By Ke Li

Jan. 30, 2019

1. Introduction

In May 1975, the diplomatic relations between the EU and China started with the visit in China of then-vice president of European Community (EC), Christopher Soames. Apart from booming economic engagement, the two sides have explored many areas of common interest and therefore built trust after several decades of contact and cooperation. However, Sino-EU relations have experienced some difficulties since 2005. Frictions, misunderstandings and distrust in this bilateral relationship have been facts that cannot be ignored and even impede furture cooperation. Some scholars demonstrated the dissonance and expressed deep concerns in their articles. This paper studies the shared and conflicting interests in concerns of Sino-EU relations through examining cooperation and disputes mainly in economic and political areas. It argues that cooperation and disputes between both parts reflect their core interests of China and the EU. Overlapping interests are cornerstones for stable bilateral relations. In contrast, different stances and interests of both sides are responsible for the escalation in Sino-EU relations. Since these two powers experience changes over the past 40 years, they begin to rethink diplomatic strategies. If China and the EU would ensure the diplomatic promotion, they should reinforce the bilateral cooperation, reinforce the common interests and solve controversial issues.


2. Overlapping Interests in Sino-EU relations

In 21th century, China-EU political relations have undergone a “honeymoon period”, a period of adjustment and a period of restoration and progressive development. Although in this process both sides have disputes and disagreement on some issues, it cannot be denied that China and EU have immense overlapping economic and political interests, which promote both sides to establish a relatively stable relationship. They regard each other as the major strategic partners in terms of trading cooperation and maintaining international stability. In this section, I will pore over major economic engagement, political cooperation and other interactions in different areas in international community within bilateral relations. With summarizing the deep economic and political interaction, I will set out the main overlapping interests between China and the EU.


2.1 Economic Engagement 

Mutual economic and trading engagement was evident during the development of Sino-EU relations over the past thirty years. Trade and economic issues are at the core of interest for Europe and China. In November 2013, the former president of the European Council, Herman van Rompuy, expressed that the EU has been a sincere and trustworthy economic ally. 


The European Union and China are two of the biggest traders in the world. China is now the EU’s second-biggest trading partner behind the United States and the EU is China’s biggest trading partner. China is the EU’s biggest source of imports and its second-biggest export market, whose trade on average over €1 billion a day. EU’s main imports from China are industrial and consumer goods, machinery and equipment, and footwear and clothing. EU main exports to China are: machinery and equipment, motor vehicles, aircraft, and chemicals. There are many knowledge-hungry Chinese firms who see EU as a vital trade partner especially in terms of high-tech export. As a developing country, the People’s Republic needs more technological expertise for transition of economic structure and its long-term economic prosperity. “Bilateral sci-tech cooperation has become the diving engine for the trade and economic relations”. As the trading between two sides booms, China and EU also discuss policies and issues regarding trade and investment in a range of dialogues for further development, for instance: (1) The annual EU-China Summit, (2) The EU-China High Level Economic and Trade Dialogue, (3) Joint Committee on Trade. Above all, the EU has recently made more efforts to reach a China-EU free-trade agreement (FTA). It provides new opportunities and improves conditions for access to the EU and Chinese markets for Chinese and EU investors. Also, both sides are trying to negotiate and conclude a comprehensive EU-China Investment Agreement that covers issues of interest to either side, including investment protection and market access. It should replace the existing bilateral investment treaties between China and EU Member States with one single comprehensive agreement covering all EU Member States.


