Europe engages China in earnest

Malgré un dialogue difficile entre dirigeants et des tensions diplomatiques, les relations entre l’Europe et la Chine se développent dans le monde des affaires. La campagne antimonopoliste lancée par les autorités chinoises contre certaines firmes étrangères peut apparaître comme une distorsion de la concurrence mais elle peut aussi être interprétée comme les prémices d’une action qui touchera les sociétés chinoises afin de développer une véritable économie de marché. Une analyse de François Godement, de l’European Foreign Relations Council.

Two items in the news at the moment show the European Union’s engagement with China in a more favourable light than do the many top-down statements of the past about “strategic partnership”. One that has received little coverage is a recent report written for the well-known Institute for Research and Education on Negotiation at the ESSEC business school in Paris.

The paper’s title says it all : “EU Strategic Partnerships : Shallow political summits, active technical dialogues ?” The authors sought to answer the question by tabulating the meetings and formats that exist between Europe and China, Brazil, Canada, India, Japan, Mexico, Russia, South Africa, Korea, and the United States. This is no small feat : it appears that the European Commission does not itself keep tabs on these meetings, nor does it coordinate most visits by commissioners. The silo effect is devastating, and makes it easier to understand the new Juncker Commission’s need to take back control of commissioners. The result of the enquiry shows that EU dialogue with China is by far the most frequent, the most extensive, and the most diversified of all its engagements with its strategic partners.

Sixty-five EU-China groups meet, of which 11 deal with political issues. Not all of the groups listed by the authors meet regularly – the High-Level Economic Dialogue disappeared for two and a half years, and the human rights dialogue has been a notorious casualty. But the same applies even more to other partners, with India cited as a particular example of this.

The number of EU-China groups is greater even the number of groups that meet with the US.
The number of EU-China groups is greater even the number of groups that meet with the US, which shows, of course, the limits of the approach. Vivet and Lalande suggest that the partnership with China is one “of necessity”, that is, stemming from the many problems in the relationship. Nonetheless, the extent of the contacts is evidence of the serious intent of Europeans in engaging China. One might in fact wonder whether some of these efforts are not lopsided. While the political relationship with India has expanded, and there is endless talk of a free trade pact, actual technical relations are remarkably thin – and the relationship with India is not short of problems and opportunities !

The authors make it clear in their conclusions and recommendations that much of this engagement remains non-strategic. Giving a nod to ECFR’s concept of “reciprocal engagement” (and not only towards China…), the authors find that most meetings and visits are uncoordinated. Meetings are not leveraged to coincide with international engagement and multilateral negotiations. And there is no effort to practice linkage – for example, by making trade-offs between concessions and offensive interests.

These findings must resonate with the experience of many EU diplomats and civil servants, who often stage huge but isolated efforts to place Europe on the map and gain traction with their interlocutors. It is to be hoped that the new European Commission and High Representative, with their tighter organisational structure, will manage to overcome some of these obstacles.

The second piece of news has been slightly more widely publicised. China has launched anti-monopoly action, both administrative and judicial, against many foreign car manufacturers, mainly from Germany and Japan. China’s National Development and Reform Commission is behind the move. It alleges that these companies, often famous brand names, maintain a monopoly on spare parts and use it to inflate prices. Public commentary on the subject has suggested that the move is part of China’s nationalistic drive to favour indigenous industry over foreign investors.

The European Chamber of Commerce in China (EUCCC), which has long been the source of well-documented and hard-hitting reports on the problems of doing business in China, comes out with a much more balanced view. It has some criticism for a process that singles out brand names and foreign partners and seems to be trying to trample companies into submission without properly hearing their cases : practices, it must be said, that are typical of China’s managed economy. But the EUCCC also points out that the implementation of anti-trust law is a key element in the transition to market, and one that is supported by consumers. Moreover, the companies that have been singled out are often joint ventures, in which a Chinese partner is actually responsible for distribution. The EUCCC advises European firms to take notice of legislative changes and to seek conformity with the legal environment.

Scapegoating foreign brand names and obscuring the role of domestic firms and interest groups makes it easier to implement competition rules.
Obviously, scapegoating foreign brand names and obscuring the role of domestic firms and interest groups makes it easier to implement competition rules. But the overall intent is still to liberalise the world’s number one auto industry and market, and that cannot be rejected in principle. In Europe itself, some national legislations (for example, in France) remain biased towards OEMs (original equipment makers) to the detriment of their spare part competitors, resulting in higher prices for European consumers.

To the Chinese public and to economic decision-makers, it should be apparent that European public and private institutions can behave in a remarkably even-handed way, favouring long-term progress over short-term interest. The EUCCC discreetly nudges European firms into speedy compliance with new anti-monopoly legislation while noting the biases in the Chinese process of implementation. This should provide a model for relations between Europe and China.