European and Asian leaders will this week discuss a stalled trade agenda between the world’s fastest and slowest-growing regions, as the debt crisis undermines expansion of commercial ties.

Europe’s economic woes may exacerbate protectionist tendencies that make it harder to expand trade with its biggest commerce partner at a time when the U.S. and Australia are forging new agreements, according to Fredrik Erixon, head of the European Centre for International Political Economy in Brussels. Apart from a trade deal with South Korea, the 27-member European Union has seen talks lag with China, Japan, India and Southeast Asian countries since 2007.

Enlarge image

Chinese Prime Minister Wen Jiabao reviews an honor guard during a welcoming ceremony at Wattay airport before the 9th Asia-Europe summit in Vientiane, Laos on Nov. 4, 2012. Photographer: Hoang Dinh Nam/AFP/Getty Images

Enlarge image

Gillard, Australia's prime minister, called for Australia to do more to take advantage of Asia’s economic boom. Photographer: Ian Waldie/Bloomberg

“Europe needs to improve its policy toward the entire Asian region in order to take up a greater part of Asia’s economic expansion, but we’re not really seeing it,” he said by phone. “The train is about to leave the station and Europe certainly isn’t on it.”

Europe’s leaders face pressure to boost ties with Asia after U.S. President Barack Obama declared a pivot to the region and Australian Prime Minister Julia Gillard unveiled a strategy last week to make her country “a winner in the Asian century.” At stake is safeguarding links that European economies are increasingly counting on, with the 19 Asian nations participating in a summit starting in Laos today accounting for 38 percent of the EU’s total trade last year, up from 30 percent a decade ago.

Euro-Area Slowdown

The International Monetary Fund expects the euro area’s economy to contract 0.4 percent this year, while China is forecast to grow 7.8 percent and the U.S. may expand 2.2 percent. Trade growth between the EU and Asian countries attending this week’s meetings slowed to 6 percent through the first six months of 2012 from a pace of 8 percent last year, according to the bloc’s data.

Asia’s exports to the EU will drop “quite significantly” in the near term as countries deleverage, Changyong Rhee, the Asian Development Bank’s chief economist, said by phone. Closer policy coordination is needed between leaders from the two regions to ensure a global recovery, he said.

“The U.S., Canada and Australia are more aggressive in Asia than Europe,” Rhee said. “The EU may be slow because you have to harmonize all countries together to have a free trade agreement, but once you have one FTA between the EU and another country it’s actually 27 FTAs.”

Trade Talks Stall

The EU suspended trade talks in 2009 with the 10-member Association of Southeast Asian Nations, a bloc with about 600 million people, and is now negotiating separate agreements with individual countries such as Singapore, Malaysia and Vietnam. Similar talks with India that kicked off in 2007 are stalled.

During a visit to Brussels two months ago, Chinese Premier Wen Jiabao urged the EU to “exercise restraint in resorting to trade-remedy measures.” The EU was the biggest market for Chinese exports last year, according to Chinese data, while China is the bloc’s No. 2 commercial partner, after the U.S.

Earlier in September, the EU started a probe into whether Chinese makers of solar panels sell them below cost, the largest European trade dispute of its kind covering 21 billion euros ($27 billion) of imports. China faces more EU anti-dumping duties than any other country, covering about 1 percent of its exports to the bloc.

China’s official news agency Xinhua published an editorial two weeks ago that criticized protectionist rhetoric in Europe. It singled out French Industry Minister Arnaud Montebourg, who has urged consumers to spurn cheaper imports and buy goods “Made in France.”

‘Contemptible Trick’

“Amid an irreversible momentum towards globalization, trade protectionism is nothing but a contemptible trick and cannot help France revive its sluggish economy,” Xinhua said.

Wen is scheduled to attend the Asia-Europe Meeting in Laos along with about 30 other heads of government and state, including Gillard, French President Francois Hollande, Italian Prime Minister Mario Monti, Russian Prime Minister Dmitry Medvedev and Japanese Prime Minister Yoshihiko Noda. Germany, Spain and the U.K. are sending foreign ministers, while Greece will be represented by its ambassador in Vientiane.

Japan is ready to start free-trade negotiations with the EU if it can get a mandate from member states, a Japanese official told reporters last week on condition of anonymity because he was not authorized to speak publicly on the matter. Noda will meet with EU President Herman Van Rompuy and European Commission President Jose Manuel Barroso in Laos.

‘Staggering’ Rise

Noda also wants to improve ties with China and South Korea after territorial spats increased tensions in recent months, Kyodo reported, citing comments he gave before leaving Tokyo. No formal talks are scheduled between the leaders, it said.

Gillard last week called for Australia to do more to take advantage of Asia’s economic boom. She aims to boost trade with the region to at least a third of gross domestic product by 2025, compared with a quarter today.

“The scale and pace of Asia’s rise is staggering,” Gillard said in a report. “There are significant opportunities and challenges for all Australians.”

Obama’s top trade priority has been the Trans-Pacific Partnership, an agreement involving nine Asia-Pacific countries that will undergo its 15th negotiation round next month. Canada and Mexico are preparing to join, while Japan may also sign up.

The slowdown in developed economies has prompted China in recent years to increase trade ties with Asia, the Middle East and Africa, Lim Cheng Teck, who heads China operations for London-based Standard Chartered Plc, said in Bangkok last week. The bank expects use of the yuan in international trade settlement to triple within three years to $1.03 trillion, he said.

“For Europe we believe it’s kind of a structural challenge that will not be so quickly solved,” Lim said. “China is kind of saying ‘OK, let’s turn to other markets.’”