions of the Japanese economic structure that affect mergers and acquisitions? Capital market and group structures Japanese industrial structures were often characterized by foreign investors not only as a barrier to the acquisition of Japanese companies, but as a barrier to entering the Japanese market at all. Japanese economic history after World War II supports this view to a certain degree. The characteristics of Japan’s inter-firm relations until the 1990s were long-term orientation, stabile ownership relations, and a preference for market share over return rates. One characteristic of the Japanese stock market is the relatively small degree of individual stock-ownership, only about 20 percent of total shares (TSE 2007: 61; Otto 1997; Sheard 1996). Foreign shareholdings, although almost constantly rising and reaching an all-time high of 26.7 percent of all shares in 2006, is still low in international comparison. The remaining shares are owned by institutional shareholders. Among them, banks play a special role, for they are stock owners as well as creditors. However, as the following chart shows, the ratio of total shares owned by financial institutions has been decreasing significantly. With respect to business corporations owning shares of other corporations, one prominent feature of horizontal groups (keiretsu) has to be named: their reliance on stable cross-shareholding (kabushiki mochiai). This dates back to the 1950s, when enterprises agreed to keep their relations tight and stable in order to prevent hostile takeovers (Kikkawa 1996). Dispatch of personnel and regular


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45 40 35

Ownership in %

30 25 20 15 10 5 0

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year Government Financial institutions Business corporation

Securities companies Individuals and others Foreigners

Figure 9.3 Development of M&A according to ownership features (source: based on Tokyo Stock Exchange Data: TSE 2007: 61).

consultations between the CEOs (in the “presidents’ councils,” or shachokai) were responsible for monitoring within the group. To a certain extent, these structures insulated the enterprises from the (capital) market (Nakatani 1984), and made the “insurance function” possible, i.e. mutual help in times of economic difficulty, resulting in a stabilization of the performance of the whole group and a leveling of results. Stable ownership furthermore allowed Japanese corporations to focus more on growth and market share than on return rates. As a matter of fact, subsidiaries of foreign enterprises in Japan (gaishikei kigyo) do reach – on average – better return rates than their local counterparts (Takahashi and Oyama 2000). Due to the long-lasting crisis and the restructuring during the 1990s, conditions have changed. The in-group insurance function is no longer effective since almost all companies are suffering from the bad macroeconomic situation, and in light of falling share prices, stable cross-shareholding turns out to be more a burden than a help. More importantly, since most corporations are in need of capital, they have to find ways to improve their finances. The clearing of

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Table 9.1 Dissolution of cross-shareholding Year

1987 1999 = annual decrease 2007 (projected)

Cross-shareholding (percent) Enterprise group companies

Non-group companies

28.0 20.0 0.67 14.7

12.5 7.0 0.46 3.3

Difference

15.5 13.0 11.4

Source: Calculations and projections on the basis of the NLI Research Institute 2000: 14.

stock portfolios consequently became one common method, leading to a decline in cross-shareholding ratios (NLI Research Institute 2000: 14). Table 9.1 first shows to what degree cross-shareholding is getting weaker. Second, it highlights the fact that cross-shareholding in keiretsu groups is still much stronger than in non-group companies. The relatively high proportion of shares held within the group turns out to be a major obstacle to any potential acquisition deal.11 However, as one can also see from the data, the difference between keiretsu and non-keiretsu firms is getting smaller. Labor market and management structures M&A in Japan are also difficult due to peculiarities in the labor market, connected with management and education structures. Since higher education hardly imparts practical knowledge (but pays more attention to the formation of social skills), most professional know-how is acquired in the company through on-the-job training and specific educational programs. The majority of employees acquire a lot of company-specific, non-transferable skills that have less value on an external labor market. In terms of Williamson’s transaction cost theory: the factor specificity, here: human asset specificity is very high. Combined with seniority-orientation and in-house careers, this also results in an underdeveloped external labor market. The same holds for the top management of Japanese corporations. It is dominated by insiders (the few outsiders often come from related companies, financial institutions and the state bureaucracy, cf. Moerke 2003), therefore there is almost no external labor market for managers. The high degree of human asset specificity of the top management is another hurdle for mergers and acquisitions. First, because incumbent management can hardly be replaced quickly, and second because the existing ties between the board and employees can mean that hostility towards an M&A deal among top management can spread to lower levels. A second important feature is the strong hierarchy in Japanese corporations. Although worded differently in the law, the CEO of a company has de facto decision-making powers over most appointments to the board of directors and


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board of auditors, and over the selection of a successor (Hirata 1996). It is also mostly the CEO who formulates the strategy and defines the goals of the company. As a result, it is quite difficult for a foreign investor to implement changes against the will of the CEO and the remaining top management. Let me give a vivid example of “face-saving behavior” in the process involving a transaction between a foreign and a Japanese company. According to Takarabe (2002: 30), Nissan’s ex-President Hanawa said in an interview that it was he himself who asked Renault’s then CEO and Chairman Louis Schweitzer to dispatch Carlos Ghosn to take over the lead at Nissan. Of course, only insiders can tell how true this is, but the example still highlights the need to include the top management of the acquired firm in decision-making. A third point of concern is the role of trade unions. As mentioned above, the relationship between management and (core) employees is based on mutual benefits and long-term perspectives. Since in-house trade unions predominate, cooperative union leaders in the latter stages of their careers are often appointed to the board of directors. Trade unions thus have an institutionalized influence, and their power with respect to the formulation of working contracts and in-house communication should not be underestimated. DaimlerChrysler, for instance, explicitly involved the trade unions in the restructuring process of Mitsubishi Motors to minimize internal resistance.12 The failure of this restructuring was at least not due to a lack of communication to the employees. Legal framework The legal framework tended to be another obstacle to mergers and acquisitions, although initial changes towards a more open system were made at the beginning of the 1990s. From that time on, companies were obliged to prepare regular reports for their main shareholders, whilst public takeover bids were deregulated (Baum 1997: 1358). At the end of the 1990s, the process of providing a more M&A-friendly environment and the lowering of entry-barriers for foreign companies gained momentum. An important step was the amendment of the AntiMonopoly Law in 1997, under which the ban on holding companies was abolished. Furthermore, the Commercial Code was changed to ease the formalities for M&A (Recof 2003b: 8). The 35th Amendment of the Commercial Code in 1999 allowed stock-swaps for cases approved by the general shareholders’ meeting. This made shares a kind of cash-equivalent, and further paved the way to the formation of holding companies (Witty 2000b: 23). In 2000, a bundle of laws were enacted which regulated the splitting of companies (kaisha bunkatsu) and eased restructuring and mergers (Witty 2000a). In 2001, in addition to changes in the accounting and tax regulations, the following two points should be mentioned: •

first, implementation of subscription rights for or options on new stocks (shin kabu yoyaku ken) which positively influenced stock options, and;

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A. Moerke second, tradability of subscription rights (for further details, cf. Musahl 2002: 31).

The latter allows the (complete) purchase of a listed stock company without the precondition of being the major shareholder. Of course, the other side of the coin is that companies within an enterprise group can use these rights to fend-off a hostile takeover of a member by purchasing these shares. It remains to be seen whether these amendments are sufficient to exert a positive influence on M&A activities. Further amendments of the Commercial Law as well as of the laws regulating accounting and tax systems followed year by year, introducing new stock option systems, preparing for consolidated statements, and modifying corporate reorganization and the ways industrial revitalization is practiced. The new Corporation Law of Japan was promulgated on July 26, 2005 and went into effect May 1, 2007. It replaced that portion of the Commercial Code that had set regulations on corporations, paved the way for new legal forms of corporations (mainly LLC and LLP), removed the minimum capital requirement for joint stock corporations and eased other settings for companies (JICPA 2006) – which means that it became easier for foreign companies to be active in Japan, too. The latest change came into effect in May 2007: the government allowed triangular mergers in which foreign firms use local units for business acquisitions, using their own shares to pay for the deal. Therefore, it becomes possible to use cash and other measures as merger currency (METI 2003: 5) and allows “[a foreign company [to incorporate] a 100 percent owned subsidiary in Japan which will merge with a target Japanese company, using foreign parent shares as merger consideration” (Burrows and Kiyohara 2005: 2; also JIC 2005: 15). Finally, one should mention that government institutions are now making a great effort to increase the transparency of the regulatory regime. The Fair Trade Commission, for instance, allows for merger notification via the internet, provides procedure templates and also publishes detailed information about mergers and acquisitions over the last five years on its homepage. To summarize this paragraph, while the Japanese system has certain unique features that are responsible for the substantially smaller number of mergers and acquisitions in Japan in comparison with other countries, the system is changing. The speed of change may not yet satisfy foreign institutions and investors, but the direction is clearly towards more openness. In the following, two case studies shall give concrete examples of mergers of European firms with Japanese, referring to effects the institutional features mentioned have on the transaction.

Case study 1 pharmaceutical industry: Roche–Chugai Introduction: M&A in the pharmaceutical industry The pharmaceutical industry witnessed consolidation on a worldwide level at the end of the twentieth and the beginning of the twenty-first century (Suzuki et al. 2004: 35):

M&A between Japanese and European enterprises • • • • •

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1999: Hoechst merged with Rhone-Poulence, forming Aventis. 2000: GlaxoWellcome merged with SmithKline-Beecham, creating the number two in terms of worldwide sales, GlaxoSmithKline. 2003: Warner-Lambert acquired Pharmacia in 2003, forming Pfizer, the number one in terms of sales. 2004: Sanofi-Synthélabo, number 13 according to sales volume, acquired Aventis – at that time number four, forming Sanofi-Aventis. 2005: Novartis acquires German Hexal, the remaining shares of US company Chrion, and Econ Labs all in one year (PWC 2006: 2).

The Japanese pharmaceutical industry, although quite insulated (and protected) until at least the 1990s, was also influenced by these developments: • • •

•

Chugai joined the Roche group in 2002 due to an acquisition. Existing ties between Pharmacia (now Pfizer) and Yamanouchi were restructured in 2004. In April 2005, the merger of Yamanouchi Pharmaceutical and Fujisawa Pharma was announced – this being the first merger of two major national players in Japan. The new company, Astellas, is expected to become number two in terms of sales in Japan, displacing Eizai. Also in 2005, Daiichi Pharma merged with Sankyo, making this the largest deal in the industry in 2005 (PWC 2006: 2).

The question is, of course, why do these mergers have to happen? The industry is characterized by relatively high profit ratios, and neither Yamanouchi nor Fujisawa, and not even Chugai, were suffering losses. But even two-digit profit rates – almost 20 percent for Yamanouchi and 14 percent for Fujisawa (Suzuki et al. 2004: 35) – do not cover the huge research and development costs that are necessary to develop new products with which the companies can globally compete. Furthermore, a complementary product portfolio and geographical dispersion are seen as motives for both a merger and an acquisition. Reasons for the Roche–Chugai merger It was stated above that Japanese corporations tend to be very reluctant when it comes to mergers with and acquisitions by foreign firms. In the case of Roche and Chugai, the necessity for a merger is not obvious at first glance. Profit ratios were acceptable, and Chugai did not have significant debts that would have caused trouble. The main reasons lay in research and development. The patent protection for Chugai’s blockbuster Eposin (which accounted for about 30 percent of sales) ran out in 2005, and there were not enough other products close to market entry that could cover the losses in market share and profit. Chugai therefore wanted to benefit from Roche’s research and development (R&D) capabilities, while Roche saw a good chance to grow in Japan, the world’s secondlargest market for pharmaceutical products. Second, both enterprises saw

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synergies through joint use of the research facilities of Roche’s US subsidiary GeneTech. Chugai’s course of action Chugai took the initiative for this transaction. In August 2000, Chugai’s CEO and President, Mr Nagayama, was said to have contacted Roche (Japan) with an offer to talk about future institutionalized cooperation. Since both firms had a strong presence in the US, this had to be taken into account. In the diagnostic pharmaceutical field, Roche as number one and Chugai’s US-subsidiary, Gene Probe, would have a combined market share of 90 percent, which would clearly violate US regulations. Thus, Chugai decided to spin-off Gene Probe. In fall 2001, Chugai officially suggested a merger with the Japanese subsidiary of Roche. The action plan for the merger was announced on December 10, 2001, with the following suggestions: • • •

a spin-off of Gene Probe; a Roche takeover bid for 10 percent of Chugai’s shares; an allocation of new shares to a third party, namely Roche, allowing for the merger.

In February 2002, the stock markets were skeptical about the merger, supposing that Chugai’s shareholders’ meeting might disagree with the plans. However, on May 24, 2002, Chugai’s board of directors agreed to the proposal. After Roche raised the proposed share price for the takeover bid (from JPY 2136 to JPY 2800), Chugai’s general shareholders’ meeting on June 27, 2002 accepted the plan. On July 31, 2002, the spin-off of Gene Probe took place. On September 19, 2002, Roche ended the takeover bid; allocation of new shares to Roche followed afterwards. On October 1, 2002, the merger between Roche Japan and Chugai was completed, leaving the Roche group as the main shareholder, with 50.1 percent of the new entity. Thus, the deal could be named an acquisition of Chugai by Roche rather than a merger. However, both parties call this transaction a merger, so the use of “merger” seems acceptable. Organizational and managerial changes The corporate reorganization following the deal went relatively smoothly. Since Chugai’s top management was willing to accept Roche as their new main shareholder, and was hoping to make new steps together, resistance was not a major problem for Roche. It is important to note that Chugai was much bigger in Japan than Roche Japan. Chugai’s (consolidated) sales and ordinary profit almost tripled that of Roche Japan, but in terms of profitability, Roche Japan achieved much higher ratios.13 One obvious change was incorporated quickly. The new board of directors after the merger contained four members dispatched from Roche, namely


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William M. Burns, Franz B. Humer, Wataru Ogawa and Hideaki Shigata. The rest of Chugai’s board members remained in their positions, making a smooth transfer possible. In terms of management decisions, Roche – being the major shareholder – has to fully consolidate Chugai, and therefore also has full responsibility for management decisions and full rights. However, as part of the agreement, Chugai is given great leeway and can basically – with the exemption of mergers and similarly important fields – make decisions by itself. This is highly welcomed by the Japanese side (and is very much the same practice found in the relationship between Roche and Gene Tech). Changes in human resource management The next area to change was human resource management (HRM). The new entity combined HRM features from Roche Japan and Chugai with somehow more weight on the European characteristics.14 The seniority-based wage and promotion system was replaced by one with clearly more emphasis on performance. Bonuses are now paid according to the ordinary profit the company reaches. For pensions, a point-system was introduced that also reflects performance; each year an employee accumulates points to a varying degree, according to the results they achieved. Comments As shown, the transaction was not the result of a need for an instant rescue, but was initiated by the acquired company in order to secure long-term growth and survival for both itself and the acquiring company. Since Chugai’s CEO was in favor of the merger, Roche was not confronted with substantial resistance. Furthermore, both enterprises expected positive effects from this merger. According to both companies’ reports, synergies can already be seen: cuts in administrative and other expenses, reduction of personnel, etc.15

Case study 2 automotive supplying industry: Bosch and Zexel Introduction Consolidation in the car industry has also led to a wave of M&A in the automotive supply industry. As a result, a fundamental reshaping of business has occurred. On the one hand, some suppliers grow into “Mega Suppliers.” They takeover more and more business, or bigger parts of the value chain from the original equipment manufacturer (OEM), resulting in the emergence of 0.5-tier suppliers which are able to fulfill a lot of the tasks of the OEM. On the other hand, a considerable number of suppliers not only grew, but disinvested business units that were not in their core competence area. Other suppliers simply

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disappeared. On a global level, it is projected that there will be a reduction from the number of 5,500 suppliers down to 2,800 suppliers in 2015 (Kalmbach and Kleinhans 2004: 5). The Japanese automotive supply industry plays a crucial role in the national economy. The automotive and supply industry together represent the second largest industry in Japan, creating a value of JPY45.8 trillion in 2004, or EUR 324 billion, based on the exchange rate at the end of the year (JAMA 2006: 4) – which equals 16.1 percent of the total value of Japan’s manufacturing shipments of that year. Almost half of this (49.7 percent) was created in the automotive supply industry (JAMA 2003: 30). However, the global restructuring process has also had an effect. OEM, regardless of their origin, announced a cut in the number of suppliers,16 forcing them to rethink their strategies and change their organizational structures through mergers and acquisitions. To name but a few examples: • • •

2002: Toyoda Automatic Loom merged with Aichi Corp (Recof 2003a: 684). 2002: NOK purchased Ishino Gasket Industries Corp (Recof 2003: 684). 2004: Hitachi announced the reintegration of Hitachi Unisia and the integration of Tokico into the Hitachi group to strengthen the automotive electronics division (n.a. 2004).

This development is not limited to Japanese corporations, but effects foreign subsidiaries as well. With the merger of Bosch Automotive Systems, Bosch Braking Systems and Bosch Electronics in July 2002, the integration of Zexel into the Bosch Group Japan was completed. Reasons for the Bosch–Zexel merger One important reason for both companies was global consolidation as mentioned above. New technology was a further factor. Zexel did not have the electronic control units which are necessary for common-rail injection for diesel engines. Bosch, however, did have the technology – although purchased from Fiat, but was in need of markets. Thus, their only chance to compete with Denso was through forming an alliance. Denso was – and is – Toyota’s main supplier in the electronics field, and had the technology, the product and the customers. Bosch’s course of action The Bosch–Zexel deal was often seen as a pure acquisition. However, things are more complicated than they look at the first glance. Bosch’s previous connection to Zexel had quite a long history. Zexel was the first licensee of Bosch’s diesel engine fuel injection pump in 1939, under the name of Diesel Kiki Co. (the name changed to Zexel in 1983). While first business activities in Japan date back to 1911, the company of Bosch KK17 was established (under the name of

Robert Bosch

1984

1980

1990

1995

*1992

Airbag Systems Co., Ltd.

Zexel Corporation

1992

Nippon ABS Ltd.

1992

1985 Bosch K.K.

1990

1997

1998

2000

2000

Corporation

Electronic

Bosch 2002

Valeo

Zexel Valeo Climate Control

1999

Corporation

Bosch

2005 sale

2005

2005

2005

Corporation

Systems

Automotive 2002

Bosch

2004

Systems

2001

Bosch Braking

2000

1999

1999

2000

Figure 9.4 Zexel’s integration into Bosch Japan (source: own chart on the basis of information from Bosch’s annual report and company homepage, and Herbes 2006: 413).

Merger Rename Investment

Diesel Kiki Co., Ltd.

Spin-off

Jidosha Kiki

License

Business Start

1970

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Robert Bosch Japan Ltd.) in 1972. From that time on, Bosch followed a strategy of creating several joint ventures and investing in a number of companies, among them Diesel Kiki Co. Bosch was a minor shareholder, owning about 13 percent of the shares. In July 1997, Bosch KK announced its integration of Zexel into the Bosch Group Japan. As an initial step, Bosch KK increased the shareholding to 30.1 percent, and then in April 1999 to 50.04 percent. After having gained the majority of shares, the company was renamed Bosch Automotive Systems Corporation. In August 2001, Robert Bosch GmbH further invested in the Bosch Automotive Systems Corporation, giving the Bosch Group a controlling stake of 55.5 percent of the shares, and 56 percent in 2004. In the meantime, restructuring took place. The car air-conditioner division was transferred to Tama Manufacturing, which was named Zexel Climate Control. Following this, French supplier Valeo was invited to invest, finally forming a Joint Venture named Zexel Valeo Climate Control Corporation. The cooling unit business was transferred to another joint venture, with US maker Thermo King as the major shareholder. Bosch also re-organized another subsidiary, Bosch Braking Systems, by spinning-off and selling several business units (namely the air brake business, the power steering business, and the exhaust brake valve business) to other companies. The remaining parts of Bosch Braking Systems merged with Bosch Automotive Systems and Bosch Electronics (which developed from Zexel’s spin-off of the airbag system) to form the new Bosch Automotive Systems in July 2002. In September 2003, Bosch withdrew from the Osaka Stock Exchange, and in December 2003 Robert Bosch Investment Netherlands B.V. became the primary shareholder of the Bosch Automotive Systems Corporation. Figure 9.4 illustrates the relations and actions taken. Organizational and managerial changes The main organizational changes were already mentioned in the paragraph above, since they were the precondition to the merger. In addition to these changes, the disinvestment of unnecessary and unprofitable businesses continued. In terms of top-management structure, after acquiring 30.1 percent of Zexel’s shares, Bosch dispatched “part-time” directors (hijokin yakuin, i.e. persons that are employed by Bosch, but fulfill duties at Zexel) thus preparing for further steps. Since Bosch had been business partner and shareholder for so many years, the resistance inside Zexel was very limited. After taking over the majority of shares, regular directors came from Bosch. The board of directors of the newly formed Bosch Automotive Systems Corporation consisted of eight persons, half of which came from the German mother company, the other half remained from the previous organs of the three companies. The strong presence of expatriates can be seen as a sign of commitment from the German side (since the dispatch is linked with high transaction costs).


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Changes in human resource management The integration of different human resource management systems turned out to be a challenge for all companies involved. The influence of different histories, traditions and values (cf. Tridico 2004) was quite noticeable, despite the fact that Bosch KK has been active in Japan for a number of years and that the mother company Bosch in Germany in terms of HRM shows similarities with Japan when it comes to the appreciation of time spent with the company and of loyalty. However, there were also differences – for instance in the degree individual performance counts. Especially in the upper level, managers at Bosch are measured against their (own) forecasts and plans as well as against their peers.18 But performance turned out to become a more important factor of evaluation also for other personnel. In short: concerning HRM and promotion schemes, there was a clear direction towards integration, following the example of the German-influenced Bosch KK. Comments The second case had its peculiarities, insofar as the acquiring company already had a long-term relationship with the acquired company – which can be seen as one of the reasons that there was no sign of resistance from Zexel’s side. However, due to Japanese law as well as business practices, Bosch could only increase its ownership in Zexel step by step. (This could be different now as a result of changes in the regulations). Major restructuring took place only after Bosch took over the lead, tackling the integration of different human resource management regimes among other. This restructuring process, although not extensively covered in the media, is an important sign for all foreign companies in Japan that it is possible to acquire and change a Japanese enterprise. The process, however, took a long time, but the results are convincing. Step by step, Bosch improved their financial status and business results, and now is not only the largest automotive supplier on a global basis, but is also profitable in Japan.

Conclusion This chapter dealt with mergers and acquisitions in Japan with special focus on transaction between European and Japanese firms. It was shown that Japan hardly shows the same openness to and intensity of mergers and acquisitions as the US or Great Britain do, and that M&A – although on a lower level – are viewed as a means of industrial policy rather than as one of the capital market. However, a growing number of transactions, and increasingly high-volume transactions, reveal that institutional conditions in Japan are changing. The opening of Japan’s industrial structures for mergers and acquisitions is also manifest in the higher number of out–in transactions. This reveals how much Japan has changed already, and is underlined by both case studies showing that

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(and how) in various industries market entry through mergers and acquisitions is possible.19 Of course, one should not overemphasize this change since there are certain elements of inertia. With the example of human resource management, both case studies show that in the case of M&A in Japan specific local factors (history, values and tradition) have to be taken into account. They will have a lasting effect on the change of the institutions involved. With respect to a comparison with other Asian countries, one has to say that the variety of institutional settings in the different countries, but also in different industries aggravates this attempt. Naturally, there is not one kind of transactions or one kind of set. Depending on the view and the topic investigated, the result will differ. With the emphasis on the state of development the certain national economies have reached, Prowse (2000: 134) writes that: “developing markets differ substantially from developed countries in their initial conditions. . . . Market and regulatory institutions that play an important role in ensuring market discipline are relatively underdeveloped in the East and SouthEast Asian countries.” Focusing on capital markets as one important institution, there are similarities to be seen: according to an investigation of Claessens et al. (2005), about 75 percent of the listed firms in their sample of nine Asian countries20 were associated with groups and made greater use of internal than of external markets. Especially for Korea, a similarity with Japan was stated – the Korean industrial groups (chaebol) are also created to protect the enterprises against hostile takeovers (Prowse 2000: 140). Mergers are seen mainly within the group, especially after 1998 when the government urged the consolidation by the exchange of non-core business with other chaebols (Haley 2000: 9). A second similarity can be seen in the field of cross-border transaction with respect to the cause of the transaction. Especially in the late 1990s and the beginning of the twenty-first century: cross-border mergers and acquisitions, as opposed to Greenfield investments, have become the most important mode of FDI in the five crisisaffected countries21 . . . In addition to strengthening foreign investors’ rights, the crisis-affected countries have tried to simplify procedures for mergers and acquisitions. (Haley 2000: 20) This also holds true for Japan.22 A look at the financial market again reveals differences. The Asian Crisis shook Indonesia, Korea, Malaysia, the Philippines and Thailand more than Japan, and the restructuring of the financial market, including the entrance of foreign players, was seen as more intense.23 To sum up: mergers and acquisitions between European (or, in a broader sense, Western) and Japanese companies are a challenge for both sides, due to the diverging institutional settings that were shown. The discussion as to


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whether convergence would be a favorable approach also seems necessary, but can only be pursued via future research in this area.

