China, EU should Push Forward Ties
With the combined size of both economies, reform of global economic governance is possible
Jo Leinen
Jo Leinen has been a member of the European Parliament since 1999. He was president of the Constitutional Affairs Committee(2004—2009) and he chaired the Committee on the Environment, Public Health and Food Safety (2009—2011). He has been the chairman of the Delegation for relations with China since 2014, and a full member of the Committee on the Environment, Public Health and Food Safety.
Since Deng Xiaoping’s policy of reform and opening-up, China has transformed itself at a speed and scale not seen before. In most of those 40 years, the country’s economy has grown at an annual rate about 10 percent, while at the same time its society has witnessed radical change in terms of better living standards as well as the ability to connect more with people and cultures outside China. Someone visiting China 40 years ago and coming back today will find a country that has changed and evolved in a way that no other country has done.
Since 1978, China has made tremendous achievements in major areas both domestically and internationally. It has overtaken major economies like Japan and Germany to become the second-largest economy in the world. This development makes it a central actor on the world stage, a role reinforced by the fact that much of China’s development is a result of the tight integration of its economy into global supply chains. Inside the country, hundreds of millions of Chinese have been lifted out of poverty at a pace never seen before and have seen their daily lives dramatically change for the better, especially in the countryside.
Nonetheless, we should not overlook some undesired effects of this economic and social development. In the years during which the search for economic growth dictated much of China’s policies, inequalities have grown, particularly between some parts of the country, and between rural and urban areas. And like in any other country that went through an era of industrialization and growing wealth, nature and the environment —and therefore the humans living in it — have paid a high price.These are not the only challenges China faces now: a slowing economy (though not always necessarily a problem in itself),a rapid aging of the population, and difficulties in a number of regions and parts of society add to growing inequalities and serious environmental damage. The Chinese government is well aware that it needs to act and has set up impressive plans to meet the challenges that come with rapid change.
One thing is clear: a modernized policy of “opening up” should be the way forward. Opening up even more and intensifying China’s international ties will be key on the way to the “new normal”. China’s leadership is already pursuing numerous international projects with great vigor, be it the Belt and Road Initiative, its engagement with Africa, the creation of the AIIB,or with a softer edge, the growing number of Chinese tourists traveling to Europe, the Americas and other countries. At the same time, Chinese companies are becoming more and more active on the international stage, bringing technology and products designed in China to worldwide markets instead of merely producing for Western companies.(https://www.daowen.com)
Looking at this growing international presence from Europe,there is often a sense of uneasiness toward China but there are two sides to the coin. Not shy of formulating and pursuing its interests, China is rapidly creating international constituencies to which the EU must find an answer. President Xi Jinping’s ambitious Belt and Road Initiative, under which China is building interconnected infrastructure spanning the whole Eurasian continent, creates tremendous potential for regional development.However, the success of such a project will be measured by the benefit it brings not only for China but also for the partner countries involved. The EU has formulated in its recent Connectivity Strategy for Asia that expects transnational and transcontinental connectivity projects to bring about concrete benefits for all partners and that they are compatible with sustainability and environmental standards.
On the other hand, China’s development and its increased international presence have created many opportunities, which Europe needs to tap. China is now able to be a much-needed international partner. In a world faced with global challenges, like climate change, which one country or even one region of the world is unable to tackle alone, China’s role cannot be overstated. Crucially,China is also willing to play that role, as has been demonstrated by the excellent cooperation between the EU and China for the Paris Climate Agreement and by the joint declaration on climate change after the EU-China Summit of July 2018.
However, the substantially different political and economic systems pose a challenge for upholding international rules and making them fit for the future. In one sense, China still has some characteristics of a developing country. Nevertheless, it has grown into a major economy interconnected with the rest of the world, creating interdependencies at numerous levels. If Europe wants China to join in the defense of a rules-based international order and fair and free trade, the two partners will need to agree on a set of common positions and answers to the challenges ahead of us. To achieve this, China and Europe first need to deepen their understanding of each other and to define which expectations are realistic and which are not.
When China joined the WTO in 2001, its market was evolving rapidly, with thorough reforms of state-owned enterprises, the emergence of commercial banks, and a modern tax system,among other changes. The other members of the organization expected it to continue on its path toward a market economy.Looking at the way China has successfully developed since the start of its opening-up policy, it is difficult to argue that China should align its political and economic system with the Western model. This should not be the expectation. China should be free to choose its own way of running its economy.
It is encouraging to hear President Xi saying recently that with regard to reforming the Chinese economy, “Opening up was key to China’s development over the past 40 years, and in the same vein, high-quality development of China’s economy in the future can only be achieved with greater openness”.
China and Europe share a strong interest to further deepen economic cooperation. No one can imagine a Chinese or a European market without the presence of the other’s brands and technologies, and that is a positive development. Their role for further cooperation is therefore essential, but can only achieve maximum results after barriers have been removed and a level playing field for fair competition has been created. I am hopeful that after the last EU-China summit, the negotiations on a comprehensive investment agreement between the EU and China can be revived.As the summit outcome document states: “Both sides welcome the exchange of market access offers which should bring the negotiations into a new phase and are committed to accelerate the discussions.” After more than five years of negotiations with limited progress, this is a welcome step forward.
The support for multilateralism and a rules-based fair and free trade order is a commitment shared by the EU and China. Both need a stable and predictable global trade and investment order.The growing challenge to this system in the form of unilateralism and protectionism runs counter to European and Chinese interests. With the combined size of both economies, a meaningful reform of global economic governance is possible. China and the EU have already established a working group on WTO reform and both have issued concept papers outlining their ideas for its modernization.
With a successful closure of the negotiations for an EU-China investment agreement, and a meaningful contribution to WTO reform, China could show its commitment for a further opening of its market and for fair and free trade. It would also show that although Europe and China’s political and economic systems are different, both can work together for the benefit of each other. And most of all it would signal that Europe and China can be defenders of a rules-based international system.