EU-China Relations

(Excerpts from a speech given at CEIBS by Stanley Crossick. Content rights reserved by the speaker and CEIBS. Use of the content must be with the prior approval from CEIBS.)

Stanley Crossick (Biography)
Director, Founding Chairman of the European Policy Centre
Dec. 2, 2002

It's an honour to be with you in Shanghai and to be talking to China's leading business school. I looked through the literature of the school and saw as your main objective: To contribute to the economic development of this country and its business community. Judging by the sudden expansion in Shanghai, China needs all the MBAs it can get.

A business manager's main focus is inevitably going to be managing a particular business or organisation, facing central and microeconomic problems. But a top business manager must also understand the environment within which he or she manages. By environment I mean local, national, regional, global, economic, political, social. All these are, of course, interrelated in today's world. I hope my lecture will help a little in that direction. It's on EU/China relations.

I reckon to spend a few minutes on how I see the basis of the relationship, or certainly how it seems in Brussels. I'll take a look at the relationship as seen across Europe, then look at the culture and try to see into the future.

For convenience sake, let's just talk European. I'm sure you understand that the European Union has around 15 countries. It will soon have 25 countries. It's not technically the whole of Europe, but it's rather easier to talk about Europe than the European Union every time.

Current policy is based on communications of the European Union Commission in Brussels, an executive as of May 2001. It was built on communications of three years earlier. There are three areas at which the relationship has looked: political and human rights dialogues; economic and trade relationships; and Europe-China co-operations.

As you know, the two-way trade between us exceeds 100 billion Euros. China is Europe's third leading trading partner behind the United States and Japan. Europe is China's second largest export market. It is expected this year that China will replace the United States as the leading beneficiary of direct investment money.

Europe has welcomed the acceptance of China to the Global Trade Organisation and has always been a supporter of that membership, although implementation of what that membership entails has thus regressed.

Europe is fully committed to supporting reform and improvisation in this country, both working with the Beijing government but also working across China with no less than 40 co-operation projects, ranging from environment to education to business governments to enterprise reform to financial services. So Europe is trying to help at different levels of society.

There are three priorities for Brussels. First is to support the economic and social reforms. Second is to improve the environment and work towards sustainable development. Thirdly, the area of good government and strengthening of the rule of law. We have bilateral summits, the last of which took place in September of this year, and there are a great deal of exchanges at different ministry and official levels.

Good integration into the international community-and that what it's all about-is not of course just about changing laws and regulations. It involves changing mentalities and requires extreme information and trading effort, which Europe tries to do its best to help China with.

There have been good business relationships from Europe. Obviously it's very important to us. How can a country with more than 1.2 billion people be other than important to us? Historically our relationship with the United States has been the most important, so far, and has dwarfed all other relationships. And it still does economically, politically and from a security standpoint.

But two things are happening. Although economically it is still, by far, the most important trading relationship in the world, it is between two mature markets and growth is therefore limited. Politically, we are growing apart. The tragic events of the 11th of September brought into sharp focus on a trend which was already there. Our American friends and we tend to see the world and its problems rather differently. We also tend to see different countries in different lights.

Much more binds Europe and United States together than divides them, and the relationship will remain critically important. But because as I said, the markets are mature, clearly one day our trade with China may well compete with our trade with the United States. It has a long way to go. Our mutual trade is 100 billion Euros; we have 600 billion Euros with the United States. But because of the mature markets I mentioned, we are in need of other markets and China is potentially the biggest.

Second, while there are still substantial policy differences between China and Europe on some issues, we think more alike than we do with our American friends. For example, policy toward Iraq and terrorism. And generally we tend to see the world in shades of grey rather than in black and white focus, which you get from the United States. So we also see, in the political field, China as a stabilising influence in the region and globally.

