Posts Tagged ‘EU-China’

A short article for a new outlet, the International Relations and Security Network (ISN), a Swiss think tank that publishes a fascinating diversity of articles about key topics. Got a few more on this topic in the pipeline – much of which is the culmination of work I have been doing in China with EU support.

China and Europe: A Dual Track Strategic Partnership

22 June 2011

empty railroad tracks at sunset, courtesy of flickr
Creative Commons - Attribution-Noncommercial-Share Alike 2.0 Generic Creative Commons - Attribution-Noncommercial-Share Alike 2.0 GenericCan dual track relations converge?

While China-EU relations may not exhibit much strategic depth, each side remains an important trading partner for the other, and they maintain a high level of socio-cultural contact. Could this dual track dynamic simply be symptomatic of what “strategic partnerships” will increasingly look like?

By Raffaello Pantucci for ISN Insights


 

In the last several years, EU-China relations have been turbulent. Most recently, the Chinese government reacted angrily to the awarding of the Nobel Peace Prize to dissident Liu Xiaobo and the broad European support for the choice, with the state press arguing that the decision “was tantamount to overt support for criminal activities in China.” This rage continues to impact Norway, where the Committee is seated, with Norwegian salmon exporters reporting that their fish are being held up by Chinese customs, rendering them inedible. Salmon exports have dropped 70 percent since last year, while discussions about a Norwegian Free Trade Agreement have been put on hold indefinitely.

EU-China Summits have also been marked by tumult in recent years. 2008 was a particularly bad year when, already spooked by events in Tibet and tensions during the Olympics, the Chinese leadership was infuriated by the Dalai Lama’s positive reception during his visit to Europe. When the French and sitting EU President Nicholas Sarkozy made time to meet with the Dalai Lama in December 2008, the Chinese responded by pulling the plug on that year’s summit. While the following year’s gathering was largely uneventful, 2010 proved problematic again when Chinese Premier Wen Jiabao, who was expecting that his country would be granted the long-awaited Market Economy Status (MES) – which confers European recognition that China is a market economy and provides some anti-dumping protections – was instead handed a list of demands, during his Brussels visit. The meeting collapsed and a planned press conference was cancelled.

Trade – the tie that binds?

Nevertheless, strong economic and sociocultural ties exist. China remains reliant on, and has continued to do business with, Norway’s extractive industries in the wake of the Nobel Prize decision. And this relationship with Norway is representative of that found across Europe more generally. Economic relations have moved forward quite well – to the tune of 113.1 billion euros in European exports to China and 281.9 billion euros from China to Europe in 2010. And Wen, Hu Jintao and Li Keqiang’s recent trips to Europe all resulted in promises of significant investment to help bolster faltering European economies.

Social and cultural exchanges are also on the rise. A whopping 210,000 Chinese are studying in Europe, while some 25,000 Europeans study in China. Chinese business schools have expressed a keen desire to learn managerial skills from their European counterparts. Already the China Europe International Business School (CEIBS) in Shanghai is one of the world’s best, and, at a recent conference, a senior foreign ministry official announced that a delegation from the National Party Congress would be dispatched to Europe to learn more about managerial and technical expertise and build further links with their European counterparts.

But such socio-cultural links also show fissures. While China might encourage the development of personal contacts and cultural or educational exchanges, it restricts the volume of foreign films that enter the Chinese market, and European and American shows do not play on Chinese television. And the British Council, the UK’s main instrument for global cultural outreach, is not permitted to teach English in China, depriving it of one of its main sources of income.

China may welcome Europeans and their investment, but they continue to make it difficult for companies that want to bring new technologies into the country. As Juergen Hambrecht, the CEO of German chemical multinational BASF, said, in response to Chinese demands that foreign companies wanting to enter the Chinese market had to hand over technical information: “forced disclosure of know-how in exchange for investment decisions” is something “that doesn’t conform entirely to our expectations.” In addition, companies that work in what China considers ‘strategic sectors’ are only allowed to enter the Chinese market as part of joint ventures. At a recent round-table of European business representatives in Shanghai, a number of participants complained about the bureaucratic obstacles they encountered, for example, when the central government might look favorably on their investments, but a local government would exclude them in favor of local competitors.