Besides growing worth of trade, economic investments could be seen as great support for both sides as well. During the Eurozone financial crisis, China provided support in the form of direct investments and portfolio investments in sovereign bonds of EU states under economic distress. In return, after China first proffered the initiative of Asian Infrastructure Investment Bank (AIIB) in 2013, the European Union showed great interest in it. In March 2015, European countries such as U.K, Germany, France and other EU states announced that they would join the AIIB as founding members, which amplified China’s confidence in promoting fair and peaceful international norms. The AIIB has drafted its bylaws with the help of several organizations, including European Investment Bank, and signed Memorandums on joint cooperation and co-financing with the Eurasian Development Bank, the European Bank for Reconstruction and Development and the European Investment Bank. Under the tension between China and the U.S, this action from EU could be seen as support by Beijing. AIIB as one of the initiatives of China’s “One Belt, One Road” strategy showed the consensus between China and European Union. For sustainable economic development the EU welcomes productive Chinese Investment in Europe and expects EU investment in China to be equally welcome according to the Joint Communication of The European Parliament and The Council. In this document, the EU puts the emphases on mutually beneficial co-operation on all aspects of investment including by finding practical ways for China to contribute to the Investment Plan for Europe. This would coincide with the “New Silk Road” Strategy which has huge investment in the whole Europe.


2.2 Political Cooperation 

In May 1975, after the then-vice president of European Communities visited China for the first time, China officially established bilateral relation with European Communities. Since then, Beijing urged Europe to downscale relations with Taiwan on political level. “The one-China principle is an important political cornerstone underpinning China-EU relation”. To keep this promise, the European countries started to isolate the Taiwanese government by cutting diplomatic talks, weapons exports and official visits. Although in 1989, Sino-EU relation escalated because of Tian’anmen-Incident, both sides tried to rebuild the political trust in the new century. In 2003 both sides confirmed the policy papers of “Comprehensive Strategic Partnership”. It indicated that the EU and China have an ever-greater interest to work together as strategic partners to safeguard and promote sustainable development, peace and stability. One of the most important high-level communications for both sides is the annual China-EU summit which was held in 1998 for the first time. This meeting identified and confirmed the basic orientation of China-EU relations. For example, in 2018 the 20th China-EU Summit was held in Beijing, where the leaders of both sides adopted a joint statement and reaffirmed their commitment to multilateralism and the rules-based international order with the UN at its core. The China-EU summit itself is of great symbolic significance and an important platform for both sides to create new dialogue mechanisms and reach new bilateral agreements. Regarding multilateralism, the EU is the most steadfast supporter and shared consensus with China during the Iraqi War in 2003. In principle, the EU and China support each other in the international arena in promoting peace and security and in fighting against terrorism. In addition, both sides take international responsibilities in terms of preventing further climate changes.


So far, there are well-established instruments in Sino-EU relations. Apart from the annual Summit, the three pillars of their interactions are the annual High-Level Strategic Dialogue, the annual High Level Economic and Trade Dialogue, and the bi-annual People to People Dialogue which provide strategic guidance. Therefore, these instruments in economic, political and cultural areas based on common interests of both sides built mutual trust in Sino-EU relations.


2.3 Overlapping Interests 

As the EU and China officially forged their bilateral relations, both sides seized the opportunity to establish and reinforce the bilateral relations. Their overlapping interests, not only in economics, but also in international affairs, benefited them increasingly and become the fundamental engine to promote the bilateral relations. Especially under the present international situation accompanying with trading disputes, regional unrest and insecurity, China and the EU should strengthen ties and increase connectivity. 


The bilateral relations between China and EU started during the Post-Cold War period where they tried to develop an independent relationship without the intervention and pressure from Washington and Moscow.  After the fall of the Soviet Union, both the EU and China intend to play a greater role to maintain international stability and order. They regard themselves as global actors who shared undeniable interest in acting as strategic partners, given their multiplying importance on the world stage. In addition, there are no geopolitical conflicts and direct threats to the security between China and EU. The absence of a direct security interest in the East Asian region by the EU allows for a relative smooth development of relations between the two sides.  Unlike the United States, which have constant disputes with the People’s Republic in terms of Cross-Strait Issue, EU holds the “One-China doctrine” confirmedly and dissociates from Taiwanese government. Since reform and opening-up policy was launched in 1978, China as a developing country urgently needed economic cooperation with advanced countries to develop its own power. The EU nations were the best partners which had advantages in technologies and strong financial resources that China hoped to tap. In terms of technology transfer, EU countries are already China’s biggest supplier of technologies and equipment. The Chinese economic miracle could be explained with the surging foreign trade volume from the EU. Many researchers from China hold the view that foreign trade between China and EU promotes China’s economic growth. Results showed that there is a positive correlation between them. In return, European nations would also like to take advantage of China’s booming economic growth. European companies were eager to get a slice of the Chinese market and took pressure on European governments to resume political contacts with the People’s Republic after escalation of the bilateral relations. Hence, the direct motivation of cooperation comes from the expectations for economic benefits between the EU and China.  


