Challenges for a Squabbling Europe – Part II

PARIS: The European Council met September 16 to discuss Europe’s relations with its strategic partners, on the heels of an informal debate about China and India by the foreign ministers. This unprecedented sequence reflects two new developments: firstly, a step towards greater coordination among European Union members that the new Lisbon Treaty institutions allow, but have yet to act decisively, and secondly, historical acknowledgement of the international system’s shift towards emerging economies.

Crafting a coherent foreign policy and security institutions to deal with rising powers like China comes not a moment too soon.

The rise – or re-emergence – of powers such as China and India is a triumph of trade-liberalization and open-investment policies pursued by industrialized nations. But the meeting underscored the recognition that these new major powers also pose challenges to Europe at several levels:

• Emerging powers create a need to rebalance the representation of nations within international institutions, from the United Nations to the International Monetary Fund, the G-8 and G-20. However, surrendering seats or voting rights will not automatically turn the new stakeholders, who have improved their representation, into promoters of the multilateral order and norms that Europe stand for.

• The fast growth of these nations increases strain on natural resources, along with environmental pollution and climate change.

• Questions about on how the rising nations will use their power and voice on a range of security challenges – from Iran to North Korea.

• Some emerging powers still doubt that democratic governance is the best long- term guarantee of further peace.

Nowhere are the challenges more real than with China. The industrial producer is almost equivalent in size to the United States. The nation climbs the technology ladder with determination. It has the world’s second largest military budget, with – many in Asia would add – territorial claims to match. For Europe, the Chinese question is a multifaceted one, ranging from its role in Africa to proliferation to international governance.

What does China want from the EU?

• Above all, to keep Europe’s markets open and expanding to absorb Chinese exports. China is therefore concerned about currency fluctuations, deflationary policies and holding on to its World Trade Organization status of a developing economy for as long as possible.

•  

  Limiting the impact of interdependent trade and exchanges on China’s domestic economy and society. Beijing needs a healthy, deep and open European capital market – reflected for example by key purchases of Spanish public bonds in July 2010 – to allow China to hedge against over-reliance on its largest debtor, the US. The 2008 global crisis has made China’s continued growth more dependent on Europe. Europe has gained leverage, both positive and negative.

• Europe’s policy towards external investment matters in Beijing. And reciprocally, of course, it matters to Europe how its own investors are treated by China. High technology and its corollary – the Chinese approach to intellectual property rights and patent protection – are also the heart of the future relations.

• Almost all of China’s other needs are negative: non-interference in its domestic issues, which unfortunately encompass human and religious rights as well as claims of territorial sovereignty. By lifting of the 1989 arms embargo on China, imposed after the crackdown on Tiananmen Square protests, the EU could meet some of China’s legitimate need, especially in dual-use technology. A strong, well-coordinated Europe might well use a review of the embargo as a source of leverage, looking at dual use, confidence-building and China’s cooperation on issues such as Iran’s nuclear defiance.

Because the EU defines its interests more widely, the needs are more extensive and varied than China’s. To put it simply, the first priority is to prioritize – and to put in place a review process on the realistic implementation of its goals. This implies also making use of like-minded global partners on each of these goals.

Europe’s short-list could look like this:

• A “second opening” of the Chinese economy. Since China’s entry into WTO, it has retained – sometimes reinforced – all the protection allowed from an earlier era. The opening now needed coincides with China’s own goal to rely more on its domestic purchasing power and growth, and on a global agenda to reduce economic imbalances. Company ownership and international stock listing, intellectual property rights, China’s financial and service sectors, and public procurement are areas of pressing interest for Europe in this context. Effective cooperation on the environment and climate change hinges on these issues more than on any other.

• Europe’s need lies with capital investment into its market. Although Europe’s external account balance remains positive, Chinese firms – and others – can still contribute much.

• Europe’s need towards China concerns security. Although all acts of proliferation set the wrong example by undermining rules, the developments in Iran concern directly Europe’s core security interests. China should be left in no doubt that its equivocations on this issue contradict any hope for a true strategic partnership. Leverage should be brought to bear on China, both positive and negative.

• Finally, human rights in their wider sense – including good governance and accountability – remain an area of difficult relations with China. Better European coordination will ensure that no European government is taken to task for meeting with foreign representatives of its own choosing such as the Dalai Lama. While encouraging the growing diversity of China’s society, Europe should not shy away from pointing at abuses when they occur.

One hopes that the European Council will formulate an overall concept for dealing with China, and decide on the process after September. This could include the following elements:

• A code of conduct for mutual accountability and solidarity in areas where a common policy stance is deemed as required or attainable.

• A taskforce to canvas the interactions between goals and the dialogue with China, linking, for example, management of issues such as cooperation in energy efficiency and intellectual property rights.

• The taskforce could also help the EU set collective priorities and, as government leaders and commission members, take these to Beijing. This would answer a justified Chinese call for clarity in European policies.

• Improve the coordination of numerous dialogues that exist with China, by reducing duplicate channels or tying them to the European process.

• Mobilize the best expertise and contacts of member states on China as well as build a strong cadre of civil servants.  To avoid a revolving-door syndrome, the new European External Action Service should enlist and retain expertise in the field.

• Finally, Europe must improve how it deals with all its global partners. An accumulation of ever-changing goals may discredit Europe with the strong realist powers emerging in the 21st century. But precisely because the new and realist emerging countries are often reticent about implementing a compact of common values, they are as likely to split on any issue of interest as to unite against external pressure.  European nations share many interests and values, and Europe as a whole will gain respect from China by building like-minded clubs and partnerships.

Europe has more power than it dares to think – but only if it brings that power together and uses it in an effective way.