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EU-China Economic Diplomacy: When Economics Meets Politics[1]

Author:Zhang Xiaotong[2]Article source:Wuhan University Center for Economic DiplomacyInput time:2014-11-19Page View:166次

 

Abstract: This article intends to understand the motivation, strategy and effects of the economic diplomacy exercised by the EU and China in their 40 years-old relationship. The article examines the EU-China economic history which can be divided into four periods: the starting-up period (1975-1988), the ‘Low Tide’ Period (1989-1992), the ‘Honeymoon’ period (1993-2005), and the ‘Turbulent’ period (2006 till now). The cases of economic diplomacy chosen here are those of strategic importance, i.e. which had a direct bearing on the overall development of EU-China relations, instead of the specific nitty-gritty negotiations of technical nature. The last part summarizes the characteristics of the EU’s and China’s economic diplomacy in their long-time relationship, with a particular focus on the EU as a sui generis player of economic diplomacy.

 

Introduction

    This article intends to understand the motivation, strategy and effects of the economic diplomacy exercised by the EU and China in their 40 years-old relationship. Here, ‘economic diplomacy’ means two things: The first is to use economic means to achieve specific political goals or strategic intentions in foreign policy. The second is to use political and diplomatic means (and influence) for economic benefits. Economic diplomacy is also referred to as a ‘political-economic linkage’ throughout this article.

    The history of EU-China economic and trade relations is dotted with two big events – the 1989 Tiananmen Incident and the 2005 Textile Crises. With those two symbolic events, the EU-China economic history can be divided into four periods: the starting-up period (1975-1988), the ‘Low Tide’ Period (1989-1992), the ‘Honeymoon’ period (1993-2005), and the ‘Turbulent’ period (2006 till now). The cases of economic diplomacy chosen here are those of strategic importance, i.e. which had a direct bearing on the overall development of EU-China relations, instead of the specific nitty-gritty negotiations of technical nature.

In the final part, efforts are made to summarize the characteristics of the EU’s and China’s economic diplomacy in their long-time relationship, with a particular focus on the EU as a sui generis player of economic diplomacy.

 

II. EU-China Economic Diplomacy in Historical Perspective

Phase 1 (1975-1988): Starting-up of EC-China Trade Relationship

    As Harrish Kapur, a China expert understood, China’s interest in the European Communities was primarily political… In contrast, the Community’s behavioural pattern towards China was different. It was principally influenced by economic factors, dictated by the very nature of its functions and its goal, which are – at least for the moment- essentially economic.[3]

    Therefore, there existed a ‘market’ for trading off political interests with economic ones between the European Economic Community and China during the early period of EEC-China relationship. This bargain was particularly visible on the eve of establishing the EEC-China diplomatic relations.

See table 1&2:


            Source: EUROSTAT 1993

   

        Source: EUROSTAT 1993

 

    In autumn of 1973, the Chinese side invited Christopher Soames, the Commission’s Vice-President in charge of its foreign affairs, to visit China. The Commission took the initiative in proposing a trade agreement with China.[4] Christopher Soames’ visit in China was finally realized in May 1975, which turned out to be a decisive move for the establishment of diplomatic relations.

    The crucial issue about which the Chinese wished to reassure themselves, before commencing any substantive exchanges (on the establishment of diplomatic relations) or before making any major commitment, was the Community’s attitude on Taiwan. During the official visit by Christopher Soames in Beijing in May 1975, the Chinese, sensitive as they were on Taiwan, and despite the informal assurances given by the EEC delegation regarding Taiwan, insisted that Soames must formally and publicly declare that Taiwan was geographically an integral part of China. The EEC delegation was reluctant to make such a declaration on the ground that it had no legal mandate to make any declaration that involved territories. Finally the impasse was broken with a compromise that Soames would publicly state that the EEC had no relations with Taiwan. This he did at a press conference on 7 May, 1975.[5]

