What the future holds for the EU – China relations?

José Manuel Barroso, President of the European Commission, and several Members of the College received Xi Jinping, President of the People's Republic of China (on the right). It was the first official visit to the European Union by the latter but also the first visit ever by a Chinese President to EU institutions. Handshake between Xi Jinping and José Manuel Barroso, in the presence of Herman van Rompuy President of the Council (in the centre). (EC Audiovisual Servises, 31/03/2014).

José Manuel Barroso, President of the European Commission, and several Members of the College received Xi Jinping, President of the People’s Republic of China (on the right). It was the first official visit to the European Union by the latter but also the first visit ever by a Chinese President to EU institutions. Handshake between Xi Jinping and José Manuel Barroso, in the presence of Herman van Rompuy President of the Council (in the centre). (EC Audiovisual services, 31/03/2014).

EU and China relations are perfectly depicted in a passage from a European Union External Action service Press release issued recently. It says, “While acknowledging China’s advancement of the economic and social wellbeing of its people in the past 25 years, the EU also hopes to see greater space open up for discussion and debate about China’s recent history and for lawyers, human rights defenders and journalists to carry out their work without harassment or interference”.

In any case the fact remains that China is the EU’s biggest source of imports and has become one of the EU’s fastest growing export markets. China and Europe now trade goods of a value well over € 1 billion a day. EU imports from China are mainly industrial and consumer goods. At the same time their bilateral trade in services amounts to just one tenth of trade in goods. According to the EU Commission in 2013, EU exports to China increased by 2.9% to €148.1bn, while the EU imported €279.9bn worth of goods in 2013 (down by 4% compared to 2012). Hundreds of thousands of jobs depend on those relations and consequently both sides are very watchful on the other side’s actions.

Trade is the king

Undoubtedly the huge economic exchanges between Europe and China play the most vital role in their overall relations. This observation is supported by the fact that the setting of the institutional environment and the management of their bilateral all-important trade has been bestowed exclusively to the Brussels authorities. The EU member states cannot sign separate bilateral economic agreements with the Asian giant. Member states are very cautious even while touching issues like human rights thought to be a sensitive subject for the Chinese, with strong impact on the overall relations.

This said, the Brussels authorities overseeing the trade between the two entities, have traditionally paid special attention to effectively support the interests of the EU member states. This past week the relevant EU services announced that China finally agreed to terminate the investigations into European wine exports. This investigation threatened to penalize the quite important and growing sales of this special EU product. Wine is of special interest in all core EU member states. In the same line of action the Commission rushed last year to rather bluntly protect the European solar panel producing industry against the Chinese exports.

Unduly ‘use’ of human rights issues

On many occasions, the Brussels authorities also ‘use’ the very sensitive to the Chinese human rights issues or some burning political topics like Tibet. They transform them into additional ‘ammunition’ in the always visible frictions over various trade topics. This is a practice introduced many years ago by the US, with Washington ‘using’ to this effect its special relations with the Dalai Lama. (As if the human rights of a colored youth in the streets of New York’s Bronx are better protected against the local police, than the rights of a Tibetan tribesman vis-à-vis the Chinese authorities).

On many occasions lately, the European Union authorities and institutions used the American methods, while confronting their Chinese counterparts. Invariably such matters offer lots of opportunities for political criticism, given China’s autocratic administrative, policing and governance practices. It’s very characteristic though that on the day the Chinese President Xi Jinping visited Brussels at the end of March, on the same day a high level representation of the European Economic and Social Committee participated in a demonstration for human rights in China.

No much attention was paid by the EESC to the subject matter of the visit which was nothing less than the EU-China investment agreement. This is a very important affair waiting to be promoted during President Xi Jinping visit in Brussels on 31 March. The agreement in question is expected to “boost bilateral investment flows by opening up markets as well as by establishing a legal framework of investment protection in order to enhance legal certainty and predictability for long-term investment relations between the EU and China”.

Of paramount economic interest

Cynically enough, the EU-China relations are so deep and wide that can’t be seriously threatened by frictions about human rights. The far-reaching effects of the trade and otherwise economic relations are so important, that touch the everyday lives of hundreds of millions of peoples in both sides. The wide diversity of economic relations of the two entities produces everyday new agreements. On 16 May the EU and China signed a landmark mutual recognition agreement which intensifies their customs cooperation.

In the framework of this new agreement EU and Chinese ‘trusted traders’ will enjoy lower costs, simplified procedures and greater predictability in their activities. ”Under the agreement, the EU and China commit to recognising each other’s certified safe traders, thereby allowing these companies to benefit from faster controls and reduced administration for customs clearance. The EU is the first trading partner to enter into such an agreement with China, having already signed similar deals with the USA (2012) and Japan (2011)”.

The TTIP and China

Last but not least the two sides must be presently exploiting the side effects on their bilateral economic relations, from the currently under negotiation EU-US Transatlantic Free Trade Agreement (TTIP). Last week in Berlin Karel De Gucht European Commissioner for Trade delivered a speech entitled “EU Trade Policy as a Means to Influence Globalization”. He more or less explicitly stated Europe’s stance on this issue. De Gucht explained, “Finally, its (TTIP’s) geostrategic implications are important. An agreement between the two largest economies in the world, the US and the EU, has the potential to be a benchmark for talks with a wider range of partners elsewhere. This means that TTIP will be an important way for us to shape regulations, norms, including on investment, and ultimately values that govern economic exchange worldwide”.

In short the EU is to use its TTIP with the US as a measure against which all the other trade agreements of the Union must comply. The EU Commissioner had more to say “…all our bilateral trade agreements … address the difficult issue of social labour and environmental standards – and recognise that trade and investment should not be promoted at the expense of labour rights or environmental regulation. At the same time, our Free Trade Agreements (FTAs) are part of the overall institutional relations with our partner countries, which in turn require respect for human rights. In our agreements, the human rights clauses constitute a so-called ‘essential element’. This means that the non-implementation of human rights obligations can ultimately lead to the suspension of the trade agreement”.

No FTA with China in sight

This is tantamount as saying that an FTA with China is presently impossible. On top of that a possible in the future EU-China free trade and investment agreement will have to comply with the principles set by the EU-US TTIP. This may be an early message, but if De Gucht expresses authentically the views of the core EU countries, it becomes clear that an FTA between EU and China is not within sight. On the contrary the EU is deeply engaged in talks with Japan for one.

All in all, the present basic institutional framework for the EU-China bilateral economic relations will basically remain the same in the foreseeable future. It will continue to be regulated by the WTO rules. The rare earths case is a strong witness of that. The EU Jointly with the US and Japan, successfully challenged in the WTO’s Dispute Settlement Mechanism China’s restrictions on access to rare earths and other raw materials. There may be more special agreements between the EU and China, but the WTO will remain the basic institutional framework for their economic relations.

 

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