Making sense of Europe’s puzzling China policy

A trade deal with South Korea proves that Europe can get things done when it wants. So why is the EU's policy with China such a puzzle? Perhaps it should learn from Germany, which is showing how to talk tough to Beijing while still achieving its aims.

ECFR Alumni · Director, Asia and China Programme
Senior Policy Fellow

The European Union’s recent China-EU summit followed hot on the heels of another successful encounter with the South Korean government that produced a free trade agreement. Two decades ago Korea was the most closed of all Asian tigers to foreign imports and financial investment, but the trade agreement shows two things: That cultural and political dogma can change, and that when Europe moves forward with a measure of coherence, it gets results. After all, not even the United States has matched the South Korean trade agreement.

Not so, or at least not yet, with China. Before the summit Europe had just done two unprecedented exercises, with a foreign affairs ministers meeting, and the European Council itself, holding extensive talks over the relationship with China and other emerging countries. Yet, translating thinking into swift action is not a strong point of European institutions, or of coordination among the 27 member states. Coherent leadership does not seem available – perhaps is contested from within when it appears.

In any case, the summit has left us with the pieces of a puzzle that does not make much sense by itself. Here are the puzzle pieces: a one-page joint statement after the EU-China summit that seems to break a record for emptiness, even though it brought back reciprocity as a principle; Strong and optimistic statements by the Eurogroup before the Summit on China’s willingness to cooperate inside the international monetary system; a follow up, after the summit, by a furious Chinese tirade, with Premier Wen Jiabao putting Europeans on notice that re-evaluation of the Chinese currency would spell disaster both for China and its global partners. There was also fairly strong language by Herman Van Rompuy, who is gaining a reputation for not mincing his words on neither the international currency issue nor on human rights: Van Rompuy reiterated a European position about the need for China to ratify the United Nations covenant on civil and political rights.

Meanwhile, Chinese diplomacy was making good use of its European trip, signing large investment deals in Greece and also Italy. In both cases, harbours and transportation were the targets of choice, opening up a major Chinese-owned backdoors into the single market. We should not be surprised if this is quickly followed by deals on fast rail lines and perhaps rolling stock. Rotterdam and Hamburg, beware. Given the facts about sovereign debt along the Mediterranean, cash-rich China is gaining a reputation there for being something of a Father Christmas, just as it has already become for many African nations.

These concrete developments on Europe’s southern flank clearly overtaking the pace of events at the European core only add to the puzzle. We already had an inkling of this when in a Bundestag speech Angela Merkel raised the issue of a Polish motorway being built by a Chinese firm and workers, with attractive financing but also European subsidies. Quite correctly, she mused about the opportunity to claim reciprocity from China and pry open its own public procurement markets.

Wouldn’t this and other issues make a perfect bargaining issue with China, as it tries to obtain market economy status? Similarly, since China wants the European arms embargo lifted, wouldn’t the repetition of EU’s basic requests on human rights be in order? Europe could also suggest that China heed Europe’s core security interest in stopping Iran’s acquisition of nuclear weapons. Some of the larger European member states have arrived at the conclusion that hardnosed bargaining with China on issues of mutual interest is the only way to move forward. But they have difficulties in getting their point across European institutions (and the knee-jerk reactions of some member states) to any issue involving China.

Just how fragmented, if not divided, Europe remains, was highlighted after the award of the Nobel Peace Prize to Liu Xiaobo, now languishing in a jail in China’s north-east. With the experience of the Dalai-Lama still fresh, one might have thought that Europeans would make sure they coordinated the thrust of their response. But in the event, either they wouldn’t or couldn’t. At one end of the spectrum, Chancellor Merkel not only commended Liu Xiaobo, but spoke of his courage and urged his release. So did the British foreign minister, William Hague, albeit in less strong terms.

Near the other end of the scale, Jose-Manuel Barroso extended his congratulations – but apparently forgot to ask for the release of the new Nobel Laureate. As to the French reaction, it can only be ascribed to post-traumatic shock coming from the recent Tibet crisis in Sino-French relations. Not only was Foreign Minister Bernard Kouchner’s statement uncharacteristically terse and hurried. But, quite simply, Nicolas Sarkozy and his prime minister ignored the occasion, and even the socialist opposition kept mostly silent. Not all of them could claim the excuse that they were going to chair the G20 summit. It seems that after Tibet, France has concluded that the best diplomatic strategy is simply to shut up.

None of the above stories are purely anecdotal. China as a realist actor is carefully watching moves by its partners. It is going to come out of this series with the belief that it should play to the needs of Europe’s weakest economies, while banking on French fickleness and discounting Germany’s currently solid diplomacy as insufficient to forge a genuine European-wide China policy.

In the coming months, Europe’s High Representative for Foreign Relations will have to report back to the European Council on its strategic partnerships. A new External Action Service will come into being, with hopefully better coordination, across the board – both with member states and among the EU’s twelve DGs – or ministries. It is a unique occasion to make up for the hiccups of improvisation that have again marred the relationship with China. And since Germany makes two-thirds of Europe’s economic relationship with China, yet seems able to express strong concerns reflecting European interests and values, why not steal a page from Germany’s book for Europe?

 

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Author

ECFR Alumni · Director, Asia and China Programme
Senior Policy Fellow