Stanley's blog

Whither EU-China relations?

The EU-China relationship has entered a worrying period. Beijing needs to take seriously European concerns, particularly when expressed by the EU Trade Commissioner, Peter Mandelson, who has consistently resisted protectionist pressures and has been seen as friendly disposed towards Beijing.

The EU sells more goods to Switzerland than to China. The trade deficit between the EU and China is growing at about £10m every hour. Peter Mandelson wrote a frank letter to President Barroso on 17 October saying that the EU’s trade relationship with China is “deeply unequal” and suggesting that China took business in Europe for granted. The Commissioner argued that tariff barriers and Chinese interventions were limiting how much the EU sold to China, costing firms billions of euros. The letter added that the Chinese were “procedurally obstructive” where dialogue has been set up.

“The Chinese juggernaut is, to some extent, out of control”, Mandelson added. “We have to make sure that the public is satisfied that the trading relationship is being conducted on full and fair trade, otherwise we are going to be in trouble.”

This brought a rebuke two days later by a group of City of London business executives touring the country, saying that Mandelson’s criticisms of China for failing to play by international trade rules were unhelpful and counterproductive. The EU Chamber of Commerce in China supported Mandelson’s comments, drawing attention to its recently published annual position paper in September, which reflected concern about the nature of the investment climate, with European companies seeing “unequal treatment” compared with Chinese competitors in industries such as finance, energy and telecommunications despite, Chinese promises to open markets.

It is time that China opened up its services market (which would also benefit Chinese companies). Added to this, China has still not ratified the 1998 International Covenant on Civil and Political Rights, nor implemented the Helsinki Summit Declaration to work together with Europe for Africa’s peace, stability and sustainable development.

I share a deep concern about EU-China relations and these are inevitably linked to Sino-German and Sino-French relations (see earlier blogs on Merkel and Sarkozy). The ‘honeymoon’ of the two bilateral relationships has come to an end, but all honeymoons come to an end. Germany and France are key parties to the marriage between China and Europe. It is now critical to work hard on the relationship which means fostering and developing mutual understanding, working together and thus building mutual trust.

It is asked what can be done to advance relations? First, our Chinese friends must be true to Confucius and act towards us as they wish us to act towards them. This means also seeking to understand things from a European standpoint – understanding, not necessarily agreeing them.

Thus some issues are much more important to one than the other (eg the arms ban has no practical relevance whatsoever but is hugely symbolic for China; and the ratification of the UN International Covenant is important to Europe but not to China). The same conduct is also often seen differently and/or in a different context in China and in Europe.

There is increasing concern that reciprocity is not growing between China and Europe. Mutuality is a Confucian precept. In trade, there is not a level playing field. Whatever the law says, European companies face serious problems because of the non-implementation of laws and bureaucratic hurdles. Politically, Beijing demands the lifting of the arms embargo, but has still not ratified the International Covenant which was signed in 1998; and its support of Myanmar is causing great concern in the West.

Commercially, Beijing demands market economy status, but allows China to be by far the biggest exporters of pirated goods to Europe. Internationally, Beijing demands a seat at the high table, but tends to demands its rights without fulfilling its corollary obligations. As is now clear, Trade Commissioner Peter Mandelson, hitherto a strong advocate of open EU markets for Chinese products, is becoming disillusioned with the lack of progress on the ground.

It is recognised that Beijing has serious implementation problems, but this is only a partial explanation for the loss of reciprocity. It is essential to understand the strength of negative public attitudes towards China (in the US more so than in Europe), fuelled by the protectionist, human rights, Taiwan and Tibetan lobbies. Unfortunately, there is no Chinese external communications policy and no realistic effort is made to counter the advocacy of these lobbies. Most serious of all,
Beijing ignores the European Parliament, without whose formal assent there can be no partnership & Cooperation Agreement.

The period leading to the Summit on 28 November and the summit itself will be critical. On the trade front, Beijing needs to take urgent steps to open up its (non-banking) services market so as to give EU companies access, and at the same time benefiting Chinese trading and investment companies. Politically, China needs to show that it will now ratify the UN Covenant. It is appreciated that this requires changes in domestic law but Beijing cannot justify taking 10 years for this, while acting successfully and with extraordinary speed economically.

China needs to engage urgently with Europe so as to reconcile its concern to respect territorial integrity with European concerns to stop genocide and extreme repression. Chinese non-interference does not mean indifference and it is understandable why China is against confrontation, but Myanmar, Darfur and Zimbabwe remain of deep European anxiety and the public are reminded daily through the media.

Perhaps the best action Beijing can take is to implement paragraph 15 of the Helsinki Summit Declaration of 2006:

“Leaders also stressed the importance of their relations with Africa, and stated their commitment to work together in favour of Africa’s peace, stability and sustainable development…The Leaders agreed to pursue a structured dialogue on Africa and explore avenues for practical cooperation on the ground in partnership with the African side, including with the support of NEPAD initiatives and with the aim of attaining the Millennium Development Goals.“

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