    I confirmed to the Minister that the Community […] does not entertain any official relations or enter any agreements with Taiwan. I explained that matters such as recognition of states did not come into the responsibility of the Community. But I pointed out to the Minister that all the Member States of the Community recognized the Government of the People’s Republic of China as the sole legal government of China and have taken positions with regard to Taiwan question acceptable to the People’s Republic.[6]

    Clearly Soames’ visit was a milestone in the Sino-EEC relations. For one thing, it created the appropriate basis for the start of a dialogue; for another, it cleared the way for the Chinese Government to use the forthcoming Deng Xiaoping visit in France – also in May 1975 – to dramatically confirm in Europe the beginning of this change in China’s relations with the Community. The pace of Sino-EEC interaction accelerated after this. The Chinese Ambassador to the Community, Li Lianpi, presented his credentials to the President of the Council and the Commission on 15 September 1975; and soon after (January 1976) talks opened between the officials of  the Commission and the Chinese Mission with a view to conclude a trade agreement.[7]

    The above is a typical case of economic diplomacy. The Chinese side made use of the EEC’s intention for signing a trade agreement to satisfy its political need on the Taiwan Question. The EEC reciprocated with a linkage mainly for trade interests. However, we have to recognize that it was not easy for the European Communities to link the trade agreement issue with the Taiwan Question. As we know, the European Economic Community, as mainly an economic regional bloc, did not have a legal mandate to make any declaration that involved territories. Mr. Soames made a bold step by making that declaration on the question of Taiwan, which played a decisive role in removing the major political obstacle to establishing the EEC-Sino diplomatic relations. Here, we saw an institutional obstacle for the European Economic Community to link politics and economics.

 

Phase 2 (1989-1992): ‘Low Tide’ period

    Europe’s attention was upon Beijing in 1989. In the immediate aftermath of the Tiananmen Incident, the leaders of the twelve Member States reacted strongly. The EC’s economic sanctions, including suspending the high-level contacts, cooperation projects and other economic exchanges, were part of European economic diplomacy in the form of negative incentives. The EC-China relationship entered into a difficult moment.

    However, the evidence did not support an explicit causal relationship between the EC’s economic sanctions and a change of course of action by the Chinese government. Neither did we witness an improvement of China’s human rights situation as expected by the Western world during the period 1989-1991 as a result of the sanctions imposed by the European Communities, the United States and other powers. It was generally recognized that Beijing did not bow to the international pressure after the Tiananmen Incident, and stuck to its own rhythm and pace of domestic economic and political reforms. For example, Beijing did not allow the admittance of independent observers to the trials and to visit the process. Nor did they accept the human rights standards advocated by the western world. Even a constructive dialogue on China’s human rights issue was going nowhere.

    The Commission later admitted the ineffectiveness of tough declarations and sanctions in its 1995 Communication on China, ‘There is a danger that relying solely on frequent and strident declarations will dilute the message or lead to knee-jerk reactions from the Chinese government.’[8]

    The EC’s linkage strategy did not hold for long. Most of the sanctions were lifted by the end of 1991. Roughly in 1992, the EC and its Member States started to readjust their China policies. Firstly, they de-linked the improvement of China’s human rights situation and the amelioration of their relations with China. Secondly, they de-linked economic relationship with human rights. They believed that their China policy should not set the aim of pushing for the collapse of China’s Communist regime, since it was impossible. Instead, China should be transformed and encouraged to gradually ‘integrate’ itself into the international society through economic and trade cooperation and other means of engagement.[9]

    The short-lived linkage has shown that it was difficult for the European Communities to maintain an effective linkage at the EC level for a long time. The difficulties could be attributed to such factors as the EC’s priority for seeking economic interests, competing national interests among Member States and a conflict between the EC’s external economic and political objectives, as well as China’s diplomatic manoeuvring.

