Much like its trade with the US, Chinas trade with the EU too has been robust but spotted with irritants. Both sides have been agitated over alleged dumping by exporters. EU has been vigilant over large-scale Chinese exports of solar panels and has initiated anti-dumping investigations. China has retaliated with anti-subsidy investigations against EU made wines and polysillicon. EU, along with the US and Japan, has also had reservations against Chinas policy of discouraging rare earth exports and has been able to secure a favourable ruling on this at the WTO.
The tacky issues notwithstanding, China has opened a new window of engagement with Europe in a manner similar to it has with the US. Trade and investment are clearly the topmost priorities in this regard. In what are notable developments in the bilateral economic space, EU endorsed Chinas participation in the plurilateral Trade in Services Agreement (TISA) being negotiated outside the WTO. At the same time, the ground has also been set for discussions on a bilateral investment deal. There are expectations that progress on the investment discussions will encourage both the EU and China to visualise a bilateral FTA in the near future.
Both China and EU will be keen on a bilateral FTA given their proclivities for bilateral and regional agreements. The Asia-Pacific has been high on Chinas radar in this regard, particularly the ASEAN, Australia, New Zealand and also Latin American countries like Chile and Peru. Ongoing bilateral investment discussions with the US and an objective assessment of the TPP are likely to see China join the TPP in future. In the meantime, it continues to negotiate the RCEP with India and other bilateral FTA partners of the ASEAN. All these though, geographically, are focused on the Pacific and its surroundings. China is keen on formalising trade links across the Atlantic too and that inevitably draws its focus on the EU, which is Chinas largest trade partner. The EU, on the other hand, has been busy stitching economic partnerships with Africa, running trade deals with major economies like Korea, Mexico, negotiating with the ASEAN, Canada, India and the Gulf Cooperation Council, and discussing the TTIP with the US. A formal trade template with its largest trade partner China will be a priority for the EU too.
President Xis visit appears to have consolidated the convergence of opinions on the desirability of a FTA between China and the EU. The sailing, however, will not be particularly smooth. China and Europe have had little to share except a robust trade relationship, which too has not been without creases. Indeed, the EUs reservations on lack of democracy in China and its human rights record have been well known. China too, for long, has considered Europe as distant and incapable of understanding its cultural traits and social values. Attention was drawn to this rather gaping divide between the two countries when Xi, addressing students at the College of Europe in Belgium, explained why authoritarian control exercised by the Communist Party of China is a far better option for the country than a multi-party democracy. Xis submissions were the first by the Chinese president before a foreign audience. It served to convey the clear message that while China was prepared to engage the West on pragmatic terms, the West could hardly hope to influence China in a manner that encourages the country to imbibe Western socio-political institutions, practices and perspectives. Political reforms were hardly on the agenda of the new Chinese leadership and were the least of its priorities.
Xis Europe visit was therefore an affirmation of the Chinese leaderships long-term goals: maximize national interests by augmenting economic benefits and engage distant lands in far-flung shores for doing so. This, however, would not mean China introducing political reforms for making its engagement more appealing. While the lines are clearly drawn between economic and political spheres, what is bit baffling is the way the leadership plans to go about in maintaining these distinctions. From an economic and business perspective, it seems prepared to accept the Western institutional and legal approaches in discussing issues related to investment, services, competition and procurement. The Western legal and institutional approaches though are largely shaped by principles underlying democracy, which discourage both political and economic monopolies. China seems to be aiming to achieve one without the other. Whether it will be successful in this unique experiment will be revealed only over time. As of now, though, it is up to Europe and the West to decide whether they are willing to tango with the Middle Kingdom on its terms.
The author is head (Partnerships & Programmes) and Senior Research
Fellow in the Institute of South Asian Studies in the National University of
Singapore. Views are personal