China and Europe have converging interest in free trade, especially in 2018 as the trade war between China and the U.S wreaked havoc on international market and trade. The Sino-EU economic development would not be projected into a zero-sum, since China recognized the political relevance of the EU as a soft balancer against the United States.  Under these circumstances, China and EU have all the more reason to uphold legitimacy of international trade against the unilateralism. According to Professor Shi Zhiqin, a resident scholar the Carnegie-Tsinghua center for Global Policy, China and EU could have convergent interests in macroeconomic coordination, which is essential for addressing structural trade imbalance. Because, trade policies from each country would lead to the chain reaction and might cause global trade imbalance. In this sense, what China and EU could do, lies in coordination and negotiations with other partners in the global platform such as G20.


By far, China and the EU have promoted wide-ranging cooperation to deepen the “Comprehensive Strategic Partnership”. Both sides support each other when facing the international financial crisis and global governance reform. In terms of tackling international disputes and issues, these two global actors contribute significantly to world peace, development and cooperation. Huge economic common interests and important positions in international community lead to the establishment and development of stable relations. However, China and EU have also experienced tensions because of different interests, which caused misunderstanding and distrust in Sino-EU relations.


3. Conflicting Interests in Sino-EU relations

As China and the EU had experienced a “honey moon” in this bilateral relation from 2003 to 2005, one statement from Romano Prodi, president of the European Commission, featuring the relations as “not yet a marriage, but an engagement” proved they had experienced a golden age. However, there still are an array of conflicting interests which jeopardize their “Comprehensive Strategic Partnership”. These are the crunch issues which prevent the development of Sino-EU relations. This chapter will analyze the major disputes between China and the EU in economic and political areas and then conclude the interests on which both sides have conflicts in bilateral relations.

In recent years scholars not only from western countries but also from China showed concerns about Sino-EU relations and held little confidence in their future development. For instance, David Scott demonstrates that “Their ‘strategic partnership’ proclaimed in 2003 in many ways is rather empty and lacks much coordination of diplomacy.” Jing Men, a scholar from China described it as a somewhat unsettled partnership, facing various challenges a decade later.  In addition, words such as “distrust, divergences, misunderstanding and conflicting” are often found in articles analyzing Sino-EU relations. Future China-EU relations will still be beset by some uncertainties, conflicts, twists and turns. Jonathan Holslag argued that if their partnership were to become truly strategic, both sides needed to clear several hurdles. One of his articles, “The European Union and China: The Great Disillusion”, illustrates the fear of Europe to this reborn state in which it infused substantial investments, aid, political efforts, and patience.  As China’s power thrived fast, the EU is rethinking the relations with China, since the old approach was no longer working and has been rendered obsolete by China’s power, according to a document “Power Audit of EU-China Relations, published by the European Council on Foreign Relations (ECFR)” China’s frequent contacts with East European countries are seen as damage to European solidarity. In return, China realized that Europe has been entering a difficult period in which various contradictions boiled over after the financial crisis. In addition, the EU has suffered from the Ukrainian crisis, the debt crisis, terrorist attacks, refugee problems, the ongoing negotiations for Brexit and the rising of right-wing party. Hence, China is reconsidering its strategy to Europe as well.

In this case, the bilateral relationship is currently going through a rough patch. Since the disputes revolving around the core interests from each side are not solved, they become conflicting interests in Sino-EU relations which might outweigh their overlapping interests. With examining the main disputes , this article briefly analyzes the essential divergence between China and Europe.