    China reacted with impressive diplomatic manoeuvring, which was largely an act of economic diplomacy. The Chinese side found that the west European countries did not threaten to revoke the most-favoured-nation and the GSP treatment granted to China. Neither did they forbid European companies to invest in China, interrupt the Sino-EC cultural or academic exchanges.[10]

    Against that background, China did not choose to confront the European Communities, nor did it drift towards isolationism. Instead, it made great efforts to keep close contacts with the European Communities and sought détente and cooperation, promoting its own development through opening-up.[11] Immediately after the Tiananmen Incident, the Chinese leaders carried out intensive diplomatic visits with European leaders. More than that, China sent out two big purchasing missions to the EC Member States respectively in June 1991 and June 1992. The first purchase signed the contracts valued at 360 million US dollars while the second signed over 15 billion US dollars.[12]

    Due to the above factors, the EC’s sanctions did not remain long. We find that the punitive measures in the form of negative sanctions were largely ineffective in the EU’s economic diplomacy towards China, which led to more confrontations and eroded Member States’ own economic interests.

See table 3&4:

 

Phase 3 (1993 to 2005): ‘Honeymoon’

    Since 1993 the European Union and its Member States started to think about their new strategy towards Asia and in particular towards China.[13] These new moves ushered in a new era of EU-China relationship. A new attitude featuring ‘transformation through engagement and partnership’ was gradually accepted and adopted in Europe. The Commission published four China Communications during this period respectively in 1995, 1998, 2001 and 2003, which were endorsed by the Council of Ministers and the European Parliament. The leaders on both sides decided in 2003 to upgrade their relationship to a comprehensive strategic partnership, kick-starting an EU-China honeymoon moment.

    The hallmark of the EU’s diplomacy towards China for this period was what we would call, the partnership diplomacy. That is to say, the EU exerted its influence upon China and achieved objectives through establishing and reinforcing its partnership with China. Partnership was not equal to a relationship free of problems and tensions. On the contrary, it served as a framework in which the EU and China managed to strike a bargain and make trade-offs within and across issue-areas. Issues were knitted together and traded off in different combinations in the shadow of a newly established and evolving partnership, which was again enriched and reinforced by the existing and newly added issue linkages. In a nutshell, linkage diplomacy underlay partnership diplomacy, which in turn consolidated the existing linkages and fostered new ones.

    For the phase (1993-2000), China’s major interests were seeing the EU become a pillar for the future multipolar world, getting the EU’s support for its WTO accession and receiving capital, technology and development assistance. The EU’s major interests were getting China’s support and recognition of its integration cause, reaping the economic, political and social benefits out of China’s WTO accession process, and improving China’s human rights conditions (largely a normative goal for the EU’s diplomacy). Specifically, the linkages were made in and across three broad areas – political and security issues, economic and trade issues, and the human rights issue.

    The phase (2001-04) witnessed the prime time of the EU-China grand bargain based on the establishment of a comprehensive and strategic partnership. Politically, for the EU side, the Iraqi War seriously undermined the transatlantic alliance relationship and divided Europe. The EU needed China to fight the US’s unilateralism and the tendency towards a unipolar world. China, as always, pursued a multipolar world. This laid down a solid foundation for the EU-China partnership. In the political-security area, there existed an implicit issue linkage with the Chinese side concerned with the Taiwan Question, the arms embargo and the democracy of international relations, and the EU side concerned with fostering effective multilateralism and global governance issues. Economically, the EU established the causal relationship between China’s market opening and the EU’s, and also sought China’s joint efforts in pursuing the success of the new round of multilateral trade negotiations – the Doha Round Agenda, after china joined the WTO in 2001.

    Trade constitutes a major aspect of the EU-China relationship. Reciprocal market opening was one of the main themes of the EU’s foreign policy towards China. The EU’s lever was tying its own market opening to China’s economic open-up. However, the EU’s interest in China was broader than market opening. The EU wanted to encourage China to continue with its domestic political and economic reform and take up a bigger role and responsibility in global economic governance.

