EU-China relations develop joint interests

by Shada Islam

Relations between the EU and China are stronger and more dynamic than ever before, driven primarily by mutual economic interests but also by both sides’ ambitions to play a bigger global political role than in the past. The EU is looking to increase its presence in China in the hope that some of the country’s economic buoyancy will rub off on Europe. China, as illustrated by its expanding web of economic deals with its neighbours, clearly also wants to be recognised as a more active world player. “We are partners, we share responsibilities,” European Commission President Romano Prodi said at the EU-China summit in Beijing last November.

EU policymakers say they can sense an unprecedented Chinese interest in Europe, partially the result of Beijing’s quest for new allies which can bolster its view of a multipolar world but also because it sees the advantages of collaborating with Europe in areas such as science and technology, education and fighting counterfeiting where Europeans appear to be more forthcoming than the Americans.

Significantly, China’s release of its first-ever policy paper on EU – and the first ever on its relations with a foreign partner - on October 13 was carefully timed to coincide with the European Commission’s report to EU governments on the “shared interests and challenges in EU-China relations.” Says an EU diplomat: “We are changing a lot and they are changing. They are choosing to invest in Europe and recognising our political value. Frankly, that is quite flattering,”

There’s more about the EU that has captured China’s imagination. For one, Europe, for all its security ambitions, does not see itself as competing with China. As a soft, non-military power, the EU is not focused on China as a rival and instead, as spotlighted in the Commission paper on China, views China as a “strategic partner” with which the it can forge a “beneficial relationship of equals” and which shares Europe’s commitment to multilateral institutions like the United Nations and the World Trade Organisation.

As EU Trade Commissioner Pascal Lamy explained in Beijing recently, unlike the US, Europe does not see China as a “geopolitical challenge.” Partly that’s because Europe is not yet a political superpower itself but it’s also because Europeans want “a greater diffusion of power, a more multipolar world,” Lamy said.

Europeans also want China to evolve surely – albeit slowly - into a more open society. Helping China’s economic development in a constructive and positive way is also about ensuring political change and liberalisation in the country, say EU officials.

The Commission paper identifies what Europeans want China to achieve: “a successful transition to a stable, prosperous and open country that fully embraces democracy, free market principles and the rule of law.” It also recognises, however, that the “course ahead is long and challenging.”

The EU has been quick to recognise China’s role as regional superpower, with the Commission highlighting that China’s foreign policy has become progressively “more proactive and constructive.”

A key problem of course is China’s human rights. Here too, however, the EU has opted for patience and cooperation. Human rights are best tackled through dialogue, practical help (for instance to help develop the judicial system) rather than through confrontation, say officials.

In practical terms this means that the EU holds a regular human rights dialogue with China – which officials say is becoming more inter-active – in which it raises its concerns about Tibet, religious freedoms and other issues. But disagreements are not allowed to colour other business and diplomatic aspects of the relationship.

Take Chinese President Hu Jintao’s visit to France in January. There were protests – roughly half of France’s 577 parliamentarians didn’t attend Hu’s speech to the French National Assembly for example – but that didn’t stop Chirac from giving the Chinese the red carpet treatment, including a warning to Taiwan on the upcoming referendum. In return, Hu pleased Chirac by announcing that state-owned China Southern Airlines planned to purchase 21 new planes from the European aircraft manufacturing consortium Airbus and hinting of renewed interest in the purchase of French fast speed trains linking Beijing and Shanghai.

EU-China trade has never been as buoyant. Total trade in 2002 was estimated at €115 billion, making China the EU’s second largest trading partner after the US. Interestingly, also while the EU trade deficit with China topped €47 billion in 2002, making it by far the largest with any partner, few in Europe voice any real worries. EU trade chief Pascal Lamy argues that the EU deficit with China is compensated by the EU’s surplus elsewhere and that unlike Washington, the EU has less of a mercantilist vision which demands a balance of trade with all partners.

The EU takes a longer-term approach to trade with China, believing that with time, liberalisation pressure from Beijing’s commitments in the World Trade Organisation and demands from China’s emerging middle class will increase the country’s appetite for foreign products.

Lamy has promised to raise market access problems “firmly but fairly” with Chinese authorities, pointing that the EU wants full WTO compliance by China in the insurance sector (the EU wants a reduction in the capital requirements for opening new branches), construction (it wants a phasing out of Chinese residence requirements for engineers and architects) car-financing and sanitary and phyto-sanitary requirements. But unlike the US, the EU makes its concerns known in a less public fashion. “Our trade diplomacy is less megaphone and more telephone,” underlines Lamy’s spokeswoman Arancha Gonzalez. “China is a huge opportunity, we are pushing hard to open the Chinese market for all our exports,” she says. Sweetening the pill, the EU also provides Beijing with technical assistance worth €20 million to meet its WTO pledges. Still, EU manufacturers are beginning to fret about the under-valued yuan and unfair Chinese competition in areas such as textile. Euratex, the confederation of EU industry has stepped up pressure for an EU move to clampdown on cheap Chinese textiles but Lamy’s team has so far opted for caution.

Meanwhile, France is pushing hard for an EU decision to lift the bloc‘s 15-year old arms embargo against China in March this year despite strong US opposition to the move and protests from the European Parliament as well as pro-human rights lobbies in Europe. French officials, backed by Germany, say the EU should end its "anachronistic" arms boycott, arguing that the embargo, imposed right after China‘s 1989 crackdown on pro-democracy demonstrators in Tiananmen Square, has now become an "irritant" in EU relations with China.

German Chancellor Gerhard Schroeder also said he favoured a lifting of the arms ban when he was in China last year. But Scandinavian countries and the European Parliament have come out against any moves to lift the ban, saying the human rights situation in China remains unsatisfactory.

The European Parliament’s Liberal Democrat leader Graham Watson says French moves to end the arms sales restrictions are “outrageous,” adding: “a desire to curry favour with the Chinese is no excuse for rethinking a long-standing European policy rooted in principle."

A majority of EU states believe, however, that the ban is an “ugly reminder” of the previous Chinese regime and argue that even if the embargo is lifted, EU arms sales to China will still be subject to the bloc‘s code of conduct which bans sales of weapons that can be used for internal repression or which have an impact on regional stability

The code, updated in 1998, relies on peer pressure to prevent sales of dual-use and other arms to countries in conflict, with EU governments agreeing that if one of their group refuses an export license to a state, others will do the same.

EU policymakers say the arms sales ban is unlikely to be lifted in March because EU countries will want to wait to see China’s response to the Taiwanese referendum on March 20. EU governments are also expected to update the code of conduct and make it leak-proof before they end the arms boycott. Some in the bloc also say lifting the ban would be easier for the European public to accept if China showed its good faith by improving its human rights performance.

Shada Islam is a Brussels-based journalist specialising in Asia