The EU understands this, and has just agreed to a far-reaching free-trade agreement with South Korea. That is the right message from the EU to Asia for this week’s top level gatherings when the Asia-Europe Meeting (ASEM) and EU-China and EU-Korea summits are being held in Brussels from the 4 to the 6 of October.

The trade deal will take effect from July 2011. Combined EU-Korea trade in goods was worth about 53 billion euros in 2009, according to EU statistics. The agreement is predicted to create about 19 billion euros ($24 billion) of new exports for EU producers.

The agreement is noteworthy for three reasons.

First, it is the largest free-trade agreement since NAFTA in 1994. It is the most comprehensive free trade agreement ever negotiated by the EU. Import duties are eliminated on nearly all products. There is liberalisation of trade in services. It is therefore a clear signal from Europe and Asia about continuing free trade even in difficult economic times.

Secondly, the EU is ahead of the US. The US Korea free trade agreement, KORUS, is still stalled. Negotiations about this agreement started long before the EU’s. Congress has kept the agreement pending. Obama has promised to give the agreement a push forward and trade ministers will be working hard to achieve a result before the G20 meeting in November in South Korea. Yet protectionist siren songs are being heard louder and louder across the US following a continued jobless recovery. The need for a speedy appreciation of the Chinese yuan is a constant demand. There is no desire for more Asian exports. And even in Asia the, EU comes first. Seoul’s trade ministry said that ‘The pact will bring about economic benefit more than a free trade pact signed with the US.’.

Thirdly, the timing is perfect. The agreement sends a great signal before the upcoming G20 in South Korea of certain commitments by the EU: to free trade, to linking with Asian economic powerhouses and particularly to South Korea. The G20 will for the first time be hosted outside a G8 country and for the first time to be hosted in Asia. Consequently, finalising this agreement shows respect for the new found power of Asia. And this respect is shown not only to China, India and Japan but also to upcoming middle powers like South Korea.

The EU should use the G20 Summit, and the EU-South Korea summit preceding it, this week on the 6th of October, to upgrade its relationship with South Korea to that of a strategic partnership. South Korea has an economy worthy of G20 status, adheres to democratic governance and values; and is committed to a multilateral approach. Equally importantly, it is the first nation to have moved from being a developing country (with a GDP per capita similar to contemporary Afghanistan after the destruction of the Korean War) to joining the OECD club of development donors.

The EU disperses more than half of the world’s development aid so a strong partnership with South Korea in that domain is desirable. It would give the EU increased leverage with other powers like China and India who still hold that their original developing country status exempts them from global norms in the development area. South Korea demonstrates that just because you were once a poor country doesn’t mean that you can give aid without any conditions regarding governance.

The EU now has to prove that the South Korea agreement was not a lucky one-off on trade and push forward with the free-trade agreements with India and with ASEAN.

The EU is still a big rumbling machine moving in odd ways. The economy is not in great shape. There might be more Greek-like debt incidents to come. Still, it remains the world’s largest economic and trading bloc. In a time where it gets harder and harder to keep protectionist voices down, the EU has given Asia just the signal it needs that there is readiness to keep the free trade agenda moving. The EU is showing why it shouldn’t be counted out in Asia.

Jonas Parello-Plesner is joining the European Council on Foreign Relations as Senior Policy Fellow. He has worked as senior advisor with the Danish government on Asian affairs. He is on the board of editors of the Danish magazine Raeson.