See table 5&6:

 

We find that the EU’s economic diplomacy strategy linking economics with politics (China’s transformation both economically and politically) was effective. As Pascal Lamy said in a report assessing his achievements as Trade Commissioner (1999-2004):

    China is now the 2nd largest EU trading partner, with a bilateral deficit running at 50% of the total (more than 60 billion euro), while total trade is growing faster than US-China or US-Japan. Moreover, China’s whole role in the system has been transformed, economically and politically.[14]

It turned out that the EU’s economic diplomacy towards China is most effective if the EU thinks big, coordinates effectively for an overall strategy and use soft means including reciprocal market opening, partnership diplomacy and long-term engagement both economically and politically.

 

Phase 3 (2006 till now): ‘Turbulence’

    The 2005 EU-China textiles crisis was seen as a decisive event for the EU-China trade relationship. As a cabinet member of the then Trade Commissioner Peter Mandelson summarized, ‘(in the textile case), it was the first time that the EU witnessed China’s genuine commercial power and massive build-up of its exporting capabilities, and directly experienced the tensions among European consumers, producers, importers and retailers’.[15] Since 2006, the EU-China trade relationship entered into a turbulent period. Five years since China’s accession to the WTO, China largely fulfilled its WTO commitments and the sweeping mutual market openings between China and Europe came to a halt. Globally we witnessed the slowdown of liberalisation, the so-called ‘reform fatigue’ in China and an increased opposition to the ‘Washington Consensus’. All these made China and the EU face unprecedented pressures in carrying through their respective liberal trade policies. Although Peter Mandelson suggested some new ideas and policy recommendations including reforming the EU trade defense instruments and put forward the first EU trade policy towards China, the implementation of Mandelson’s trade policy encountered great difficulties. The trade tensions came to a high point in mid-2007. French President Sarkozy strongly criticized Peter Madison’s China policy was ‘too naïve’ and demanded ‘the end of naivety’ and reciprocity.[16] In October 2007, in a private letter to Commission President Barroso (later leaked), Mandelson said: ‘To some extent the Chinese juggernaut is out of control’, and that the European Union was ‘sitting on a policy time bomb[…]I believe that there is greater scope for discussion and collaboration with the United States’.[17] The 2007 EU-China Summit witnessed the utmost tensions in bilateral relationship, which was unprecedented. Tensions were mainly focused on Chinese currency manipulation, trade imbalances and other issues.

    Similar to his compatriot, Sir Leon Brittan, Commissioner Mandelson focused his trade policy towards China on reciprocal market opening. But he had to face much intensified domestic pressure and make more arduous efforts to tackle the challenges posed by globalization and the rise of China. During the first two years of his tenure as Trade Commissioner (2005-06), he had to, above all, live through the textile crisis. Once the textile issue dropped off the agenda, he immediately focused his attention on market access.

    Mandelson tried systematically to strike a grand bargain with China, the essence of which was a reciprocal market opening in a broader scale. As he said in a speech in July 2006, ‘China must continue to work to meet its WTO obligations and it must commit to playing by the rules. In return Europe must accept the Chinese challenge to adapt and compete. That is the grand bargain’.[18]

    The grand bargain can be equally seen as an act of economic diplomacy, in which political influence and diplomatic nuances were exercised for economic objectives. Although the EU tactically used economic diplomacy, pressing Beijing to make concessions in market opening, we however found that the EU’s specific market opening requests were basically refused, except for one item - the environmental, social and safety conditions. The following Table is an illustration of EU requests and China’s responses, with an assessment of results graded from ‘positive’ to ‘negative’. ‘Positive’ means that the EU’s request had been accepted. ‘Negative’ means that the EU’s request was rejected.