3.1 Trade Deficit

As mentioned above, bilateral trade is both an important incentive in EU-China. However, there is also a debate about trade imbalance. The EU’s trade deficit has been growing gradually, from US$4.619 billion in 1997 to US$91.66 in 2006. By 2008, the EU’s trade surplus has turned into a deficit of $266 billion.  However, due to unbalanced economic development among member stated during global economic crisis in 2008, the trade deficit with China leaded to internal divisions within the EU. Particularly China was blamed for the struggling economy in Southern European countries. Hence, these countries took pressure on the European Commission to adopt emergency measures against a huge quantity of Chinese imports including textile products coming into Europe. With the growth of bilateral trade and investment, competition overweighs cooperation between China and Europe. For the protecting of the European market, China has become the main target of EU trade defense and investment barriers. From January to November 2012, among 19 trade remedy investigations were initiated by the EU. Additionally, there were 4 anti-dumping investigations and 3 countervailing investigations against Chinese goods, accounting for 1/3 and 1/2 respectively in the total investigations. Such imbalanced trade, according to the EU, has been partly explained by obstacles to market access in China. In order to increase its exports to China, the EU has urged China to liberalize trade flows by removing barriers to imports including price controls, discriminatory registration requirements and arbitrary sanitary standards. What’s more, these criticisms were the reasons of the EU’s refusal to grant Chinese market economic status as well.


3.2 Market Economic Status

Another dispute in economic area lies in granting Chinese market economic status. In accordance with an agreement under the World Trade Organization(WTO), market economy status affects if one country adopt anti-dumping measure to its import counterpart. When China joined the WTO on December 11, 2001, it was written into the agreement that member states are treating China as a non-market economy. This allowed them to impose anti-dumping duties on the basis that China’s low prices did not reflect market reality. However, according to one clause in the agreement that “In any event, the provision of subparagraph (a) (ii)shall expire 15 years after the date of accession”, the Chinese government believed that after December 11, 2016, China was to be treated automatically as a market economy and certain trade barriers were supposed to be lifted. In contrast, the EU’s understanding of this clause is, that China is no longer automatically considered a non-market economy after 15 years of WTO accession, but it doesn’t mean that China could be automatically regarded a market economy. Whether the market economy should be treated specifically regarding the circumstances in each anti-dumping case. An internal EU report, published in the Financial Times, on June 28, 2018 revealed five criteria for recognizing China’s full market economy status. They hold the views that the Chinese government still exerts certain intervention in the market. Some state-owned Chinese enterprise have more advantages, which discriminate against foreign companies. In terms of intellectual property protection, there is still scope for further improvements. From the perspective of China, to be recognized as a market economy is also a matter of reputation. Although Russia was not a member of the WTO before 2012, its full market economy status has been recognized by the European Union in 2002. In terms of disputes over trade deficit, China was disappointed in the EU’s reaction. According to Zhiqin, Shi, the director of the Tsinghua Belt&Road Strategy Center and a resident scholar at the Carnegie-Tsinghua center for Global Policy, populists have used the EU’s rising trade deficit with China to accuse Beijing of mercantilism and unfair trade tactics. They have also declined to acknowledge China’s support for the EU during the eurozone crisis, which took the form of direct investments and portfolio investments in sovereign bonds of EU states.


3.3 Arms Embargo 

A further area of dispute is associated with arms embargo imposed in 1989 by the Western countries in the lead of United States against reactions of Chinese government in Tian’an men square incident. The arms embargo prohibited the sale of weapons and military-related or dual-use technologies to China. The lifting of the arms embargo has been a topic for discussion in the EU since late 2003, because removing the embargo on weapons would be a strong political symbol, showing European willingness to deepen relations with China.  In 2004 some European leaders tried to repeal it. However, because of the pressure from United States which concern about Cross-Strait Issue and rising Chinese military power, the EU choose to maintain it. According to a document released by European Commission, the conditions to lift arms embargo lie in progress on human rights situation, improving cross-straits relations and keeping transparent in military expenditure. Therefore, the removal would imply that China made progress in recent years. Furthermore, within the EU, some countries such as France and Spain are keen on lifting the embargo, but others including UK are opposed, which made the EU not easy to speak with one voice on foreign policy.


