Cover Feature Interview

His Excellency David Daly, European Union Ambassador to Australia and New Zealand, speaks with Chris Cubbage, Executive Editor for APSM about Europe’s interest and activities in the Asia Pacific, the EU’s involvement with the Afghanistan conflict and the future of the Euro Economic Crisis.

APSM: Thank you so much for your time. I wanted to get your views on the European Union’s (EU) relationship with Australia and New Zealand, more importantly on how it actually relates back to the European Union’s activity in the Asia Pacific generally.

Ambassador:  Well, first thing I would say is that EU Australia relations and also EU New Zealand relations are going really from strength to strength. With Australia, let me talk firstly about Australia, We’ve had a diplomatic relationship for 50 years now. In 1962, the first Australian Ambassador was listed to the EU institutions in Brussels. For a lot of that time, our relations have been characterised by disagreements over agricultural trade issues. But those issues have been put behind us at this stage, for a number of reasons, including the fact that the EU has substantially reformed its common agricultural policy. But also due to the fact that international trade negotiations in Geneva have been very successful.  Firstly, in bringing agricultural issues into the WTO (World Trade Organisation) system, this happened with Europe around 1995. And today, international trade is a major area of a cooperation between us.

The basis of the overall relationship is built on the foundation of very strong economic partnerships. European Union is Australia’s biggest economic partner when you put trade and investment added together. China is Australia’s biggest trade partner, but the European Union is Australia’s second biggest trade partner. Trade was worth over $80 billion dollars last year. When you look at investments, foreign investments and stock investments that comes from European Union member states, is in the region of $630-640 billion dollars. This is a third of  all foreign investment stock in this country (Australia).

The economic foundation for the relationship is extremely strong, however, this sometimes comes as a surprise to Australians, because they’re not used to thinking in terms of regional blocks as it were and are more thinking in terms of individual countries. So when you do that, you find China number one and then maybe Japan or Korea whatever, and then finally you hit upon Germany and the UK and the other member states. But Europe, from an economic point of view and a trading point of view especially, operates as a single market and a single trading block, and that’s why when you talk about international trade issues like, who has solved the DOHA round (DOHA Development Round), everybody is much more quick to say, yes the Americans have to play a role, the EU has to play a role, India, Brazil, China and so on, as well as Australia.

In other words, in that context, people think very naturally about the European Union as a block, they don’t ask what the role will be played by Britain, or by France or by Germany or Ireland or any other member states. They ask what is the role to be played by Europe. So that’s why, it comes sometimes as a bit of a surprise to Australians when looking at the trade partners and to find that Europe is the biggest economic partner and the second biggest trade partner.

APSM: Is it the increase in trade from the general rise in the Asia Pacific region from China and India, in particular?. Is it the economic rise of the Asia Pacific which is driving the trade with the European Union?

Ambassador: Well, there is no doubt that the bulk of the economic dynamism is coming from emerging countries, and many of these are indeed in Asia, and we all know that China and India are very important in that. But there are also other Asian countries that are participating very fully in that,  like Indonesia, Malaysia, Singapore, the Philippines, and Vietnam. There are plenty of Asian countries that are furthering global economic growth. This is a very good thing. The global economy needs all the growth that it can get. So I think that has to explain why China, in fact over took the European Union as the number one trade partner two years ago. Because prior to that, Europe has been Australia’s number one trade partner for twenty years.

APSM: Do you think that is what the European Union sees Australia much like, if I can say the US would see Australia, as a strategic partner in the region and a safe partner. Do you think European Union sees Australia in much the same way?

Ambassador: I would say that when we look around the world and we look at a country like Australia, the main focus is firstly, as I said economically, but secondly, and I’m just listing these, I’m not listing these in any order of importance, but second issue that we see very clearly that we live on a very small planet. There are lots of global issues which none of us can resolve on our own, we all have to participate in the global economy, we all have to participate on climate change issues, on national security issues, on development issues, and the Millennium Development Goals. When we look at these global issues, and we look at Australia, we see a country that has shared values with us in the European Union and thankfully we have no monopoly on these values, these values are shared by many countries all over the world but the point is that with Australia, we see a partner that has these values as well, and when you share these sort of values then it is easier and more likely, that you are able to form a partnership on those global issues.

So looking at Australia in terms of partner in today’s world, is very much the way we look at Australia and our relationship with Australia.

APSM: What is the European Union’s position at the moment in terms of the Pakistan and Afghanistan conflict, Pakistan in particular in terms of its relationship with the US. What’s the EU position there?

Ambassador: Well, we want to develop very strong relations with Pakistan, these relations are going in the right direction. We have a long relationship in terms of trade and development. Just at the beginning of June this year, we launched an EU Pakistan Strategic Dialogue, which is aimed at overseeing the implementation of a five year engagement plan with Pakistan.