 

As the above Table shows, the results of the EU’s market access requests were generally negative. This was largely attributable to the following factors:

    Firstly, as some European scholars argued, China’s domestic climate for further trade-and-investment liberalization was clearly more inclement than it had been before WTO accession; and there were signs of greater industrial-policy interventionism. These tendencies were reinforced by an external climate of liberalization slowdown, ‘reform fatigue’, Washington-Consensus scepticism, and the first signs of increasing protectionism in response to worsening global economic conditions.[19]

    Secondly, the EU had insufficient power resources, whether political, economic or institutional. The grand bargain was, to some extent, a lame duck. It was difficult to have a grand bargain only in trade. During the 1993-2004 period, the EU boasted a “honeymoon” relationship with China, which created an enabling environment for effective linkages across areas. In other words, the EU’s increased political influence vis-à-vis China created positive spill-over effects in its trade relations with China.

    Thirdly, the EU had not managed to deliver sufficiently on China’s requests, which made the Chinese side feel the trade bargaining was unbalanced. The Table 2 below shows that most of Chinese requests ranging from the Market Economy Status issue, more stringent EU anti-dumping disciplines to removal of several tariff peaks were not satisfied.

    Fourthly, the EU’s institutional structure and the competing interests among the Commission and Member States handicapped the EU’s external actions. For the grand bargain, we witnessed an expanding trade agenda compared with that during China’s WTO accession negotiation. Many trade issues fell out of the exclusive competence of the European Communities (marked in the following Table as ‘Commission + Member States’). For some specific trade issues, Member States either shared competences or had exclusive competence. In this context, the Commission was handicapped in delivering on China’s requests. Although EU had one single chief trade negotiator with all kinds of market access requests from Member States, it had 28 decision-makers who were divided on whether to accept China’s market access requests. Such a dichotomy between the negotiating agent and decision-makers did not help resolve the deadlock of the EU’s trade negotiations with China.

 

 Since 2008 although China-EU trade relationship had recovered


 

But there emerged new troubles, in particular about the so-called trade remedy cases. In 2010, without recognizing China's market economy status, the EU started the anti-subsidy investigation into China's wireless modems. In 2011, the EU started to impose anti-subsidy duties on Chinese coated article. Almost at the same time, China started to impose anti-subsidy duties on EU potato starch. Among all the trade remedy cases, the most dramatic one was the solar panel case. It was a symbolic case of economic diplomacy characterized with using political influence as instrument for economics.

In 2012, the European Commission launched anti-dumping and anti-subsidy investigations on Chinese exports of solar panel, involving over 20 billion US dollars. This was the most expensive trade dispute between China and the EU. The Chinese government represented by its Premier Li Keqiang launched a series of high-profile media campaigns and high-level political consultations, exercising political influence vis-à-vis European counterparts. Li met with German Chancellor Merkel, seeking German support for an amicable solution, and phoned the President of the European Commission, stating that ‘nobody wins in the trade war…if the European side insists on punitive measures, China will surely take retaliatory measures’.[21] The result turned out that the preliminary anti-dumping duty rate was reduced from 47.6% to 11.8%. On 2 December 2013, the Council backed the Commission’s proposals to impose definitive anti-dumping and anti-subsidy measures on imports of solar panels from China. In parallel, the Commission confirmed its Decision accepting the undertaking with Chinese solar panel exporters applied since the beginning of August 2013. Those Chinese exporters that participated in the undertaking and that met the conditions of the undertaking can be exempted from anti-dumping duties, which was 47.7% on average.[22] The solar panel case is a litmus test, which shows that China has skillfully used its economic diplomacy built upon its increasing strengths and confidence.

