Europe presses Asia to open economies, boost demand

VIENTIANE Tue Nov 6, 2012 12:57pm GMT

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VIENTIANE (Reuters) - Europe pressed Asian countries on Tuesday to open their economies further and urged China to ramp up domestic demand as it seeks to tap into the faster-growing region and ease the effects of its long-running economic crisis.

European Commission President Jose Manuel Barroso said the 49 countries of the Asia-Europe Meeting (ASEM) agreed to a "strong rejection of protectionism" at a two-day summit in Vientiane, Laos.

But Europe made no concrete progress on trade deals with its Asian counterparts and several leaders voiced concern about the increasing use of non-tariff barriers as some countries seek to raise protective trade walls.

The European Union's planned free-trade agreement with Japan, for example, has hit a stumbling block over dismantling non-tariff barriers in the Asian country. Free trade talks with India are also making slow progress.

"It's very important for all of us to avoid - namely when there are problems in terms of financial and economic crisis - what could be a temptation for different countries to become more inward-looking," Barroso said. "The European Union is definitely on the side of those who want more open trade."

Global policymakers are scrambling to avoid a fresh economic downturn as the 17-member euro zone economy slides toward recession this year and the United States heads for a "fiscal cliff" of spending cuts and tax hikes in January.

Falling European demand has been a drag on Asian economic activity this year, obliging governments to step up investment and other spending to stimulate domestic demand.

Zhu Min, Deputy Managing Director of the International Monetary Fund, has warned that a further deterioration in Europe's economies could knock as much as 2.0 percent off economic growth in the United States and Japan and 1 percent from China's economy.

Some Asian leaders have hinted at frustration with the European financial crisis, urging more decisive action to shore up growth. Japanese Prime Minister Yoshihiko Noda said on Monday that Europe should take "courageous and expeditious implementation" of the rescue steps it had agreed.

Europe buys about a third of Asia's higher-end exports and is the biggest source of direct investment in the region.

"As Europe finds itself in economic difficulties, the Asian economies must step up to the plate and ensure that (they) contribute to the global economy," said Indonesian Foreign Minister Marty Natelegawa.

China, on course for its weakest year of expansion since 1999, has boosted domestic infrastructure spending but some economists fear it will be insufficient to stop growth falling below the official 7.5 percent target for 2012.

EU WANTS INCREASED CHINESE CONSUMER DEMAND

European nations had given China a "gentle hint" at the summit to rebalance its economy by increasing consumer demand, Malaysian Prime Minister Najib Razak told reporters.

"I think there is a general feeling among European countries that there is a need for China to rebalance its economy," Najib said. "Less emphasis on exports but (more) on domestic demand."

Najib said protectionism was "rearing its ugly head" globally but that Asian leaders had opposed it "categorically".

Europe is seeking expanded economic ties with Asia as it tries to tap into the region's still-robust growth and compete with a U.S. military and economic "pivot" back to Asia.

ASEM accounts for more than half the world's population and trade. But the biennial summit is billed as an informal gathering that is mostly an opportunity for high-level discussions rather than decision-making.

In a closing statement, the group said Europe's economy was expected to make a "gradual recovery and that leaders pledged "new momentum to cooperation between Asia and Europe".

(Additional reporting by Paul Carsten; editing by Ron Popeski)

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