This is a means of working on sensitive issues but that you can imagine, in developing a trade relation and developing economic corporation. These things are all about helping to strengthen the capacity of a country like Pakistan. To finance its economic development but also things like democracy and good governments and human rights. We also see these as very important issues sitting side by side with socio-economic development. So there is an engagement and a dialogue with Pakistan which is developing very strongly across all of these issues.

That doesn’t mean that we necessarily agree on everything, but what’s important is to try and have a strong open dialogue with them. Of course in Aid terms, we give to Pakistan a substantial amount of development aid, in the region of €250 million for the next couple of years. This is a hefty contribution to the country. It is a sign of the degree to which we are committed to Pakistan and to the region.

Ambassador:  With Afghanistan, we are deeply committed, I mean the European Union and the member states of the European Union, are contributing around €1Billion a year to Afghanistan. When you take all of the contributions added together military and civil and so on. The European Union contribution is about €200million of that a year and it’s focused again on the same sorts of issues – governance, agriculture and economic development. But also we are heavily involved in police training together with other partners. I think we partner with Japan on police training in Afghanistan. And also we are focusing on health sector. So again it is a question of being in an engagement which goes beyond the immediate time. This is one of the issues which, I think is an important thing to know about the European Union’s engagement in different parts of the world. Like I mentioned at a conference in Perth in relation to the Horn of Africa, the European Union is able to bring in a comprehensive approach to these issues. We are able to bring a security, sometimes military, sometimes civil security element, like the police in Afghanistan or the contribution of the military of some other member states. But that also links in with humanitarian aid and that also links in with medium and long term developmental aid.

So the European Union as a partner in these crisis areas is not just a military or security partner that comes in for the short term and disappears. We’re in these places for the long term and try to help them become strengthen states and able to handle their own problems themselves.  And that’s the ultimate goal.

 

APSM: You mentioned agriculture development in Afghanistan. there is still an emphasis on the drug trade and the poppy plantations. What’s the general position of the EU, are you able to point to any specific programs that the EU is running in terms of changing over the agricultural focus in Afghanistan from drug crops through to legitimate crops.

DD:  I think we need to develop their agriculture  and the risk looms large as it were, not just a question of poppy, obviously. That is more of a median term thing, to develop a stronger agriculture across the board. So that’s what I will say on that part at this stage.

APSM:  In relation to the current EU Economic Crisis, where do you see this situation to be at and developing over the next three to five year timeframe.

Ambassador: On the European economy, we‘re definitely in a very tough situation just right now, we have an economic crisis that has been brought on by the Global Financial Crisis, but  it has revealed certain weaknesses in parts of Europe, particularly in relation to public debt and public financials and sovereign debt.  The European Union is taking a number of measures across different areas. We need to strengthen the financial sectors so there are measures taken to recapitalise banks to make that stronger, the measures that are needed in the public finances, where the government emphasis needs to be brought under control and substantially reduced.

And there are also measures that are needed in the area of structural economic form of various member states where more competition needs to be brought into things like the labour market, issues of rises of pension ages are being addressed across Europe. Where the balance of taxation and unemployment needs to be addressed. So in each of these areas there are many measures have already been taken and more are being taken.

We had a meeting of EU heads of state and government at the end of June, which adopted a growth in jobs compact, as it’s called,  to boost the question of goals across Europe which the leaders are committed to increase in the European investment bank’s capital, for example by €10billion, which will increase its lending capacity by €60billion and so on. It agreed on various measures in relation to strengthening, what we call the internal market and areas of innovation and research, for example we’ve been working for many years on issues like having a single European patent to make it easier for inventors across Europe to be able to commercialise and protect their patents. And this is a costly exercise in Europe right now, because you need a patent in each of the member states but we’ve reached an agreement for a single patent which reduces the cost particularly for small to middle enterprises and young researchers.

Now these are small measures that have been taken, there are more measures that have been taken which are much more in the press. You would’ve heard of things called the firewall funds where European countries have put huge sum on the table and be used for helping the weaker member states get through the crisis. And countries such as Greece, Ireland, Portugal have been availing of these funds. These firewall funds they come from the European stability mechanism and another called the European Financial Stability Facility, these come to a total of €800billion, so we’re talking about huge sums of money, which the various countries of the European Union have dug into their pockets to put this money on the table.