Notes 1 The author would like to thank Mr Witty, ARQIS Foreign Law Office, Tokyo, and Mr Musahl from Ernst & Young, Tokyo, Mr Ozaki, Mr Taga and Mr Yamazaki from the Development Bank of Japan as well as Mr Sugahisa from Japan’s Fair Trade Commission for their precious time and valuable information. Remaining errors and misinterpretations are solely mine. 2 The case of DaimlerChrysler and Mitsubishi Motors is a good illustration of the difficulties cross-boarder M&A may face. For a more detailed analysis, cf. Moerke and Dolles 2004. 3 One methodological remark: Schatz calculates his ratios as value of transaction over GNP. 4 GDP measured at current prices in national currency, data taken from OECD data base http://stats.oecd.org/WBOS/default.aspx?DatasetCode=REFSERIES. 5 For the definition of “institutions,” we follow Jansen (2000: 2) who states that institutions are: 1 2 3 4

6 7 8 9 10 11 12 13 14 15 16

patterns of social relations that are; durable; function as rules or order; and are seen as legitimate and can be enforced through sanctions.

With this definition, we are quite in line with the common understanding of this volume that institutions are general rules that influence the behavior of actors (cf. Chapter 1 in this volume). Highly advanced financial speculation (so-called zai tekku) is given as one reason to invest abroad (Hearing at the Development Bank of Japan, February 5, 2005), while inside Japan “rescue mergers” dominated (Nabor 1999: 200). Schröppel (2001: 18) provides a good analysis of diminishing Japanese investment in Asia. “Tender offers for Japan firms hit record 3 trillion yen in FY06,” in The Nikkei Weekly, April 9, 2007. “Cross-border M&A wave coming ashore in Japan” in The Nikkei Weekly, March 12, 2007. “Govt To Expand List of Sectors Protected From Foreign Buyers,” in The Nikkei Weekly, April 26, 2007. The case of the DaimlerChrysler–Mitsubishi Motors deal reveals a lot about the opportunities an enterprise group can have to either support or undermine a single (foreign) major shareholder (for details, cf. Moerke and Dolles 2004). Hearing at Mitsubishi Motors Corporation, June 19, 2003. One important reason for this is the fact that cost-intensive R&D slammed profit margins for Chugai, but not for Roche Japan, since the Roche group covered these. However, not everything was introduced for everybody to the same degree. Personnel in management positions probably had to accept the European rules to a higher degree than the shop-floor worker. www.chugai-pharm.co.jp/pdf/annual_report/2004/AR04e_04.pdf. The most often cited example is probably Nissan, because Carlos Ghosn, after becoming CEO, announced he was cutting the number of suppliers by half – but the same holds true for Japanese companies. Aisin Seiki, first-tier supplier from the Toyota group, is said to have reduced the number of core suppliers from seven to two (Hearing with K. Aoki, Kantogakuin University, June 16, 2004).

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17 KK means “Kabushiki Kaisha,” the Japanese wording for a stock corporation. Here Bosch KK refers to the Japanese subsidiary of Robert Bosch (Germany). 18 Hearing at Bosch Stuttgart, September 24, 2003. 19 The post-merger integration, however, is another field with its own challenges. For a description of success factors for Japan, cf. Vaubel and Herbes (2007). 20 Hong Kong, Indonesia, Japan, Korea (South), Malaysia, Philippines, Singapore, Taiwan and Thailand. 21 Indonesia, Korea (South), Malaysia, the Philippines and Thailand. 22 JETRO 2002, as well as the interview with K. Taga and Z. Yamazaki, Development Bank of Japan, February 25, 2005. 23 Rajan (2001: Table 9) gives precise figures on how many banks went bankrupt, how many merged, etc., Kitamura et al. (2001) discuss mergers in the Japanese financial system.

Bibliography Baum, H. (1997) “Börsen- und Kapitalmarktrecht in Japan,” in K. J. Hopt and H. Baum (eds) Börsenreform, Stuttgart: Schäffer-Poeschel. Burrows, R., and Kiyohara K. (2005) Guide to Cross-border Tender Offers in Japan. Available online at: www.iflr1000.com/includes/print.asp?CountryID=6&sIndex=2 (accessed March 3, 2005). Claessens, S., Djankov, S., Fan, J. and Lang. L. (2005) The Rationale for Groups: Evidence from East Asia. Available online at: http://www1.fee.uva.nl.fm/Conference/ cifra1999/group-NTU.doc (accessed March 31, 2005). DBJ (Development Bank of Japan), Economic and Industrial Research Department (2007) Do M&A Improve Corporate Financial Performance in Japan? Tokyo: Development Bank of Japan. DBJ Research Report No. 59. Haley, U. C. V. (2000) “Corporate Governance and Restructuring in East Asia: An Overview,” Seoul Journal of Economics, Special issue on “Corporate Governance and Restructuring in East Asia,” vol. 13, 3: 1–27. Herbes, C. (2006) Post-Merger Integration bei europäisch-japanischen Unternehmenszusammenschlüssen, Wiesbaden: Deutscher Universitäts-Verlag. Hirata, M. (1996) “Die japanische torishimariyaku-kai. Eine rechtliche und betriebswirtschaftliche Analyse,” Zeitschrift für Betriebswirtschaft, Sonderheft 3: 1–28. JAMA (Japan Automobile Manufacturers Association, Inc.) (2003) The Motor Industry of Japan, Tokyo: JAMA. —— (2006) The Motor Industry of Japan, Tokyo: JAMA. Jansen, D. (2000) Der neue Institutionalismus, Speyerer Vorträge, vol. 57. JETRO (Japan External Trade Organization) (2002) New Business Practices and Opportunities in the Japanese Economy, Tokyo: JETRO. JIC (Japan Investment Council) (2005) Measures Considered Necessary to Expand FDI in Japan – Japan’s Response to Opinions Expressed through such Channels as the 31st JIC Expert Committee Meeting, Tokyo: Cabinet Office. Available online at: www.investment-japan.net/meeting/2005/0214item1.pdf (accessed March 10, 2005). JICPA (Japan Institute of Certified Public Accountants) (2006) Corporate Disclosure in Japan – Overview, Tokyo: JICPA. Kalmbach, R. and Kleinhans C. (2004) “Zulieferer auf der Gewinnseite,” AutomobilProduktion, April 2004: 4–8. Kikkawa, T. (1996) Nihon no kigyo shudan – zaibatsu to no renzoku to danzetsu [Japanese Corporate Groups], Tokyo: Yuhikaku.


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Kitamura, Y., Suto, M. and Teranishi J. (2001) Reflections on New Financial System in Japan: Participation Costs, Wealth Distribution, and Security Market-Based Intermediation, Tokyo: Hitotsubashi University Institute of Economic Research. CEI Working Paper No. 2001–25. Menkhaus, H. and Schmitt, H. (2000) “Mergers and Acquisitions in Japan,” in Pohl, M. Japan 1999/2000: Politit und Wirtschaft, Hamburg: Institut für Asienkunde, 5: 172–186. METI (Ministry of Economy, Trade and Industry) (2003) Comments of the Government of Japan on 2003 National Trade Estimate (NTE) Tokyo: METI. Available online at: www.meti.go.jp/english/report/downloadfiles/gCT0336e.pdf (accessed March 3, 2005). Moerke, A. (2003) “Rumble in the Boardroom? The Change of Japanese Corporate Governance Schemes,” Zeitschrift für Japanisches Recht, vol. 8, 15: 142–160. Moerke, A. and Dolles H. (2004) Corporate Governance in Multinational Corporations during Turbulent Times – Cases from the Automotive Industry, Tokyo: Deutsches Institut für Japanstudien, Working Paper 3/04. MoF (Ministry of Finance), International Bureau (2007) Outward and Inward Direct Investment 2001–2005. Available online at: www.stat.go.jp/data/nenkan/zuhyou/ y15120s1.xls (accessed April 30, 2007). Musahl, H.-P. (2002) “Akquisitionen mit Naked Warrants,” Asia-Bridge, November 2002: 31. n.a. 2004. “Hitachi: Tokiko to Hitachi Unisia no jidosha buhin kaisha wo jugatsu ni kyushu gappei [Hitachi absorbs Tokiko and Hitachi Unisia’s Automobile Parts Business in October],” in Nikkan Kogyo Shimbun, March 29, 2004, p. 5. n.a. 2004. Hitachi: “Itchoen Voso” no shingan [Trues and Lies about Hitachi’s ‘Trillion Yen Plan”] Shukan Toyo Keizai, 2004/7/3, pp. 38–39. Nabor, A. (1999) “Mergers & Acquisitions: Öffnung und Wandel der Japan Inc,” in M. Pohl (ed.) Japan 1998/99. Politik und Wirtschaft, Hamburg: Institut für Asienkunde. Nakatani, I. (1984) “The Economic Role of Financial Corporate Grouping,” in M. Aoki (ed.) The Economic Analysis of the Japanese Firm, Amsterdam, New York and Oxford: North-Holland (Elsevier Science Publishers B. V.). NLI Research Institute (2000) Kabushiki mochiai kaisho jittai [The Reality of Dissolving Cross-shareholding], Tokyo: NLI Research Institute. Nomura Shoken (eds) (2006) 2005 Nen no nihonkigyo ni kanren suru M&A no doko [Patterns of M&A of Japanese Corporations in 2005], Tokyo: Nomura Shoken. Nomura-Shoken-Kin’yukenkyujo (2003) 2002 Nen no nihonkigyo ni kanren suru M&A no doko [Patterns of M&A of Japanese Corporations in 2002], Tokyo: Nomura Shoken. OECD (2007) OECD Statistics Reference Series. Available online at: http://stats.oecd. org/WBOS/default.aspx?DatasetCode=REFSERIES (accessed May 2, 2007). Otto, S.-S. (1997) “Corporate Control-Mechanismen und Stakeholder Relations in Japan im Wandel,” Zeitschrift für Betriebswirtschaft, Ergänzungsheft 4/97: 43–74. Prowse, S. (2000) Corporate Governance in East Asia: A Framework for Analysis. Available online at: www.unescap.org/drap/publication/dp20_1973/dp20_04.pdf (accessed March 3, 2005). PWC (PricewaterhouseCoopers) (2006) Corporate Finance, Insights: Pharmaceutical Sector 2005/2006, London: PWC. Rajan, R. (2001) On the Road to Recovery? International Capital Flows and Domestic Financial Reforms in East Asia, Adelaide: Adelaide University, Centre for International Economic Studies Discussion Paper No. 0124.

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Recof Corporation (2003a) Nihon kigyo no M&A detabukku [Data Collection on M&A of Japanese Corporations], Tokyo: Recof. —— (2003b) Shoho kaisei to keiei senryaku [The Amendment of the Japanese Commercial Code and Corporate Strategies], Tokyo: Recof. —— (2004) Mergers & Acquisitions Research Report, vol. 2004, 7. —— (2007) 1985 nen iko no maketto betsu M&A kensu no suii [Change in the Number of M&A in Different Markets from 1985 on]. Available online at: www.recof.co.jp (accessed April 30, 2007). Schatz, K.-W. (2003) “Unternehmenskooperationen und Fusionen – die deutsche Perspektive,” in R. Kroker and H. Conrad (eds) Deutschland und Japan: Mit Reformen zu neuer Dynamik, Köln: Deutscher Instituts-Verlag. Schröppel, C. (2001) “Mergers und Acquisitions in Asien,” Japan Markt, 10, 9: 17–19. Sheard, P. (1996) “Interlocking Shareholdings and Corporate Governance,” in M. Aoki and R. Dore (eds) The Japanese Firm, Oxford: Oxford University Press. Shirai, S. and P. Rajasekaran (2001) Assessment of China’s Financial Reforms. Available online at: www.unescap.org/drpad/projects/fin_dev2/adbishirai2.pdf (accessed March 3, 2005). Suzuki, M., Yamada, Y., Mizuochi T., Yamada, H. and Nomura A. (2004) “Shu ga Nihon o osou” [“Acquisition Attack Japan”], Shukan Toyo Keizai, 2004/07/24: 26–43. Takahashi, R. and Oyama T. (2000) Insights into a Recent Increase in Foreign Direct Investment in Japan. Theoretical Explanation and Research Based on Actual Developments, Tokyo: Bank of Japan, Research and Statistics Department. Takarabe, S. (2002) Karurosu Gon wa nissan wo ikani shite kaetaka [How did Carlos Ghosn change Nissan], Tokyo: PHP Bunko. Tridico, P. (2004) Institutional Change and Economic Performance in Transition Economies: The Case of Poland, Brighton: Sussex European Institute. SEI Working Paper No. 74. TSE (Tokyo Stock Exchange) (2007) Fact Book 2007, Tokyo: Tokyo Stock Exchange. Vaubel, D. and Herbes, C. (2007) Mergers and Acquisitions in Japan. Successful Postmerger Integration is the Key, Tokyo: Roland Berger Strategy Consultants. Williamson, O. E. (1990) Die ökonomischen Institutionen des Kapitalismus, Tübingen: Mohr. Witty, T. (2000a) “Das japanische Gesetz zur Spaltung von Unternehmen. Teil 1: Handels und Desellschaftsrecht, ” Japan Markt, Jg 9, Heft 12, 17–24. Witty, T. (2000b) “Handelsrecht: Einladung zum Wandel,” Asia-Bridge, June 2, 2000: 23.

10 Beyond the taboos? The opportunities and limitations of Asian–European track-two dialogue Katja Freistein

Introduction One of the engines in the process of tying Europe and Asia closer together has been so-called “track-two” diplomacy. Academics, politicians, businessmen and other experts in different policy fields have developed and influenced the dialogue between the two regions and contributed to the growing Asian–European relationship. In the official documentation of the Asian–European processes, which are characterized by their discursive rather than mandatory power, there is hardly any mention of the second track. Thus, it would, perhaps, be premature to ascribe too important a political role to this form of dialogue between experts from both regions. However, the socio-political and socio-cultural significance of interregional track-two discourse cannot be underestimated. As the ASEM process, as an institutional framework for Asia–Europe relations, itself is characterized by a high degree of informality and non-committal negotiations and has so far proceeded very slowly, track-two processes could be a complementary framework for the Asian–European construction site. Based on academic and practical knowledge and technical expertise, track-two dialogues could help to establish new issues between the participants and to open spaces for debate. They could, furthermore, prove to be a substantive instrument for leading the necessary debates and setting new agendas in order to advance Asian–European relations. Yet, what are the actual implications and potential of the Asian– European track-two process with respect to interregional relations? Has the dialogue developed into a steady policy network – e.g. as an epistemic community – and what are its chances on the one hand and its limitations on the other? This chapter is designed to help understand the mode of operation and the mechanisms that enable this cross-cultural dialogue to take place, and it aims to discern the functions as well as the limitations of the second track in Asia–Europe relations. I will concentrate on the role of interregional research communities and their impact on politics. The main focus, therefore, is on think tanks, research institutions and academics from university backgrounds, and their potential to initiate and forward the building of policy communities that seek to influence Asian–European political relations. To start with, I will put forward the concept of track-two diplomacy and its practical implications for

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Asian and European interregional relations. I will then shortly introduce theoretical ideas about such policy networks in order to get a better understanding of the working mechanisms of track-two processes. Two main functions can be derived from these empirical and theoretical findings about the second track that I will use to analyze Asian–European track-two relations. After presenting several of the participants involved in these dialogues, I will examine the main functions and performance of current second track processes. In the concluding remarks, the potential and limitations of Asian–European track-two diplomacy will be evaluated.

The concept of track-two diplomacy Track-two diplomacy refers to an unofficial, yet officially acknowledged and employed level of meetings, often within institutionalized settings.1 The role of track-two diplomacy in Asia is much different from that in Europe;2 this is mainly because the respective norms of cooperation and the institutional settings of Europe and East Asia differ. Generally, it is assumed that Asian interstate cooperation is characterized by non-binding, non-committal arrangements, by low-key consultations, and informal and personalized meetings (see Acharya 2001) whereas European – or Western – cooperation culture is said to aim for clear, legally binding and authoritative decisions. However, it is more likely a historically and socially developed difference in practice than in fixed cultural notions that accounts for the respective cooperation tradition. This assumed cultural gap might account for the huge differences between the Asian and the European traditions of international relations. While cooperation in the European Union is highly legalized and endowed with innumerable functioning institutions, the East and Southeast Asian region is characterized by “soft regionalism,” i.e. a paucity of mechanisms for multilateral collaboration (Rüland 2002: 179). Due to the specific cooperation tradition and an apparent aversion to formalized institutions, track-two processes have been established as indispensable parts of the regional institutional architecture in addition and as an alternative to track-one, that is, official regional institutions (see Ball 1994). Hence, a multitude of track-two mechanisms have evolved.3 Particularly in the field of security cooperation in the Asia-Pacific region, track-two diplomacy has been able to provide significant impulses for the development of collective strategies to tackle urgent security problems. In economic and business affairs, a similar development has taken place. Various Asian think tanks have been founded that have supported their national governments as well as the regional institutions, particularly the ASEAN Regional Forum (ARF), with technical advice and expertise in track-two frameworks – always, however, impaired by political realities (Simon 2002). Thus, track-two diplomacy is awarded a special role in the Asia-Pacific context. Because of the low degree of institutionalization in the East Asian region, a culture of cooperation that favors personal ties and unofficial consultations has produced strong track-two diplomacy that can be regarded as an alternative

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institutional level in itself. Whereas at times the second track is employed in conflict management, here it serves much more as a regular dialogue (and diplomatic) mechanism (Caballero-Anthony 2005). Theoretical approaches Drawing on theories about ideas, knowledge and policy advocacy, track-two diplomacy can be – minimally – defined as networks (Nesadurai and Stone 2000). Track-two processes have no hierarchical order and rely primarily on interpersonal relations, thus functioning as “arenas of non-strategic, communicative action” (Börzel 1997). Essentially, they encompass actors that share a common goal (e.g. the solution of a policy problem) and choose a cooperative way to discuss these issues; its main actors are academics from universities and think tanks.4 Different theoretical approaches dealing with the meaning of knowledge and ideas in politics can be deployed to explain the essentials of track-two diplomacy: they include “discourse coalitions” (Hajer 1993), “policy communities” (Singer 1993), “advocacy coalitions” (Sabatier 1993) or “epistemic communities” (Adler and Haas 1992). They correspond in many aspects, but differ in others. Keck and Sikkink, for example, generalize: advocacy networks are significant transnationally and domestically. By building new links among actors in civil societies, states, and international organizations, they multiply channels of access to the international system (Keck and Sikkink 1998). Their emphasis on the relevance of networks for gaining access to international politics is one of the points that all of the following approaches have in common. The most prominent approach commonly referred to in the (Asia-Pacific) second track context is the epistemic community approach developed by Peter Haas, following a tradition of functionalist thinking (Haas 1992). This approach has gained much attention over the last couple of years because the role of non-material factors in international relations has experienced an enormous boom. According to Haas, epistemic communities consist of “professionals with recognized expertise and competence in a particular domain and authoritative claim to policy-relevant knowledge within that domain or issue area” (Haas 1992: 4) thus constituting an alternative level of consultation, in which experts in various fields organize their specific knowledge and competencies. By elevating new issues to the political agenda (i.e. agenda-setting) and by offering their expertise to decision-makers, members of epistemic communities can influence state interests and policy processes. Thus, one essential effort of track-two dialogues is the process of knowledge transfer from scientific discourse to politically relevant discourse. Once part of an institutional form, e.g. as track-two diplomacy, “the members of a prevailing community become strong actors at the national and transnational level as decision-makers solicit their information and delegate responsibility to them” (Haas 1992: 4).

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Consequently, track-two initiatives can eventually become almost autonomous quasi-institutions that try to influence government members and can have an impact on their politics. This notwithstanding, their influence depends on their own ability to convey their ideas to relevant decision makers as well as on the structural conditions, i.e. the distribution of power between states or the relevance of the issues concerned at the time. However, Haas also states that the members of an epistemic community “have 1) a shared set of normative and principled beliefs, which provide a value-based rationale for the social action of community members,” implying that norms play a crucial role in the functioning of epistemic communities (Haas 1992: 3). This is an important point to which we will return later. What matters most about the role of policy networks is the “material power of ideas,” i.e. the impact that knowledge and specific expertise can have on actual politics. What can be learned for the better understanding of track-two diplomacy is that new ideas for the solution of problems can be developed outside the elite-centered system of (Asian) politics,5 and that a decentralization of knowledge, organized in the form of expert networks, can be an important amendment to official politics. Moreover, the diffusion of norms is another vitally important task performed by these track-two networks, turning them into norm entrepreneurs (Acharya 2004; Finnemore and Sikkink 1998). All in all, the second track aims at a transfer of knowledge and – often normative – ideas; furthermore, social learning, especially the learning of cooperative behavior and trust, are another essential part of it (Kerr 1994: 399). The Asia Pacific experience Remarkably, the (South) East Asian track-two architecture is characterized by the participation of different groups of actors: although a notably higher proportion of track-two actors are experts6 – from academia, journalism, business or the military – the attendance of government and parliamentary officials and diplomats is crucial. Some observers, nevertheless, claim that non-state actors are becoming more significant.7 Especially with generational changes within track-two, that are slowly beginning to unfold, a change of direction towards closer relations with track-three groups may become possible.8 What distinguishes track-two diplomacy from purely academic conferences and workshops is, most of all, its close connection to the first track, be it by the direct participation of politicians or the existence of communication channels between the two tracks.9 By and large, complete independence from the first track is unimaginable. Yet there can be qualitative differences in the degree to which the first track interferes with the second track. This may depend on political conditions, but it may also depend on the participating parties; in any case it influences the proceedings of track-two diplomacy. The participation of government officials in track-two forums can be problematic because it contradicts the original character of track-two initiatives.10 Furthermore, the autocratic nature of a number of states in Southeast Asia causes many members of track-two forums to moderate


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their criticism of government policies for fear of reprisals. The advocates of track-two diplomacy mostly belong to elites that publish their ideas and research results, yet do not take part in any lobbying activities in order to pressure governments. In the logic of an assumed Asian cooperation culture, the total autonomy of the track-two level from the track-one (i.e. the governmental) level is not desirable or even thinkable for governments in the region that vigorously insist on non-interference in internal affairs.11 While the second track is a frequently and – at times – successfully utilized tool in international politics in Asia, its role in European politics is far less prominent. In Europe, no comparable track-two architecture exists. Even though there has always been a tradition of policy consultancy involving think tanks and academic research institutes that give advice to national governments or – more recently – to the institutions of the European Union, it is not given the same importance as in East and Southeast Asian international relations. Although, of course, academic conferences are regularly held within the European Union and with partners outside it, they are only one participatory instrument employed in liberal democracies. Whereas in the European context of liberal democracies political participation of civil society actors and a pluralism of publicly voiced opinions are common and many different actors are granted a right to participate in policy-making, these conditions do not exist in the majority of Northeast and Southeast Asian states. Therefore, as civil society actors are largely excluded from political decision-making, one substitute for a broad-based participatory process has been established in the form of track-two diplomacy. Functions We may discern two major functions of track-two diplomacy. One is socialization, the other innovation.12 These functions are generally agreed upon by the research literature, yet often only implicitly; all of them have specific subfunctions that can be derived from the theoretical concepts introduced above and are of practical significance for the Asian–European dialogue, albeit to varying degrees. Socialization refers to processes of social learning that is crucial for the participants involved in these meetings. As explained above, track-two talks help to familiarize the actors concerned with the habit of conducting a dialogue, which furthers the chance of cooperative behavior. It’s not only concrete policy issues that matter in these dialogues, but also underlying belief and norm systems. As the normative frameworks of the track-two participants may differ greatly, the transfer of knowledge and important norms within the dialogue is a condition of the operability of this dialogue. Therefore, an agreement on common ground or at least a minimal consensus to continue is an important objective of the discussions. On the second track, actors are able to modify their positions much more than at the level of regular diplomacy when required, thereby – ideally – creating space for a more open dialogue and paving the way for compromise solutions. In addition to formalized settings, the relevance of

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frequent meetings, dinners and private conversations as well as all other activities on the sidelines of track two forums should not be underestimated. In the Asian context, in particular, personal contacts and – as a consequence of close personal relationships – the building of mutual trust are essential factors that can determine the outcome of political negotiations – especially when the discussion focuses on problems that are highly politicized such as security, human rights, democracy, social rights and environment. In the Asian–European context an example of that could be dialogues about the importance of issues such as democracy or social rights that are controversial in many regimes. Another important effect of these socialization processes is identity-building. The Asia-Pacific track-two dialogues have made a significant contribution to region-building, creating and (re-) interpreting shared symbols and myths in order to spread a feeling of collective identity.13 As stated above, the track-two level in the region is still mostly elite-centered, so the participants – even if they lack actual political power – are able to exert influence on public opinion by publishing articles in newspapers or serving the media as experts. The socialization function of track-two most certainly gains importance in the Asian–European context, where finding a common ground without negotiating would be an almost insurmountable task. The innovation function of track-two dialogues primarily refers to agendasetting. By opening up or “framing” discourse (Rein and Schon 1991), actors on the second track can influence the direction and course of discussion about new policy issues. As they hold the key to pertinent expertise, track-two actors can advocate and organize the dissemination of new international norms or policy issues that they are concerned with (for their own interests or a more general concern). Their advantage lies in their own unofficial status and the closed nature of workshops and meetings (which is almost always the case in the Asian context). Issues that are otherwise excluded from diplomatic dialogue or simply bracketed for the sake of face-saving and maintaining harmony can be discussed on the second track, as this is less inhibited by political constraints, at least in an ideal case. New norms or urgent, politically explosive topics can – ideally – be tabled and be discussed in a matter-of-fact manner. In the Asian context, arguing about controversial issues like human rights or the erosion of the Southeast Asian non-intervention principle can be taboo in official dialogue; the relocation of such issues from the first to the second track therefore paves a way to debate them, however limited this may be in practice. Recapitulating what the theoretical approaches have to say about policy networks and relating to the functions derived from them, one can attribute different roles and capabilities to the second track. In the following, we shall see which functions can be accounted for in Asia–Europe track-two relations. First, the main actors – especially those from the Northeast and Southeast Asian region – are to be introduced and presented in their broader institutional context. The key actors are institutions that produce knowledge, i.e. either academic institutions such as universities or, more prominently, think tanks.14 Second, some empirical examples are provided to assess the opportunities and limitations associated with this form of interregional dialogue.


