EU-China ties: Beyond the headlines (Originally published 10/02/12)

Expect no headline-grabbing breakthroughs at the China-EU summit in Beijing on February 14. China is unlikely to drop its strong opposition to the European Union’s Emission Trading Scheme (ETS), there will be no spectacular China-funded rescue package to ease the Eurozone sovereign debt crisis and Beijing will remain outside the international consensus on sanctions against Syria and Iran.The EU, meanwhile, will stay firm on keeping its arms embargo on China and not grant Beijing much-coveted status as a market economy.Discord on these and other issues is only part of the story, however. There is more to the EU-China relationship than meets the eye. New economic and geo-political realities are prompting both sides to sidestep old grievances, think afresh and try to seek out common ground.It is not proving easy. Traditional and new areas of disagreement - including strong divergences over China’s human rights record – have not disappeared. However, behind the headlines, Europe and China are slowly but surely building a new network of ties that bind.Mostly this is economic necessity. Europe needs all the rich friends it can get to help ease the current Eurozone debt crisis. China’s economic future depends on continued access for its exports to Europe’s large market.But both sides are also exploring new avenues for cooperation. The launch of a high-level EU-China people-to-people dialogue at the Beijing meeting is a case in point as is the start of an EU-China partnership on sustainable urbanisation.EU and Chinese officials are discussing energy questions, cyber security, water management and counter-piracy activities. Efforts to step up cooperation with China on these and other global common goods are a step in the right direction to meet key 21st Century security challenges.For the moment, however, the focus remains on economics and trade. Crucially, as the Eurozone crisis grinds on, there is heightened awareness of the expanding connections and deep interdependence between the European and Chinese economies.If both sides play their cards right, this could signal the start of a real “win-win” era.China has an interest in safeguarding the health of its biggest export market. It also needs to diversify its currency reserves. Prime Minister Wen Jiabao’s repeated assurances – given most recently during German Chancellor Angela Merkel’s visit to China – that Beijing will help Europe to fight the current crisis reflect a strong recognition that in an inter-connected world, as he put it, “helping stability in the European market is actually helping ourselves”.Meanwhile, with an eye on China’s 3.2 trillion dollar currency reserves, EU officials say enhanced cooperation with China is more than ever before a “strategic necessity”.As such, while EU Commissioners Karel De Gucht and Michel Barnier may threaten China over its restricted rules on government procurement and constraints on exports of rare earth, the EU has little interest in engaging in a damaging tit-for-tat trade confrontation with Beijing.Similarly, European fears over the political fall-out from rising Chinese investments in Europe – especially in infrastructure and utilities - are likely to ease once the phenomenon loses its novelty value. As cooler heads point out, far from “buying up” Europe, like corporates the world over, Chinese companies are looking for commercially sound and viable investments.Clearly, Europe needs to press for an equally open Chinese market both as regards European investments and European exports. But with China poised to become the EU’s largest trading partner this year, overtaking the United States, and Europe still the biggest market for Chinese exports, both sides know it is time to look beyond their daily skirmishes to the rewards inherent in building closer and stronger relationship.