So we’re coming through this crisis by taking very real measures, but we still have some distance to go, I mean, this year the estimate is that there would be zero growth in the EU economy. Our forecasts are for growth of 1.3% next year 2013. These are the estimates of the European Commission but they are also estimates of the IMF (International Monetary Fund). Currently we have a number of member states who will have negative growth in the course of this year. They come to a total of seven to eight member states will be in that position, but next year, only one of those will be in that position, and that’s Spain. So, there is a progress that has been measured, that has been indicated but it is slower than we all would like, and there are real economic and social issues that are out there. I mean unemployment is far too high, we have to do more to get jobs, but at the macro level, the situation is not as bad as the dramatic headlines indicates.

Ambassador: The European Union exports last year went up 8% imports with the union went up 5%, so we continue to be a growing market for the rest of the world and we continue to be an area that trades increasingly with the rest of the world.  The European Union is a market of 500 million, relatively affluent consumers so when you look at the figures together, European Union is the world’s biggest trader, and on the one hand that is a great benefit for us, because trade remains a very dynamic motor for the European economy. Both trade within Europe, which is totally free from any restrictions and trade with the rest of the world. European Union has very low industrial tariffs. It has a very open trader, visa versa, with the rest of the world. So it’s very important that that is the case because it helps us from the pick-up in the world’s economy.  But it’s still a situation of great concern to us and Europe, and that’s why all these measures of being taken. Very innovative solutions have been devised by the European leaders to navigate through the crisis.

One of the things just to note is that the system of the common currency of the Euro, has clearly been strengthened over the course of this crisis because before the crisis we didn’t have any of these firewall funds that I mentioned before, and those funds are like having a mini IMF for the European Union, for the Euro area. We had a weaker form of economic policy coordination, compared to what we have given ourselves in the last year, where we have hugely tightened the economic policy coordination across the member states and that includes coordinating on fiscal policy issues as well.

There are a number of positives to be taken where the crisis is being used to strengthen the system, but we still have a number of years to go because the recovery will be a slow recovery rather than a fast one.

APSM:  And I suppose that brings us back around to the first question of the amount of trade with Australia and the Asia Pacific and obviously that is a good sign if that’s continuing to grow as a leading trading partner.

Ambassador: Yes, I saw a figure recently that showed our goods to Australia in trade, which is very healthy compared to Australia’s growth in trade with other countries, so we shouldn’t be totally seduced by the headlines. Sometimes the headlines are talking about things without being fully being grounded on the economic reality underneath.

I don’t want to be misunderstood in any way to be down playing the degree to which the crisis in Europe is a serious one. It’s a very serious one for us and we know because of our weight in the world economy, I mean we’re 22% of the world’s economy, of course it matters hugely to our partners in Asia, including in Australia and New Zealand. It’s a crisis that we are rising up to the challenge of I would say.

APSM: It has, and it just requires us to rethink what we do, as you say, you certainly answered my question for the longer term that there are some benefits out there. And in a way, have you, I’ll finish up here Mr. Daly, in terms of you know there’s been some talk about Asia becoming a one currency into the future, using the European model for the Asia Pacific, is that something you’re hearing or is it too far away to start to contemplate with any seriousness.

Ambassador:Well, the thing I would say there, is firstly that we have 60 years in the European Union of experience of bringing the economies together in a  more integrated way and in managing the politics of all of that and developing for ourselves a much stronger role for Europe in the world. Now that is very valuable experience and the two things that flow from the experience – we are very open to offer the benefits of that experience to other partner countries around the world. And the second thing is that we often find ourselves in different parts of the world helping to promote regional integration mechanisms between countries.

The second thing I would say, is that you cannot take the European Union, in my view, and just photocopy it. I think that you plonk that down on a map and use it just exactly like that for other regions. Every region has their story. Countries and regions need to be ready to reach these conclusions for themselves. On the one hand, yes we have great experience and we offer that but on the other hand you can’t just photocopy the European Union and plonk it down and say, now it has worked for Europe and has been fantastic for Europe and therefore it ought to work for you. It’s a lot more complicated than that, and don’t forget that underlying the development of the European Union, is the very real coming together between Germany and France, and other countries in Europe. Former enemies coming together after the second World War. This is something which is not an automatic given, it has taken great credit to Germany and to France and the other countries to be able to go through this process of reconciliation.  Because we couldn’t have built any stable foundation if we didn’t have that reconciliation in Europe. So that’s a very important thing to understand.

APSM: Certainly, in terms of the economic model – I think the political model in particular would be most challenging indeed in Asia Pacific. And again as you say, Germany and France at least give the example that it can happen.

Ambassador:But I think one of the things that the current economic crisis reminds us of  is that the economy falls into dependency of economic integration and it cannot be totally divorced from the politics of it.

APSM: Yes, they do go hand in hand. Mr. Ambassador, thank you so much for your time.

Ambassador: You’re Welcome.  All the best

APSM:  Thank you.

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