But none of this is very surprising. A country naturally looks out for its own interests, and China is merely following that course. That the companies involved tend to be state-owned simply means that the government-business linkages are clearer than in Western scenarios.

Bridging dual track relations

Indeed, China’s financial pressures are significant. While the country has witnessed dramatically high levels of annual growth in recent years, its leaders continue to insist that China remains “a developing country.” And, in some ways, this is of course true. A visit to the wilder regions of Xinjiang will reveal people living in almost medieval conditions – a stark contrast with the dizzying, glamorous heights of Shanghai’s Pudong New District.

Contradictions also exist within EU-China relations. On the one hand, Europe and China remain highly interdependent with significant trade flows in both directions. At the same time, however, deep tensions obviously exist, and security relations are largely absent from the bilateral dialogue. While this may seem to fall far short of a genuine strategic partnership, existing ‘strategic partnerships’ rarely exist without these kinds of serious contradictions. For example, while France and the US fell out dramatically over Iraq in 2003/2004, they nevertheless remained close partners, with their respective national intelligence services continuing to work together out of Paris to counter the threat of international terrorism. This was at a time when the US Congress was speaking of “Freedom Fries,” and French leaders spoke out against the war and United States to rapturous applause at the UN.

The point is that strategic relationships between states are complex bilateral interactions with both positive and negative elements. China and the EU may not have a relationship with the same sort of strategic depth as the transatlantic alliance, or, for example, China’s relationship with Pakistan, but, at the same time, both parties have overwhelming incentives to make it work. In this way, the EU-China strategic partnership is similar to the relationship between the US and China, the key distinction being that the US has a clearer decision-making structure than the EU. This key difference can be found in most of the EU’s bilateral relationships, where a lack of clarity from Brussels, and competing opinions from member states, leaves partners frustrated.

modus vivendi must be established before the EU and China can become more than just trading partners. Issues like MES and the continuing European arms embargo against China weigh heavily on the relationship and have no clear resolution in sight, while any European effort to speak out on human rights draws a sharp rebuke from China. Europe needs to establish a coherent voice on these issues and figure out what, beyond trade, it wants out of the EU-China relationship. From China’s perspective, the relationship is both frustrating and effective – on the one hand, efforts to get the technology it wants are blocked; on the other, EU member states are always clamoring for Chinese investment, leaving China to pick and choose where and when it wants to engage.

Unfortunately, dramatic changes in EU-China relations are unlikely anytime soon. China will continue to want what Europe cannot give, while Europe’s fractured decision-making will impede any capacity to move things forward. At the same time, both sides will remain crucial trading partners, with China’s recent investments in European debt merely strengthening the link. This may not be a strategic partnership that will be able to re-shape the world anytime soon, but it is one that works and needs to work; for the time being, accepting the limits of current dynamics would be a good start.

 


 

Raffaello Pantucci is a China Program Associate at the European Council on Foreign Relations and a Visiting Scholar at the Shanghai Academy of Social Sciences. The research for this article was made possible thanks to the EU STF Program.

Advertisements

A rather belatedly posted piece on the ECFR website looking at EU-China relations comparing them to US-China. Am finishing up a longer paper on this which will hopefully draw out some useful ideas for people. In the meantime, any suggestions or things that I am missing would be very welcome.

Handling the Chinese: Europe should take lessons from Washington

BY RAFFAELLO PANTUCCI – 24 JAN 11

President Hu is no doubt pleased about how his trip to Washington went. Aside from some translator issues, there were no embarrassing moments and it looked to the world like a meeting between two of the world’s most powerful leaders. From the American side too there is certainly relief that things went so well – some concessions were given by the Chinese on DPRK and indigenous innovation, a few big deals were signed and the press walked away assessing that the President had pressured the Chinese on human rights.