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The Asian–European dialogue Asian track-two actors Some of the track-two forums in the Asia-Pacific region have developed from small, closed workshops into highly rated institutions, effectively constituting an institutional network on a sub-governmental level. In the field of security politics, a regional track-two architecture has been unfolding in Southeast Asia since the early 1980s, although it originated much earlier, initially in the form of the Institute for Strategic and International Studies (ASEAN-ISIS) dialogue that included the core states of ASEAN and that still plays an influential role in the region.15 It organizes conferences and workshops, is responsible for numerous publications and is involved in regional policy-making. Furthermore, ASEANISIS has been a driving force of regional talks about a human right mechanism and has helped to initiate the ASEAN People’s Assembly, a non-governmental forum paralleling official ASEAN summits, “bridging government and NGOs.”16 Differing from state to state, some member institutes of the ASEANISIS have direct access to state bureaucracies and are well embedded in policymaking. Going beyond security issues, ASEAN-ISIS is now a major forum for political discourse led by think tanks, often in cooperation with other nongovernmental actors, in fields like human rights, human security and social welfare. The other well known forum, much broader in terms of geography and membership, is the Council for Security Co-operation in the Asia Pacific (CSCAP), a network of 21 national committees that mainly deals with security issues and hosts conferences involving academics and politicians from the region as well as outside it. It is decidedly transregional in that it comprises members from East, South and Southeast Asia, from North America, Europe and Russia. The CSCAP, in which working groups on security issues such as transnational crime, maritime cooperation, or comprehensive and cooperative security are organized,17 is closely interlinked with the ASEAN Regional Forum (ARF) and helps to place issues on its agenda.18 Single institutes, like the Shanghai Institute of International Studies, the Chinese Institute of International Relations, the Japan Center of International Exchange or the Center for Strategic and International Studies (Jakarta) with high profiles are also frequently involved in track-two activities. In the economic sector, forums like the Pacific Economic Cooperation Council (PECC) and the Pacific Trade and Development Conference (PAFTAD) have contributed greatly to institution-building and shaping economic and trade agendas (Morrison 2004). All in all, on the academic level a broad base for think tank activity within track-two forums exists in the AsiaPacific region. A steady number of experts from the core states of East and Southeast Asia have been the mainstay of track-two meetings in both a regional and an interregional context for more than a decade. Some of these people have come to be highly regarded as scholars and have actively contributed to region-building and

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policy innovation in the Asia-Pacific by offering policy advice and regularly communicating with decision-makers. When it comes to Asian–European relations, these academics and former politicians have proven to be reliable partners for second-track meetings and common research projects. The extremely personalized structure of Asian international relations has also been mirrored in Asian–European track-two relations for this reason; these have had to lean on personal networks right from the beginning. European track-two actors The spectrum of European participants in track-two meetings is diverse: national think tanks, political foundations (especially in Germany), university institutes, the European Union, and government ministries or agencies all send experts and academics to the meetings. Like their Asian counterparts, many track-two participants from Europe are experts on Asian affairs rather than on European issues. The resulting numerical superiority of Asia experts on both sides, of course, may be due to the fact that European foundations are much more present in Asia than vice versa. The positive effect of this may turn out to be a heightened sensitivity to the needs and agendas of their Asian counterparts on the part of the Europeans. The European Alliance for Asia Studies (EAAS) is a forum resembling the Southeast Asian ISIS on the regional level, yet with a stronger academic focus. The EAAS consists of Asia institutes from the United Kingdom, the Netherlands, Germany, France, Belgium, Spain and Scandinavia and it should be considered a framework for cooperation rather than an actor.19 Its self-proclaimed objective is the coordination of Europe-based research on Asia by providing a framework for the various institutes and bundling their resources “to the benefit of the institutes’ national research environments and the European community at large.”20 Research institutes or think tanks with a more pronounced involvement in political affairs include national centers, like the London-based Royal Institute of International Affairs, the German Institute for International and Security Affairs (SWP), the Netherlands Institute of International Relations (Clingendael), or the French Institute of International Relations (IFRI), on the one hand and explicitly European ones, like the European Policy Centre, on the other. Staff from these institutions routinely participates in track-two conferences. Individual participants involved in Asian–European track-two dialogues are recruited from the institutes named above, from universities and from national think tanks. Special cases are political foundations like the German Friedrich Ebert Foundation (FES) and the Konrad Adenauer Foundation (KAS). Both foundations operate country and regional offices in Southeast and Northeast Asia, which contribute to Asian–European academic exchange by organizing and funding meetings, workshops and conferences where track two participants meet. They also publish Asian–European journals, which provide another platform of debate for European and Asian scholars, intellectuals and senior officials.21


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Besides scholars, also representatives of the European Commission, the European Parliament, national embassies, parliaments and political parties are regular participants in track-two meetings. Yet, there is a noteworthy asymmetry of high-ranking officials: while the Asian side often sends senior bureaucrats and politicians, the European representatives usually do not belong to the top level. The European parliamentarians that attend, as in meetings held in Brussels or Strasbourg, come and go erratically, and in many cases only participate in the session for which they have been scheduled as speakers. A similar asymmetry exists with regard to keynote speakers. While in Asia track-two meetings are often addressed by the President, the Prime Minister, the Minister of Foreign Affairs or any other senior minister of the host country, European political heavy weights usually give priority to other commitments. Asian participants consciously notice such imbalances. For them they seem to buttress their belief that Asia – lofty declarations notwithstanding – still constitutes a subordinate priority for European policy-makers. Asian–European actors and activities In order to enhance the cohesion between Europe and Asia, a number of – officially or privately initiated – interregional institutes have been founded. Most of them function as facilitators for activities of other institutes and provide for funding of conferences etc. One of these institutions is the Asia–Europe Foundation (ASEF), part of the third or socio-cultural relations pillar of ASEM. ASEF, which is based in Singapore, was created in 1997 and has been facilitating academic and cultural exchange between the ASEM partners ever since. Its main task is the convening of conferences, symposiums, seminars, public lectures, youth camps, art competitions, performances, exhibitions, and so on. It is therefore a classic track-two instrument, at least as far as the academic field is concerned. ASEF lives up to both functions that the second track can take on: socialization and innovation. First of all, socialization implies that the participants get to know each other plus their respective cultural backgrounds and thus find a common basis for dialogues. This is a task that is central in the establishment of lasting and fruitful relations between the two regions. ASEF may contribute to the formation of a collective Asian–European identity and thus strengthen ASEM’s agency function. Given the cultural diversity and policy preferences of ASEM members, for Asian–European ties to grow stronger, it is indispensable to foster mutual understanding through better knowledge of the other side. Only a dialogue free of cultural stereotypes will produce the expected results. To this end, efforts are channeled into so-called program areas (international relations, governance, education/science/technology, and cultures and civilizations), all of which are accompanied by events and agendas. These include, for example, regular conferences and talks in which both academics and politicians from Asia and Europe take part. Additionally, the newly founded Asia–Europe Journal invites scholars from both regions to submit articles and thus, too, contributes to agenda-setting in Asia–Europe relations.

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Another agent is the Tokyo-based Council for Asia–Europe Co-operation (CAEC), whose members come from several European and Asia-Pacific think tanks and which has a European secretariat in Trier, Germany. Like the CSCAP or other track-two forums, it has formed working groups (called “task forces”) and dedicates itself to facilitating intellectual exchanges between Europe and Asia. The topics discussed here include migration, unemployment and institution-building. Like other second-track mechanisms, the CAEC seeks to influence the ASEM process by publishing conference reports and books, and by reporting to government agencies. It stands out from other bodies, though, because it has sincerely attempted to include European and Asian (-Pacific) academics and politicians to contribute to forming an interregional epistemic community.22 At this point, some track-two mechanisms will be introduced as examples of the Asian–European dialogue. A number of dialogues, such as the EU–ASEAN think-tank dialogue, workshops organized by ASEAN-ISIS and European political foundations and CAEC conferences, are the basis of lively interregional track-two exchanges. But what forms of dialogue take place between the (mainly) academic experts from the two regions? How do they relate to each other, what issues do they cover and how do they arrive at common positions? And, ultimately, where are the limits of these dialogues? These are some of the questions we shall now address. The Asia–Europe track-two dialogues include a number of very different activities; some of them are part of frameworks approved by governmental/ regional agencies (like the EU) and have a decidedly interregional design, while others become Asian–European dialogues in that they incorporate participants from Asian and European countries. Some workshops or conferences are part of (semi-) official processes, such as the Asia–Europe Foundation Workshop Series, the Asia–Europe Roundtables or the Asia–Europe Think Tank Dialogues, while others are initiated by national institutions or conducted in a multinational rather than interregional arena. Yet, in their focus on certain issues great congruence can be traced, owing among other things to a convergence of participants. One of the prime concerns in Asian–European relations is security (see Chapter 6 by Frank Umbach in this volume). Additionally, issues of nontraditional security have entered the interregional dialogues because with growing global interdependence and the perception of transnational security problems as threats, there is an increased demand for information and experience to be exchanged. Other recurring subjects in the political dialogues are human rights, democracy, governance and energy as well as environmental, social and human security.23 One of the dialogues, for example, is the Europe–China Academic Network (ECAN). ECAN was established in 2006 and has its focus on developments in and related to China. While academic links with Southeast Asia and Japan have existed for some time, closer second track relations with China had yet to be established. Within ECAN, research on topics relevant to both sides, like “Political and Human Rights Dialogues; Economic and Trade Relations;” and “EU–China Co-operation” will be explored at annual


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conferences.24 The first conference was held in Brussels in October 2006, featuring a broad array of China-related topics. Participants of the network are academics and experts from European institutes with a focus on Chinese studies and Chinese think tanks. The character of the Chinese think tanks, however, may pose a challenge to the informal nature of the dialogues as some of these centers are quasi-governmental and have strong ties to state agencies – this might prove to be counterproductive when it comes to discussing controversial issues openly and searching for novel ways to deal with them. Yet, engaging Chinese academics in a dialogue may eventually lead to a mutual socialization process that would benefit Asian–European relations. Another regular dialogue within the framework of ASEF is the Asia–Europe Roundtables. Topics of the biennial meetings, so far, have included “TransNational Problem-Solving in a Global Era: Towards Multi-Level Governance?” (2001) “Peace and Reconciliation: Success Stories and Lessons from Asia and Europe” (2003), and “Conflict Prevention” (2005). The Singapore Institute for International Affairs (SIIA) has acted as a host for the preparatory meetings; the last preparatory workshop was held in June 2006 in Singapore with participants from Asian and European countries. The discussions about “how regional communities in Europe and East Asia help to build or rebuild democracy in post-conflict countries” centered on questions of common experience and aimed at learning the different ways in which the regional communities handled peacebuilding, i.e. in the Balkans or in Cambodia.25 The majority of European experts focused on the institutional settings and the relevance of coordinated policy action in multilateral frameworks in their contributions, whereas their Asian counterparts stressed the importance of empowering national governments and expressed their worries about increasing external pressures from the great powers. One participant concluded that the Europeans always tried to find solutions that involve institutions, whereas in the Asian context the situation was different and institutions much weaker. He expressed the desire that the participants of Asian–European dialogues should look for problems where they have a coincidence of interests and try to learn from each other.26 This short example illustrates the chances as well as the limitations of these dialogues: communicating highly context-related experiences may be the beginning of a dialogue, but it will not suffice to foster mutual understanding, let alone learning. If both sides are willing to listen, a true dialogue – instead of a sequence of monologues – may develop. Nevertheless, it frequently happens that both sides only exchange what they consider good practice. Europeans expect that the Asian side emulates their example of regional cooperation, while Asians expect Europeans to recognize that their achievements have been the result of their own approaches, formats and methods. Some problematic issues of Asian–European political relations have been constantly on the agenda of track-two meetings. One particularly vexing issue has been the problem of how to handle Myanmar. The Europeans resented the “constructive engagement” policy of ASEAN and – in line with the sanctions they had imposed on the Burmese junta – were unwilling to accept the participation of

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junta members in ASEM and ASEAN–EU meetings after Myanmar became a member of ASEAN in 1997. In fact, so serious were the disagreements that the ASEAN–EU dialogue was stalled for three years, before it resumed low-profile with the Vientiane ministerial meeting in December 2000.27 Like in other disputes between the EU and ASEAN, disagreements about fundamental norms of cooperation lay at the bottom in the dispute over Myanmar. Interestingly, however, even in track two meetings these divergent views are rarely debated openly as even many ASEAN academics take a critical stance on the changeresistant and intransigent posture of the Burmese military junta. It is usually the new ASEAN members who – by referring to the principle of non-interference – take issue with demands of the EU that ASEAN exert pressure on the junta to initiate genuine political change. Other tangible topics of workshops and meetings have included: • • •

• •

“Global Climate Policy after 2012 – ASEM’s Contribution” (Asia–Europe Environment Forum workshop held in April 2007); “EU–Asia Relations – Cooperating on Regional Security and Integration” (workshop held in June 2006); “Asia–Europe Environment Forum – 1/3 of Our Planet: What Can Asia and Europe Do for Sustainable Development?” (workshop held in November 2005), “Comparing Access to Justice in Asian and European Transitional Countries” (workshop held in June 2005); “Global Governance – Japan–EU Think Tank Roundtable” (January 2005, Tokyo), and; “Peace and Reconciliation: Success Stories and Lessons from Asia and Europe” (conference held in October 2003).

This shows that the spectrum of topics is wide. The numerous conferences, therefore, create the space and an opportunity for generating new ideas and focus attention on problems that are habitually excluded from official track-one talks, but the drawback is that many meetings are one-stop events with little follow up and depth. The issue of institutionalizing the ASEM process is also frequently raised in second track meetings; while interregional cooperation is more or less based on low or “soft” institutionalization, suggestions to develop more structures and mechanisms to further institutionalize the official dialogue have kept reappearing since the preparatory meetings for the London Summit of 1998.28 Another increasingly important field of interregional cooperation is culture. Comprising concrete educational and cultural exchange programs, such as ASEMUS, the cooperation project involving museums, or the ASEF University framework initiatives provide space in which to lead interregional dialogues based on states’ mutual interest in each other. One very prominent aspect of Asian–European relations is the domain of intellectual exchange. It is part of the socio-cultural pillar and facilitated by ASEF. Besides the European Asia Alliance, which seeks to coordinate research on Asia in Europe, there are


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numerous bilateral ties between European and Asian research institutions such as Asia Link or Asia Duo. These initiatives help to create and consolidate the networks on which track-two dialogues thrive. The track-two meetings create knowledge communities in issue areas of global concern such as security, environment, human rights, migration or pandemics in which academics are better able to bridge differences of interest than politicians. If they managed to achieve more continuity in the dialogue themes (except for security), track-two meetings might truly live up to their innovation and socialization function. Chances and limitations What are the chances and limitations of an Asian–European track-two dialogue? Referring to the question of “soft talking” versus “hard talking” in these dialogues, one can take this differentiation as a guideline. Another benchmark might be the positive versus negative effects of some general criteria that characterize a second-track process: its membership, its issues and its working mechanisms. For one, the extent to which the second track represents an alternative to the first track needs to be shown. Second-track meetings are part of almost every process in Asian–European cooperation and complement official negotiations in different fields. Notably, not much hard talking is being done in the informal, yet more official, talks between the ASEM governments or on the second track. That is why the question of ASEM’s institutional development is a crucial point of discussion. So far, the Asia–Europe dialogue was characterized by shallow institutionalization, comparable to the cooperation format of ASEAN, typically involving informal and personal interactions and producing non-binding commitments. ASEM itself is only marginally institutionalized, so demands have been voiced to legalize and institutionalize cooperation under its umbrella. This is a discussion, however, that is repeated in most other interregional dialogue forums such as the ASEAN Regional Forum (ARF) and the Asia-Pacific Economic Cooperation (APEC). As regards the content of track-two meetings, several issues have been reappearing – such as Myanmar, security relations and the specifics of the Asian–European relationship – and some of the participants have come to form a strong core of Asia–Europe experts. Yet, criticism or expectations from the partners cannot routinely be disclosed openly, for example about a lack of interest on the European side or about a lack of openness on the Asian side, only gradual change can materialize. On the credits side, much is to be said for the ability of the second track to supplement and prepare critical issues for the first track, mainly by debating and exchanging points of view and by transferring knowledge and norms. Perhaps it has been one of the advantages of the second track that no “hard” talking had to be done, which meant that the pressure to come up with solutions for certain problems could be kept low. As the Asian–European track-two process has emulated its Asian formats in most areas, it is certainly not an instrument of conflict management (as demonstrated in the Myanmar case). The areas, in which it excels, nevertheless, are socialization and, to a

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lesser degree, innovation: all in all, second-track dialogues have already contributed to identity-building on a low level, e.g. by making intellectual exchange an Asian–European enterprise. Its greatest weight has probably been its personalized structure, which has enabled the participants to familiarize themselves with each other and to exchange opinions. On the negative side, Asian–European track-two has so far been unable to overcome the constraints that arise, for example, from cultural and political differences.29 A lack of understanding mostly on the Europeans’ part and a lack of necessary knowledge or even interest on both sides, which is much graver, have hampered progress at certain times. This especially holds true where parliamentarians or officials from national ministries are involved who are poorly informed about Asian affairs and consequently show a lack of comprehension with respect to the Asian members of track-two dialogues. This explains the occasionally rather schoolmasterly way in which some Europeans treat their Asian counterparts, lecturing them rather than exchanging opinions and information with them. This unidirectional dialogue may leave a bitter aftertaste – a feeling that the Europeans are arrogant and ignorant. Fortunately, this is not generally the case, least of all where membership is balanced and includes scholars with an intimate knowledge of their partners’ culture. While it may be advantageous at times if track-two participants get to know each other well, the other side of the coin is that an over-familiarity with each other can cause boredom and fatigue rather than productive curiosity and a thirst for knowledge. What is more, this trend could eventually lead to a stabilization of the status quo instead of pushing for progress, and it can also create a quasi-monopoly of experts, while others – perhaps those with some new ideas – are excluded. Furthermore, two problems that one could paraphrase as a lack of information and a lack of common interest apply to both sides: in the case of many Europeans who are not specialists in Asia research, it is a lack of Asia-specific knowledge and, perhaps, sensitivity. Whether it is ignorance or indifference, many think-tank experts and politicians fail to take the peculiarities of the diverse cultures and the political realities of their Asian partners into consideration. Other participants, on the other hand, sometimes lack the scientific background to fully appreciate and participate in discussions – a problem that occurs especially within the new ASEAN member states. Additionally, the success of track-two conferences is at times hampered by the inability or indifference of the participants to identify topics that are relevant for Asia–Europe relations. Returning to the epistemic community approach, we can assume that the problem might be that the required “shared set of normative and principled beliefs” is indeed missing. The very nature of interregional dialogues would make it desirable, though, to find a common basis and formulate positions of shared interest. These problems clearly call for a broadening of joint research that extends beyond the academic world. With initiatives like the annual Asia–Europe Workshop Series (EAAS and ASEF) that has successfully established joint Asian–European research ventures, Asia Link, which supports projects that include European and Asian institutes, and Asia Duo, which fosters


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exchanges between academics on the same level from one Asian and one European country each, Asian–European research can be integrated into ongoing activities at universities and other academic institutions. The quantity and the quality of the programs, nevertheless, still have to be improved. A striking, yet surprising, limitation that has an impact on Asian–European second-track dialogues is the restriction placed on the discourse by diplomatic conventions. While the main feature of the second track is supposed to be its openness regarding differing points of view and its interest in “constructive dissent,” things look rather different in reality. It is not – as one might think – only or mainly Asian diplomats or pro-government think-tank representatives that intervene when views are uttered that may contradict official politics. There are also European officials who thwart discussions that they regard as being too open or too far away from realpolitik, official government positions and diplomacy for their liking. This is, of course, a development that undermines the functions of the second track and consequently its very right to exist. A final problem that needs to be mentioned here is the actual impact that the track-two conferences have. First, one difficulty participants face is how to avoid talking at cross-purposes: experts from both sides tend to report about their own, regionally limited experiences and state their own points of view, which often only reproduce a single perspective and tend to ignore the question of its more general applicability.30 This holds true, for example, when a participant from Europe reports on the latest developments in the EU and neglects to give an outline of the repercussions of these developments for his Asian partners – or the other way round. A lack of reflection on the implications of statements made by one partner for the others is a problem that clearly needs to be avoided. Therefore, it is important to make clear how single, unconnected statements relate to each other and to show how both partners can learn from each other’s expertise. This is a matter that can only be solved by the experts participating in the dialogues. Second, the relevance of the outcomes reached in the discussions with respect to the first track is probably the most difficult issue at hand. What recommendations find their way into official debates? A look at the official statements of the summits and the working programs suggests that a relationship actually exists and, perhaps, a simultaneity of discourse.31 Main themes such as terrorism and ways to fight it, or ways to handle Myanmar clearly reflect discussions both on the first and the second track; although track-two dialogues are only rarely officially mentioned,32 some of the ideas developed in these debates can be rediscovered in Chairman’s statements.33 These include energy security and sustainable development, for example, themes that only recently advanced to ASEM’s agenda at the Hanoi Summit.34 Others, on the other hand, are missing: central ideas like democracy or human rights that rank high on track-two agendas do not explicitly appear in the statements. This suggests a greater openness with respect to track-two discussion compared to their official equivalents, albeit an openness that is not mirrored in a successful transfer to track one. Generally, one can never really prove that track-two discussions actually have

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an impact on the first track; it is indicated by a change in discourse, though, by new issues on the agenda or the adoption of a certain vocabulary, all of which point to an influence, or at least an impulse, stemming from the experts’ dialogues. In the end, the role of Asian–European track-two dialogues is an ambivalent one: while their ability to contribute to a strengthening of interregional ties is potentially high on the one hand, the reality of restrictions from above as well as from within denies it a prominent part in the ASEM process on the other. On the whole, regular meetings of academics, think-tank members and politicians have been a valuable supplement to the official, biennial ASEM summit meetings.

Conclusion To be realistic, the future potential of track-two dialogues in the ASEM process is likely to remain limited. As explained above, the actual impact of the second track on policy design is low. Even if policy recommendations were taken more seriously by the first track and implemented into political decisions, it is most probable that the political influence of second-track diplomacy would remain small. Moreover, although critical issues are currently being discussed and possible solutions charted in track-two dialogues, no way has been found so far to overcome the taboos that still dominate and restrain the official discourse. In at least two areas, however, there may be a chance for second-track mechanisms to find a niche for themselves – the first is definable as innovation and the second as socialization. Both are concerned with the role of the second track as a mediator between civil society and political leadership. First, the second track could compensate for the missing link between the first track and civil society in the ASEM member countries – people-to-people relations have been recognized as a central problem lately as the issue of participation by civil-society actors has become one of the main criticisms and demands expressed by Asia–Europe experts (see Chapter 11 by Sebastian Bersick in this volume).35 For that reason, track-two actors, many of whom are members of civil society themselves, could mediate and become a transfer mechanism between the regional institutions and civil society groups such as NGOs, trade unions or others by integrating the latter’s agendas into second-track discourse.36 This would help to set new agendas and broaden the spectrum of Asian–European political relations, and it would certainly be consistent with the second track’s agenda of norm entrepreneurship. Second, track-two processes will carry on being instruments of confidence-building between Europe and East and Southeast Asia. As long as academics from both regions plus, of course, delegates from governments and regional organizations keep meeting and talking to each other, relations between the two regions will not terminate and are also unlikely to deteriorate. They might even extend, in fact, if second-track processes were to become integral parts of the ASEM process and could act as a kind of transmission belt between debates on the level of civil society and of governments.


