With China taking the lead, Europe and Asia will address global economic crisis during summit

EU-Asia summit to address economy

BRUSSELS — European and Asian leaders opened a formal summit amid high security and palace opulence, hoping to agree on commitments to keep the global financial system on an even keel and find a better balance on the Europe-dominated International Monetary Fund.

The leaders found their way through a cordon of gun-toting security and barbed wire sealing off the center of the capital.

There, they were welcomed in the marble, gilted royal palace under crystal chandeliers — but the meeting was expected to be stronger on symbolism than achievements.

Asian leaders will be looking for a commitment from European leaders to give up some of their seats at the International Monetary Fund to emerging economies.

“The fact that Europeans show us the flexibility and willingness to negotiate is important,” said Rhee Chang-yong, a South Korean delegate. “For us, the IMF quota reform is very symbolic and very important,” he said, reflecting Asian feelings their economic emergence should count for more on the global stage.

South Korea will organize the Group of 20 meeting of the world’s major economies next month and expects to have an agreement then.

The leaders of 48 nations will focus on economic issues during the opening session of the two-day summit, seeking common ground on ways to fix and regulate the global financial market.

They will also face potential clashes on market restrictions and trade surpluses. On Wednesday, there will also be bilateral EU summits with China and South Korea.

Chinese Premier Wen Jiabao already set the tone during his visit to debt-laden Greece this weekend, vowing to cooperate with Europe to keep the global economy stable.

“The European Union is China’s biggest trading partner,” Wen said Sunday. “Relations between the two sides have reached an unprecedented level. Both are irreplaceable partners.”

Overall, the nations from the two continents represent about half the world’s economic output and 60 percent of global trade. but, instead of Europe driving the summits, the emergence of China as a new trading juggernaut has somewhat turned the tables at the biennial meetings.

Last week, the IMF said that Asian and Latin American economies were doing well but prospects for some European countries, including Greece, remain uncertain.

Wen insisted however that mutual help was the only way ahead. “Cooperation can help both sides significantly. They do not have any fundamental clashes of interests. Both sides have a stake in rebuilding the international financial system.”

On Wednesday, the EU leaders and South Korean President Lee Myung-bak will sign a free trade pact that will slash billions of dollars in industrial and agricultural duties, despite some countries’ worries that Europe’s auto industry could be hurt by a flood of cheaper cars.

The deal — the first such pact between the EU and an Asian trading partner — will come into force on July 1, 2011.

Japan’s Prime Minister Naoto Kan will pursue a free trade agreement in his bilateral meetings with European leaders, said Foreign Ministry spokesman Satora Satoh.

Japan feels itself at a competitive disadvantage with South Korea, which has an agreement with the EU that has taken a bite out of Japanese exports, particularly of cars and LCD televisions, he said. He said Japanese business was “alarmed” by the EU’s deal with Seoul.

While Japan is anxious for an agreement as soon as possible, he said the Europeans still lack consensus among its 27 members. With an economy four or five times larger than Korea’s, the Europeans are being more cautious with Japan.

“There is a sense that we are not making full use of our potential,” he said. EU-Japan trade peaked at euro117 billion in 2008, but were driven down by the financial crisis last year.

Besides the economy, Japan also has an issue with China, as both continue a diplomatic row following the arrest of a Chinese fishing boat captain whose trawler collided with Japanese patrol vessels near disputed islands.

“It is important to thoroughly explain the stance of our country,” Kan said of his plans at the summit.

Since the incident in the East China Sea, Beijing has suspended ministerial-level talks with Tokyo and postponed talks on jointly developing undersea gas fields. Japan released the captain last weekend, but Beijing then requested an apology — prompting Japan to demand China cover damage to the patrol boats.

The European Union proposed new measures to keep government debt in line last week and earlier outlined measures to better control international banking and financial trade. Several Asian nations have already welcomed such measures. Many of the issues will taken up again when the Group of 20 nations meeting in Seoul, South Korea, on Nov. 11-12.

It does not mean economic discord will be kept at bay this week.

Many Western nations have complained that China keeps its currency undervalued to give its exporters an unfair price advantage on international markets while at the same time China closes off its markets, keeping European businesses out.

“Business leaders are increasingly concerned about the deteriorating business climate for foreign companies in China,” wrote Philippe De Buck, the head of the confederation of European business BusinessEurope.

Wen countered that “Europe’s exports during the crisis have declined to other countries, but seen a substantial increase to China alone … It may appear that there is competition between Europe and China, but in reality there is more cooperation than competition,” Wen said.

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Associated Press Writer Art Max contributed to this story