Let me leave beside the United States connection and turn directly to the China-Europe relationship. As I said, we can not ignore 1.2 billion people economically or politically. Economically, Europe supports Chinese trade expansion and liberalisation. At the same time, we are obviously worried about the trade deficit we have with China, which is 45 billion Euros and likely to grow. For this reason, we are anxious to see that normal trade barriers are reduced and that no new ones are erected. We hope that China's entry into the WTO will encourage this.

European experience is notably available on how to adopt rules and policies to globalization and how to minimise at the same time the resulting economic effects. Europe is keen to help ease China into the global system. But at the same time, we have some concerns. It is obvious that you need a sound microeconomic policy. We understand that structural changes take time. But we are a little impatient (for) the Chinese government to combat piracy and counterfeiting and to increase respect for intellectual property law, a subject of very great importance in the West and of great, great importance to companies as they develop their opportunities here in China.

And in general, we are concerned about the enforcement of legislation if nothing else. That legislation complies, in theory, with international standards even if in practice it does not. So to us, always, the rule of law is critically important, from an economic and business standpoint as well as a political one. And it is this improved law enforcement and general development of the rule of law that is important for China if it is going to protect and increase its direct investment.

Turning to the political dimension, Europe wants a stable China, along which will influence regional and global stability. Its key objects are to help China achieve a society that is based on rule of law, and keeping this rule of law is central to us. That is what we would like. Because we believe that only an open society will bring long-term stability and economic prosperity. Of course, it's understood that if you bring in structured reforms too quickly or without sufficient care, they can have a destabilising effect. It is for China and its leadership to work. Europe is there to provide support and encouragement; it is not there to dictate what to do and how to do it.

However, as China has chosen to join the World Trade Organisation and accepts the obligations that follow from membership, it has to address a number of issues. For example, the WTO rules require judicial review of administrative action in the economic sphere. Individuals and companies must have recourse of action against, for example, my administration. That is required by the WTO. You will see it will have an effect on your own legal system in other spheres.

In the transition toward a local society, different constituents in society need to be encouraged. The civil society in Europe is very important. The Non-Governmental Organisations, by the way, are trusted in Europe by the people far more than the governments. Again, the EU-China dialogue and co-operation is there to help.

Our political dialogue has broadened and now addresses issues such as international terrorism and the non-proliferation of weapons of mass destruction. Separate from that, there are also twice-yearly dialogues specifically on human rights, which allows the discussion of a wide range of issues. There are also a number of co-operative projects. For example, Chinese implementation of United Nations human rights covenants, local democratisation and legal and judicial reform. Europe keeps a vigilant eye on Hong Kong and Macao, but so far is comfortable with the implementation of that "One Country, Two Systems" policy. I just came from Hong Kong, in fact. The success of this unique Hong Kong structure is vitally important to China as well as to Hong Kong. It is important to the international status of China and the ultimate resolution of the Taiwan dispute.

Turning now to this relationship as seen from China, I note this more as an encouragement to you to give your views when we have a discussion afterward. They are perhaps more like hopes; they're not really for me to know more than that. Economically, Europe offers to China a large market, a pool of investment and co-operation in a wide range of fields. I think we also offer patience and understanding. I hope that's seen from China, and a willingness to help in your transition. You may be suspicious that Europe wants to exploit China commercially. We only have to look back at history and you can understand such a concern. But of course trade is not a zero sum game. Both sides can be winners. There is every reason they will be.

The second concern I expect from the Chinese standpoint is that we Europeans tend to regard China too much as a developing country. Europe's research and development investment in China confirms its belief in the quantity and quality of Chinese talent available. China's economic transformation has been due, partly, to foreign technology and management, but the Chinese workforce also plays an extremely important role.

Europe now sees China, particularly since the WTO admission, economically in global terms. The Chinese view should be enhanced by our enlargement from 15 to 25 countries shortly. Politically, we have to look at this internally and externally. Should you be worried about any attempted European interference in your internal affairs? I suggest no. But you have to expect, from time to time, public criticism in the West on issues of human rights treatment, of the Falun Gong, Tibet and maybe Hong Kong and Taiwan. But European governments are likely to remain supportive of Chinese government policies in the absence of serious incidents. On one hand, we are encouraging the move and the transition to modern and democratic society. We are urging a fast approach, yes, but we understand the process has to be controlled and the big debate, of course, is what the control really means. How fast can you change?