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The main cause for a moderately optimistic vision of the future of the Asian–European second track is the evolution of an interregional epistemic community, comprising many renowned experts and scholars who are interested in getting the bi-regional process going. While this epistemic community has not stood out on account of its great impact on Asia–Europe politics, it has nevertheless reached a degree of continuity and momentum that will hopefully ensure its survival. It will be in the hands of the track-two participants from both regions to overcome the constraints imposed on them by government officials and diplomats and to bridge knowledge gaps between them in order to use the exchange of views and ideas productively to gradually change public opinion. Even if access to government elites will be barred, the Asian–European second track could try to use its means to improve the general acceptance of the interregional process in society and consequently contribute to (a moderate) Asian–European identity-building this way.

Notes 1 For a definition and conceptualizing of “track two” see among others Louise Diamond and McDonald (1991) and Davies and Kaufman (2002). 2 A recently published article states that the number of track two processes in the AsiaPacific amounts to up to 150. See Ball et al. (2006). 3 Rüland says: It was a conservative and minimalist way of power sharing to preserve the economic miracle and, by coincidence, their legitimacy through the professionalization of government operations. Conservative and minimalist it was because they delegated some advisory and recommendatory authority to a small group of persons whose only resource was technical and scientific knowledge in a specific and narrowly defined policy sector. (Rüland 2002a: 85) 4 On the role of think tanks, see Stone (2002). 5 See, for a similar assessment, Job (2003). 6 Joern Dosch gives a number of 50.7 percent for academics, 30.5 percent for representatives of the governmental sector, 11.7 percent for the private sector, and the rest for “elder statesmen” and military (all numbers average for the years 1990–1994). See Dosch (1997: 90). 7 See Caballero-Anthony (2004); more generally also see Lee (2006), Yamamoto (1995) and Woods (1993). 8 Interview with Mely Caballero-Anthony of the (former) Institute for Defence and Strategic Studies (IDSS, now S. Rajaratnam School of International Studies) in July 2006 in Singapore. 9 Commonly, a distinction is made between “track two” and so-called “track one-anda-half,” the latter being more official and closely linked to the governmental level, while the former is more independent from political decision-making. However, the line between these two levels cannot always be drawn clearly. “Track three” is the term for the level of civil society groups, NGOs and other non-state actors. 10 The qualification that politicians attend in “their private function” is often referred to as a “polite fiction;” see, for instance, Kraft (2000: 344). 11 Rüland even remarks: “Addressing the numerous insurgencies in ASEAN member countries was anathema for the track two dialogues, as they too adopted the track one

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mantra that these conflicts constitute internal affairs and their discussion would be a violation of ASEAN’s sacred principle of non-interference” (Rüland 2002a: 90). Classically, track-two diplomacy refers to negotiations in conflict management in political crises – this is an important function that, however, does not apply to the Asian–European context. Another function is institutionalization, which is not elaborated here. Two renowned track-two forums (the ASEAN-ISIS network and the Council for Security Cooperation in the Asia-Pacific) initiated and paved the way for the foundation of the ASEAN Regional Forum; other, economic dialogues (PAFTA, ECC) contributed to the establishment of the Asia Pacific Economic Cooperation. Given the trend of soft institutionalization in the region, this achievement of the second track is rather remarkable. This function, however, is rather limited as institution-building does not happen perpetually; but it is valuable and crucial at other times all the same. For a similar argument see Higgott (1994). The aforementioned theoretical approaches tend to have an elite focus and to neglect other actors from civil society. For the case of Southeast Asia, however, this is largely in accordance with the reality of policy processes. The member institutions of ASEAN ISIS are as follows: Brunei Darussalam Institute of Policy and Strategic Studies (BDIPSS), Brunei Darrussalam; Cambodian Institute for Cooperation and Peace (CICP), Cambodia; Institute of Foreign Affairs (IFA), Laos; Center for Strategic and International Studies (CSIS), Indonesia; Institute of Strategic and International Studies (ISIS), Malaysia; Institute for Strategic and Development Studies (ISDS), Philippines; Singapore Institute of International Affairs (SIIA), Singapore; Institute of Security and International Studies (ISIS), Thailand; and the Institute for International Relations (IIR), Vietnam. Bantarto Bandoro of the Centre for Strategic and International Studies (CSIS) in an interview in June 2006 in Jakarta. See www.cscap.org/groups.htm. For a close scrutiny see Caballero-Anthony (2005). The member institutes are: International Institute for Asian Studies (IIAS), The Netherlands; Nordic Institute of Asian Studies (NIAS), Denmark; Institute of Asian Affairs (IFA), Germany; European Institute for Asian Studies (EIAS), Belgium; Asia Europe Centre (AEC), France; Centro de Estudios de Asia Oriental (CEAO), Spain; The School of Oriental and African Studies (SOAS), United Kingdom. www.asia-alliance.org/ (February 2007). The Friedrich-Ebert Foundation publishes Cooperation and Dialogue, the KonradAdenauer Foundation Panorama. See for example Maull et al. (1998). For conference programmes see Dialogue and Research Monitor of the Japan Center for International Exchange (JCIE), e.g. www.jcie.or.jp/drm/track2.html#II.50, and the websites of ASEF, www.asef.org/, and Asia Alliance, http://asia-alliance.org (February 2007). See ECAN homepage, www.ec-an.eu/. See www.siiaonline.org/siia_hosted_the_5th_asia_europe_roundtable_preparatory_ meeting_on_12_-_13_june_2006, accessed February 2007. Interview with the current Senior Research Fellow at the Institute of Southeast Asian Studies (Singapore) Rodolfo Severino in July 2006 in Singapore. See http://ec.europa.eu/comm/external_relations/asean/intro/14jcc.htm (June 2005). See for instance Soesastro and Nuttal (1997): www.caec-asiaeurope.org/IE/ Publications/index.html (June 2005). I am very grateful to a European track-two participant for the chance to interview him on July 5, 2004. I owe a great part of my inside information and views to his critical, yet well-balanced account. For instance, see articles in the volume by Delmartino et al. (1999).


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31 See Chairman’s statements from the Fourth (Copenhagen) and Fifth (Hanoi) ASEM Summits, plus statements from the Seventh Foreign Ministers’ Meeting (Kyoto), http://europa.eu.int/comm/external_relations/asem/intro/ (June 2005). 32 There is an explicit reference to the second track in Finnish president Ahtisaari’s speech at the ASEM Symposium (2006): www.asem6.fi/news_and_documents/ en_GB/1157883117277/. 33 This is visible especially in the summary of discussion (annex to the statements). 34 Here, one can trace a link between recommendations from the CAEC task forces and the goals stated in the Hanoi Summit Chairman’s Statement. See www.caecasiaeurope.org/IE/Publications/index.html (June 2005). 35 Among others, see Colomé (2001), Fort (2003) and Soesastro and Nuttall (1997). 36 Interview with See Seng Tan of the IDSS in July 2006 in Singapore; also see his article.

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Tan, S. S. (2005) “Non-official Diplomacy in Southeast Asia: ‘Civil Society’ or “Civil Service’?,” Contemporary Southeast Asia, vol. 27, 3: 370–387. Woods, L. (1993) Asia-Pacific Diplomacy: Non-governmental Organizations and International Relations, Vancouver: University of British Columbia Press. Yamamoto, T. (ed.) (1995) Civil Society in the Asia Pacific Community, Singapore: ISEAS/JCIE.

11 The democratization of inter- and transregional dialogues The role of civil society, NGOs and parliaments Sebastian Bersick

Introduction Since the end of bipolarity, non-state actors have become objects of interest for international relations theorists. With their concept of “governance without government,” Rosenau and Czempiel were among the first to stress the “growing importance of societies and the degree of interdependence between them” (Rosenau and Czempiel 1992: 270). Former United Nations Secretary-General Boutros Boutros-Ghali stated that civil society organizations are “a basic form of popular representation in the present-day world. Their participation in international relations is, in a way, a guarantee of the political legitimacy of those international organizations” (cited in Baker 2002: 122). Recently, the Cardoso Report, named after Fernando Henrique Cardoso, Chair of the Panel of Eminent Persons on United Nations–Civil Society Relations, analyzed the growing capacity and influence of non-state actors in international relations and the deficits of democracy in global governance (United Nations 2004). International dialogue forums are thus increasingly seen as mutating into arcane circles of experts who are remote from the aspirations and concerns of ordinary people at the grassroots level. To what extent do Asia–Europe relations fit this state of affairs and what has been done to give a greater voice to civil society? Who speaks for civil society in Asia–Europe relations? What can be said about the legitimacy of these representatives of civil society? Whereas the literature on civil society in democratization theory concentrates on the national level (Gill 2000; Croissant 2003), new normative approaches by theorists construct models in which global civil society represents the outline of a future world political order in which the importance of nation states as actors in global politics ceases. Theorists seek to understand whether global civil society “can serve as a constituent part of, even a means to, a democratized world order” (Baker 2002: 116). In that context, the role of civil society and parliaments in the system of Asia–Europe Meeting (ASEM) governance will be analyzed. Do non-state actors facilitate the democratization of interregional1 relations (even if some of the national political systems involved are not democracies)?

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Shaw identifies three types of institutions in which an emergent global civil society is comprised: 1 2 3

formal organizations; links of informal networks and movements global organizations “which are established with a specifically global orientation, global membership and activity of global scope.” (Shaw 1994: 650)

As will be demonstrated, interregional regimes, such as the ASEM process, are part of global civil society engagement as well. Although global in focus, the scope of civil society in the Asia–Europe dialogue is an interregional one. Civil society is “no homogeneous actor” (Merkel and Lauth 1998: 7) and definitions of the term vary. In the following, civil society actors will be defined as voluntary associations outside the realm of the state and the economy.2 Parliaments do not belong to civil society,3 but to the realm of the state. However, since they take part in the Asia–Europe dialogue, their role with respect to the democratization of interregional relations will also be discussed. In this chapter, a differentiation is made between two categories, namely, a political and a pre-political civil society. The latter has no specific function for civil society, but exercises different functions in relation to societal sub-systems including the arts, music, education, sports and religion (Pollack 2003: 54). A political civil society has a mediation and communication function between citizen and state. This function was formulated by Habermas, in whose view civil society has the function of identifying and interpreting societal problems: “Civil society consists of those more or less spontaneously created associations, organizations and movements which pick up, condense and pass on [in] amplified [form] the resonance that public problems find in the private sphere to the political public” (Habermas 1994: 443). The mediation and communication function of civil society vis-à-vis democracy can thus be an indicator with which to analyze civil societies’ role regarding the democratization of the Asia–Europe dialogue.4 This function of civil society correlates well with the democratization of the Asia–Europe dialogue. The democratization of an interregional dialogue will be defined as a process that allows civil society to participate in the politics of interregional relations (see Bersick 2004a). This participation is a process in itself since, before the beginning of the interregional dialogues between state actors, no civil society community existed between Asia and Europe, that is, on the interregional level of the international system. Thus, by performing the functions of civil society in an interregional context, the dialogue itself becomes democratized.

The formation of civil society structures in the Asia–Europe dialogue The ASEM process has been conceptualized by Asian and European governments as a top-down process. It has been called an “elitist project” (Yeo 2002: 108). Since its inauguration, ASEM actors have disagreed on the question of

246 S. Bersick whether civil society should be part of the ASEM process. The necessity to have a meeting between Asian and European leaders was an important driving force and stimulus that motivated the governments of the Association of Southeast Asian Nations (ASEAN) member countries to start a new cooperation dialogue with Europe – outside the confines of the ASEAN–EU dialogue. According to Ong Keng Yong, the former Press Secretary of the Singaporean Prime Minister and ASEAN Secretary General since 2003, the opportunity to discuss common issues at the level of the leaders was seen as the most important difference between the ASEM and the ASEAN–EU dialogue.5 Consequently, civil society actors were not conceptualized as ASEM actors in the first ASEM summit in Bangkok in 1996. A parallel (non-official) meeting of Asian and European Non Governmental Organizations (NGOs)6 and trade unions in Bangkok attempting to mirror the ASEM process was subject to harassment by the Thai government. Having been established as the so-called “missing link” between Europe and Asia, the official ASEM process is confronted with demands by civil society to remedy another flaw. In the absence of a link between governments and civil society, the latter calls for communicative channels which would complement the essentially top-down nature of governmental interactions by a bottom-up process directly involving people’s representatives. It’s only because of the activities of certain European governments and civil society forces that the elitist ASEM process has opened up for civil society actors. Even before the first ASEM summit took place in Bangkok in 1996, a conflict of interests existed among its participants concerning the role of civil society in the ASEM process. According to a Danish diplomat, it was the European side which emphasized the importance of people-to-people relations and of the role of NGOs – in the face of forceful resistance by Asian participants.7 As a consequence of this opposition, the Asian side successfully prevented the use of the term “civil society” being used in paragraph 19 of the Chairman’s Statement of the second ASEM summit in London in 1998. Although the Europeans had used the term in a draft version of the Chairman’s Statement, it was finally changed to the phrase “all sectors of society.”8 China was a major agent in this context. While elaborating on the Asia–Europe Cooperation Framework (AECF) in 1998, Beijing again tried to prevent the use of the term “civil society” in the document, substituting it by the phrase “relevant sectors of society.” This time the Chinese government failed, however. The Asia–Europe Vision Group (AEVG) recommended the involvement of NGOs in 1999, especially with regard to the promotion of political and security cooperation, emphasizing the need for “good governance and human rights” (AEVGR 1999: 37). Ultimately, and counter to Chinese interests,9 the Asia–Europe Cooperation Framework (AECF 2000) mentioned civil society together with the government and the business sectors as being the “prime actors” in the ASEM process (AECF 2000: paragraph 25). Furthermore, ASEM leaders agreed that the ASEM process: should go beyond governments in order to promote dialogue and cooperation between the business/private sectors of the two regions and, no less


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important, between the peoples of the two regions. ASEM should also encourage the cooperative activities of think tanks and research groups of both regions. (AECF 2000: paragraph 8) During their meeting in Bali in July 2003, ASEM Foreign Ministers stated that “in the margins of ASEM events, host countries may, at their discretion, organize activities with business,10 think tanks, the academe and other sectors of society” (ASEM 2003: paragraph 5). This development triggered a process that has gradually led to the inclusion of civil society actors and parliaments into the mainstream of ASEM affairs (see below). The Asia–Europe Foundation (ASEF) plays an important role in this context. The Asia–Europe Foundation (ASEF) The ASEF was founded in February 199711 and is financed by the ASEM participants. Its first Executive Director, Ambassador Tommy Koh, emphasized the Foundation’s function to overcome the danger Huntington identified in a possible clash of civilizations. This perceived threat was the underlying reason for ASEF’s objective “to promote better mutual understanding between Asia and Europe through greater intellectual, cultural and people exchanges” (ASEF 1997: Chapter 50). Although ASEF was established as a foundation, it is, in fact, an intergovernmental body that represents its participants’ interests. ASEF’s Board of Governors consists of 39 members who are designated by the ASEM participants. The overall majority of the governors are serving or former senior governmental officials from ASEM countries.12 ASEM Senior Official Meeting (SOM) leaders meet regularly with ASEF’s Executive Director “in order to ensure that [the] ASEF annual work program is coherent with the ASEM official work programme” (ASEM 2004b: paragraph 14). Unlike the ASEM process, ASEF has a legal capacity, which is why ASEM documents refer to ASEF as the only institution in the ASEM process.13 ASEF promotes, intellectual, cultural and (3) people-to-people exchanges between the two regions and serves as a coordinator and host of seminars, conferences and fora in the three issue areas. Since ASEF is supposed to be responsible for cooperation between the “civil societies of Europe and Asia” (AEVGR 1999: 34), one of its objectives is that the participation and integration of all civil society actors that do not belong to the business sector is managed by the Foundation. Criticism by NGO representatives to the effect that ASEF’s approach to the participation of civil society actors is not pluralistic enough has been countered by both former and by the current ASEF executive directors, who emphasize that NGO participation is at the centre of ASEF’s work. Nevertheless, those NGOs which organize the Asia–Europe People’s Forum (AEPF) have heated debates about ASEF’s function and role as a facilitating actor for civil society’s engagement in the ASEM process. The NGO report of a meeting of civil societies’ representatives held in June 2004 in Barcelona states:

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S. Bersick Many people expressed their frustration that ASEF only caters to the elite section of civil society. Some participants complained that they were not involved in past activities where synergies could have been formed between their initiatives and ASEF initiatives – for example, post-World Summit on Sustainable Development (WSSD) discussions. Some raised questions about the legitimacy of ASEF as a facilitating actor if its network is not broad enough to represent the various voices, sectors and perspectives of civil society. Some asked about the access of marginalized people such as indigenous peoples, peasants and grass-root people. There is still a general view that NGO voices have not been heard since 1997, and that their concerns have effectively not been addressed when compared to the interests of the business sector in the ASEM process.14

The international trade union movement has also voiced its criticism about ASEF’s work and demands that the Foundation establishes a “large-scale policy work program within ASEF and with the involvement of trade unions.”15 On the basis of this assessment by NGO representatives, it can be said that ASEF has not met the function of establishing a political civil society within the Asia–Europe dialogue, because the normative integration of civil society into an Asia–Europe dialogue has not taken place. Nevertheless, ASEF is successfully establishing a pre-political civil society within the Asia–Europe dialogue. This success stems from its many initiatives and programs16 in the fields of cultural exchange, intellectual exchange, people-to-people and public affairs that ASEF has successfully initiated, including dialogues between European and Asian nonstate actors covering such fields as religion, the arts and music. NGOs Non-governmental organizations had not been conceptualized as ASEM actors by the founding fathers of ASEM. NGOs, including Amnesty International, for instance, demand an institutionalized link between the NGOs engaged in ASEM affairs and the member governments. Encouraged by such demands, several NGOs – Focus on the Global South (Bangkok) and Transnational Institute (Amsterdam) being two important examples – organized a meeting for those civil society actors who were interested in Asian–European cooperation, but which were not allowed to participate in the first ASEM summit. The interest of those actors organized in the Asia–Europe People’s Forum (AEPF) (as the NGO grouping has called itself since its second forum in London in 1998) is “to work for an accountable, transparent and accessible ASEM process, open to the participation and inter-action of citizens in both regions.”17 The AEPF defines its role as being threefold: 1 2

to strengthen network-building within and across Asia and Europe; to analyze common interests, for example, the neo-liberal globalization and the consequences for the peoples in each region, security and military threats in Asia and Europe; and

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to provide a channel for critical engagement with the official ASEM process.

These functions were performed during the AEPF, which was held in Hanoi in 2004. The critics of globalization used the Forum to discuss the so-called “neo-liberal ideology” of ASEM countries, accusing the governments of exposing the people to the “mercy of the market.”18 NGOs discussed counterstrategies, emphasizing instead the needs of developing countries and promised to strengthen their own capacity to have an impact on global power relations. In this context, cooperation between the civil societies of Asia and Europe and also within each region is expected to lead to the implementation of a strategic vision: the building of “alternative regionalisms” which would challenge the current global economic system. The objective of this vision is to “create a world of cooperating nations within regions, negotiating their specific policies as well as cooperating with other regions on matters of shared global concern” (Brennan 2004: 3). According to Walden Bello, the Executive Director of the Bangkok-based research, analysis and advocacy institute Focus on the Global South and a leading activist of the anti-globalization movement, Southeast Asian nations will not “survive as national economies” if they do not become part of a larger economic bloc. This is because of increasing global competition from China, the EU and the US. Bello points out that the process of regionalization in Southeast Asia can only be achieved through a combination of political will and the democratization of the process of regional integration. In this context, it is argued that the planned economic integration between ASEAN and China and between ASEAN and India, through the establishment of free trade areas (FTAs), creates the specter of a “powerful Asian ‘regional’ economic response to the global dominance of the EU” or the potential dominance of Asia by China and/or India “as the emerging regional superpowers” (Keet 2004: 7). Within this broad conceptional framework, Asian and European NGOs strive for the “deglobalization of the world” through the building of socalled alternative regionalisms.19 NGOs have identified the ASEM process as a mechanism and instrument for the implementation of this macro-objective. By proposing alternatives in the policy areas of trade, investment and socioeconomic development, security and peace, sustainable environment and water and energy privatization, the members of the AEPF seek to influence regional governance in Asia and Europe and interregional governance between Asia and Europe. Because of this non-governmental approach to governance issues, ASEM participants have not tried to coopt the AEPF by making it, for instance, a formal link between the governmental and the non-governmental level that would allow for institutionalized vertical cooperation. Instead the ASEF has been designated with that function. However, the ASEM-process does not deal with social issues as the social responsibilities of governance (be it on the domestic, intra- or interregional level) or social security systems are not

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addressed.20 Asian developing countries, in particular, argue that the social agenda primarily serves the interests of industrialized countries. The introduction of social standards would increase the production costs of developing countries and thus erode their comparative edge over the economically more advanced European members. In that context members of the AEPF’s International Organizing Committee (IOC) emphasize21 that most Asian and European state actors and the European Commission share the common interest that the social dimension should not be part of the ASEM process. Moreover, “there is no such thing as a democratic Europe meeting a non-democratic Asia.” On the contrary, it is specific countries both from Asia and Europe, for example Malaysia,22 Finland and the Netherlands, that are “relatively open” and in favor of engaging the AEPF in the official ASEM process. According to one activist, the EU Commission made it “absolutely clear” that issues which were related to the social dimension should not be discussed within the ASEM process, but in other international organizations that dealt with them, like the International Labour Organization (ILO). Another member of the IOC underscores that the AEPF has “never asked ASEM governments to allow AEPF to be an official link.” The AEPF is thus confronted with the question of whether and to what extent it will be coopted by the official ASEM process. In response to the resulting functional curtailment of the AEPF, its members have developed the idea of a “social pillar” for the ASEM process. Several suggestions have been made about the format, the content and the implementation of a social dimension. The most prominent suggestion relates to the institutionalization of an “Asia–Europe Social Forum” (or “ASEM Social Forum”). This initiative would add a social pillar to the existing three pillars in ASEM, namely, the political, economic and cultural pillars. It would be the function of the new forum to analyze the social implications of ASEM initiatives in all ASEM pillars and to amend them if necessary. The demands for a social dimension within the official ASEM process can be traced back to the ASEM summit in Seoul in 2000, when the AEPF called for an “Asia–Europe Social Forum” to be established. This NGO-driven process met with the interests of the trade unions, who had also pointed to the necessity of paying attention to social themes in the ASEM process.23 It was only in the international workshop on social policies and the ASEM process in March 2002 in Berlin that NGOs and trade unions interests in ASEM affairs resulted in a common meeting and the demand to “integrate the social dimension into all aspects of the policy and practice of the ASEM process, and to assess the social effects of this process (mainstreaming)” (Fritsche 2002: 4). Although subsequently the AEPF lobbied hard, ASEM leaders did not support the proposal during their summit in Copenhagen in 2002. Nor did they agree on it during the following summit in Hanoi in October 2004.24 A decisive question for civil society actors emerges against this backdrop: “What is the extent to which civil society groups can influence the agenda and become co-opted by ASEM?” In the eyes of these actors, their work has reached a crossroads. To quote an outspoken assessment by one leading NGO activist:


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I do not think the official ASEM process has opened up for civil society nor that any of our arguments have come across in a serious way. ASEM 4 in Copenhagen was a shame in that sense. The Asia–Europe Business Forum was well received by the officials and yet we [the NGOs] were hardly given any space for dialogue.25 Asian NGOs in particular emphasize that it is still difficult for them to raise issues that are regarded as sensitive by their governments. As they pointed out during a meeting in Barcelona, European and Asian governments do not share the same understanding about the role of NGOs in society. Asian governments still suspect that NGOs will try to challenge their power and legitimacy. This explains why Asian NGOs hope to gain influence over the ASEM process through a dialogue with their European peers. Nevertheless, there is a general feeling among NGOs that they are still not viewed as equal partners within the ASEM context, “but rather as groups that could be either co-opted or ignored.”26 Such concerns were corroborated by actions undertaken by the Vietnamese government, which, as the host of the fifth ASEM summit in October 2004, vigorously tried to prevent the AEPF from taking place. Until then, AEPF meetings had more or less been held parallel to the ASEM summits. In the end, the Vietnamese government succumbed to diplomatic pressure and allowed the AEPF to convene, but successfully insisted that the meeting took place a month in advance of the summit. According to one participant, the thrust of the AEPF had changed “as the Vietnamese government, rather than the people, influenced proceedings even though the meeting was [meant to be] a people’s forum.”27 As a result of the AEPF’s activities, horizontal networking between European and Asian NGOs increased due to the Forum’s and ASEM’s interregional approach. The AEPF enables Asian and European civil society actors to coordinate and propagate their common objectives. NGO forums produced, for instance, “Peoples’ Visions,” which were handed over to the official ASEM process and emphasized the importance of human rights issues at a time when they were deliberately left out by the leaders (Brennan et al. 1996). Furthermore, in light of NGOs’ input in the policy areas of environment and human trafficking, some argue that “NGOs have become an important stake holder in the ASEM process” (Richards 2004: 8). Despite these advances, the influence of NGOs on the ASEM process has only been moderate. The actual influence of Asian and European civil society actors on policy-making and governance in ASEM affairs can, at best, be described as limited, as NGOs are excluded from formal agenda-setting and decision-making processes. Currently, there are no regular meetings or consultations between the AEPF and ASEM Senior Official Meeting leaders. Parliaments When ASEM was launched, parliamentarians were not thought of as potential ASEM participants. However, referring to the need to democratize the dialogue