III. Characterizing EU-China Economic Diplomacy

We draw the following conclusions based on the above case studies with an emphasis on the EU as a sui generis player of economic diplomacy. First, economic diplomacy is a crucial modus operandi for both the EU and China. The case studies show that economic diplomacy served as a relevant and indispensable way for the EU to handle its relations with China. On many occasions, economic diplomacy was used tactically to obtain a specific concession, such as the EU’s conditionality on China’s accession to the WTO. On other occasions, economic diplomacy was essential in shaping the major aspects of the overall EC/EU-China relationship. During the ‘starting-up’ period (1975-1988), the Commission’s linkage between its pursuit of economic interests and China’s pursuit of political interests on the Taiwan Question was crucial in creating a political basis for the two parties to establish diplomatic relations. During the period of ‘partnership’ (1993-2004), the EU-China partnership was actually enabled by many implicit linkages, mainly in the following areas: political-security, economic and trade, human rights. These linkages were, in substance, many different combinations of political-economic trade-offs. In turn, this evolving partnership, once established, enabled more new linkages to be created. During the period (2006-08), the Commission attempted to strike a grand bargain with China in the trade policy area for reciprocal market opening. This grand bargain shaped the key aspects of the EU-China relationship during this period. We conclude that economic diplomacy is a crucial modus operandi for the EU and China in their external relations. Second, the Effectiveness of Economic diplomacy varied in different historical periods. Throughout the case studies, we find that the EU varied in its effectiveness of economic diplomacy. Generally speaking, the EU’s economic diplomacy was the most effective in achieving its goal through partnership diplomacy during the period 1993-2005, and was the least effective during the period (1989-92). Third, the EU is a sui generis player of economic diplomacy. Different from other powers like the United States or China, the EU is a non-unitary actor with multiple chief negotiators and decision-makers across pillars. Even for the first pillar, there exist competence divisions between the EU level and the Member States, not to mention the wide heterogeneity of interests and preferences among the Member States. Moreover, the EU’s governance structure is by no means static, where increasingly trade competences are moving to the EU level. All these factors have significant implications for the effectiveness of EU’s economic diplomacy towards China. 

 

The EU’s division of competences had mixed implications for the effectiveness of the EU’s economic diplomacy

    The EU has a sui generis pillar structure with division of competences both within and across pillars. Trade belongs to the first pillar – community competence, while foreign policy falls under the second pillar – common foreign and security policy (CFSP). They have different decision-makers and negotiators.

    We find that the European Communities’ limited competence and the European Union’s pillar structure negatively affected the effectiveness of EC/EU’s economic diplomacy on at least three occasions: on the eve of the establishment of EEC-China diplomatic relations in 1975, after the Tiananmen Incident in 1989, and the grand bargain period from 2006 to 2008 when the Commission put to China the idea of reciprocal market-opening. In the first two cases, the EC attempted to establish a linkage between a political and economic issue, which required the transfer of power resources across the political and economic areas. The third case concerned linkage between two economic issues. We find that the EC/EU’s division of competences vis-à-vis the Member States either undermined the effectiveness of economic diplomacy:

That being said, the EU’s competence-sharing structure with its Member States also created further opportunities for the EU to apply linkages. As Marianne Dony explains, the external action of the EU could be viewed as the outcome of the interactions between the EC (acting within the context of the first pillar), the EU (acting on the basis of the second and third pillars) and the Member States (acting within their own competences).[23] We note that the European Commission did not hesitate to make use of the tension between some Member States and China to further its own plans. A clear example of the Commission using this strategy to enhance its role and raise its profile as an international trade negotiating party, occurred on the eve of the first EU-China High-level Economic and Trade Dialogue (HED) in April 2008. Commissioner Mandelson was able to make use of the tension between France and China to gain favour from the Chinese side by distancing himself from the position of the European Parliament and France on the Tibet issue, calling their boycott of the Olympic Games opening ceremony ‘a political gimmick’. His position was supported by President Barroso who led a large delegation in China to launch the first session of the HED. This was a clear case of political-economic issue linkage where the Commission first delinked the opening ceremony of the Beijing Olympic Games from the Tibet issue, and then linked an economic issue (ensuring the success of the first HED) with a political one (whether to boycott the Olympic Games or not).

 

3.2 Characterizing the EU’s power fungibility in its economic diplomacy

    Since economic diplomacy is in substance a way of converting political power into economic power or the other way round. We are in particular interested in the issue of power fungibility. We asked two questions: first, in which direction is the power fungible? Is it fungible from politics to economics or the other way round? Second, which is more difficult, power fungibility within an issue-area or across issue-areas? Some preliminary thoughts are illustrated as follows:

    In which direction is the power fungible? Realists usually believe that power fungibility is top-down. Our case studies have presented a mixed picture: the EU’s power fungibility in its trade relations with China is both top-down and bottom-up.

