The European Union faces a double imbalance vis-à-vis China: economic, reinforced by anti-competitive measures, and diplomatic because of a lack of structure within the EU that prevents the Europeans to be able to enjoy a relationship of equals with Beijing.
Primacy of economic considerations and EU diplomatic weakness. China is a commercial (1st world exporter), economic (second global power) and financial power (largest foreign exchange reserves in the world, including a large part of the sovereign debt of European countries). The EU is the first trading partner of China, but it seeks to diversify its partners (FTA with ASEAN in 2010). China sets up increasingly in Africa, Latin America and South East Asia and the yuan is internationalized. Given the attractiveness of China and its importance for the EU, European diplomacy has remained quiet on political issues (internal migration, imprisonments, Internet censorship and persistent corruption). Institutions as well as the Member States have shown a lack of coordination in their policy towards China (eg climate negotiations).
How to find a balance in Sino-European relations?
- Rebalance trade rules: Fighting against tariff barriers in many industries (eg banks) against subsidies not notified to the WTO, against the export quotas of rare earths (China has already been sentenced to WTO in 07/11 following on from a complaint from the EU), increase IPR protection and reduce regulatory obstacles and technical certification, promote standards of health and safety for imported products, counter the monetary dumping money and attract crossed FDI .
- Develop economic partnerships, scientific and cultural: Promote partnerships between European and Chinese companies (establishments of joint ventures), scientific cooperation, cultural and academic exchanges.
- Conduct several actions:
- complete negotiations on a PCA on economic trade and investment;
- identify priority areas for partnerships;
- implement a proactive policy at European level (European grouping of companies by sector and high value added),
- implement an ambitious research and innovation policy;
- support SMEs wishing to invest in China;
- negotiate a bilateral investment ambitious.
In order to have an influence on Chinese trade and social policies, the EU should adopt a structured diplomacy. The establishment of an ad hoc structure to control the Sino-European relations in the EEAS could be considered. The EU should refrain from speaking out on issues where no consensus was reached.
To increase its influence vis-à-vis China, the EU must strive to:
- support the achievement of China's market economy status;
- its accession to the Agreement on Government Procurement (GPA);
- use its trade defense instruments;
- use development aid provided to China as a leverage during negotiations;
- better representation of developing countries in global governance bodies.
Finally, the EU should focus its attention on the development of the China domestic situation, including the risk of a slowdown in Chinese growth, generalization of social conflict and radicalization of the ruling classes.
The establishment of fair trade rules and the development of partnerships with China are vital to rebalance the relationship between the two powers. In the short term, the EU should also seek to reduce the weight of its debt in order to regain credibility against Beijing.