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between Asia and Europe, deputies from the European Parliament started to ask for a “wider and creative role” for the elected representatives of the people (Hindley 1999: 31). Over time, it has become a characteristic of the ASEM process that parliaments are increasingly engaged in interregional dialogue – even though their role is a low-key one. An interview with a German parliamentarian who is a member of the Bundestag Foreign Affairs Committee and its ASEAN subgroup, for instance, revealed that the ASEM process is not a pressing matter for German parliamentarians. At the EU level, the European Parliament is engaged progressively. Politicians discuss working papers on the ASEM process, which the European Commission prepared, and scrutinize the results of the various ASEM summits. Regarding ASEM, the significance of the European Parliament derives from its debates in plenary sessions, its resolutions, its recommendations, interpellation and reports. The Parliament makes particular use of the few instruments available to it in order to emphasize the need for human rights commitments within Asian–European relations and the ASEM process specifically.28 It opposed Burma’s application to become an ASEM member, “deplores” the fact that this has happened29 and “condemns the total disregard of the Burma junta for the welfare of the people in Burma.”30 Through its resolutions the Parliament exerts pressure on the Commission to include “clear commitments on human rights, democracy, good governance, and the rule of law”31 in official ASEM documents. Yet the “paucity of a human rights dimension” within ASEM (Wiessala 2004: 9) indicates the clear limits of the European Parliament’s ability to influence the process. Apart from the above-mentioned instruments, interparliamentary meetings are further instruments of parliaments’ involvement in the ASEM process. National and European legislators meet in the context of the Asia–Europe Parliamentary Partnership (ASEP) and the Asia–Europe Young Parliamentarians’ Meeting. The first ASEP meeting was held in Strasbourg in 1996, the second in Manila in 2002 and the third in 2004 in Hue, Vietnam. The Hue meeting dealt with international security and the role of international law, the need for fairer and more equal global trade, the importance of cultural identity and diversity and the role of parliamentarians in Asian–European relations. In contrast to earlier meetings, the delegates decided to continue the institutionalization of the ASEP, thereby facilitating a process of horizontal networking between ASEP members and their guests.32 ASEP meetings will be conducted on a regular biannual basis before ASEM summits take place and be held alternately in Asia and Europe. Furthermore, a study group on the procedural framework for future ASEP meetings will be set up. The delegates agreed to establish information channels that further the promotion and sharing of experience in making laws on economic and institutional reform, economic integration, poverty reduction and environmental protection. Whether the cooperation of the legislatures will transcend the traditional decision-making processes of ASEM and how far the institutionalization of ideational linkages will have an impact on the normative concepts of the participants will be an interesting research ques-


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tion for a future analysis of the role of parliaments on the democratization of interregional relations. So far it has not. Apart from this, the new ASEP agenda mainly focuses on economic issues and does not consider the role of NGOs. Although it mentions the formal participation of parliamentarians in the Asia–Europe Business Forum, the participation of civil society actors in the ASEM process is not addressed. Whereas ASEP is organized under the auspices of the European Parliament, the Asia–Europe Young Parliamentarians’ Meeting (AEYPM) is organized by the Asia–Europe Foundation (ASEF). The AEYPM has been held five times: the first meeting was held in Cebu, the Philippines, in November 1998 and subsequently in Lisbon in April 2000, in Bali in November 2001 and in Venice in October 2002. The fifth meeting, in October 2003 in Guilin, China, was coorganized by ASEF and the National People’s Congress of the People’s Republic of China (PRC). Some 41 parliamentarians from 14 ASEM countries and the European Parliament exchanged views and perspectives on the theme, “promoting mutual growth and development in Asia and Europe through strengthened inter-parliamentary dialogue.” According to ASEF, the AEYPM provides: 1

2

3

a platform for young parliamentarians to develop a greater awareness and understanding of external issues that affect political, social and economic development in their countries; legislators with the opportunity to obtain an in-depth understanding of outlooks and experiences from the perspective of their counterparts from other countries through intercultural exchanges; and a network of friends with the same professional interest within the ASEM community through dialogue and frequent contact in all the aspects of the program.33

As an offshoot of the AEYPM, the Asia–Europe Foundation developed the Asia–Europe Inter-Parliamentary Dialogue (AEIPD). The AEIPD is an online Internet forum in which only former participants of the Young Parliamentarians’ Meetings are allowed to take part. Its objective is to promote dialogue among members of parliaments of the ASEM countries.34 In this context, a former head of the ASEM desk of the European Commission points out that a new “consultative assembly of representatives of national parliaments and the European Parliament” could be institutionalized. Such an assembly would increase the democratic legitimization of the ASEM process by promoting a “socialization process between officials and representatives of all sectors of society.” This is why he favors the setting up of a Social Forum, which would help improve “engagement and dialogue” (Reiterer 2002: 116). The argument that the legitimacy of a given institution is also a function of the type of actors (state/non-state) participating in it, has been recently put forward by the Cardoso Report. The Report of the Panel of Eminent Persons on United Nations–Civil Society Relations argues that involvement with civil society and parliaments helps the United Nations in its agenda-setting processes

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by way of identifying global priorities. Furthermore, the “support base” of the organization is strengthened by becoming more responsive and accountable. The report concludes that participatory democracy is becoming more important alongside representative democracy and deduces that the legitimacy in policy shaping “does not derive solely from the ballot box.” This is why “intergovernmental organizations should become more accountable, transparent and responsible to citizens globally” (United Nations 2004: 28). Though it has been demonstrated in the above analysis of the AEPF that ASEM members – at least until now – do not intend to provide the ASEM process with a democratic legitimization that is based on the concept of participatory democracy, recent developments indicate that participatory democracy is entering the ASEM process. The following two examples will serve to illustrate this development. Example I: the Barcelona meeting of civil society In June 2004, members of civil society met for two days in the city of Barcelona for an informal consultation on “Connecting Civil Society of Asia and Europe.” The meeting, which was organized by the ASEF in conjunction with Casa Asia, the International Institute of Asian Studies (IIAS) and the Japan Centre for International Exchange (JCIE), brought 187 individuals from 27 countries together. In terms of finances, logistics and delegates, it was the biggest event ASEF has initiated and managed to date. According to the organizers, one of the objectives of the meeting in Barcelona was “to consolidate” the engagement of civil society actors that are interested in Asia–Europe affairs. A further objective was to provide a platform for a dialogue on “how ASEM can promote civil societies in both regions” and “how better to integrate civil society actors into ASEF programs and on how to facilitate greater participation, closer integration and better access of civil society and its representatives into the ASEM process.” As the objectives indicate, the meeting was a reaction by ASEF to criticism by civil society that ASEF was being too elitist. In order to counter this image and the inherent dysfunction of ASEF, those civil society representatives were “directly involved who are most concerned and effected by the outcomes of policy-making and decisions on the ASEM level” (Bersick 2004a: 3). Any civil society actors who were interested in the Asia–Europe dialogue were entitled to participate. The meeting was intended to encourage the formulation of civil societies’ suggestions and recommendations,35 thereby “increasing public access to the policy level.” Six thematic clusters were discussed in workshops: governance, human rights, gender issues and labor relations; environment and urbanization; education, academic cooperation, science and technology; dialogue of civilization, inter-faith dialogue and cultures; trade, development cooperation, social issues and migration; international relations, regionalization processes and security issues. In addition, the participants met in six sectorial working groups. According to their area of expertise, the participants took part in the following working groups: research institutes, think tanks and academics; NGOs; trade


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unions; cultural institutions; media; and civil society resource organizations.36 Every workshop and working group produced a report on the outcome of their discussions. The final “Barcelona Report” was conveyed to the ASEM leaders through their Ministers of Foreign Affairs. In the case of the NGOs’ working group, which was hosted by the Asia–Europe People’s Forum (AEPF), the quo vadis status of NGOs’ involvement in the ASEM process became evident. Among other issues, the participants reflected on the following questions: “Why do we establish networks?,” “What are we networking for?” and “Who are we?” and finally on the general questions “What do we want from ASEM?” “What can ASEM do for us?” and “What can the Asia–Europe Foundation (ASEF) do for us?” In the end, the participants produced a series of recommendations and ideas that went into the Barcelona Report. One example is the recommendation that ASEF should support the participation of NGOs in the AEPF and should “foster Civil Society Organizations’ capacity building.”37 The Barcelona Report goes on to formulate three key messages: 1 2 3

the creation of a social pillar within the ASEM process is necessary; ASEM needs to improve its transparency. Civil society can act as an independent monitor to enhance ASEM’s accountability; the Burma/Myanmar issue should be resolved by a common policy approach.

However, some of the NGOs left Barcelona with the uneasy feeling that they had been used by ASEF for legitimizing the role of the Foundation as the true representative and institution of civil society engagement in the Asia–Europe dialogue. Some NGO activists were particularly concerned that their projects often suffer from funding constraints, whereas ASEF has “abundant resources,” as one activist claimed with regard to the 22,726,817 euros that ASEF received between February 1997 and March 2004 from both the European Commission and national governments.38 Whether this critical assessment of ASEF’s work with respect to the activities of NGOs has to be revised will soon be seen. In order to demonstrate the willingness and interest of ASEF to cooperate with civil society, ASEF’s then Executive Director Ambassador Delfin Colomé promised at the end of the conference that ASEF would contribute 50 percent of the cost of every initiative that was taken to ASEF by civil society. The outcome of the Barcelona meeting showcases civil societies’ demand to participate in the official ASEM process. At the same time, the Barcelona Report signals ASEF’s interest in the development of structures of participatory democracy within the ASEM process. The Barcelona Report is thus an example of the direct participation of citizens in a civil society mechanism dealing with issues relevant to them.

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Example II: the roles of the international trade union movement and of political foundations The quest for a social dimension within the ASEM process is another example of the role civil society plays in the ASEM process. Trade unions have been engaged in the Asia–Europe dialogue since they presented their first statement on the occasion of the Bangkok ASEM summit in 1996. Since May 1997, when the German Friedrich Ebert Foundation (FES) organized a workshop for Asian and European trade unions, the Asia–Europe Trade Union Forum (AETUF) has met on a regular basis and has issued statements for the ASEM summits in London, Seoul, Copenhagen and the summit in Hanoi. The AETUF criticizes the official ASEM process, inter alia, for the promotion of unregulated markets, thereby maximizing the “profits for business and political elites.” In the aftermath of the Hanoi summit, trade unions demanded that the ASEM leaders should strengthen the social dimension of ASEM and the integration of “a wider range of ASEM’s stakeholders, including workers and their trade unions, into the ASEM process.”39 In this context, the active cooperation of the Chinese and Vietnamese government with the international trade union movement and the FES indicates a positive change. During the ASEM summit in Copenhagen in 2002 leaders agreed on a “Workshop on Employment.” Following this agreement, a preparatory meeting took place in November 2003 in Beijing and another one was held in April 2004 in Hanoi. The “Informal ASEM brainstorming on the Future of Employment and the Quality of Work” in Beijing was cosponsored by the German Federal Ministry of Economics and Labor, the FES and the Chinese Ministry of Labor and Social Security. Apart from government representatives and the European Commission, non-state actors also took part in the meeting, including the Asian Employers’ Confederation, the European Trade Union Federation, the Danish Trade Union Federation, the All-China Confederation of Trade Unions and the China Employment Confederation. The second informal seminar (the “Informal ASEM Brainstorming on the Future of Employment and the Quality of Work: The decent work agenda in a globalized economy”) was jointly organized by the Vietnamese Ministry of Labor, Invalids and Social Affairs, the German Federal Ministry of Economics and Labor and the FES. Representatives from governments, trade unions and the business world discussed the issue of interregional labor and employment policies with a view to the fifth ASEM summit. Both seminars would not have been possible without the active engagement of the FES. According to a representative of the foundation, the FES “invested a lot of time” and eventually succeeded in convincing the German Ministry as well as the Chinese and the Vietnamese side to hold the seminars.40 In June 2004, an “ASEM Employment Conference” was held in Berlin (Bersick 2004b). At the conference participants also included representatives from the social partners, NGOs, the academe and business representatives. Thus, for the first time, governments and civil society met back-to-back. While the


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government delegations were meeting on the first day, civil society actors participated in the conference on the second day. This new ASEM format demonstrates that the Chinese government – whose delegation substantially outnumbered even the German delegation – is starting to cooperate with civil society actors in order to fight some of the problems that threaten the stability of the political system of the Peoples Republic of China (PRC). The great significance attached to labor issues by the Chinese government is well illustrated by a statement made by the Chinese Vice Minister of Labor and Social Security, who said: The gap between labour demand and supply, structural unemployment, the increasing urban unemployment pressure due to labor migration from rural areas to urban cities, new labor market entrance and the need for reemployment of the unemployed are the major issues to be addressed in China. With China’s entry into the WTO, the mismatch of labor quality and job demands also becomes more and more obvious . . . We are pleased to work with other countries and actively promote Asia–Europe exchange and cooperation in the field of employment and social security, which is of great significance, as major activities of ASEM.”41 However, the fact that Vice Minister Wang left after the first day and thus did not participate in the conference with civil society during the second day demonstrates the general concern that the Chinese government still has with regard to civil society. Nevertheless, the gradual inclusion of civil society actors is only possible because the government in Beijing changed its ASEM policy with regard to civil societies’ role in an interregional dialogue. Beijing has started to tolerate civil societies’ participation in the official ASEM process even though this is only in an “informal” setting. This policy change, in turn, is the result of the European policy of engaging civil society. A parallel development can be observed in Hanoi. Although Vietnam has not been a co-sponsor42 of the ASEM initiative to hold a “workshop on employment,” the Vietnamese government agreed to host the preparatory meeting. Thus, Hanoi started to cooperate with civil society actors within the scope of an interregional dialogue. As Henkel et al. point out, the inclusion of a social dimension in the ASEM process might result in a solution to the question of how “to engage civil society in the official process” (Henkel et al. 2004: 5). Whether this marks the start of a new process in which Vietnam, whose government did not use the term “civil society” in official statements until recently, accepts civil society as part of the official ASEM process remains to be seen. The holding of the AEPF in Hanoi and the way in which the ASEM governments dealt with the Barcelona Report in Hanoi during the fifth ASEM summit have been indicators of such a development.

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Towards the democratization of interregional relations? As the ASEM initiative of a workshop on “The Future of Employment and the Quality of Labour” indicates, ASEM has opened up to the lobbying and work of NGOs, trade unions and political foundations. The gradual inclusion of national legislators and the European Parliament is proceeding, even though it is clear that elected representatives themselves need to be engaged more systematically with ASEM issues. At the same time, it is a specific feature of ASEM that the European Commission functions as an active facilitator of the democratization of the ASEM process both through the engagement of civil society activities and by their funding. The Forum of Venice held in 1996 was one of the first examples of this policy, followed by the Manila Forum in 1997. The European Commission also organized an Asia–Europe Consultative Seminar with Civil Society in November 2003 in Brussels.43 In the same year, the Commission for the first time contributed funds to an ASEM-related NGO and trade union seminar in Berlin that dealt with social policies. The two case studies described above indicate that a socialization process between governmental and non-governmental actors is underway. At the same time, it is necessary to integrate civil society further into ASEM affairs in order to counter the danger of losing civil society actors’ engagement in the ASEM process. Otherwise, NGOs might want to de-link their input into Asia–Europe affairs from that of their respective governments. An opportunity for cooperation would then be lost. Therefore, in order to capitalize on civil society engagement in the ASEM process, governments which do not favor or oppose the growing capacity, legitimacy and influence of non-state actors (especially the PRC and Vietnam) need to be convinced that it is in their own national interest to form a strategic partnership between governmental and non-governmental interests in Asia–Europe relations. Time is pressing because the window of opportunity for integrating non-state actors – and especially NGOs who have contributed peacefully to the Asia–Europe interregional dialogue so far – may soon close. This is mainly because the interested civil society actors have reached a point of uncertainty after nearly ten years of lobbying (Bersick 2003). They know that they “need to determine why and how [they] should continue to lobby ASEM itself and what weight [they should] give to this in comparison to lobbying on issues and campaigns of common concerns.”44 As a consequence, the question arises as to whether non-state actors should be part of the official ASEM process or “get on with the process of assuring their own identity” (Fouquet 2004: 7). This quo vadis status was apparent in Barcelona, when one NGO activist questioned “the legitimacy of the ASEM process for speaking for civil society.” For such a scenario, Asian and European trade unions are writing on ASEM’s wall that the process “can lose public support and will become the target of growing popular concern at the negative aspects of globalization.”45 The verdict that the political pluralism of civil society impairs consensus building and “prevents the AEPF from acting either as a coherent policy community capable of shaping interests and choices or as a


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knowledge-based epistemic community capable of shaping interests and choices” (Richards 2004: 8) was tested and given explanatory power. But at the same time the Barcelona meeting marks an important change in the relationship between the official ASEM process – represented by the ASEF – and civil society: some NGOs started to cooperate with the ASEF for the first time. The Barcelona meeting shows that the role of the ASEF is evolving. The ASEF is gradually opening up to the involvement of civil society actors interested in an Asia–Europe dialogue. Therefore, a new trend is slowly becoming apparent: the Asia–Europe civil society formed through the official ASEM process (via ASEF) not only consists of a non-political civil society, but also of a political one. During the Barcelona meeting, civil society actors acquired a mediation and communication function between the citizen and the state. The ASEF facilitated this development. This trend is an important indicator of the rising legitimacy of civil society in the ASEM process and one that spurs on the democratization of ASEM and its activities. The legitimacy of civil society in the Asia–Europe dialogue increases as a result. This important process has been recently underlined by the initiative of an Asian NGO. In November 2004, the Manila-based Institute for Popular Democracy (IPD) organized a Philippine Forum on the ASEM process in cooperation with the FES. The forum that took place after the ASEM summit in Hanoi was a capability-building seminar and workshop for Philippine civil society representatives. It was a response to the feedback given by Filipino participants to the AEPF in Hanoi and their perceived knowledge gap with respect to the ASEM system and Asia–Europe relations. For the first time Asian civil society actors from one Asian ASEM country met with the objective of enhancing their ASEM-related capacity. The seminar and workshop enabled the participants to identify their own research and advocacy agenda with regard to the work they did that was related to Asia and Europe, to upgrade the quality of their involvement in the AEPF and to prepare themselves for critical and informed interaction with national, regional and interregional institutions. In this context, the 50-odd civil society actors also met with government officials. In this way, the current presidential advisor and former Philippine Foreign Secretary, Delia Domingo Albert, and the Executive Director of the IPD, Joel Rocamora, underscored the interdependence of state and non-state actors in intra- and interregional relations.46 The participation of non-state actors in international organizations or regimes such as the ASEM process raises the question of whether non-state actors are actually in a legitimate position “to speak for the people.” Whereas this legitimacy problem does not exist with reference to the participation of parliamentarians within the ASEM process, several Asian and European officials question, for instance, the legitimacy of the Asia–Europe People’s Forum (AEPF). Within the theoretical discourse on democracy and the cosmopolitan democracy school of thought, it is argued that non-state actors increasingly influence inter-state decision-making processes (see Archibugi et al. 1998). Furthermore, the growing transfer of important political decisions from the national to the

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regional and global level of governance can lead to a reduction in citizen participation in those processes. Instead of democratically legitimized governments, new transnational elites may control the agenda-setting and decision-making processes and abuse their new powers.47 In this context, Rittberger points to two alternative forms of political participation and of public control of governance and government at the global level: participation and control through “public science” and participation and control through a “government-independent public” (Rittberger 2003: 219). Rittberger argues that the opening of political decision-making networks (on the global level) to the “government-independent public” functions as a device to control and curtail executive power. The government-independent public should therefore be regarded as a “fundamental public good” (Rittberger 2003: 220). The Asia–Europe People’s Forum and a possible social pillar of the ASEM process are thus examples of the direct participation of citizens in a civil society mechanism that deals with issues which interest them. The quest of NGOs to participate in the agenda-setting processes of ASEM therefore constitutes a form of participatory democracy which receives legitimacy from its function of checking government power.48 The question of the legitimacy of civil society forums also featured in the Barcelona conference. As Rüland notes, “many advocates of people’s interests, such as the ASEM People’s Forum, are selfstyled representatives of civil society with no legitimately established mandate” (Rüland 2001: 68).49 Because ASEF has no mandate either, i.e. the authority to act as the representative of the civil society, the organizers of the Barcelona conference deliberately called the meeting an informal consultation. By doing so they intended to avoid open critique by ASEM countries that do not want civil society actors to gain legitimacy and that perceived the meeting as potentially instrumental for such a development (e.g. the PRC). Apart from that, it was the organizers’ objective to make the process of preparation, invitation and organization “entirely transparent and open” (ASEF 2004: 3). In order to achieve this, not only ASEF’s civil society database was used to identify the individuals and organizations that had received invitations (there were more than 850 names). Furthermore, the co-organizers (International Institute for Asian Studies, Japan Center for International Exchange and Casa Asia) and the so-called ASEM Contact Points in the Ministries of Foreign Affairs of the ASEM member countries were asked to recommend institutions that deal with one of the regions, Asia–Europe relations or have specific expertise in one of the thematic areas. As a result, the participating civil society actors belonged to more sectors of society than in any other event that ASEF had previously organized. Only 2.7 percent of the participants belonged to non-ASEM countries compared with almost 14 percent during the second AEPF (see Rüland 2001: 68). Furthermore, the participants’ countries of origin were quite evenly distributed; no major power, for instance, was over- or underrepresented. The source of legitimacy of the civil society representatives that took part in the formulation of the Barcelona Report is not derived from a mandate which is granted by an electorate or by an intergovernmental body. However, the meeting


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Table 11.1 Participants from civil society at the informal consultation “Connecting Civil Society of Asia and Europe” convened June 16–18, 2004 in Barcelona, Spaina ASEM Member countries Austria Belgium China Denmark Finland France Germany Indonesia Ireland Italy Japan Korea Lithoniab Luxembourg Malaysia Netherlands Philippines Portugal Singapore Spain Thailand United Kingdom Vietnam Total

No. of participants 1 1 10 3 9 + [1] 11 + [1] 13 10 1 4 8 + [1] 7 + [1] 1 1 5 8 16 + [1] 11 8 14 + [1] 10 13 11 182

Non-ASEM countries

No. of participants

Australia Canada Ethiopia US

1 2 [1] 1

5

Source: Handbook for Participants, “Connecting Civil Society of Asia and Europe. An Informal Consultation,” June 16–18, 2004, Barcelona, Spain. Notes a The Consultation participants are classified as coming from various sectors of civil society defined as Research Institutions, Think Tanks, University Departments, Non-Governmental Organizations, Trade Unions, Consumer Organizations, Business Associations, Cultural Houses, the Media, Civil Society Resource Organizations and Foundations. Participants representing Government Ministries and International Organizations, such as the United Nations, are highlighted in square brackets [ ]. b Not classified as an ASEM member at the time of the Consultation. Lithuania was admitted to ASEM, along with the nine other new EU members and Cambodia, Laos and Burma/Union of Myanmar, at the fifth ASEM summit in Hanoi, October 7–9, 2004.

made a difference as the recommendations that it produced gain legitimacy in terms of participation and contents. The Barcelona Report is thus a concrete result of the operationalization of the concept of open regionalism within the ASEM regime (Bersick 2004). By forming a public that is independent from governments to a high degree, the ASEF facilitates a process that can lead to the opening of political decision networking on the interregional level to civil society actors. The trend of ASEF functioning as a facilitator for the democratization of the Asian–European dialogue may well continue. The new Executive

