China and Europe: an important partnership

Cathay Pacific China Trader Award Dinner, Kasteel De Wittenberg

06 November 2002  [Check against delivery]


The Fundaments of EU-China relations

  • Diplomatic relations with China established in 1975. There have been dramatic changes in China since 1978. Economic and social reforms have made China a major trading nation and emerging global political power.

  • EC-China Trade and Co-operation Agreement in 1985. Since then relations have accelerated and intensified, particularly in recent years, building on a series of Commission strategy papers (1995, 1998, 2001) which define the long term policy for the relationship.

  • EU main objective: to build a dynamic and comprehensive partnership, support China's rapid and full integration into the international community, politically and economically. China's success will be beneficial for all. The EU encourages China to take its full place in the institutions of global governance.

  • EU-China relations have developed under three main headings, namely:

    • political dialogue, which includes specific dialogue on human rights;

    • economic and trade relations, including relations in a number of sectors which are key to economic and social reform,

    • EU-China Co-operation Programme, an instrument through which the EU provides technical assistance to China.


EU-China Relations present status and plans for the near future

Economic and Trade Relations

  • Economic and trade relations were the starting point, and continue to be a very important facet, of our relationship. In 1975, China barely appeared on our map. In 2001, there was bilateral trade of €105 bn and China was the 3rd largest trading partner outside of Europe. This growth trend continues, with more than €62 bn in trade in the first 7 months of 2002. The impact of WTO membership is clear: EU exports to China in 2002 grew more strongly than imports (10.9% against 2.9%).

  • We hope that accession will reduce the huge EU trade deficit, which reached €45 billion in 2001, the largest with any trading partner. Reasons for this deficit include the growing strength of China as an exporter. EU companies present in China contribute significantly to this, as do the continuance of market access obstacles. China's accession to the WTO was one of the most momentous events of recent times, and of crucial importance in removing the remaining barriers, to promote increased EU investment. There are increasing amounts of EU investment in China ($25bn in mid-2001). But EU share of the total is far smaller than elsewhere. In terms of new flows, the EU is down from 1st to 4th place (excluding HK) in 2000. EU investors seem to be holding back, while others (US, Japan, Taiwan) are seizing new opportunities following WTO entry. As a result, China is poised to overtake the US as the largest FDI recipient in the world in 2002. EU companies should be less timid and ensure strong European presence in the Chinese market.

  • The EU has always been a keen supporter of Chinese accession to the WTO. China's membership will benefit both China and the world - cementing China's place in the global economy, buttressing the internal reform process, and strengthening the rule of law.

  • The EU will seek to work closely with China to make the Doha Development Agenda a success. A successful conclusion will be crucial to the development of global economic exchanges, particularly in the present economic climate. The EU and China will play important roles, not least as potential bridge-builders between developed and developing countries.

  • The monitoring of China's WTO compliance will be a major EU priority in coming years, to ensure that our firms benefit fully. We recognise that China has achieved a lot since accession. But issues of concern remain, including lack of transparency and establishment of new non-trade barriers which could neutralise liberalisation brought by accession. Problems are to some extent unavoidable, given the immensity of the task with which China is faced. Yet we will seek to resolve these through consultations, and by supporting China through dialogue and co-operation programmes.

  • China's integration into the world economy and continued internal reforms will not be painless. There will be enormous challenges: economic - the requirement to maintain growth and overall macro-economic stability; social - growing income disparities, increasing urban unemployment and tensions in the countryside; political - the need to manage these complex processes, and at the same time, gradually put into place the rule of law.

  • Reforms are on the right track. The main thrust of EU-China cooperation programmes are to support China in this challenging process. Co-operation strategies therefore support implementation of the EU's general strategy towards China, rather than focussing on traditional development assistance.

  • In particular, assistance focusses on the considerable EU experience on how to adapt rules and policies to globalisation, and how to minimise the negative socio-economic impact. The EU would like to share this information with China, to help ease her integration into the global system. This is a key objective of EU-China dialogue, and of several EU cooperation projects, which will continue to be reinforced.

    Much progress has been made in stepping up dialogue on questions of sectoral policy and regulation, focussing on WTO-/reform-related areas, e.g. enterprise policy, standardisation, information society, environmental policy, energy, and science and technology.

  • The EU is seeking to complement the 1985 Agreement by negotiating a number of bilateral agreements. A maritime transport agreement is to be signed later this year. There are ongoing discussions on a customs cooperation agreement, to facilitate trade and combat counterfeiting. Additional agreements may be possible in the future.

  • The EU will also seek to strengthen cooperation with China in other important areas, such as education and science and technology. The GALILEO project combines scientific and industrial aspects, in which China has expressed keen interest. The EU will explore ways of making China a privileged partner in this important venture.

  • For full integration of China into the international community, it is not enough that Chinese laws and regulations change, mentalities must change too. This will require long term effort in training and dissemination of information. The Commission is ready to play a key role in this respect. The EU will contribute €67 million over the next 3 years through relevant cooperation projects, including support in the areas of WTO obligations, enterprise reform, social security reform, financial services and the information society. These new activities complement ongoing programmes on IPR, WTO accession, legal and judicial cooperation.