    There is evidence to show that the EC/EU tied political issues to economic ones in order to obtain concrete economic benefits. For example, during the 1975-88 period, the linkage was applied from high politics to low politics (top-down). But during the period of 1989-92, when the European Communities imposed economic sanctions for the sake of China’s human rights, it was a bottom-up linkage, with the EC’s power transferred from low politics to high politics.

    Our research also showed that the EU was good at obtaining economic benefits through political leveraging, while poor at achieving political goals through economic leveraging. In other words, the EU’s power fungibility is more top-down than bottom-up. The explanation might be the central position of economic interests in European decision-makers’ calculations of. They were reluctant to sacrifice economic interests for political objectives. Even if they were willing to do so, that willingness did not hold for long due to the pressure from domestic interest groups. This reminds us again that the EU is, first of all, an economic Community. This contrasts with the United States, who easily put politics and geo-strategic interests above economics in handling its relations with China. As David Shambaugh argues, most US analysts principally view China’s rise through its increasing hard power: the growth of Chinese military power and its effect on US national security interests in East Asia, both with respect to Taiwan and more generally. Even China’s substantial economic prowess and trade surplus with the United States take a back seat in these debates to the national security implications of China’s rise.[24]

Which is more difficult, the linkage within or across issue-areas? Andrew Moravcsik has argued that the major constraint on political-economic linkage (the essence of economic diplomacy) lies in their domestic distributional implications. On this logic, the potential for linkage (across issue-areas) is far more limited than the potential for concessions within issue-areas.[25] Our case studies have largely proven Moravcsik’s argument that linkage within issue-areas is generally easier than across issue-areas. But we differ with him on the reasons behind that. We find that this was largely attributable to the EU’s pillar structure and competence divisions. For example, the political-economic issue linkage did not hold for long in the 1989 Tiananmen Incident.  This was partially because the foreign policy dimension was divided between the European Communities and the Member States, who chose to prioritize their own economic interests and preferences above the Community’s overall strategy.

 

The EU used structural power resources for economic diplomacy purposes

    The EU’s non-military character forces the EU to resort to civilian power resources. Our findings have proven this point. This contrasts with the United States or Russia, who has strong military-security power and therefore could adopt top-down linkages (political-military power resources used for economic purposes) relying on hard power. The EU also adopted top-down linkages. But the question is through what kind of power resources the EU applied such top-down linkages. The case studies show that the EU resorted mainly to its political and economic interdependence relationship with China. Sometimes, this relationship was balanced. Sometimes, it was asymmetrical in favour of one side. We call an asymmetrical political or economic interdependence a type of structural power resources, since they mainly resulted from the EU’s relative position in the international system compared with other great powers, and from the EU’s potential to become a great power or a pole in a multipolar world. These power resources correspond to the present and near future distribution of power and therefore, were strategic in nature. They were widely applied in the EU’s economic diplomacy.

    There had been evidence to show that the EU was a master in using the structural power resources, which, to some extent, made up for its insufficiency in military-security power. The EU-China political or economic interdependence, as a type of structural power resources, was applied on several occasions: respectively in the EU’s negotiations with China on the latter’s WTO accession, the two phases of the EU-China Textile Disputes, the establishment of the High-level Economic and Trade Dialogue and the grand bargain on reciprocal market access (2006-08).

