Dealing with China: a How To Guide

At the G20 summit one prospect frightened most of the delegates more than their inability to stem the economic downturn: that China would emerge as the de facto “indispensible power”, to use Madeline Albright’s erstwhile phrase about the US.

China’s call for the Renmimbi to replace the dollar as the world’s reserve currency, and its limited fiscal stimulus were triumphs for Chinese diplomacy. And while delegates mingled in the Excel Centre, the Chinese navy was busy spelling out long-range ambitions, including plans to build large combat warships, next-generation aircraft and sophisticated torpedoes, the offensive intent of which should be clear to all. 

So what should our China policy be? That is the question my ECFR colleagues John Fox and Francois Godement attempt to answer in a new report. I asked John, a former British diplomat and China expert a few questions.

DK: Does China have us – the West, the EU – over barrel?

JF: China’s foreign and domestic policy has evolved in a way that has paid little heed to European values, and today Beijing regularly contravenes or even undermines them. The EU’s heroic ambition to act as a catalyst for change in China completely ignores the country’s economic and political strength and disregards its determination to resist foreign influence. The result is an EU policy towards China that can be described as “unconditional engagement”: a policy that gives China access to all the economic and other benefits of cooperation with Europe while asking for little in return.

The EU allows China to throw many more obstacles in the way of European companies that want to enter the Chinese market than Chinese companies face in the EU – one reason why the EU’s trade deficit with China has swollen to a staggering €169 billion, even as the EU has replaced the US as China’s largest trading partner. Efforts to get Beijing to live up to its responsibility as a key stakeholder in the global economy by agreeing to more international coordination have been largely unsuccessful. The G20 summit in London in early April 2009 demonstrated Beijing’s ability to avoid shouldering any real responsibility; its relatively modest contribution of $40 billion to the IMF was effectively payment of a “tax” to avoid being perceived as a global deal-breaker.

So whilst there is interdependency between China and the EU (and the US) and China doesn’t exactly have the EU over a barrel, the EU is certainly the doormat in the relationship and China pulls no punches in walking all over it.

DK: You write in your report that the EU needs to move to a China policy of “reciprocal engagement”, but is there any evidence that China would respond to such an approach?

JF: The EU – often in tandem with the US – has achieved small but real changes in Chinese policy that shows that China can shift its position when faced with a united EU approach on targeted issues. The EU, acting through the E3 troika of Britain, France and Germany, has managed to get China to back its efforts to halt Iran’s uranium enrichment programme – but at the cost of having China shield Iran from tougher measures.

The backing of China, a veto-wielding state, for the European position in the UN security council has been essential, and EU efforts to bring China on board were a diplomatic success.  Issues such as Darfur and Iran show that China will shift its position when faced with united and focused demands. EU member states will find themselves in a far stronger negotiating position when it comes to tackling illegal dumping practices and encouraging further economic opening by China through adopting a “reciprocal engagement” approach.

Similarly, the push for China to pay more attention to human rights will stand a much better chance of success if it is backed by the large group of European countries who prefer to accommodate China on political issues for supposed trade benefits.

DK: Reciprocal engagement” or tit-for-tat competition? Is there really a difference?

JF: “Reciprocal engagement” is not code for tit-for-tat competition or an aggressive strategy to contain China. The EU has no choice but to engage China as a global partner and to accept its historic rise. Rather, the EU must make it in China’s best interests to deliver what Europeans are asking for. Reciprocal engagement means firming up the EU approach and driving a harder bargain in negotiations with China, with the aim of coming to mutually beneficial deals that result in greater openness on both sides.

Reciprocal engagement espouses two principles and two criteria. The principles: European offers to China should be focused on a reduced number of policy areas, and the EU should use incentives and leverage to ensure that China will reciprocate. The criteria: relevance to the EU, and a realistic expectation that a collective European effort will shift Chinese policy.

DK: Your report is about the EU’s China policy. You barely mention the US except when you argue that EU leaders need to make a case “to their American interlocutors that the best results with China. .. .can only be achieved through partnership with Europe.” But is the reality not an emerging “Pax Chimerica”, where the EU’s role will be largely irrelevant?

JF: The election of Barack Obama has opened a new chapter in US foreign policy, but one marked by unprecedented economic challenges and the rise of China and other powers. The American debtor and its Chinese lender have locked each other into a symbiotic embrace. Whilst talk of a G2 or pax Chimerica is premature, it is clear that if Europe wants to avoid being left on the sidelines it needs to completely change the way it engages China, and the US.  To be heard on these issues, the EU needs to move fast to demonstrate its importance to China – and it must make a similar effort in Washington.

Europeans need to make the case to their American interlocutors that the best results with China, whether on climate change, rebalancing the world economy or fighting the spread of nuclear weapons, can only be achieved through partnership with Europe. And they will need to persuade China that listening to the EU on major strategic issues pays, while ignoring it carries a cost.

DK: You say that China policy has been based on the false presumtion that Beijing will change if the EU engages. Does this mean we have to give up all hopes of China ever changing her ways?

JF: China is not by any means static. The point in our report is that China is not a malleable entity to be shaped by European engagement – China is developing politically and economically in a way it is itself defining. There is increasing public debate within the country on a range of topics not directly linked to the regime’s legitimacy and ideology. But no positive steps can be directly linked to European or even western pressure. Treatment of Chinese human rights advocates – a topic regularly raised by EU leaders – has actually worsened in recent years.

EU hopes that China would continue opening up its economy following its accession to the World Trade Organisation (WTO) in 2001 have been disappointed– the Chinese government has treated WTO membership as the end of the reform process rather than a beginning. Beijing has tightened central control of Chinese firms and reinforced informal barriers to foreign entry into the Chinese market.

Political liberalisation seems to have stalled, or even reversed: China has tightened restrictions against NGOs, stepped up pressure on dissidents, and stopped or rolled back local electoral reforms. At the UN, Beijing has built an increasingly solid coalition of general assembly votes, often mobilised in opposition to EU values such as the defence of human rights. However to renounce human rights goals in the name of “realism” would weaken the essential principle of the EU and European society – the rule of law. Instead, the EU must bolster the credibility of its human rights stance – including, when necessary, listening to criticism by China and Chinese citizens of its own criminal law and human rights practices.