3.4 Human Rights and Tibet Issue 

Divergence on human rights and the Tibet Issue could seriously impede the development of Sino-EU relations. In 2008, when the French President Nicolas Sarkozy met with the Tibetan spiritual leader Dalai Lama, China pulled out the 11th EU-China Summit which was hosted by France on 1 December 2008. The Chinese government blamed the French president for gravely damaging Sino-French relations. Not only the French President, but also other European leaders such as then British Prime Minister Gordon Brown and German Chancellor Angela Merkel met with him. In each instance Beijing strongly condemned and stopped varying degrees of economic and political dialogues and communications. The EU has repeatedly emphasized the importance of human rights and set up human rights dialogue with China in the long run. It was originally designated in 1995 in aftermath of Tiananmen massacre. In 2018, the 36th round of the EU-China Human Rights Dialogue was held in Beijing, in which the European Union emphasized the deteriorating situation of civil and political rights in China. However, some scholars argue that those efforts from the EU, do not really promote of human rights in China. According one policy report from European Council on Foreign Relations (ECFR), the EU’s ability to get China to be more respectful of the human and civic rights of its own citizens is very limited. The Dialogue on Human Rights shows little converge on Human Rights and democracy norms, and the EU’s push against China for normative human rights may be a dead end. Although there is no further development on human rights dispute, it still indicates misunderstandings from each side regarding ideology.


Actually, not every dispute is separately discussed by China and the EU. Economic grievances revolve around political debates, compromise with one issue could be leverage on other episodes. Due to the trade deficit, the Chinese government has argued that if the EU were to lift its arms embargo, it would allow European companies to sell high-value, high technology products to China, thus helping to reduce the trade deficit.  In contrast, the EU aims for a deal on lifting the arms embargo in exchange that China must contribute to human rights. The division of human rights thwart other normal communications and dialogues between China and the European Union.  


From 2005 till now, the disputes between China and EU feature everything from trade contradictions to political tensions. In economic level, due to growing trade deficit, the EU criticized that Chinese market has not live up to its promise for European companies. Until now the EU’s refusal to grant China a clear Market Economy Status (MES) has been a major quarrel in the relationship. From a political perspective, the arms embargo is also indicative of the clash of interests. In terms of divisions in ideology, there is chasm between China and the EU such as disputes on human rights and Tibet issue.


3.5 Conflicting Interests 

The growing trade deficit in European trade with China, arms embargo lifting, granting market economy status, disputes over human rights and Tibet are responsible for rising tension in Sino-EU relations. The troubled political relations exert more pressure on bilateral economic cooperation. Major differences in priorities and concerns are responsible for misunderstandings and distrust that have escalated tension:


Firstly, they insist on different ideology and their own development path. For EU leaders, liberal democracy and political rights are vital universal values, however, China consider them not as universal, but relative, because China attached more importance on socio-economic rights regarding people’s living standard and each country experiences different developing period. One Chinese scholar wrote in his article that the widely shared belief in Europe is that its political systems and values are intrinsically superior, which is condescending to China. In terms of Tibet Issue, it is clearly found that no country could challenge China’s sovereignty and territorial integrity. They are the core national interests of China. In 2005, China National People’s Congress approved the anti-secession law with the purpose of emphasizing sovereignty over Taiwan and of keeping Taiwan from declaring independence. From China’s perspective, the Dalai Lama is not a peace-loving spiritual leader but a political villain who is trying to split the People’s Republic and China would never allow it to happen. However, Europe believes that under the influence of democratic community China will liberalize its economy, improve rule of law and democratize its politics. This strategy was called as “Europe’s unconditional engagement” which means that China should be what the EU wants. China is very sensitive to EU intervention in its internal politics. And yet the Europeans realized that it is not easy to transfer this huge authoritarian system during the contact with China, which revealed the problems of bilateral relations.