Looking beyond trade: EU-China political and human rights dialogue

  • WTO membership in the medium-term will have a profound impact on Chinese society as a whole. WTO rules oblige the government to provide judicial review for administrative actions in the economic realm. This is likely to have spill-over effects throughout the legal system and help consolidate the rule of law.

  • WTO entry will thus support China's transition towards an open society based on the rule of law and respect for human rights. This is a key EU objective. Respect for human rights will benefit China's development and lead to greater stability. It is the EU's duty, as a friend of China and of the Chinese, to be open and candid on this important issue.

  • Human rights dialogue, held twice a year, was established in 1996. This enables discussion of EU concerns in areas such as: freedom of expression, association and religion, application of torture and death penalty and the situation of ethnic minorities, in particular in Tibet and Xinjiang. Individual cases are also raised. The next round of dialogue will be on 14/15 November in Beijing.

  • Human rights dialogue is complemented by a series of cooperation projects e.g. support to Chinese implementation of the UN human rights covenants, democratisation at local level and legal and judicial reform. A human rights small project facility, which aims to support emerging Chinese civil society, was launched this year.

  • Chinese civil society will play a key role in successful transition towards a more open society. The EU will therefore seek its deeper involvement in both dialogue and co-operation programmes.

  • Human rights is only one part of the regular and intensive EU-China political dialogue. There have been five annual summits since 1998. Political dialogue has broadened considerably in recent years, and now covers a wide range of topics, from regional conflict to global issues such as non-proliferation and international terrorism.

  • The EU would like to engage China further in addressing the "dark side of globalisation" e.g. illegal migration/trafficking in human beings, drug trafficking and money-laundering. Illegal migration is a relatively new area of co-operation, which gained momentum after the 2000 Dover tragedy, when high-level dialogue on the issue was established. A €10 million co-operation programme is currently under discussion, which would strengthen Chinese capacity to combat illegal migration, raise awareness of key target groups and improve information/ support research in this area. Speedy return of illegal migrants is key to any policy on illegal migration; we therefore intend to start exploratory talks for an eventual readmission agreement ASAP.

  • On the other hand, legal personal contacts are also essential to broaden and deepen the relationship. The EU is committed to increasing such contacts through exchanges in both directions. It will therefore be important to conclude the agreement on "Authorised Destination Status" ASAP, which will facilitate and multiply visits of Chinese tourist groups to the EU.

  • Political dialogue also covers Hong Kong and Macau. The EU watches developments closely and monitors compliance with Basic Laws, 'one country, two systems'. HK is the showcase for what WTO membership and economic liberalisation, and also the rule of law could mean for China. The HK anti-sedition law is a worrying step in the wrong direction.

  • Finally, in our political dialogue, we also discuss the thorny issue of Taiwan. There is a clear EU stake in stability and peace across the Taiwan Straits and a successful Taiwanese transition from an authoritarian to a democratic regime. There are strong EU commercial links with Taiwan, which is our 3rd largest trading partner in Asia. The EU position is 'One China' but the Taiwan issue can only be resolved through peaceful dialogue, without the use or threat of force. Rapid economic integration of Taiwan with the Mainland will bring the two sides closer together. Direct transport and trade links will help and we should welcome recent positive noises on this (although some in this room have a clear stake in the status quo).


Conclusion

  • The 5th EU-China Summit was successfully concluded on 24 September. The Summit's broad agenda demonstrated a mature partnership. Both sides stressed their resolve to further expand and deepen EU-China co-operation in all areas to strengthen this partnership, including by jointly addressing global challenges like migration.

  • Trade and economic relations will be an essential ingredient of our relations. But we have moved far beyond the initial one-dimensional stage of our relationship.

  • The EU is changing in ways that are leading China to adjust its own strategic vision of Europe. The Euro, EU enlargement, ESDP and CFSP are all ingredients of an ever-increasing interest in strengthening Sino-European relations.

  • The EU and China increasingly exchange views and co-ordinate positions on international issues and global challenges, such as terrorism, non-proliferation and regional conflicts. We hope to intensify and expand policy co-ordination in the future. The EU is building on China's desire for a global role, by encouraging it to make a deeper commitment to world affairs in the emerging 21st Century global order.

  • Many political and economic uncertainties lie ahead for China. There is a profound EU interest in a stable, prosperous and open China that fully embraces democracy, free market principles and the rule of law.

  • Developing a comprehensive, robust and enduring relationship with China will be one of the EU's great challenges in the 21st century. This will also be central to China playing its full part on the world stage. There had been a very positive start, relations are at a historic high point, as confirmed by President Jiang earlier this year. But much more can, and should, be done. The EU is prepared to work with China, in the framework of its strategic partnership, to achieve a lasting and mutually beneficial relationship for generations to come.