Matured China-EU partnership needs matured bilateral framework

By LU Xiankun

In July this year, the annual China-EU Summit will be held in Beijing. This year marks the 20th anniversary of this highest-level dialogue between the two sides. In 1998, the statement of the first China-EU summit said that, while the world was undergoing “significant and profound changes… further enhanced dialogue and cooperation will not only serve the fundamental interests of the two sides, but also contributes to world peace, stability and development.” Twenty years later, that judgement is even more relevant as the world faces a growing tendency towards unilateralism and protectionism, including by some major powers. Therefore, the demand for enhanced cooperation with China is needed more than ever. This year is an excellent moment to reflect upon what we have and what is missing from that “long-term stable and constructive partnership oriented towards the 21st century” that was announced 20 years ago. 

Chinese Premier Li Keqiang (C), European Council President Donald Tusk (L) and European Commission President Jean-Claude Juncker co-chair the 19th China-EU leaders' meeting in Brussels, Belgium, June 2, 2017.[Photo: Xinhua]

Much has changed in this last twenty years. On the plus side, the number of EU member states has grown from 15 to 25, and the EU is an indispensable player in many issues at the global and regional level. Brexit was a blow, but the strength and influence of the EU remains intact. And China has also developed from an impoverished developing country to a global economic power and is increasingly becoming a confident player at international arena. 

On the negative side, the 2008 financial crisis substantially changed the narrative around globalization. And changes in the domestic politics of the United States and some European countries have changed how they engage with the world. These changes have posed serious challenges to global governance and policy for many, including the EU and China. 

The dynamism is also different between China and the EU. Today, over one million U.S. dollars of goods is traded between China and Europe every minute. More than 600 flights are flying between their major cities every week. Over 160 trains carry goods along China-Europe railways every month.  Over seven million people are travelling between the two giants every year. About 16,000 enterprises (2016 statistics) with investment from the EU are operating in China. And the EU is becoming the most attractive destination for the boom in China’s overseas direct investment.

In their response to this dynamic and evolving situation, China and the EU have made efforts to develop their relationship and enhance its institutional framework. In 2001, China and EU agreed to establish a “comprehensive partnership”, which became a “comprehensive strategic partnership” in 2003. In 2005, the Strategic Dialogue was set up, followed by the High Level Economic and Trade Dialogue in 2008 and the China-Europe High-Level Political Parties Forum in 2010. Dozens of other dialogues have also been established covering subjects including security, human rights, trade, finance, culture, education, environment, energy, information technology, and maritime transport.  

These dialogues are surely a helpful way to constantly review bilateral relations and provide real-time political guidance. However, such fluid dialogue can also sometimes be disruptive because of intervening elements, and fall short of capturing the dynamism of bilateral cooperation and the long-term and stable political guidance the relationship needs. The cancellation of the 2008 summit because of tensions between China and France, which held the EU presidency that year, following Sarkozy’s meeting with a separatist, and summits in recent years that failed to produce the usual joint statements because of long-standing differences on thorny issues, are examples of the problems that can arise. 

Despite all the eye-catching rhetoric, there is no bilateral agreement between China and the EU that can provide comprehensive governance for their bilateral relations. Policy considerations are scattered throughout policy papers, summit joint statements, and various sector-specific agreements. In 2006, Chinese and European leaders agreed to launch negotiations on a Partnership and Co-operation Agreement that would encompass the full scope of their bilateral relationship. From public reports, however, little seems to have been achieved, and it is far from clear when this agreement might be achieved. 

Even on economic and trade cooperation, which is said by leaders on both sides to be one of “the most important drivers” towards an enhanced strategic partnership, the only existing governing agreement is the “Agreement on Trade and Economic Cooperation” signed in 1985 between China and the European Economic Community. Back in 1985, China was just beginning to open its doors to the outside world, and the European Economic Community had just 10 member states. In 2006, China and the EU announced that they would launch negotiations to update the 1985 Agreement. However, the picture remains similarly unclear as to when a new agreement might be signed. Since 2014, the two economies started negotiations on a bilateral investment agreement, but according to some sources, there is still a long way to go before these negotiations will be concluded.

For years, China and the EU have repeatedly declared to each other their recognition of the other’s important global role, committing to put their bilateral relations “on a commensurate footing” with their relations with other major partners. After 20 years, such commitments remain to be realized and their “comprehensive strategic partnership” set in stone. It is now time to take real action to set up a long-term legal framework to govern bilateral relations, as the first step towards a real strategic partnership. 

This means Beijing and Brussels should expedite their negotiations to sign the new Partnership and Co-operation Agreement, and update the 1985 agreement for economic and trade cooperation. Meanwhile, given the lack of momentum within the multilateral trading system to push forward trade liberalization and investment facilitation, China and the EU should take bold actions to step up their bilateral cooperation for two-way market opening. The bilateral investment agreement negotiations must be concluded as soon as possible, and the EU should seriously consider China’s offer, proposed more than once at the highest level, to start looking at the possibility of a bilateral free trade agreement.  

In numerous bilateral summit statements and policy papers, China and the EU committed to build up a “mature partnership”. Without a mature legal framework, their partnership can only go so far. Put simply, China and the EU have been falling in love for too long – now it’s time to put a ring on the finger. 

(Professor LU Xiankun is former senior trade diplomat of China, and was in charge of China-Eu trade affairs from 1993-2000. He is the Emeritus Professor of University of International Business and Economics and Wuhan University of China. He is also Managing Director of LEDECO Geneva, and Senior Vice President of Shenzhen UEB Technology Co. LTD.)