Externally, should the enlargement of the EU and NATO worry China? Should European development of a defence and security policy alarm to be a worry? My answer is no. Europe does not see China as a threat. Indeed the only threats we see today come from rogue states and international terrorism. So long as China is helping to defeat these forces in its own interest as well as global interest, I see no problem.

In view of the historically antagonistic Sino-Russian relationship, should China be worried about the quasi-admission of Russia to NATO and the closer relations between Europe and Russia? I answer no again. Because our relations with Russia confirm Europe's willingness to help Russia as it seeks to help China. And Russia, too, must be a responsible member of the international community. We welcome it as such. Europe has no desire to play one country off against another. I know that sometimes statements out of Washington suggest the Americans may think that way from time to time. At least we in Europe have learned that balance of power and divide and rule policies of the 19th and 20th centuries lead to catastrophic results. In Europe we have pooled our sovereignty in the interest of ever-closer co-operation.

Finally, we come to China's old enemy-Japan. Japan and Europe relations are good but unexciting, which I think in Chinese terms is good. If I understand correctly, living in exciting times is a curse. So that makes relations good but unexciting. There are virtually no problems economically and there's very little dialogue between Tokyo and Brussels. Again, I don't see that anything Europe does in its relationship with Japan has any negative impact on China.

You may tell me after I finish this. But then your assessment of the China-Europe relationship as seen from China's perspective is rather more relevant than mine. And I'm more concerned to have you come out with your views then necessarily defending mine.

So much then for the present. Turning to the future. Might my optimistic presentation prove wrong? Of course. What might affect it? In today's fast moving, fast-changing society there are many things: a change in leadership in China or Europe; a change of policies in China or Europe; economic change in China; political destabilisation in China; other unforeseen events. It's hard to see European leadership and European policies changing toward China and introducing a different scenario for China-European relations. But of course, European reaction to events in China could change that. But we hope there will be no events that would change that.

Conversely, we see no sign of any leadership or policy changes coming down from China which would cause concern as to our relationship. But we do recognise there remains the risk of economic failure and political destabilisation. As I said, there's always the unforeseen events, of which there are many more these days than there used to be.

In conclusion, I think China faces not only economic and political uncertainties, that Europe has a deep interest and indeed a deep stake in helping China in a manner, which will produce a stable, prosperous and open country, a China in which the rule of law prevails. Europe has a vested interest in helping China economically and politically, both in China regionally and globally. Europe has much to offer China in this. China is bound to be become the dominant regional power and a global force. We in Europe seek to help build a strong, confident China taking its place as a world power. History tells us that danger does not come from a powerful nation economically successful and politically stable, confidant in its own destiny. Danger comes from nations which are powerful but which lack confidence and which feel threatened.

I conclude with two quotations and one recommendation. Jean Monnet, founder of the European Union, closed his memoirs with a sentence to the effect that the European Community, as it then was, is at a stage on the road to the organised world of tomorrow. By that, he meant that a successful Europe might become a force to help make ours a better world and to secure, in today's language if you like, effective global governance. That sounds very idealistic, but that is what the European Union is all about.

My recommendation is that each one of us, in China and Europe, and all the others in all their spheres, promote exchanges between us, particular among your age group so as to increase our mutual understanding, which in many areas is very lacking on both sides.

The second Jean Monnet quote, also from his memoirs, comes out of his visit to Shanghai in 1933 as a banker. His words of wisdom are how to deal with the Chinese. I quote: "The secret is simple: Act as you speak. See there's never any contradiction between what you say and what you do."

It's a good lesson for all human relations, but, alas, one that is rarely followed.

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