Contrast this with the last EU-China Summit last October, which resulted in Premier Wen Jiaobao being irritated, a press conference being cancelled and a scuffle over some journalists being excluded, which was read by the press as evidence of Chinese authoritarianism abroad. The only reason this embarrassment was so quickly brushed under the carpet was the almost total absence of any meaningful media coverage of what takes place in Brussels. If there ever was a signal that Europe’s approach to China was broken, hopefully this is it.

Some in Europe will disagree with this harsh assessment, highlighting that the EU is able to work at a mechanical and practical level with their Chinese counterparts. The EU is China’s biggest trade partner and discussions at a trade or economic level are sophisticated and effective. Furthermore, the deals signed in America are on a par with the deals signed when President Hu went to Paris last year or when David Cameron went to Beijing.

But those deals were at a bilateral, member state level, and while it is true that some very important discussions take place at an EU-China level on trade, IPR and tariffs, all of these are quite practical discussions that are in everyone’s interests. Nations will always try to find ways to trade and sell things to each other. The reason that the Chinese reaction to their DC trip was so much more positive than that EU-China Summit was that there was clear evidence of Washington taking Chinese concerns seriously and effort was put into making sure the event looked good.

In the lead up to the meeting, Beijing was repeatedly visited by senior American diplomats. Chinese officialdom was told about what was going to happen and how it would happen. The issues on the table were raised and repeated, so President Hu knew what he was going to be facing long before he got to the White House. China was worried about how the meeting would play given previous humiliations when the President has visited the White House, and the US made sure none of the hiccups of the past took place. This resulted in a good event from which both sides were able to walk away with their heads held high.

In stark contrast, when Premier Wen went to Brussels for the summit he was presented late with a list of demands that the EU expected as outcomes from the meeting, and told that the market economy status question which he thought had finally been resolved was not to be concluded this time. At a business meeting during his visit (which at least some Chinese diplomats counted as a success!), Premier Wen finally lost his temper and went off-script to warn Europe not to “join the choir” of those telling China to re-evaluate. The disaster was such that the final press conference of the summit had to be cancelled.

Clearly, Brussels failed to do all the necessary diplomatic footwork. This was no doubt in part due to the fact that the EU was then in the midst of the big reshuffle, as Catherine Ashton figured out her role and the EEAS was drafted. But it would be too easy to blame it all on this, and the reality is that the EU still fails to get what it is that it needs to do if it wants to be taken seriously by the Chinese.

China is serious about wanting market economy status from the EU and the arms embargo lifted. Neither of these things may seem of much tangible import – MES will be irrelevant in four years anyway and the arms restrictions in place at a member state level are stronger than the embargo – but to China they would be a clear message that Europe recognises they are important to China and are wiling to give them over even though they are politically thorny at home. This optic is important to the Chinese, and the EU is giving no sign of having taken this on board.

In 2004, the lifting of the arms embargo was described as a “done deal,” and then nothing happened (everyone believes this was due to American pressure). In early 2010, the new Spanish Presidency of the EU hinted that the time might have finally come, but others rapidly corrected them. Then, late in 2010, a paper leaked out in which Catherine Ashton suggested that the embargo was “a major impediment,” and that a “way forward” needed to be designed. But in early 2011, while Li Keqiang was in the UK, stories emerged of David Cameron’s rage at the possibility, suggesting the idea was once again dead.

This vacillation on something that China repeatedly says it holds dear is seen by Beijing as a slap in the face. Couple this with European behaviour on the Galileo satellite project – China was disinvited having initially been brought in as a senior partner on a project to create an alternative to the US-controlled GPS system – and with Europe’s continued failure to recognise China’s market economy status, and it is easy to see that Wen’s behaviour at the messy meeting in October was the result of accumulated anger. So while Hu went to Washington and had the red carpet rolled out for him, Wen went to Brussels and ended up having to cancel a press conference. No one went home happy and now a higher hill will have to be climbed to ensure the next one looks better.