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Director of ASEF, Ambassador Cho Won-il, recently pointed out that he regards the participation of civil society actors as a priority objective for ASEF’s work.50 At the same time this new output legitimacy of ASEF which the Foundation has acquired by being instrumental in forming a political civil society is restrained by ASEF’s organizational structure. It allows the 38 ASEM countries and the European Commission to block any initiative that conflicts with an individual participant’s interests. This is why ASEF cannot function as a device to control and curtail executive power of ASEM governments. What is more, it cannot do so because it has – in contrast to the AEPF – not been established to perform that function. The two different normative settings translate into differing objectives and define the function and role of both institutions. However, the Barcelona Report demonstrates that ASEF has effectively enlarged its room for maneuver. If ASEF continues to enhance civil society capacity and integrate civil society actors into the Asia–Europe dialogue as it did in Barcelona, the Foundation may well further facilitate the democratization of interregional relations between Asia and Europe. ASEF could thus become an agent for the production of a “fundamental public good” (Rittberger 2003: 220). For this to happen, it will be necessary for ASEF to continue to facilitate the forming and cooption of the political civil society into the official ASEM process. Whether this development will continue and open up new links for NGOs to influence ASEM policies needs further careful evaluation. The fifth ASEM summit in Hanoi in October 2004 was the first opportunity. Leaders were to be presented with the Report of the Barcelona meeting. If the leaders had made use of the Barcelona Report and, for example, contributed further resources towards enhancing civil society capacity-building, or agreed to build policy and operational partnerships within the interregional context of ASEM affairs, then civil society actors’ policy recommendations could have had a direct and peaceful impact on the official ASEM process. Furthermore, if the leaders had agreed to a meeting of the Social and Labor Ministers within the ASEM context, NGOs and trade unions would have made a real impact on the ASEM process. Yet neither the first nor the second happened – a future meeting of the Social and Labor Ministers was not agreed on, nor do the three documents that were adopted by the ASEM leaders in Hanoi enhance the role of civil society actors in the official ASEM process.51 This inhibiting of the further democratization of interregional relations needs to be put into context. Vietnam was certainly one of the least pro-democratic host countries for an ASEM summit. The democratic momentum that is building up on the part of state and non-state actors with regard to ASEM affairs had come a long way – from Bangkok via London, Seoul, and Copenhagen to Hanoi. An overall assessment of this development, therefore, has to take the process character of ASEM affairs and the results that the process has delivered so far into consideration. In this respect, the ASEM process is a case in point that interregional dialogue forums have the potential to develop the structural and normative preconditions to be able to engage civil society actors from different regions, thereby reinforcing the democratization of interregional relations. This


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may explain why it was only during the recent Foreign Ministers’ Meeting in Kyoto and not during the ASEM summit in Hanoi that the Ministers “welcomed a proposal to hold a ministerial meeting on labor and employment issues (. . .) as a follow up to the discussion at ASEM 5.”52 Within this line of reasoning, the 2006 ASEM summit in Finland offers an opportunity to further the democratization of the ASEM process before the seventh ASEM summit takes place in the People’s Republic of China in 2008. Within the ASEAN context, non-state actors are having a decisive impact on the development of the normative and institutional basis of cooperation (Caballero-Anthony 2005). In the ASEM context the role of civil society, NGOs and parliaments vis-à-vis the democratization of the process is currently indicating a similar trend, as the top-down structure of the process is becoming porous. While the influence of NGOs on the overall ASEM process is small as they have been excluded from processes of agenda-setting and decision-making, the ASEM regime is in a transition process that is transforming its elitist format to a more participatory one which allows for vertical dialogues and agenda-setting, as the example of the holding of the first ministerial meeting on labor and employment issues shows. Yet this is not to say that civil society has become one of the three “prime actors” of ASEM, as stated by the AECF 2000. Since the first ASEM summit in 1996, a development has taken place which adds a further dimension to the empirical study of the role of civil society in international relations. As the ASEM process shows, the emergent global civil society is also an element in interregional regimes. This development has led to the formation of a political civil society within the official ASEM process and marks a change in the role and function of civil society actors. Furthermore, the development adds an important participatory dimension to the politics of interregional relations and consequently to global governance (see also United Nations 2000: 56). Since the 2004 ASEM summit in Hanoi did not endorse this development by taking advantage of the Barcelona Report as a term of reference, the role of civil society is still in limbo. The quo vadis identity of NGOs in ASEM affairs has been perpetuated, at least until the coming summit in September 2006 in Finland. This will be the next opportunity for the governments to decide whether they want to facilitate democracy in global governance by empowering non-state actors within ASEM. Two different developments can be distinguished at present. On the one hand, the mediation and communication function of civil society has increased in the course of the first ten years of the ASEM process. Civil society actors have become progressively involved in the politics of interregional relations. Thus, participatory democracy has entered the official ASEM process via the work of NGOs, trade unions, political foundations and ASEF, and a democratization of the Asia–Europe dialogue has taken place. On the other hand, the ASEM summit in Hanoi has shown that this trend is not selfsustaining; governments have simply ignored ASEF’s new function as a facilitator for the formation of a political civil society within the Asia–Europe interregional dialogue as well as the AEPF’s demand for a social pillar within the official ASEM process.

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Notes 1 Interregional cooperation is given when two collective actors cooperate even though they belong to different regions. Interregional cooperation is also given when two collective actors and N more actors cooperate that belong to two different regions. See Bersick 2004a. 2 A functional approach identifies five criteria that need to be fulfilled in order to decide whether a societal actor belongs to civil society or not: 1 2 3 4 5

it needs to be independent from the state; its actions must be related to the community; it must act in public, thereby; inducing societal interests into the political process, while; not using force. (Lauth 2003: 224)

3

4 5 6

7 8 9

In the case of the political and legal community concepts, civil society is a part of the state. For sociologists and philosophers, focusing on the state as government, civil society is separate from the state. For the definition used in this text see also Habermas (1994: 443). They are part of the “strong public.” Habermas distinguishes between “weak publics” composed of the “informally organized public sphere ranging from private associations to the mass media located in ‘civil society’ – and ‘strong publics’ – parliamentary bodies and other formally organized institutions of the political system” (Baynes 1995: 216–217). Concerning the relationship of democracy and civil society, at least three more functions of civil society can be distinguished: societal self-defence, political socialization and normative integration (Lauth 2003: 225). The interview information used in the chapter was gathered by the author on field studies in Asia and Europe over the last five years. Definitions of NGOs vary. See, for instance, the definition offered by ASEAN: an NGO is a “non-profit making association of ASEAN persons, natural or juridical, organised to promote, strengthen and help realize the aims and objectives of ASEAN cooperation in the political, economic, social, cultural, scientific, medical and technological fields.” Guidelines for ASEAN Relations with Non-Governmental Organizations, Manila, June 16–18, 1986. www.aseansec.org/8138.htm (accessed October 2, 2003) The Economic and Social Council statute of the UN’s definition of an acceptable NGO embodies six principles. An NGO should support the aims and the work of the UN, be a representative body and be a non-profit-making body. NGOs cannot use or advocate violence, they must respect the norm of “non-interference in the internal affairs of a State,” and finally, an international NGO is one that is not established by inter-governmental agreement. See www.un.org/esa/coordination/ngo/Resolution_ 1996_31/index.htm (accessed October 3, 2003). With respect to their function, Rüland emphasizes that “though NGOs are often a mirror picture of the political culture of a society, they make an important contribution for the pluralization of society” (Rüland 1996: 63). Interview in April 1998, London. Draft Version of the Chairman’s Statement of the Second Asia–Europe Meeting, London, April 3–4, 1998. Since then, a change in China’s attitude towards the role of civil society has taken place. One early indicator of that important development is the “Informal ASEM Seminar on Human Rights,” which took place in Beijing in 1999 with participation of civil society actors from all of the ASEM countries, that is, NGOs and – mostly – the academe. In September 2004, the sixth ASEM Informal Seminar on Human Rights took place for the second time in the PRC (in Suzhou).


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10 The annual meetings of the Asia–Europe Business Forum (AEBF) enable highranking business representatives from Asia and Europe to meet regularly and build up close contacts at a political level. The Forum has developed its own agenda, dealing with a wide range of issues, for example, infrastructure investment, trade facilitation and small and medium-sized enterprises. In 1998 and 2002, the fora took place backto-back with the ASEM summits, which promoted the personal networking between private and government sectors. The European Commission describes the AEBF as follows: “Working together with the ASEM Economic Ministers, the private sector has pursued its own ASEM dialogue through the Asia–Europe Business Forum.” See: http://europa.eu.int/comm/external_relations/asem/min_other_meeting/index_min.htm (accessed March 5, 2002). 11 For the following see Bersick (1998: 83–86). 12 See asef.org/about_board.asp. 13 ASEF is “incorporated under Singaporean domestic law as a not for profit corporation with tax exempt status” (ASEF 1997: 190). 14 Report of Workshop No. 2: NGOs: Networking and Cooperation between Asian and European Development NGOs and Social Movements, Connecting Civil Society, June 18, 2004, Casa Asia, Barcelona, Spain. 15 International Confederation of Free Trade Unions (ICFTU), European Trade Union Confederation (ETUC), ICFTU Asian and Pacific Regional Organisation (ICFTUAPRO), Creating a Social Partnership in ASEM: Trade Union Statement on the Agenda for the 5th Summit of the Asia–Europe Meeting (ASEM), Hanoi, April 24, 2004. 16 For an overview of the current programme see ASEF News, No. 212/03/2004 or www.asef.org. 17 Internal background paper of the Asia–Europe Peoples’ Forum on the AEPF’s Strategies & Structure & Emerging Questions, October 2003. 18 See Santiago, cited in Brennan (2004: 19–22). The AEPF dealt with four thematic clusters, including Peace and Security, Economic and Social Security, Democratisation and People’s Rights and the Peoples’ Responses. 19 See Keet (2004: 7–13). 20 For the following see Henkel et al. (2004: 4). 21 Telephone interviews in October 2005 with two leading European NGO activists and members of the AEPF’s International Organizing Committee. The committee consists of six European and six Asian NGOs. On the European side, there are 11.11.11. (Belgium), Care (Denmark), Asienhaus (Germany), Centre Lebret. Economie et humanisme (France), Action Aid (U.K.) and Transnational Institute (The Netherlands). On the Asian side, there are the Asian Regional Exchange for New Alternatives (Hong Kong), Peoples Solidarity for Participatory Democracy (Republic of Korea), Era Consumers Association (Malaysia), Institute for Popular Democracy (Philippines), Focus on the Global South (Thailand) and Forum Aid (Thailand), www.asienhaus.de/index.php 22 The Ambassador of Malaysia to Belgium, Luxembourg and to the EU has recommended that the AEPF “should be accorded the same status as the Asia–Europe Business Forum” (Ridzam 2004: 16). 23 For the following see Fritsche (2002: 3–5). 24 Under the section on “Closer Economic Partnership” included in the Chairman’s Statement made in Hanoi, labour and social issues are indirectly mentioned. The leaders agreed to promote “sustainable economic growth, dialogue on employment, and the reduction of the development gap among ASEM partners” (ASEM 2004c: paragraph 2.3). 25 Interview in October 2003. 26 Report of Workshop No. 2: NGOs Networking and Cooperation between Asian and European Development NGOs and Social Movements, Connecting Civil Society, June 18, 2004, Casa Asia, Barcelona, Spain.

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27 Bhanravee Tansubhapol, “Hanoi hijacks a meeting of the people,” www.thailabour.org/news/04091701.html (accessed December 6, 2004). 28 See Bulletin of the European Communities May 1999; Committee on Foreign Affairs, Human Rights, Common Security and Defence Policy (2000). 29 European Parliament (2004: paragraph 1). 30 European Parliament (2005: paragraph 1). 31 European Parliament (2000: paragraph 2). 32 The Secretary General of the ASEAN Inter-parliamentary Organization (AIPO) and the Secretary General of ASEAN took part as well. See for the following ASEM (2004a). 33 Summary, Fifth Asia–Europe Young Parliamentarians Meeting, Guilin, China, October 23–26, 2003, p. 1. 34 For details, see www.asef.org/aeipd/. 35 For the complete list of the 71 recommendations see ASEF 2004. The recommendations have been differentiated into general and specific ones. The former recommend, inter alia, “dialogues between all stakeholders of Civil Society and the governments” and a “regular and direct dialogue between Civil Society representatives and the officials of ASEM.” The latter recommendations range from the need to address the plight of trafficked women as a human rights issue to the establishment of a social dimension in the ASEM process and to the launch of an ASEM think tank network. 36 Resource organizations are active in enhancing the role of civil society in both regions in order to foster greater cooperation. 37 Bersick (2004a: 6). 38 See ASEF News, MITA (P) No. 212/03/2004, p. 8. 39 International Confederation of Free Trade Unions (ICFTU), European Trade Union Confederation (ETUC), ICFTU Asian and Pacific Regional Organisation (ICFTUAPRO), Creating a Social Partnership in ASEM: Trade Union Statement on the Agenda for the 5th Summit of the Asia–Europe Meeting (ASEM), Hanoi April 24, 2004, p. 5. 40 Interview in August 2004, Berlin. 41 Speech made at the opening ceremony of the ASEM Employment Conference by Wang Dongjin, Chinese Vice Minister of Labour and Social Security, June 1, 2004, Berlin, Germany. 42 The cosponsors of the German initiative are China, Spain and Ireland. 43 See Berkofsky et al. (2003). 44 Internal background paper of the Asia–Europe Peoples’ Forum on the AEPF’s Strategies & Structure & Emerging Questions, October 2003. 45 International Confederation of Free Trade Unions (ICFTU), European Trade Union Confederation (ETUC), ICFTU Asian and Pacific Regional Organization (ICFTUAPRO), Creating a Social Partnership in ASEM: Trade Union Statement on the Agenda for the fifth Summit of the Asia–Europe Meeting (ASEM), Hanoi April 24, 2004, p. 5. 46 While Albert states “governments can’t do it alone,” Rocamora stressed that “we have no choice but to relate to governments.” Observation made by this author, November 26, 2004, Manila. The analysis underscores the findings of those theorists of international relations who do not call into question politics as practised by states. As the call for a social dimension and a “Social Forum” within the ASEM process and for the integration of the Asia–Europe Peoples’ Forum in the official ASEM process indicates, civil society actors “seek the entrance to State power” (Rittberger 2003: 201) in order to become part of the policy-making processes. In this context, it can be said that – within the interregional setting of international relations – civil society actors work with the statist preconception of the liberal democratic model (Baker 2002: 129). 47 Regarding this line of argument, see Rittberger (2003: 218–219).


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48 On the broadening from representative to participatory democracy and the role of civil society, see The Report of the Panel of Eminent Persons on United Nations–Civil Society Relations, p. 8. 49 Rüland notes that 14 percent of the signatories of the ASEM People’s Vision of the second AEFP in London in 1998 did not come from ASEM countries and that several smaller countries were overrepresented, while countries like Germany and China were “represented very weak[ly] or not at all” (Rüland 2001: 68). 50 Observation made by this author at the International Convention of Asia Scholars, August 24, 2005, Shanghai. 51 For the documents see www.asienhaus.org/. 52 ASEM (2005: paragraph 20).

Bibliography Archibugi, D. Held, D. and Köhler, M. (eds) (1998) Re-Imagining Political Community: Studies in Cosmopolitan Democracy, Cambridge: Polity Press. AEVGR (Asia-Europe Vision Group Report) (1999) For A Better Tomorrow. AsiaEurope Partnership in the 21st Century, Seoul: Asia–Europe Vision Group Secretariat. ASEF (1997) Memorandum of Association of the Asia–Europe Foundation. The Companies Act, 28.01.1997, Singapore: ASEF. —— (1997) Dublin Agreed Principles of the Asia–Europe Foundation, in: Asien, No. 64, July 1997. —— (2004) The Barcelona Report – Recommendations from Civil Society on AsiaEurope Relations. Addressed to ASEM Leaders, Singapore: ASEF. ASEM (2003) Chairman’s Statement of the 5th ASEM Foreign Ministers’ Meeting, Bali, Indonesia, July 22–24, 2003. —— (2004a) Declaration of the Third Asia–Europe Parliamentary Partnership Meeting, Hue City, Vietnam, March 25–26, 2004. Available online at: www.asem5.gov.vn/, (accessed May 4, 2004). —— (2004b) Dublin Agreed Principles of the Asia–Europe Foundation, amended on October 6, 2004, Hanoi. Attachment A of Annex I of the Chairman’s Statement of the Fifth Asia–Europe Meeting, Hanoi, October 8–9, 2004. —— (2004c) Chairman’s Statement of the Fifth Asia–Europe Meeting, Hanoi, October 8–9, 2004. —— (2005) Chairman’s Statement of the 7th ASEM Foreign Ministers’ Meeting, Kyoto, May 6–7, 2005. Baker, G. (2002) Civil Society and Democratic Theory. Alternative Voices, London: Routledge. Baynes, K. (1995) “Democracy and the Rechtsstaat: Habermas’s Faktizität und Geltung,” in S. White (ed.), Habermas, New York: Cambridge University Press. Berkofsky, A., Quigley, J. and Geest, W. (2003) Asia-Europe Consultative Seminar with Civil Society, Seminar Report, Brussels: European Institute for Asian Studies. Bersick, S. (1998) ASEM: Eine neue Qualität der Kooperation zwischen Europa und Asien, Münster: Lit. —— (2003) “The Role of Civil Society in the Asia-Europe Meeting – The ASEM Process,” in Dialogue + Cooperation, 3/2003, Singapore: Friedrich Ebert Foundation: pp. 55–60. —— (2004a) Auf dem Weg in eine neue Weltordnung? Zur Politik der interregionalen Beziehungen am Beispiel des ASEM-Prozesses, Baden-Baden: Nomos. —— (2004b) Europa, Asien und die Zukunft der Beschäftigung. Available online at: www.asienhaus.de/angebote/ahrundbrief/2004/12–2004.htm

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Brennan, B. (ed.) (2004) Linking Alternative Regionalisms For Equitable & Sustainable Development, Transnational Institute Briefing Series No. 2004/11, Amsterdam: Transnational Institute. Brennan, B., Heijmas, E. and Vervest, P. (eds) (1996) ASEM Trading New Silk Routes. Beyond Geo-Politics & Geo-Economics: Towards A New Relationship Between Asia And Europe, Amsterdam: Transnational Institute and Focus on the Global South. Caballero-Anthony, M. (2005) Regional Security in Southeast Asia. Beyond the ASEAN Way, Singapore: ISEAS Publications. Croissant, A. (2003) “Demokratie und Zivilgesellschaft in Ostasien,” Nord-Süd aktuell, vol. 2: 239–260. European Parliament, Committee on Foreign Affairs, Human Rights, Common Security and Defence Policy (2000) Report on the Commission Working Document: Perspectives and Priorities for the ASEM Process (Asia–Europe Meeting) into the new decade, (COM (200) 241) – C5–0505/2000 – 2000/2243 (COS)) Final: A5–0207/2001, May 31, 2001; PE 294.868; presented by: Elmar Brok. European Parliament (2000) Resolution on the Third Asia–Europe Meeting (ASEM 3) in Seoul, October 20–21, 2000, October 4, 2000, PE 296.999\99. —— (2004) Resolution on Burma/ASEM, PE 347.737\19, September 16, 2004. —— (2005) Resolution on Burma, May 12, 2005, paragraph 1. Available online at: www2.europarl.eu.int (accessed June 16, 2005). Fouquet, D. (2004) “Developing the ASEM Process to Its Full Potential: Bottom-Up and Parallel Initiatives,” ASEM Research Platform Newsbrief, 2004: 7. Fritsche, K. (2002) “Introduction,” in K. Fritsche (ed.) Social Policies and the ASEM Process. International Workshop, Berlin (March 4–5, 2002), Focus Asien No. 8: 3–5, Schriftenreihe des Asienhauses, Essen. Gill, G. (2000) The Dynamics of Democratisation. Elites, Civil Society and the Transition Process, Houndmills: Macmillan. Habermas, J. (1994) Faktizität und Geltung. Beiträge zur Diskurstheorie des Rechts und des demokratischen Rechtsstaats, Frankfurt am Main: Suhrkamp. Henkel, F., Herberg, M. and Schmidt, F. (2004) Für eine soziale Dimension im asiatischeuropäischen Dialog: Herausforderungen vor dem fünften ASEM-Gipfel in Hanoi, Working Paper, Hanoi: Friedrich Ebert Foundation. Hindley, M. (1999) “Involving Politicians in the Political Dialogue: A Parliamentarian Perspective,” in: W. Stockhof and P. Velde (eds) ASEM: The Asia–Europe Meeting. A Window of Opportunity, London and New York: Kegan Paul International. Keet, D. (2004) “Regional Programs in the South and New Peoples’ Initiatives,” in: B. Brid (ed.) Linking Alternative Regionalisms For Equitable & Sustainable Development, Transnational Institute Briefing Series No. 2004/11, Amsterdam: Transnational Institute. Lauth, H.-J. (2003) “Ambivalenzen der Zivilgesellschaft in Hinsicht auf Demokratie und soziale Inklusion,” Nord-Süd aktuell, vol. 2: 223–232. Merkel, W. And Lauth, H.-J. (1998) “Systemwechsel und Zivilgesellschaft: Welche Zivilgesellschaft braucht die Demokratie?,” in Aus Politik und Zeitgeschichte, 6–7: 3–12. Pollack, D. (2003) “Zivilgesellschaft und Staat in der Demokratie,” Forschungsjournal Neue Soziale Bewegungen, vol. 16, 2: 46–58. Report of Workshop No. 2: NGOs: Networking and Cooperation between Asian and European Development NGOs and Social Movements, Connecting Civil Society, June 18, 2004, Casa Asia, Barcelona, Spain.


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Part IV

Conclusion

12 Main findings and conclusion Assessing the surplus value of Asia–Europe interregionalism Gunter Schubert

The objective of this volume as laid out in the introductory chapter is to deepen our understanding of Asia–Europe interregionalism within the changing system of international relations. By generally assuming that the institutional setting of specific forums like the Asia–Europe Meeting (ASEM) or the EU–ASEAN dialogue influences the social, political and economic behavior of the actors involved, the authors have discussed and tested existing theories on the functions and benefits of interregionalism and interregional cooperation in general and its Asia–Europe variant in particular. Their overarching concern was to assess the impact of Asia–Europe interregionalism on the evolution of a system of global governance – often emphatically called a “New World Order” – and to highlight the factors and processes which allow us to explain this impact as precisely as possible. Hence, the different chapters discuss basic assumptions of interregionalism as a new sub-discipline within the field of international (economic) relations and as a conceptual approach to understand Asia–Europe cooperation as it happens in practice. This is done by providing the reader with an in-depth analysis of the elements that could shape a theoretical framework of interregionalism, followed by a number of case studies undertaken to empirically qualify the surplus value of Asia–Europe interregionalism – or its multilateral utility (Dent 2004) – within the multilayered international system. In this concluding chapter, the main findings of this volume are summarized with respect to three overarching questions: •

• •

To what extent does the practice of Asia–Europe interregionalism shape the behavior of the actors involved and how does this affect the ongoing process of interregional cooperation? To what extent does current Asia–Europe interregionalism contribute effectively to a thriving system of global governance? To what extent does empirical evidence on Asia–Europe interregionalism confirm or refute theories on regional integration as paradigmatically introduced in the introductory chapter?