    Clearly, the EU adopted systemic-level calculations when exercising economic diplomacy tactics in its relations with China. China also responded with systemic-level considerations. The EC/EU has been perceived by China as a great power, rich in power potentials and having the so-called ‘shadow of the future’. China treated the EC/EU with considerations about the present and near future distribution of power in mind. Between 1975 and 1988, the EC built upon its power potential as a counterbalancing power against the Soviet Union and made an implicit linkage between its structural power resources on the one hand and seeking economic benefits from China on the other. This strategy was effective throughout the 1990s and is still useful now, when the EU is perceived by the Chinese side as a potential pole in a multipolar world. The EU managed to build upon these structural political power resources to win favours and concessions from the Chinese side. We find that the EU was adept in drawing upon its systemic-level position and making frequent use of these linkages.

 

 



[1] 'EU-China Economic Diplomacy: When Economics Meets Politics' (2014) 19 European Foreign Affairs Review, Issue 3/1, pp. 57–76

[2] Zhang Xiaotong, Associate Professor at the School of Political Science and Public Administration, Wuhan University, China. The author thanks Mr. Xiao Runxuan (Economics and Management School of Wuhan University) for indispensible editing assistances.

[3] Harish Kapur, China and the EEC: the New Connection (Martinus Nijhoff Publisher, 1986), 93.

[4] Ibid., 31-32.

[5] Ibid., 35-37.

[6] Text in FBIS Daily Report, 9 May 1975, A-19.

[7] Kapur. H, China and the EEC: the New Connection (Martinus Nijhoff Publisher, 1986), 37.

[8] Communication of the European Commission, A Long-term Policy for China-Europe Relations, Com, 279/final (1995).

[9] Qiu Yuanlun, the EU’s Long-term China Policy and the Sino-EU Economic and Trade Relationship, World Economy (Chinese periodical), Issue 8, 4 (1999).

[10] Zhimin Chen and Gustaaf Geeraerts, Foreign Policy Integration in European Union: A Mission Impossible? (Beijing: Shishi Publisher, 2003), 363.

[11] GUO.Guanyu, A Study of China-EU Cooperation (in Chinese) (Beijing: World Affairs Press, 2006), 51.

[12] Ibid., 52.

[13] Ibid., 365.

[14] European Commission, Trade Policy in the Prodi Commission (1999-2004): An Assessment, Brussels, 12. (2004)

[15] Interview with Per Haugaard, a cabinet member of Commissioner Mandelson, Brussels (22 July 2009).

[16] Nicolas Sarkozy, Speech at the international aerospace show, le Bourget, http://www.ambafrance-uk.org/President-Sarkozy-s-speech-at-Le.html (accessed 23 Jun. 2007).

[17] New York Time, EU trade chief calls for aggressive action against China, http://www.nytimes.com/2007/10/17/business/worldbusiness/17iht-trade.4.7932574.html (accessed 17 Oct. 2007).

[18] Peter Mandelson, EU Trade and Investment with China: Changes, Challenges and Choices, EU-China Conference, Brussels (7 July. 2006).

[19] Fredrik Erixon, Patrick Messerlin, and Razeen Sally, China’s Trade Policy Post-WTO Accession: Focus on China-EU Relations, ECIPE publication (2009).

[20] Modified on the basis of Table 1. in Iana Dreyer and Fredrik Erixon, An EU-China Trade Dialogue: a New Policy Framework to Contain Deteriorating Trade Relations, ECIPE publication, no. 03, 14 (2008).

[21] http://www.chinaelc.cn/ch_jxzl/2013081280666.html (accessed 12 Aug. 2013)

[22] European Commission, EU imposes definitive measures on Chinese solar panels, confirms undertaking with Chinese solar panel exporter, Com IP/13/1190, (2013).

[23] Marianne Dony, The EU’s external relations and their evolving legal framework, in Mario Telo (ed), The European Union and Global Governance (Routledge/Garnet series: Europe in the World, 2009), 149.

[24] David Shambaugh, The New Strategic Triangle: U.S. and European Reactions to China’s Rise, The Washington Quarterly, vol. 28, no. 3, 14 (2005).

[25] Andrew Moravcsik, The Choice for Europe: Social Purpose & State Power from Messina to Maastricht, UK: UCL Press, 65 (1999). 






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