It is flogging a dead horse to continually criticise Europe about its incapacity for unified decision-making, but European leaders should at least be able to organise the optics of a meeting with China. Once they have resolved this they can start to seriously think about what it is they want from a “strategic partnership” with China.

A new post over at Whose World Order?, the new blog I contribute to for my new organization, the European Council on Foreign Relations. As I have mentioned before, this is going to be a relatively regular feature, so any ideas for it would be warmly welcomed. Thanks, as ever, to Sue Anne for pics.

Shanghai View: A day at the Races

Date: 29th November 2010  |  Author: Raffaello Pantucci

Categories: China
Tags: ChinaGermanyShanghai

This weekend, German street car racing came to Shanghai. It was not the first time that it had taken place, but it was a surreal experience to see a chunk of Shanghai transformed, at least in part, into a racetrack screaming branding in German daubed with large yellow posters advertising Deutsche Post.

The race was the culmination of the DTM year of racing, and was the 1st race of the season outside Europe and in Asia. When asked why they did these races here, the common consensus amongst the organisers spoken to was that they saw this as a huge potential market and that anything to raise their profile in it was a good thing. But the market is still in its infancy here. To give a sense of numbers, some 5,000 showed up for the final days race, while an average European race attracts 80,000. However, as the vast Chinese consumer market grows it is likely that the market for those seeking high-end cars and the fine tuning equipment and parts to turn them into racers is also likely to grow and both Audi and Mercedes Benz (and the army of smaller parts companies) want to guarantee they have a share of that.

The event itself was apparently organized in part by Ye Jingzi, the daughter of Marshal Ye Jianying, a veteran of the Long March and founder of the PLA, who was recently featured in the FT as a rising “princeling”. She was running around the racecourse and at the end was amongst those doling out the prizes. Also present was a Vice Mayor, who provided a stamp of officialdom to the event, though frankly did not seem that impressed by the whole thing.

Prior to the race, some of the team organizers were complaining about the track and its difficulties. Since the course ran through the middle of new Shanghai, during the evenings prior to the race the roads had been left open to the public bringing dirt onto the roads that made it harder for the drivers to get good grip.

But this aside, it was clear that this was an important race. The teams had all brought out their main sponsors to the course, partly doubtless because this was the final of the season, but also since this was China and everything Chinese is of course elevated to a different level. For German manufacturers like those selling car parts getting in early and with good contacts into the Chinese markets is essential. Cars remain an industry that foreigners can only invest in if they establish a joint venture with a Chinese firm; something that alarms people concerned with the tech transfer issues involved. It also puts competitors like General Motors and Volkswagen (VW) in the odd position of both having joint ventures with the Shanghai Automotive Industry Corporation (SAIC). So they are working with a partner who is also helping their competition, as well as producing separate SAIC cars for the same market. None of this, it should be added, has detracted from making VW a fortune in the Chinese market. Audi, a VW firm, is the car most frequently used by Chinese officials and according to figures released in late October for the year prior, the company’s profits from two joint ventures in China was a whopping €513 million, more than double the €231 million made the year before. According to the WSJ, in 2009, VW sold 1.4 million units, up from 1.02 million the year before, placing it atop the scoreboard of vehicle sales in China.

In the end it was a British driver who won the race, and a Scottish driver who won the overall competition. Chinese driver Congfu Cheng, while playing with home-field advantage, was only able to place 15th. Still, I was led to understand that this is not the last time a race will take place in China and I am sure in the future, Chinese drivers will also become a growing presence on the DTM scoreboard.

Pictures courtesy of Sue Anne Tay, who has some more on her blog