Following this agenda, the chapters have been arranged in four sections: one more concerned with theoretical issues regarding the relationship between

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interregionalism and multilateralism, with Asia–Europe interregionalism as the point of reference (Part I); another one containing policy studies which help us to assess the empirical reality of Asia–Europe interregionalism by focusing on government actors (Part II); a third section, which takes account of the tensions and compatibilities between the non-government actors involved in Asia–Europe interregionalism and the future significance of these non-official forces (Part III); and a concluding section (Part IV). Part One introduces into the theme of the volume. Jürgen Rüland and Cornelia Storz (Chapter 1) contextualize research on interregional relations in political science and economics. They show how theory building on interregional relations strongly draws from the three major strands of international relations theory, that is, realism, liberal institutionalism and social constructivism. Economists have added with transaction cost theory another approach which may – as Doris Fischer (Chapter 3) argues – also be applied to interregional relations. Recent studies on interregional relations have begun to test these theoretical assumptions empirically and have thereby shown that, more than contributing to institution-building and acting as “multilateral utility” (Dent 2004), interregional relations have largely been balancing devices by the major regions of the Triad. Mathew Doidge (Chapter 2) provides us with a highly useful framework for investigating the two questions by which academic research on interregionalism should be guided: first, to what extent does the functionability of interregionalism depend on the constellations of the regions involved? And second, what effects will qualitative differences between these regions have on the quality or effectiveness of interregionalism? Of central importance to Doidge’s approach are the concept of actor capacity and the notion of actorness, the latter of which determines the degree to which a regional grouping of states can be called a genuine actor in the international system. Doidge identifies “three fundamental requisites of actorness:” action triggers, pointing at the cause of a regional actor to engage in goal-orientated collective action; policy processes/structures, i.e. the ability to take decisions in terms of authority, internal institutionalization and form; and performance structures, i.e. the tools (or capacity) to carry out a decision once being taken. Only where these requisites are met and states (or sub-states) are actively engaged in launching and coordinating activities among all the members of a regional grouping, genuine regionalism can be identified. A regional actor as defined by Doidge is thus a: territorially-based organization, with a determinable identity, constructed by states for the purpose of designing and implementing a set of policies in relation to a given issue or issues, and which are directed towards the improvement of the position of those states on that issue or issues. With his framework spelled out, Doidge then turns to the EU–ASEAN relationship in order to qualify the extent of genuine interregionalism to be found therein. Five functions of interregionalism come into play here, which serve as analytical tools for its measurement: balancing, rationalizing, agenda-setting,

Main findings and conclusion 275 institution-building and collective identity formation (see also Chapter 1). Combining (regional) actorness with the functions of interregionalism allows for the set-up of a matrix to determine the degree of interregional integration and effectiveness – or the probability of “regional integrative responses” in Doidge’s terms. Effectiveness depends on cohesiveness, while it has been observed that any further degree of intraregional integration on one side can only be triggered by an asymmetrical relationship in integration between the different regional groupings concerned. To put it in other words, the bigger the difference between the respective degrees of intraregional integration, the more likely interregionalism is to thrive, as the weaker side is induced to bring about more internal cohesiveness. Consequently, the less demanding functions of interregional dialogue may be performed, or performed to a better degree. However, if the “comparative difference in actorness diminishes,” these functions may finally become unimportant because of successful goal attainment and growing interregional cohesiveness. At this point, people will expect the more demanding functions to gain momentum and cooperation to become more substantial, pushing alliancestyle balancing, rationalizing and agenda-setting to the centre of the regionalist project. Seen against this background, EU–ASEAN relations and ASEM are only at the beginning of any meaningful integration, as Doidge states. But although Asia–Europe interregionalism is still rather non-performing with respect to the advanced functions mentioned above, it is not worthless. As Doidge concludes, the building of institutions and the formation of a collective identity – although of less importance for bringing about effectiveness and cohesiveness – do still provide “securitization,” as they contribute to the establishment of regional security communities (see the ASEAN Regional Forum, ARF). This means that interregional dialogue should not be disqualified too quickly because it fails to live up to the comprehensive framework that Doidge has introduced. Even lowintensity interregionalism can be useful to achieve one of the most important objectives linked to global governance, namely the establishment of peace between the nations and their states. In that sense, the EU–ASEAN relationship does, in fact, contribute some added value to the ongoing undertaking to establish a sustainable system of global governance. Part II of this book discusses sectoral issues of contemporary Asia–Europe interregionalism involving government actors. In her contribution addressing the relationship between economic interregionalism and global governance in both theoretical and empirical perspective, Doris Fischer (Chapter 3) asks if it is reasonable for the European Commission to engage in transregional trade cooperation with individual Asian countries or ASEAN instead of staying on the multilateral track of the WTO. The benchmark for her assessment based upon New Institutional Economics is the promotion of global governance as a system that – according to her definition – enhances global welfare by international trade liberalization and facilitation. Conceptionally speaking, Fischer differentiates between real economic integration, institutional cooperation and institutional integration, which she regards as being three different degrees by which

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regional and global governance in the above-mentioned sense can be measured. For its part, the WTO only tolerates regional economic agreements if they promise to contribute positively to its own regime and liberalization agenda in the long run. At the same time, it can be expected that the only agreements that really do this are those in which all of the participants pursue the goal of eventual global integration – and not some kind of modern mercantilism by shielding off their economies from the rest of the world. How does economic (inter-)regionalism translate into a driving force of global governance? Clearly, regional trade agreements make decision-making easier as they comprise a smaller number of actors than in global multilateral settings such as the WTO. They may thus be more efficient with respect to time, produce institutional capacity and eventually set the agenda for successful global negotiations at a later date. However, as Fischer points out, economic regionalism can also enhance the transaction costs of establishing global trade facilitation, as its institutional set-up and internal coordination are complex and time-consuming, especially with actors engaged in different agreements at the same time, whilst personal resources are usually limited. Quite probably, the gross benefit of any regional trade agreement for the establishment of a global governance system would deviate from its net benefit as assessed by the different participants. To put it more simply, what’s good for economic regionalism is not necessarily good for trade-orientated global governance. Fischer assumes that any economic deal between Europe and ASEAN would certainly be complicated and cost-intensive, making a positive contribution to international trade liberalization doubtful. However, as economic regionalism – both bilateral and interregional – seems to be the order of the day in Asia, the European Union may soon be ready to step back from its policy of exclusive multilateralism and engage in “region/one country” agreements with Asia. This again points at the surplus value question implicitly raised at the beginning of her chapter and makes Fischer’s argument run full circle. Obviously, the author is skeptical that a convincing argument can be made for interregionalism if trade liberalization is the focus of the analysis. However, if we take more objectives than just trade liberalization into account, the picture changes when it comes to the gross and net benefits of interregionalism. A combination of economic, social and political issues on the interregionalist agenda may do the trick. This assumption is checked by the subsequent empirical studies in this volume. Hanns G. Hilpert and Klaus-Jochem Kecker (Chapter 4) challenge the “missing link” argument referring to the so-called “global triangle” of North America, Europe and Asia. As to the authors’ understanding, one cannot speak of weak Asia–Europe relations in the triangle in terms of more recent trends in trade and investment flows between the two regions, as is often claimed in less sophisticated analyses. The mutual import shares of Asia and Europe are now higher than both regions’ respective imports from North America. At the same time, however, the authors show that there is, in fact, a “missing link.” Regarding exports, North America still figured as the main destination for goods from Asia and Europe between 1994 and 2005. Criticizing conventional methods of

Main findings and conclusion 277 determining interregional trade dependence and measuring the latter by socalled trade intensity indices, the authors find that the bilateral trade interdependence between Asia and Europe is low in relation to what could be expected by the global economic weight of both regions on the one hand and by their respective import and export shares with North America on the other. Also, Europe’s exports to Asia grew at lower rates than Europe’s total exports between 1994 and 2005, while the reverse was true for Europe’s imports from Asia, with China and Vietnam pushing the engine. Applying cluster analysis, Hilpert and Kecker identify two clusters of regionally orientated economies and extraregional exporters in Asia which both have strong export links to the United States and, as they put it, “reasonable” ties with Europe, again indicating a continuing imbalance in the global triangle. Interestingly, this converges with developments in Europe, where clusters of equally high degrees of regional integration can be identified. The authors’ findings thus do not derail the claim of a “missing link.” A closer look at foreign investment gives more substance to the dismantling of the “missing link” argument, however: rising European foreign direct investment (FDI) figures suggest a sustained trend, while Europe gained a leading position in most Asian countries between 1994 and 2002. In absolute terms, however, Europe is still lagging far behind US and Japanese FDI in Asia. Most importantly, the gap cannot be explained by European FDI that is mainly redirected to Eastern Europe in the context of European enlargement, as these investments are due to the shifting of labor-intensive manufacturing to cut costs at home. Clearly, Europe’s investment in Asia is strategic in nature and orientated towards global markets, which makes Europe’s relative austerity concerning Asian FDI look all the stranger. In their conclusion, Hilpert and Kecker actually confirm the “missing link” argument: trade between Asia and Europe may be considered more substantial than usually reported by a more careful disaggregation of interregional import and export flows, but in sum, the argument is confirmed, as the authors state that “Asia and Europe could do more to intensify their interregional relationship to enhance production efficiency and economic welfare.” Whether the recent trend of a more positive development can be maintained and will entail growing interregional trade intensity in the future remains to be seen. As the authors ultimately point out, more import liberalization and export promotion in both Asia and Europe are certainly critical here. Howard Loewen and Dirk Nabers (Chapter 5) evaluate the contribution of the ASEM process to the “political management of globalization” in their chapter, notably the painstaking effort of establishing global investment and trade rules on the one hand and hammering out a new international financial architecture on the other. Their empirical assessment is sobering when related to rationalizing and agenda-setting in terms of Doidge’s framework. The second ASEM summit, which took place in London in 1998, produced a conversion of interests as European “liberal” positions and Asian “interventionist” positions were considerably reconciled in the debate on reforming global financial markets in the aftermath of the so-called Asian crisis, but this common stance was only short-lived and

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could not be channeled into the discussions within the IMF, the forum where the final decisions to alter international adjustment policies would have been taken; the interregional differences on this issue proved to be just too big. What was equally frustrating was ASEM’s effort to create a joint agenda to seal the Multilateral Agreement on Investment, which had been discussed for many years. In the end, ASEM failed to produce a common position on the WTO’s trade liberalization regime, parting on the issue of labor rights in the run-up to the 1999 WTO Ministerial Conference in Seattle. The reason for ASEM’s obvious failure in these three policy fields is related by the authors to different “cooperation cultures,” a long-familiar motif used to explain the differences between Asia and Europe. In multilateral settings, as this motif goes, Europe is output-orientated and fixed on binding rules and norms concerning cooperative behavior, whereas Asia is dialogue-orientated and prefers informality and non-binding agreements. The different cooperation cultures constitute diverging material interests in the outcome of the dialogue, and the authors propose that future research should systematically integrate both aspects in order to produce better assessments of the future potential of Asia–Europe interregionalism. They further stress that it is necessary to fully understand how deeply culture is internalized within the institutional context on both sides, whilst culture itself cannot be explained without taking into full account the fact that it primarily reflects a power differential between First World and developing countries. To put one of the authors’ main points in different terms, as long as Asia still lags behind Europe (and the West) in terms of economic and political might, the regions’ different “cooperation cultures” will remain as obstacles to a sound dialogue performing of the five functions of interregionalism that Mathew Doidge has proposed. The Asia–Europe security nexus is discussed in Frank Umbach’s chapter (Chapter 6), which poses the question of whether interregionalism entails more global and regional security. His analysis reveals many deficits and missed opportunities on both sides. As the author states, the European Union has long been maintaining the stance that engaging in regional security issues in the AsiaPacific region amounts to safeguarding its own strategic interests, i.e. upholding peaceful international (trade) relations. Both its global security and nonproliferation strategy papers adopted in 2003 claim an active role for the Union in responding to security challenges and resolving international conflicts worldwide. This implies the development of a coherent security concept also applicable to Asia, which the EU still lacks for reasons of pure political opportunism on the part of their most important member states, notably France and Germany. Consequently, the European Union has so far been unable to become a strong voice in the ASEAN Regional Forum (ARF), of which it has been a member since 1994. It failed to be perceived as an essential mediator in the protracted efforts to denuclearize the Korean Peninsula when it briefly assumed such a role in 2001. Moreover, as Umbach persuasively argues, the EU has failed to live up to its many China strategy papers and become a strong partner of the People’s Republic of China, one who is capable of effectively influencing Chinese

Main findings and conclusion 279 foreign policy to the benefit of regional and global security. On the contrary, the EU’s member states have willingly succumbed to the Chinese game of divide et impera vis-à-vis Europe for commercial privileges, thereby compromising European authority and long-term security interests, not least within the ARF. If the last Commission strategy paper published in October 2006 which has been surprisingly tough on China concerning the “Taiwan issue” and Chinese military expenditure is indicative of a new EU China policy approach remains to be seen. The author strongly criticizes the EU’s dismissal of transatlantic coordination in shaping its security agenda, particularly with respect to China’s increasing militarily power. More European cooperation with the United States is essential when approaching Asia-Pacific security, but this is certainly difficult for Europe given China’s concept of “multipolarity” and its opposition to so-called US hegemony. As for ASEAN, it has done little to bring about a security concept of its own, as it sticks to its traditional “security culture” and to the sacrosanct principles of non-interference in its members’ internal affairs and consensual decision-making. Consequently, it can do little about China’s systematic efforts to dominate the existing forums of regional security dialogues and impose its own policy preferences on the participants. More institutionalization and integration is definitely needed in both Europe and Asia before any fruitful security nexus can be established. Until then, cooperation between Asia and Europe on security issues will be unable to successfully resolve issues like weapons proliferation, international terrorism or global energy security. It will also fail to deal with those hot spots which have the potential of escalating into regional and even global conflicts: the Taiwan Strait, the Korean Peninsula, and the South China Sea. Umbach’s chapter is strikingly appellative: although both the EU and ASEAN are closely entangled in global security dialogues and have acknowledged the necessity to develop coherent strategies of conflict prevention and resolution, their efforts have been hampered by the secondary interests of individual governments, established “strategic cultures” that constrain them from taking on “hard power” outlooks, and a highly ambivalent relationship to China. This all translates into much passivity when global security overlaps or collides with Chinese strategic interests. From this perspective, Asia–Europe interregionalism has not achieved much so far, even if dialogue and cooperation have been extended in the past within numerous track I and track II forums. As long as the European Union and ASEAN are unable to overcome their internal problems with respect to forging a new consensus on their respective security profiles and on how to deal with China, as Umbach suggests in his profound analysis, no qualitative jump in Asia–Europe security cooperation can be expected. In this case, the current dialogue will not bring about any more integration and institutionalization, but rather reflect the stagnation of Asia–Europe interregionalism. Martina Timmermann’s chapter on EU–Asian human rights policy (Chapter 7) strikes a more optimistic note. Timmermann’s analysis is positive as regards the gradual convergence of human rights norms in Europe and Asia via

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multifaceted dialogues between experts, which are most prominently institutionalized on the official regional level within the ASEM framework and, more specifically, in the realm of EU–China relations. Moreover, these efforts are substantially complemented by non-governmental dialogue. Doubtlessly, the problematic issue of human rights ranks high on the EU’s list of policy priorities and has been meticulously spelled out in numerous official documents since the first EU–Asia strategy paper (entitled Towards a New Asia Strategy) was published in 1994. Timmermann does not overlook the fact that the Europe-Asia dialogue on human rights lacks transparency “in terms of goals, procedures, and results obtained.” However, she states that there’s a positive relationship between dialogue and outcome, even if technical and financial assistance from Europe may be a major support factor here. The author notes many developments in China that indicate a gradual adaptation to existing human rights mechanisms. Human rights-related agenda-setting and institution-building are identified by China’s unconditional invitations to the UN Special Rapporteur on Religious Intolerance and the UN Working Group on Arbitrary Detention (1998); the government’s signing of the International Covenant on Civil and Political Rights (1998) and its ratification of the International Covenant on Economic, Social and Cultural Rights (2001); or by the foundation of the All-China Lawyers’ Association’s Constitutional and Human Rights Committee (2004). Most importantly, the EU–China human rights dialogue has helped to push Chinese legal reform forward. Applying Mathew Doidge’s framework here, Asia–Europe relations have crossed the line from low-intensity interregionalism to more substantial cooperation, at least in the field of human rights policy. This is certainly a courageous stance to take. But even though her position may be controversial, Timmermann’s observation of a learning process and changing behavior on the part of the Chinese government is worth debating. She feels this has been caused by regular interregional interaction and the institutional formality that the EU–China human rights dialogue has produced so far. Her chapter shows that much depends on the way one sees things, i.e. whether a glass of wine is half full or half empty. One is reminded here of the discussion of costs taken up earlier in this volume by Doris Fischer, namely whether costs are considered too high or perfectly appropriate is largely a subjective question depending on an actor’s (and observer’s) preference structure. Although the empirical evidence presented by Timmermann is scant, the widespread assumption that China remains untouched by this dialogue and the common belief that its human rights policy follows its own kind of rationality not receptive of the values of universalism are not particularly credible. One conclusion that can be drawn from Timmermann’s chapter is that it makes a valuable hypothesis that should be further tested against the negative assessments of critics of the EU–Asia human rights policy who deride it as idle and useless talk. The motifs and contents of interregional policy cooperation are further addressed by Werner Pascha’s chapter (Chapter 8), which analyses Europe’s participation in the Asian Development Bank (ADB) and points out some general problems concerning how non-regional actors can be integrated in

Main findings and conclusion 281 regional organizations. Given the fact that many EU member countries have opted to be shareholders of the ADB and wish to become important lenders of ADB money for various reasons (some of them surprisingly inconsistent, in fact), the author first asks about the chances of a European agenda getting implemented in this body (although it does not exist yet). Applying the Johnston Power Index methodology, Pascha neatly shows that Europe could make a real difference to the ADB’s decision-making processes if it managed to forge a unified approach and win over other members of those ADB voting groups in which European member countries are represented; assembling a voting share of just 22.4 percent, Europe’s voting power would come close to 50 percent, meaning that if Europe, i.e. the EU, wanted to act as a homogenous interest group and have a common agenda to carry through, it would have the capacity to determine a large number of the ADB’s policies. This is a rather abstract notion, however. Speaking purely in terms of mathematics, Europe could not make an independent stand against a non-supportive US or Japan, whilst any determined move that went against the interests of Asian ADB members would be a tough sell in the region. It’s equally important to note that a coordination of interests within Europe would create high transaction and agency costs, whereas exit is a non-option in a surrounding that does not provide any alternative channels for development aid and technical assistance. Also, a European disengagement would be perceived very negatively in Asia and cause Asia–Europe relations to deteriorate. Pascha also points out the complex principal-agent problem in getting things done at the ADB, as there are multiple layers of agents down the chain of command which cannot be controlled effectively. Unclear goals, ineffective voices and a dysfunctional organization, in the author’s words, all raise the question of whether European participation in the ADB makes any sense at all. The author thus follows more skeptical assessments of interregionalism, using arguments heard in institutional and political economics. At the same time, however, Pascha adds that European participation cannot be revoked without paying a high price for the long-term objective of cooperative relations between Asia and Europe. Having said this, the author makes a proposal stating the minimal conditions for productive participation. Pascha places emphasis on the necessity to generate European bargaining power via a clear-cut labor division within the European Union: the EU should concentrate on multilateral aid based upon a coherent policy approach to be pursued in the ADB (or new MDBs), while all bilateral aid is handled by individual member countries. In the author’s view, such a reorientation and unification of Europe’s ADB policies promises to give it a stronger voice in Asia; it may also help to shape a common European foreign and security policy and initiate a new era of cooperative Asian multilateralism at the same time. At present, this is a rather unrealistic vision, given the current state of European political integration and Asia’s reservations with respect to binding multilateral agreements. However, as the reader is reminded by Frank Umbach’s contribution, productive Asia–Europe interregionalism cannot be fostered if Europe fails to make progress in speaking and acting as one body.

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Issues related to the extent of Asia–Europe interregionalism driven forward by non-government actors (multinational enterprises and civil-society actors) are discussed in Part III. Andreas Moerke adds a micro-level study to what are mostly macro-level contributions in this volume by focusing on the specifics of merger and acquisition activities (M&A) between Japanese and European companies (Chapter 9). He thus highlights the problems of integrating different institutional regimes and corporate governance cultures when interregionalism boils down to entrepreneurial practice. His point of departure is the ongoing – though somewhat lessening – resistance of Japanese markets to so-called “out–in transactions,” i.e. foreign companies partly or completely acquiring a Japanese corporation within Japan. Clearly, M&A has long been tolerated as a means of industrial policy in Japan, yet it has hardly been accepted as an everyday means of operating capital markets. The reason behind this – fortified by other features like cross-shareholding, a high degree of domestic institutional stock-ownership and a restrictive legal system – has always been the effort to protect domestic companies from hostile takeovers and defend the Japanese economy against foreign “intrusion” in general. However, Moerke reports that times are changing in Japan, as can be seen by encouraging modifications to its laws, especially since the late 1990s in areas such as accounting, taxation and trade. As it seems, the country is slowly coming to terms with foreign investment and the international demands of more open domestic markets. In case studies on the merger of pharmaceutical giants Roche and Chugai on the one hand and automotive players Bosch and Zexel on the other, the author describes the institutional adaptations undertaken during the respective merger processes. In both cases, the Japanese side wanted the merger to take place (it was not hostile to it, at least) and responded positively to corporate reorganization, including the change of long-term schemes of human resource management. The study shows that Japan’s economy is cautiously opening up, even if this does not imply an abandonment of its institutional regimes and its corporate governance culture. On the whole, however, although recent developments in Japan are promising, Asia’s market and regulatory institutions remain underdeveloped and hence make cooperation with foreign companies difficult. Moerke’s final hint at the lack of research concerning the question of whether the convergence of institutional regimes and corporate governance is really inevitable in the process of European–Japanese M&As is important. As his chapter suggests, convergence may be the end result of a longer process of creative mutual adaptation in which success is only possible with the constructive cooperation of all actors. The Japanese case may be prone to criticism for those opting for unconditional liberalism of goods and capital markets, but be more encouraging to those who see economic interregionalism as the chance to communicate diverging enterprise cultures to the benefit of both material interest and normative standards concerning national identity and social cohesiveness. The final two contributions to this volume are as much normative as they are based upon empirical insights, hence telling us much about the shortcomings of contemporary Asia–Europe official relations and interregionalism. While one

Main findings and conclusion 283 deals with the somewhat opaque track II diplomacy that is taking place between Asia and Europe, the other is interested in the role of civil society and its aspirations to become an accepted stakeholder in the ASEM process. Interestingly, both authors talk partly about the same organizations involved in the formation of non-official Asia–Europe cooperation. Due to the existence of a more personalized and less institutionalized “cooperation culture” in Asia, track II diplomacy may be accredited with particular significance in shaping official agendas and influencing government policy, as Katja Freistein (Chapter 10) hypothesizes. It builds “epistemic communities” of professionals with expertise that less well-informed politicians cannot afford to ignore when intending to make cooperative strategies work in the context of Asia–Europe relations. Freistein identifies two eminent functions of track II diplomacy: socialization and innovation, the first of which has so far proven to be the most important aspect in the Asian–European context. As a matter of fact, track II dialogues are strongly entrenched here, with the Council for Security and Cooperation in the Asia Pacific (CSCAP) figuring as the most prominent entity of this type, although CSCAP is an Asian track II organization closely linked to the ASEAN Regional Forum, with European experts being invited to participate on a regular basis. Turning to more institutionalized forms of European–Asian track II diplomacy, Freistein names, among other, the Asia Europe Foundation (ASEF) and the Council for Asia–Europe Cooperation (CAEC), both directly related to the ASEM process. Whereas ASEF’s mission is to promote social and cultural relations between Asia and Europe, a task for which it is provided with substantial amounts of money from ASEM’s member states, the CAEC, like CSCAP, is a scholarly undertaking focusing on specific policy fields common to Asian–European interests such as migration and unemployment. Freistein contends that track II diplomacy has so far contributed positively to the ASEM process by facilitating the rise of an influential group of academics who discuss all of the sensitive issues that have been shelved from the official agenda for reasons of political sensitivity. It has been most effective in performing the functions of socialization and – to a lesser degree – innovation, as it not only institutionalizes political dialogue on more controversial matters, but also partakes in the project of building an Asian–European identity. However, track II diplomacy has been able to do little so far to lift certain conflict-resolution measures to the official level of ASEM and suffers from internal deficits such as little knowledge about Asia on the part of many Europeans and, on a more general level, the non-existence of a “shared set of normative and principled beliefs” of the actors who are involved. All in all, Asia–Europe track II diplomacy seems to be most important as a form of compensation for another “missing link” between the first track and civil society, the latter still being politically marginalized in many Asian countries. In that sense, while the official ASEM process is bickering over issues like Myanmar and still suffers from poor intra-regional policy coherence, track II diplomacy can at least solidify the existence of an Asia–Europe epistemic community that, as the author believes, will

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have a positive impact on the first track as well in the long run – at least in the construction of an Asian–European identity-building. The “missing link” between the official ASEM process and civil society that Freistein has pointed out is directly addressed in Bersick’s chapter at the end of this volume (Chapter 11). Its relevance is related to the underlying assumption that only the integration of civil society’s interests into ASEM can guarantee its democratic nature and its positive value for people on both continents. While this assumption is to some extent debatable, as it does not, for instance, consider the problem of many NGOs’ internal (non-democratic) structures, Bersick is interested in the question of who legitimately claims to represent civil society in Asia–Europe relations. He distinguishes theoretically between a pre-political and a political civil society, of which only the latter performs the Habermasian functions of mediation and communication between the citizens and the state – functions which may serve as the best indicator of the degree of democracy currently attained in Asia–Europe interregionalism. As a matter of fact, ASEM has seen a good deal of quarrelling over the integration of civil-society actors since its inauguration, with particular Asian member countries – most prominently the PRC – rejecting such dialogue for reasons exclusively linked to domestic politics. However, the Asia–Europe Cooperation Framework (AECF) promulgated in 2000 mentioned civil society – next to the business sector – as one of the “prime actors” in the ASEM process. Since then, even Chinese obstinacy has given way to a more compromising stance towards the participation of European and Asian NGOs in ASEM’s agenda-setting procedures. Bersick enumerates the most important players in this field and puts particular emphasis on ASEF, which he regards as being the only genuine institution involved in the ASEM process. Although branded elitist and a closed-door institution by many NGOs, it has made a great effort to change this image, not least by initiating the Barcelona Report in 2004, the most important civil-society policy document passed on to ASEM governments so far. Barcelona may have changed civil society’s skepticism of the ASEM process, as Bersick notes, and may have triggered a change within ASEF as well. It could now become a true representative of and political actor in civil society in Asia and Europe after having remained in the pre-political realm for a long time. Although the results of the Barcelona Report were not incorporated into the agenda of the ASEM summit in Hanoi, it must still be noted that this document embodies a new stage of cooperation between ASEM and civil society that is proof of a shared collective identity among those non-official forces that are actively engaged in Asia–Europe relations. As Bersick predicts, ASEF is likely to play an important role in the future by ensuring that this development becomes sustainable and that the ASEM process will evolve into a forum where governments and non-state actors engage in communication on and the mediation of conflictive issues of mutual concern, notably in the realm of social policy and human rights. What can finally be said concerning the central point of the scholarly discussion on contemporary interregionalism, which refers to its surplus value for

Main findings and conclusion 285 bringing about a sound system of global governance? The studies in this volume have carefully examined the functions of interregionalism – most notably rationalizing and agenda-setting – to assess this surplus value and have come up with some fairly mixed results. Whilst most of the case studies caution against giving Asia–Europe interregionalism too much credit for substantially complementing or even strengthening multilateralist forums as they exist today, there is also considerable optimism regarding its capacity to establish and stabilize common norms and values in Asia and Europe, i.e. identity-building. Most of the contributions in Part II, which analyses governmental relations, assess the outcome of ASEM in a skeptical tone. The tenor in Part III, however, analyzing nongovernmental relations, is somewhat more optimistic. Several policy fields exist for which the absence of a united voice in Asia and Europe result in a weak contribution of ASEM to an emergent structure of global governance, namely foreign policy (Loewen and Nabers), foreign trade policy (Pascha; Hilpert and Kecker), security policy (Umbach). Only in the field of human rights policy, the undertone has been less critical (Timmermann). At the same time, however, all of the contributions in Part III (Moerke; Freistein; Bersick) assign an important role to ASEM and related discussion forums with respect to the forming of identities and the changing of long-established practices. In Moerke’s paper especially, it becomes clear how interregionalism materializes in detail, and how the long-established rules – concerning human resource management in this case – adhered to by two different actors may change as a result of mutual direct contact. Culture and norms, so-called “informal institutions,” which are often identified as barriers to cooperation and institutionalization (see Loewen and Nabers, Chapter 5, this volume), are thus not understood as static, but can be modified by an evolving institutional setting of mutual cooperation. On the one hand, it becomes clear then how cognitive processes are determined by previous experience and interaction, as argued by social constructivism, while on the other, we see how they can be re-shaped by developing common institutions. This result seems to support the thesis that the specificity of the actors and their interaction plays an important role for the outcome of cooperation. Quite obviously, non-governmental actors possess more similar characteristics and are ex ante more unified through common interests than government actors are. Moreover, at least in the case of M&A, it becomes clear that when an agreement on common institutions is found, the change of practice may be more easily achieved than expected. Even if much of what has been said on interregionalism in this volume seems to be based more on hope and desire than on empirical evidence, it cannot be overlooked that building common norms and values needs time since the process of Asia–Europe integration has only just started. Currently, it is hard to see that Asia–Europe interregionalism has achieved a degree of institutionalization that clearly constrains the thinking and behavior of the actors involved. It thus seems to be justified to question the optimistic undertone that characterizes so many academic studies that apply a “political science approach.” Perhaps they should be more frequently counterbalanced against arguments like those

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made by Doris Fischer, who asked by the economic approach she took here: can (Asia–Europe) interregionalism really help multilateralism to thrive or does it raise the opportunity costs by setting up a platform that actually complicates decisions that have to be taken (or that it would be better to take) in multilateral forums anyway? Still, we have learned from the introduction to this volume and from its various chapters that a static focus on costs and (immediately) measurable benefits may underestimate the “veiled” and long-term effects of regional institutional arrangements. Besides this, time matters. We need more empirical research to test the surplus value of interregionalism, and this book provides the necessary analytical tools to be used and some of the relevant topics to be investigated in this endeavor. For the time being, the surplus-value assumption should be treated more as a possibility than a teleological certainty – or a hypothesis that still needs convincing verification. The current performance of Asia–Europe interregionalism does not allow for an unequivocal verdict yet, and it remains to be seen whether it really has the capacity to coin mental models that make global peace and welfare more probable. The future will tell.

