Norwegian policies towards Asia – our place in a transitional global economy
Oslo, 22 May 2014
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- Good morning,
- I welcome this opportunity to address current developments in Asia and the Government’s policies towards the region.
- The most dramatic change in the world economy in recent decades has been the rise of Asia – both of individual countries as economic powers, and of the region as a whole.
- Asian regional cooperation used to be based on how countries defined their relationship with external actors such as the US or major European powers. Now, both self-interest and perceptions of common interests and values drive regional integration.
- More than half the world’s population lives in Asia, a continent that accounts for 34 % of the world’s GDP and 28 % of world trade.
- The Asian Development Bank has estimated that by 2050 more than 50 % of global GDP will be generated in Asia – compared to 27 % today. This means that in 20 years’ time, most of the economic growth in the world is likely to take place in Asia.
- At the same time, we should not forget the other side of the coin: territorial disputes, nationalism, historical mistrust and ideological differences all influence regional development.
- Many Asian states are vulnerable to changes in the global climate. Eighty per cent of the world’s natural disasters occur in Asia.
- Two thirds of the world’s poor live in Asia – most of them in the populous Asian middle-income states. The energy needs of the continent will be doubled by 2030, and half of this increase will be in China.
- The gas deal announced yesterday between Russia and China is significant.
- This poses great challenges for the developmental path of Asian states, both individually and collectively.
Trade and economic developments in Asia
- There is a good chance that we – the Western world – will continue to act as we have in Asia ever since the late 18th century: that we will pursue the potential for profit and the prosperous markets, just as when Japan and China first opened up for trade.
- Our objective is to have a presence in the region. To protect our own interests. And to benefit from the growth in Asia.
- What do we have to lose, if we don’t achieve this objective? We risk being bypassed by the rapid political changes that are taking place.
- Economic development paves the way for political influence. We are witnessing a global reshuffling of power as a result of changes in the distribution of economic strength. This has implications for global political priorities.
- We must rethink our positions.
- Until the 19th century, India and China were the world’s main economic powers.
- During the past decades, Asia has once more been the locus of spectacular growth in world trade. Japan emerged early as an economic power, quickly followed by the “Asian Tigers” and China.
- Today, India, China, Japan, Indonesia and South Korea are all in the G20. Soon, the biggest economies in the world might – once again – be China and India.
- According to the World Bank, China will most likely be the largest economy in the world in terms of purchasing power by the end of this year. India is already number three on this list.
- Yet, in nominal terms, both the US and the EU are still the global leaders – by far – and will remain so for years to come. It is important to remind ourselves of this fact. It helps keep things in perspective.
- Trade has increased the interdependence between Asian nations.
- The two studies presented today clearly illustrate this fact. For instance, we find that more than half of Asia’s trade and over 40 % of global value chain flows in Asia are intra-regional.
- This is a significant shift from earlier, when Asian economies were driven by exports to other parts of the world.
- Parallel to Asian economic growth, the number of free trade agreements and multilateral partnerships is growing and becoming a ‘spaghetti bowl’ of overlapping arrangements, to borrow a phrase from Professor Park.
- Currently there are 71 free trade agreements in the region, and several new ones are under negotiation.
- The Regional Comprehensive Economic Partnership is expected to be finalised by 2015. However, it is unclear how this will play out alongside the Trans-Pacific Partnership, which is also under negotiation. And it remains to be seen how both of these might affect the overall conditions for economic activities in the region, as well as positions in the WTO negotiations.
- The ‘spaghetti bowl’ of free trade agreements increases the need for stronger global regulatory arrangements. I am encouraged by the outcome of the Bali WTO meeting, which gives hope of bringing the Doha process back on track again.
- In order to ensure a predictable environment for our interests in Asia, a strong multilateral order led by the United Nations must be maintained. Norway is a firm supporter of ongoing institutional development in the region. In our view, the activities of the UN and the Asian regional integration efforts can be mutually beneficial.
Norway’s ‘Asian economy’
- Norwegian economic interests in Asia are complex and affect many sectors. Professor Park and Mr Melchior will paint a more detailed picture, but I would like to outline a few points.
- One month ago, I was in Bangkok, speaking at the Norway-Asia Business Summit. The broad participation clearly proves the importance of Asia to Norwegian business interests.
- Today, more than 425 Norwegian companies have a presence in Asia. They employ almost fifty thousand people. They trade within the Asian markets, and they trade across borders with the Asian markets.
