Europe and China: Boring is Better
China-EU summits don’t produce quite the political frisson they used to. Stories about China not bailing the eurozone out are now as tired as stories about the EU not lifting its arms embargo. Chinese Premier Wen Jiabao’s valedictory appearance in Brussels in September inevitably prompted observers to reflect wistfully on the days when the EU-China strategic partnership was firmly in the geopolitical spotlight. Yet this nostalgia is misplaced. Geopolitical heat is precisely what both sides need to avoid. Navigating an influx of Chinese investment and an upgrading of EU-China military ties, vital tasks not just for China and Europe but for the future global economic and security order, will depend on a continuation of the no-drama relations that were in evidence at the 2012 EU-China summit rather than the grandiose ambitions of previous years. The supposed high point of the EU-China relationship, back in 2004/5, was in reality based on a series of false assumptions: that trade and economic tensions could be resolved purely through goodwill; that a closer security relationship could be developed without reference to Europe’s traditional alliances; and that the two sides had an overlapping vision of the rules of global order.
Since then, the EU has made more headway when it has been willing to play hardball on trade policy, whether through the opening of subsidy investigations into Chinese companies or its proposed reciprocity rule for public procurement projects that targets access to China’s restricted market. It has taken steps to coordinate its Asia policy more closely with the United States, as the joint statement by EU High Representative Baroness Ashton and Secretary Clinton at the ASEAN Regional Forum in July laid out. And while a majority in Europe may have seen eye-to-eye with China on the U.S. invasion of Iraq, disputes over Syria and Libya have again laid bare the fundamental differences between the two sides over issues of civilian protection and the use of force. If the vision of the relationship once embodied by Jacques Chirac and Gerhard Schroeder has faded, recent years have also seen another false dawn of sorts. Since 2010, speculation has abounded that China would deploy its financial arsenal to mop up the bonds of imperiled eurozone members, invest massively in the European Financial Stability Facility (EFSF), or simply unleash a vast flow of direct investment.
In practice, China has been no more willing to throw money around indiscriminately than anyone else. While much of the EU-China summitry in the last couple of years has been absorbed with the eurozone crisis, Beijing has only judiciously increased its investments in the EFSF, eurozone bonds, and hard assets. The eurozone’s troubles have also had the inevitable effect of channeling greater Chinese political and economic focus towards the principal powerbroker in the crisis, Germany, with Angela Merkel paying her second visit to China this year barely weeks before the summit. Yet this progressive stripping away of fantasies about the EU-China relationship is no bad thing. The two sides are developing a pattern of ties that is better attuned to power realities, less prone to the disappointment of false expectations, and more honest and transactional about differences. What it lacks in excitement it makes up for in maturity and stability. This foundation will be crucial if two of the most important developments in the partnership are to be successfully maintained. First, the relationship is finally entering into a phase where the distribution of economic rewards appears better balanced.
The trade deficit between the two sides has come down in 2012, with imports from China stabilizing and exports from the EU continuing to rise during a time when many other export markets are seriously troubled. While trade numbers can be a relatively retrograde way of thinking about economic benefit, even more important in the coming period is the dramatic shift in China’s status from an importer to an exporter of capital. The true depth of the EU’s economic relationship with its largest partner, the United States, lies not in the flow of goods and services but in the mutual integration of each other’s markets, investments, companies, and professionals. From Greek ports to British nuclear power plants, Swedish car companies to French utilities, the beginnings of this process are now underway with China too. While the scale of what has already taken place has often been oversold, the potential is enormous. The impact of what could be as much as $1 trillion of inbound Chinese investment to the EU by 2020 would be greater for EU-China relations than any other development in the last decade. Yet it will also be politically challenging for both sides.
The sensitivity in Europe has already been evident from the urging by European Commissioners Tajani and Barnier to President Barroso that an investment screening process be put in place at an EU level. While some security and economic concerns are warranted, the normalization and deepening of Chinese investment flows should undoubtedly be the primary goal. The other promising development over the last year is the establishment of a new EU-China defense and security dialogue. As China’s security relationships with many of its neighbors and with the United States become characterized by greater tension, the role of the EU in building deeper ties with the Chinese military could potentially be an important one. China is seeking to develop an advanced military with global reach, able to address a range of new challenges for Chinese interests overseas, such as counter-piracy, peacekeeping, and non-combatant evacuations. European militaries offer China the advantages of cooperation with some of the world’s most experienced and capable forces without the corollary difficulty faced with the United States – that the two sides also have to prepare for potential conflict scenarios.
As well as drawing China into taking on a greater role in the provision of global public goods in the security sphere, closer ties would aid the integration of a military that still harbors deep suspicions about the West. While dialogues and exchanges already exist with individual member states, and to a limited extent with NATO, the EU layer should provide the existing security relationship with additional strategic momentum, coordination, and transparency, which can help to allay any concerns that might be raised by Europe’s traditional allies. Both processes – integrating China as an investor in Western markets and a global military actor – would yield advantages that go well beyond the EU-China relationship itself. But they depend on being able to avoid the sort of geopolitical hyperbole, both angst and over-optimism, that once characterized it. Wen may have wanted a headline grabbing final act, such as the long-sought-after market economy status. Laying these foundations should prove a more enduring legacy.
This article was prepared for the Europe-China Research and Advice Network. Image from the President of the Council of Europe's Flickr photostream.
Andrew Small is a Transatlantic Fellow with the German Marshall Fund of the United States in Washington, DC.
The views expressed in GMF publications and commentary are the views of the author alone.