Bibliography Dent, C. M. (2004) “The Asia–Europe Meeting and Inter-regionalism: Toward a Theory of Multilateral Utility,” Asian Survey, vol. 44, 2: 214–236.

Index

absolute values, trade volumes 74–6 Acharya, A. 13, 224 acquisitions: case studies 210–17; economic structure of Japan 206–10; findings 282; Japan experience 202–5; overview 201–2 action triggers 39 actor capacity, definition of 38–43 actorness 20, 33–8 actors: and activities track-two dialogue 231–5; Asian track-two dialogue 229–30; findings 274; Pacific track-two dialogue 230–1 Adler, E. 145, 225 Administrative Punishment Law (CPPL), China 163 African Development Bank (AfDB) 177–8 agenda-setting 15–17, 19–20, 43, 44–5, 48–50 Aggarwal, V.K. 6, 16, 18 Aldenderfer, M.S. 81 Allen, David 35, 36, 37, 39 “alliance-style” balancing 43–4, 48–50 Alliot-Marie, Michèle 124 altruistic motives, ADB participation 178–83 Americas, trade data 81–7 “anti-separation law”, China 126–7 arms embargo, China 123–8 Asia Pacific Round Tables 132 Asia Pacific track-two dialogue experience 226–7 Asia policies, human rights in 150–1 Asia–Europe Business Council 8 Asia–Europe Business Forum (AEBF) 103 Asia–Europe Cooperation Framework (AECF) 8, 103, 246 Asia–Europe Foundation (ASEF) 103, 231

Asia–Europe Inter-Parliamentary Dialogue (AEIPD) 253 Asia–Europe Journal 232 Asia–Europe Meeting (ASEM): conceptual and theoretical foundations 97–9; Contact Points 260; debate on international financial reform 104–6; dialogue on investment 106; dialogue on trade 107; Employment Conference 2004 256–7; findings 277–8; formation of 8, 15–16; global governance role 108–10; human rights dialogues 152; multilayered system of governance 99–101; origins of 101–3; overview 95–7; Philippine Forum 259; process 245–63; research on 11, 12–13; Senior Official Meeting (SOM) 247 Asia–Europe Parliamentary Partnership (ASEP) 252 Asia–Europe People’s Forum (AEPF) 247, 248–51, 254, 257, 258–60; International Organizing Committee (IOC) 250 Asia–Europe Roundtables 233 Asia–Europe Trade Union Forum (AETUF) 256 Asia–Europe Vision Group (AEVG) 8, 246 Asia–Europe Workshop Series 236–7 Asia–Europe Young Parliamentarians’ Meeting 252, 253 Asia–European Foundation (ASEF) 8, 247–8; Barcelona meeting 254–5, 257 Asia–Pacific Economic Cooperation (APEC) 15–16, 174 Asian Development Bank (ADB): European interest in 178–83; European strategy proposal 193–5; findings 280–1; Long-Term Strategic Framework (2001–2015) 179, 192; problems of European participation 192–3; voice and threat of exit 183–8

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Asian Development Bank Fund (ADF) 174, 176, 188–9 Asian Development Bank Institute (ADBI) 177 Asian financial crisis 63, 91, 104–6 Asian region, trade data 81–7 Asian–European track-two dialogue 229–38 Association of Southeast Asian Nations (ASEAN): +3 process 105–6; ASEANPOL 130; Charter 158–9, 165; collective identity 13–15; Commission for the Promotion and Protection of the Rights of Woman and Children 158; Declaration of ASEAN Concord II (1003) 159; Declaration on Joint Action to Counter Terrorism (2001) 129; findings 274–5; human rights 156–64; institutional integration 69–70; and multilateral security cooperation 128–9, 131, 135; Programme for Regional Integration Support (APRIS) 46; Regional Forum (ARF) 128–35, 224, 229; trade agenda 174; Working Group for a Human Rights Mechanism 145, 152–3, 157–60 automotive supplying industry, Japan 213–17 Balassa, B.A. 10, 60 Barcelona Report (2004) 254–5, 257, 260–1, 262 Bello, Walden 249 Bersick, Sebastian 8, 14, 16, 18, 19, 22, 244–63, 284 bilateral EU–China human rights dialogue(s) 153–5; impact on “software” institution-building 160–4 Blashfield, R.K. 81 book overview 20–3 Bosch 213–17 Boutros-Ghali, Boutros 244 Bretherton, C. 39 “Bretton Woods institutions” 57 Bruhle, T. 3 Budzinski, O. 9 Burrows, R. 210 business transfer transactions 204–5 Buzan, B. 131 Caballero-Anthony, M. 129, 225, 263 Cambodia 43–4, 128 Camroux, D. 12, 46 capability–expectations gap 36 capital market structures, Japan 206–8

Caporaso, J. 37–8, 39 Cardoso Report 244, 253–4 Cecchini Report 9–10 Charter of Fundamental Rights, EU 145, 146–7 China: civil society 257; EU arms embargo 115, 117, 123–8, 135–6; FDI 89–91; human rights 151, 153–64, 165–6; security relations 121–8, 131–3, 135–6, 153–5, 160–4; trade 79–80 Chirac, Jacques 124 Chügai 210–13 civil society: Barcelona meeting of 254–5, 260–1, 262; findings 284–5; formation of structures 245–57 Claessens, S. 218 Clark, A. 189 cluster analysis, trade data 80–7, 92 collective identity-building 15–17, 43, 45–50 Commercial Code, Japan 209, 210 common interest, lack of 236–7 communication channels, ADB 188–9 components approach to actorness 38–9 conceptual clarifications 5–7 conceptual foundations, ASEM 97–9 “concert of regions” 18 Cooper, E. 115 cooperation cultures 108–10 coordination, ADB 190 Cornelius, P. 58–9 Corporation Law (2005), Japan 210 Council for Asia–Europe Co-operation (CAEC) 15, 232 Council for Security Co-operation in the Asia Pacific (CSCAP) 229 Criminal Procedure Law, China 163 cross-shareholding, Japan 206–8 Culpeper, R. 174, 189 cultural differences 236 Custody and Repatriation (C&R) Measures, China 162 Czempiel, E.-O. 244 Davignon Report 33 defence expenditure, China 123 democratisation, interregional relations 258–63 Dent, C.M. 12, 16, 17, 18, 100, 102, 273, 274 development banking 173–95 diplomacy: Asia Pacific experience 226–7; Asian–European actors and activities 231–5; Asian two-track actors 229–30;

Index 289 chances and limitations 235–8; European two-track actors 230–1; findings 283–4; functions 227–9; overview 224–5; theoretical approaches 225–6 diplomatic conventions 237 Doctor, M. 3 Doidge, M. 4, 19, 20, 21–2, 32–50, 274–5, 280 Dreis-Lampen, B. 7 East Asian Economic Caucasus (EAEC) 8 East Timor 129 Eastern Europe, FDI 89 economic effects, liberalization 66–8 economic incentives, human rights 155–6 economic integration 60–2 economic structure, Japan 206–10 Edwards, G. 4, 11 Eminent Persons Group (EPG) 159–60 energy interdependencies 122 epistemic community approach 154–5, 225–6 EU–ASEAN transregional human rights dialogues 157–60, 165 EU–Asia strategy papers 150 EU–China bilateral dialogues 151–6, 160–4, 165 EU–China Legal and Judicial Cooperation Program 155–6 EU–China Network for the Ratification and Implementation of the UN Human Rights Covenants 154–5 Eurocentrism 12–13 Europe–China Academic Network (ECAN) 232–3 European Alliance for Asia Studies (EAAS) 230 European Asia Alliance 234–5 European Commission: and China 122–3; Country Strategy Paper 2002–2006 156; EU–China Strategy Papers 127; as facilitator of ASEM process 258; and human rights 147–8, 154–6; “New Strategy for Asia” 103; Opinion on the Intergovernmental Conference 37 European Community Humanitarian Aid Office (ECHO) 156 European Council 148–9, 160–1; Working Party on Human Rights (COHOM) 147–8 European Court of Human Rights 147, 153 European Initiative for Democracy and Human Rights (EIDHR) 148, 149

European Parliament 122, 126, 147, 252 European Political Cooperation (EPA) 33, 44 European region, trade data 81–7 European Security and Defence Policy (ESDP) 115, 121, 133–4 European Union (EU): and ARF 129–34; and ASEAN 128–9; Chinese arms embargo 123–8; Code of Conduct on Arms Export 124–5, 126, 149; Common Foreign and Security Policy (CFSP) 114–17, 121, 133–4, 148–50; Comprehensive Strategy for Future Relations with Southeast Asia (2003) 115; Directorate General for Development 148; human rights 146–51, 156, 165–6; Human Rights and Democracy program 156; institutional integration 69–70; international identity 37; Ombudsman 147; security cooperation in Southeast Asia 128–34; security engagement in Northeast Asia 117–28; strategy papers 150–1 EUROPOL 130 exit, ADB 183–8 export relationships, cluster analysis 80–7 Fawcett, L. 40 Federal Ministry for Economic Cooperation and Development (BMZ), Germany 189 Fédération Internationale des Driots de l’Homme (FIDH) 165 financial assistance (FA) 176–7 Fischer, Doris 22, 57–70, 274, 275–6, 286 Five-Power Defence Arrangements (FPDA) 114 foreign direct investment (FDI) 88–91, 97, 99 foreign policy, human rights in 148–50 forums, functions of 15–17 Fouquet, D. 258 free trade areas (FTAs) 249 Freistein, Katja 22, 223–39, 283–4 Friedrich Ebert Foundation (FES) 230, 256 Friedrich Naumann Foundation 153 Fritsche, K. 250 Furubotn, E.G. 59 G7 186 Germany: and ASEM process 252; development policy 181, 182, 189, 190–1; security relations 124–5; trade 79–80

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Gilson, J. 5, 6, 17, 46, 48 global governance 58–9; multilayered system of 99–101; and multiple regionalism 62–5; and regional integration 60–9; through regionalism 65; versus regionalism 66–9 global issues, ASEM cooperation on 108–10 global level human rights dialogue 151–2 globalization: concept of 97–9; management of 101–7 governance 58–9; EDBs 177–8 government failure 175–6 governmental human rights dialogue 153–4 group structures, Japan 206–8 Haas, P.M. 145, 225–6 Habermas, J. 245 Haggard, S. 9, 17 Hajer, M.T. 225 Haley, U.C.V. 218 Hänggi, H. 4, 5, 6, 11, 17, 32, 41, 46, 96 Hanrieder, W.F. 35 “hard talking” 235 “hardware” institutions 147–8; impact of transregional dialogues 157–60 Heinz, W.S. 149 Held, D. 57, 97 Henkel, F. 257 Herrberg, A. 36–7, 39 Herrmann-Pillath, C. 9, 17 Herzog, Roman 146 hierarchical cluster analysis 81 Hill, Christopher 36, 38, 125 Hilpert, Hanns Günther 22, 73–92, 276–7 Hirata, M. 209 Holm, H.-H. 97 “hubs and spokes” pattern 64, 66 human resource management: Bosch and Zexel 217; Roche–Chügal 213 human rights 144–6; in common EU and foreign security policy 148–50; in EU–Asia policies 150–1 human rights dialogues 151–6; findings 279–80; impact of 156–64 human rights mechanisms, progress in cooperation with 161–2 Human Rights Network 165 Human Rights Watch (HRW) 163, 164 Hurrell, A. 4, 40, 41 individual stock-ownership, Japan 206–8 information, lack of 236–7

innovation function 228 Institute for Popular Democracy (IPD) 259 Institute for Strategic and International Studies (ASEAN–ISIS) 229 institution-building: as function of interregional forums 15–17, 43, 48–50; impact of EU–China bilateral dialogues 160–4; impact of transregional dialogues 157–60 institutional balancing 15–17, 19, 43–4, 48–50 institutional capacity 37–8, 65, 66 institutional cooperation 60–2 Institutional Development Programme for the ASEAN Secretariat (IDPAS) 46 institutional framework, EU human rights 146–8 institutional integration 60–2, 69–70 institutional rationalization 15–17, 19–20, 33–4, 43, 48–50 institutions 144–6 intercultural communication 13 interdependence, trade 77–9 INTERFET 129 International Atomic Energy Agency (IAEA) 117, 118, 119, 121 international financial reform, ASEM’s contribution 104–6 International Institute of Strategic Studies (IISS) 132 International Labor Organization (ILO) 107 International Monetary Fund (IMF) 104–6, 174 Interparliamentary European Security and Defence Assembly 126 interregional economic–security nexus 134–6 interregional interdependence, trade 77–9 interregional relations: democratization of 258–63; first generation research 12–15; second generation research 15–18; third generation research 18–20 interregionalism 43–8; research on 8–20; surplus value of 273–86 interregionalization 6 investment: ASEM dialogue on 106; in Asia 88–91; findings 276–7 investment increase transactions 204–5 Japan, acquisitions see acquisitions “Joint Declaration on Cooperation to Combat Terrorism” 130 Jupille, J. 37–8, 39

Index 291 Keck, M. 225 Kecker, Klaus-Jochem 22, 73–92, 276–7 Keet, D. 249 Keohane, R.O. 3, 17, 99–100, 102, 144, 166 Kiyohara, K. 210 Konrad Adenauer Foundation (KAS) 230 Korean Energy Development Corporation (KEDO) 114, 117–19 Korean Peninsula, security engagement 117–21 Kraft, H.J.S. 42 Krasner, Stephen 59, 60, 99, 144 labour market structure, Japan 208–9 Lamy, S.L. 144 Langhammer, R.J. 12, 17, 64 Lauth, H.-J. 245 Lechervy, C. 12, 46 legal framework, Japan 209–10 legal reform, progress in 163–4 Libya, WMD 119–20 Lim, R. 131 Loewen, Howard 16, 17, 18, 19, 95–110, 277–8, 285 management structure, Japan 208–9 managerial changes: Bosch and Zexel 216; Roche–Chügal 212–13 Maull, H.W. 15, 19, 46 Menkhaus, H. 202 MERCOSUR 41 mergers see acquisitions Merkel, W. 245 minority interest transactions 204–5 Missile Technology Control Regime (MTCR) 126 Moerke, Andreas 201–19, 282 Mols, M. 12 Monopoly Law (1997), Japan 209 “most favored nation” principle 66 Multilateral Agreement on Investment (MAI) 106 multilateral development banks (MDBs) 175–8 multilateral security cooperation, EU/ASEAN 128–9 multilayered system, global governance 99–101 multinational enterprises (MNEs) 88–91 multiple regionalism 62–5 Muntarbhorn, Vitit 153 Myanmar 128, 152, 233–4, 237 Nabers, Dirk 17, 95–110, 277–8, 285

national motives, ADB participation 178–83 Neumann, I. 97, 100, 101 “new regionalism” 3–5, 63–4 non-actor forces, influence of 35–6 non-governmental human rights dialogue 154–5 non-governmental organizations (NGOs) 149, 246–51, 254–5, 258–60, 262, 263 Nonproliferation Treaty (NPT) 117, 118, 119 North American trade 75–9 North Korea, WMD 117–21 Northeast Asia, security engagement 117–28 Nuttall, S. 16 Nye, J. 99, 102 Organization of Economic Cooperation and Development (OECD) 88–91, 106, 181–2 Organization for Security and Cooperation in Europe (OSCE) 135 organizational changes: Bosch and Zexel 216; Roche–Chügal 212–13 organizational problems, ADB 188–92 Pacific Economic Cooperation Council (PECC) 229 Pacific Trade and Development Conference (PAFTAD) 229 Palmer, N.D. 3 Pandit, K. 82 paradigm-driven actorness 33, 39–40 Pareira, A. 6, 16, 18, 19 parliaments 251–7 Pascha, Werner 22, 173–95, 280–1 Patten, Chris 160 performance structures 39–40 personnel representation, ADB 182–3 Peters, B.G. 144, 166 Petri, P.A. 67, 68 pharmaceutical industry, Japan 210–13 “pipeline problem”, development banks 181 policy processes/structures 39–40 political differences 236 political foundations 256–7 Poon, J.P. 82 Prowse, S. 218 Raffarin, Jean-Pierre 124 Regelsberger, E. 4, 11 regimes 144–6

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Index

regional actorness 42–3 regional development banks 173–83, 192–3 regional governance, incentive effects 180 regional integration 60–9; Europe and Asia 69–70 regional level human rights dialogues 152–3 regional peculiarities of development 179–80 regional trade agreements 57–70 regionalism: concept of 40–1; global governance through 65; versus global governance 66–9 regionalization, concept of 5–6, 40 Rein, M. 228 Reiterer, M. 253 relational approach, ASEAN 13–15 relations: evolution of 7–8; research on 8–20 relative shares, trade 76–7 research 8–20 Richards, G. 259 Richter, R. 59 Rifkin, Jeremy 194–5 Rittberger, V. 3, 260, 262 Robles, A.C. 19, 106 Roche 210–13 Roloff, R. 4, 5, 11, 15, 18, 103 Rosenau, J. 244 Rudengren, J. 189 Ruggie 48, 100 Rüland, Jürgen 3–23, 41, 43, 99, 102, 104, 106, 224, 260, 274 “rules of origin” 68 Russia, arms sales 123–4 Sabatier, P. 225 Schmitt, H. 202 Schon, D. 228 Schröder, Gerhard 124 Schubert, Gunter 273–86 security cooperation, Southeast Asia 128–34; findings 278–9 security engagement, Northeast Asia 117–28; findings 278–9 security policy, human rights in 148–50 self-interested motives, ADB participation 178–83 Sending, O.J. 97, 100, 101 Serradell, V.P. 12, 101 Shangri-La Dialogue Annual Security Forum 132 shareholder rights, ADB 183–4

Shaw, M. 245 Sigal, L.V. 117, 118 Sikkink, K. 225, 226 Singapore Institute for International Affairs (SHA) 233 Singer, O. 225 Sjöstedt, Gunnar 34, 36, 39 Smith, Michael 35, 36, 37, 39 social constructivism 10–11, 17–18, 100 socialization function 227–8 “soft law”/“soft institutionalism” 14–15 “soft loans” 176 “soft talking” 235 “software” institutions 146–7; impact of EU–China dialogues 160–4 Sorensen, G. 97 South China Sea 132–3 Southeast Asia, security cooperation 128–34 sovereignty 101 “sovereignty pooling” 42 special funds, development banks 176 Sterling-Folker, J. 100 Storz, Cornelia 3–23, 274 supranational regional actorness 42 Taiwan Strait conflict 122, 123–8 Takarabe, S. 209 technical assistance (TA) 176–7 Thailand 104 “Thematic Programme for the Promotion of Democracy and Human Rights Worldwide 2007–2013” 158 theoretical approaches, track-two dialogue 225–6 theoretical foundations, ASEM 97–9 Tibet 121 Timmermann, Martina 22, 143–66, 279–80 track-two dialogue: Asia–Europe 229–38; concept of 224–8; overview 223–4 trade: ASEM dialogue on 107; China 121; cluster analysis of data 80–7; differentiated observations 79–80; findings 275–7; interregional interdependence 77–9; overview 73–4; relative shares 76–7; volumes 74–6; see also regional trade agreements trade data clusters: (1998) 81–3; (1995) 83–5; (2005) 85–7 trade intensity indices 77–9 trade liberalization, economic effects 66–8 trade trends (1988–2005) 87 trade unions 209, 250, 256–7

Index 293 transactions, Japanese mergers/ acquisitions 202–5 transatlantic trade 75–9 transregional level human rights dialogues 152–3; impact on hardware institution-building 157–60 Treaty of Amity and Cooperation (TAC) 42–3, 129 Treaty of Amsterdam (1997) 146 Treaty on European Union, TEU (1992) 146, 148 Tsakaloyannis, P. 44 UK, trade 80 Umbach, Frank 22, 114–36, 232, 278–9 unit-driven actorness 33–4 United Nations (UN): agenda-setting 253–4; Commission on Human Rights (UNCHR) 125, 154–5; Covenant on the Rights of the Child 162; High Commissioner for Human Rights (UNHCHR) 161–2; Human Rights Council (HRC) 151–2; International Covenant on Civil and Political Rights (ICCPR) 126, 161, 162, 164; International Covenant on Social, Economic and Cultural Rights (ICESCR) 161, 162; Millennium Development Goals 178, 179, 181, 187, 192; Security Council Resolution 1718 120–1; Special Rapporteur on Torture 161–2; Vienna Declaration 150

US, security policy 117, 118, 119, 120, 121, 125–6, 129, 132, 135–6 Väyrynen, R. 3, 18 “Vientiane Action Programme 2004–2010” 158, 159 Vietnam, civil society 251, 257 Vogler, J. 39 voice, ADB 183–8 voting groups, ADB 184–6, 190–3 Wapenhams Report (1993) 181 “weak link” thesis 102 weapons of mass destruction (WMD) 117–21, 129–30, 134 welfare economics 9–10, 41 West European Union (WEU) Assembly 126 Whitman, Richard 37 Wiessala, G. 252 World Bank: development banking 173, 177, 179, 181; “World Development Report 2002” 59 world trade: growth rate 97–8; position of Asia and Europe 74 World Trade Organization (WTO) 63, 64, 106, 107, 122 Yaoundé Convention 32 Yeo, L.H. 8, 18, 19, 110, 245 Young, O.R. 35 Zexel 213–17

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