- The gradual changes taking place in the Norwegian economy are reflected in our trade with Asia. Changing trade and investment patterns link Norwegian capital, technology and competence directly to the Asian markets and to their strategic sectors. China, South Korea and Japan are our most important export markets in Asia. Over the past ten years, Norwegian exports to ASEAN countries have increased by 178 %.
- The fact that Norway has become an investor nation affects our outlook on the world – and how the world views us. The Government Pension Fund Global now holds more than 1 % of the world’s listed company shares, and 17 % of the Fund is invested in Asia.
- Technology and fisheries are important sectors for trade with Asia, and our raw materials exports are significant – including oil. Growing maritime and offshore industries in Asia present us with new opportunities. Our expertise and technology in these fields complement the region’s industrial demands.
- As the oil age is peaking, developing our knowledge-based industry will become increasingly important. We must seek to forge effective partnerships with the vibrant knowledge-intensive communities that are being established in Asia. We must invest in knowledge and innovation if we are to maintain our competitive edge in the global economy.
- The basis for securing Norwegian interests abroad – including our economic interests – is an active and strategic foreign policy.
- The Government will maintain a focus on active diplomacy and political consultations with Asian countries.
- Norway has long-standing good relations with Asian countries. Over the years we have facilitated conflict resolution efforts in a number of Asian countries. And we have made a substantial contribution to ISAF, as well as providing humanitarian and development assistance in Afghanistan. Increasingly, we now meet our Asian partners in the fields of development and conflict resolution on their own continent.
- China, South Korea, India and Japan take a direct interest in both the Arctic and the Antarctic region. Last year we welcomed China, along with several other Asian states, as a permanent observer to the Arctic Council. This brings major Asian powers closer to our doorstep, and creates an opportunity for engaging with them on key issues relating to our national interests.
- The promotion of universal values is a priority for the Government.
- Good governance, human rights, the rule of law, non-discrimination and environmentally-friendly production are among our main priorities. We will continue to discuss these matters with governments and regional organisations in Asia.
- Norway is actively seeking to develop a closer partnership with ASEAN.
- ASEAN is the most closely-knit organisation for cooperation in Asia and a strategic centre of gravity in the region. Although other sub-regional arrangements are slowly emerging, none are as well-established as ASEAN, or have the same degree of convening power.
- Our membership in ASEM gives us access to a platform for dialogue between the EU and more than 20 Asian countries, and an opportunity to meet regularly in the same room with many of our most important economic partners.
- Our prosperity and future growth depend on Norwegian companies succeeding abroad, on market access and on Norway being seen as an attractive country for investments.
- Economic diplomacy – the promotion of business interests abroad – is vital in this context.
- Through EFTA, Norway is currently negotiating free trade agreements with a number of Asian countries, including India, Vietnam, Indonesia, Thailand and Malaysia.
- We now have in place a bilateral social security agreement and a tax agreement with India.
- For many years, there has unfortunately been no movement in the bilateral free trade negotiations with China because of the strained relations between Norway and China.
- It is in our interest to normalise our political relations with China.
- However, this will take time and there are no easy solutions – as has been illustrated in recent weeks.
- Due to our engagement in the region, Norway needs to develop greater analytical expertise on Asia. We are seeking to create incentives for building expertise and knowledge about Asia in Norway.
- Increasingly, knowledge-intensive communities are being established in Asia, both in the fields of innovation and technology and of regional and global affairs. We must keep abreast of developments and seek to forge strong partnerships with relevant institutions.
- In foreign minister Brende’s foreign policy address to the Storting on 25 March 2014, he stressed that the Government will step up the pace of its efforts to promote Norway’s business interests internationally.
- To further this aim, we are establishing a new department at the Ministry of Foreign Affairs that will bring together business promotion, economic diplomacy, energy, and development policy.
- In closing, let me thank Professor Park and the highly capable team at NUPI for two valuable reports, and for this opportunity to share my thoughts with you today.
- The pull of the Asian economies is not without political ramifications.
- Asian states have an interest in translating economic power into political power – nationally, regionally and globally.
- We welcome this development, but at the same time we must make sure that our own interests are aligned accordingly and are effectively upheld.
- Our economic and trade interests in the region must be given high priority. Having said this, we must not neglect the wider political developments in the region or our deeply-rooted Norwegian values and policies, such as maintaining an international framework based on the rule of law, human rights and sustainable development.