Secondly, as a supranational regional organization, EU’s complicated systems, institutions and more importantly different interests from member states make bilateral cooperation more complicated. No matter big or small, each individual member state is important in the final decision of the European Council. And in some occasion, national interests of member states outweigh sometimes when the EU tries to reach a functioning common foreign policy, while the interests, ideas and other forces inherent in the EU member states will continue to play an important role in China-EU relations. The EU is far from a single “dialogist” which makes China-EU relations more uncertain. For this reason, China is disappointed and frustrated with the slow pace of decision-making at the EU-level and thus prefers to deal with each European country individually. Since “Belt and Road Initiative” was proposed in 2013, China forged new relationships with East European countries and held 16+1 annual Summit which aims to invest in this region. But it was viewed as separating EU by Brussel.


Thirdly, the US as an external factor affects China-EU relations strongly. At some occasions, such as lifting arms embargo, the United States exerted severe pressure on Brussel. Washington urged the EU to maintain the embargo and threatened to cut off American transfers of military technology to Europe. Americans are reluctant to see China domain Asia-Pacific region and counterbalance the influence of the US. Due to China’s growing military strength and soaring exports, the U.S have all the more reasons to strengthen the transatlantic partnership with the European countries. For Europe, although the US president Donald Trump right now may share different opinions with the European leaders, the most important bilateral strategic relationship is still with the United States in terms of a fully-fledged military alliance and deeply integrated economics. By contrast, despite China and the European Union have no geopolitical conflicts either in Asia or in European continent, their relations could be strongly changed due to Sino-US and US-EU relations. Cordial Sino-America relations could contribute to the development of China-EU relations.


4. Conclusion

In poring through the cooperation and conflicts in Sino-EU relations, this paper points out that the bilateral relations developed steadily since 1975 and established comprehensive strategic partnership successfully. Mutual recognition on common interests is an important part of bilateral relations and an important basis for decision-making. The EU and China share the overlapping interests of bilateral trade and investment which is one of the engines that drive the development of  diplomatic relations. Both sides are trying to reach free trade agreement to overcome obstacles in trade and investment. Such tight economic interaction constitutes an essential part of the strategic partnership. Without fierce clash on geopolitical interests, they engage in maintaining international peace and stability. To gain an increasing influence in international affairs and balancing the power of the United States, each decides on a multilateral framework rather than unilateralism. This is another engine for stable bilateral relations. In fields such as climate change, prohibition of nuclear weapons and regional security, there is scope for further cooperation.

However, economic political and ideological divergences between the EU and China become increasingly concerning. The EU adopted strict policies to Chinese production because of soaring trade deficit. On the other hand, China feels humiliated due to unsolved market economy status and arms embargo issues. The fact that EU isn’t able to speak in one voice could be the chance for China to gain more trust in countries like Greece and Poland. But China’s interaction with East European countries was criticized by European leaders. What’s more, attempting of the EU to use ‘soft law’ mechanisms like Human Rights Dialogue to codify highly sensitive political issues had a debilitating effect. Because both sides still hold different ideology and would never make a compromise on issues such as territory integrity. For the EU, economic and political doubts to China rise simultaneously accompanying with negative images both in governmental institutions and in the public. Although China shared understanding of European diversity, in the meantime it began to form a three-dimensional European policy pattern which emphasizes the EU, the European major powers and the European sub-region, while paying more attention to Europe in terms of balancing other powers in international community. In addition, the United States still plays an important role in Sino-EU relations and have great influence on issues such as arms embargo and market economic status. As a result, the initial enthusiasm about the partnership has been gradually replaced by disappointment. Due to their different interests. both sides need to make an effort to deal with the difficult issues and make sure that these problems will not gradually jeopardize bilateral relation in the long run.

As Chinese’s power grows rapidly, whereas the EU faced problems in the process of European integration, both sides have come to recognize the existence of disputes, misunderstandings and divergences. Therefore, they adjust the bilateral relations more pragmatic and made an effort to solves the disputes and conflicts. Policy convergence and divergences between the EU and China will not be static. The two sides would use shared and conflicting interests to have leverage on a wide range of issues. The partnership should be maintained and developed for the sake of mutual benefits.


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0 # Chaoting 2019-09-26 23:27