1 Deepening international cooperation

First of all, many thanks to the organisers for inviting me again to this panel discussion. A year ago, we met for breakfast. This year, it is for lunch. Either way, there is certainly plenty of food for thought. 

The basic insight of Adam Smith and David Ricardo still holds: Specialisation and trade can make everyone better off. This, however, relies on all sides accepting common rules for fair and open trade on a level playing field. Today, some key players are challenging the rules of the game. How should Europe and Asia shape their relationship in this changed world?

I am convinced that Europe and Asia should deepen their economic ties – on an open, rules-based and reciprocal basis. Trade, investment and technological cooperation are key sources of productivity, innovation and prosperity. 

Trade volumes between Asia and the EU countries have risen considerably in recent years. Developments vary significantly, however. Since 2019, EU exports to China have remained broadly stable, but imports from China have increased substantially.

By contrast, trade with other Asian countries has generally expanded. EU exports to South Korea, India and the Association of Southeast Asian Nations (ASEAN) have grown strongly, while trade with Japan has developed more moderately. Imports from these countries have also increased, in most cases more strongly than exports. This development shows the mutual benefits.

As Asia is not a single economic area for Europe, different approaches are needed.

2 Relations with Asian countries

China is one of Europe’s most important economic partners, but it is also one of its most complex: Deep trade links coexist with critical import dependencies and growing competitive pressure. China is an important source of a wide range of goods and an important export market for Europe. At the same time, China is an increasingly powerful industrial competitor and a source of risk when it comes to critical imports.

With Japan, South Korea, Singapore and Vietnam, the European Union has already deepened its rules-based trade relations. India, with its high economic growth and its large market, is gaining in importance. The EU‑India trade agreement reached this year marks a major achievement. Last year’s agreements with Indonesia are also very welcome, as the country plays an important role in Europe’s diversification strategy, too.

3 Various forms of cooperation

Beyond trade and investment, economic cooperation between Europe and Asia also includes research and development, as well as joint production. One example is Silicon Saxony. In this established European microelectronics cluster, the joint venture ESMC will create additional semiconductor capacity in Dresden. One of the partners is TSMC, the world’s leading semiconductor foundry based in Taiwan. In this case, targeted government support for private investment is helping build resilient value chains.

Thailand is also seeking to attract investment from the semiconductor industry. Just two weeks ago, Infineon opened its new manufacturing site near Bangkok. Other forms of cooperation are emerging in a more market-driven way, based on the international division of labour: Airbus in India, for instance, combines European technology and global platforms with Indian engineering, suppliers and manufacturing capacities. This means that cooperation extends far beyond investment in India.

To conclude on Europe’s relations with Asia: Their key strength lies in complementary capabilities and shared value creation. Governments can facilitate this cooperation through open markets, reliable rules and good investment conditions. Specific resilience considerations or spillover effects can justify targeted government support.

4 Strengthening Europe’s competitiveness

Ultimately, the strongest response to global challenges is to strengthen Europe’s competitiveness. Key building blocks for this include: First, better European infrastructure – including energy based on renewables which is reliable and affordable. In particular, artificial intelligence needs good conditions, such as sufficient computing capacity and data centres.

A second building block is creating better financing opportunities by implementing the Savings and Investments Union. For example, start-ups need to be able to access enough European venture capital to scale up at home and compete globally.

Third, Europe should also aim to remain indispensable in critical parts of global value chains. In a recent speech, ECB president Christine Lagarde mentioned the Dutch multinational company ASML as a link in the chain that no one can afford to remove. Its lithography technology enables the mass production of microchips. ASML and TSMC have been working together for many years. This shows how highly specialised firms from Asia and Europe benefit from each other.

To sum up, there is no single strategy for Europe towards Asia. We need to strengthen the resilience and diversification of our economic relations with China, while advancing rules-based integration with a broader group of Asian partners. While we remain open, strengthening European competitiveness and sovereignty should be a priority.