China and EU ties –troubles ahead?

Updated On: Dec 02, 2007

As China and the EU head for confrontation, France reaps the benefits of being friendly to China.

All pretence seems to be off as EU and China confront each other on the growing trade deficit, and other trade disputes ranging from counterfeit products to food safety. As the EU pressures China for fairer economic engagements, Chinese Premier Wen Jiabao insisted on gradual reform. EU is also criticizing China for keeping an artificially low currency. The EU, China's largest export market, ran a trade deficit of 128 billion euros (175 billion dollars) with China in 2006 - which is likely to balloon to 170 billion euros in 2007, according to EU statistics. EU’s frustrations with China are augmented by its unsuccessful coded persuasion to cajole their American counterpart to increase the value of the US dollar.

"The EU exports less to China than to Switzerland, a country of seven million people," European Commission President Jose Manuel Barroso lamented. "Our ultimate goal is to create a level playing field for both sides." "Our trading relationship with China started as we know in a balanced way," Mandelson said. "Now it is less balanced. Indeed in my time in China these last five days, it has grown by over two billion euro," he said, referring to the trade surplus. "We... need to identify a solution to solve this question, and I hope that it is a cooperative one," Serge Abou, the EU's ambassador to China, said. "Protectionism is not a winning option. So let us unite our efforts to resist protectionist trends."

Chinese Premier Wen countered the Europeans by arguing: "China will continue to reform the RMB exchange rate regime in a gradual, proactive and manageable manner," he said. "The exchange rate is a cause to some extent, but not the sole decisive factor behind the trade deficit."

Not every European leader is fuming at trade imbalance with China. The French are  benefiting from an economic renaissance with Beijing. French President Sarkozy arrived in Beijing for a visit just before the EU-China summit. Sarkozy was accompanied by a 200-member delegation of government officials, entrepreneurs and journalists and was handsomely rewarded with business deals worth close to US$30 billion.

"Our two countries enjoy very close political ties and energetic economic links," the French president told a business forum. He expressed confidence about future bilateral cooperation in politics, economy, technology and other fields. He said that he appreciated China's constructive role in international affairs, especially its positive contribution to the Korean Peninsula nuclear issue and the Darfur issue.

He said he also wanted to discuss how France and China could make bigger contributions to global security. Sarkozy said China was the first Asian country he has visited since becoming president. He reiterated France's support for the one-China policy. Sarkozy said he attached importance to stronger China-France economic and trade ties, saying mutual benefit and cooperation should be the core of the ties. He said one important task was to encourage enterprises of all sizes from both countries to work together. In other words, Sarkozy followed all the diplomatic rituals that made the Chinese happy.

China and France have signed an 8 billion Euro nuclear energy deal. "This is the largest commercial contract signed in the French nuclear energy industry history and opened a new chapter of nuclear cooperation between the two countries," said Anne Lauvergeon, Chairperson of French company Areva which participated in the deal.

Other French industrialists visiting China with President Nicolas Sarkozy say they have finalised trade deals worth almost 20bn euros ($30bn; £14.5bn), including a delivery of 160 Airbus passenger planes to the value of about 10bn euros. "The total amount of these contracts has never been matched before," Sarkozy told the Chinese president as they met in Beijing's Great Hall of the People. The Airbus deal singlehandedly rejuvenated the European planemaker, which has struggled in the face of delays and Europe’s inability to persuade the Americans to boost the weakening dollar.

France and China have also signed a joint statement on responding to climate change and the establishment of a partnership between the two countries in this regard. Sarkozy hailed the releasing of the joint statement as a "significant and unprecedented thing".

According to the joint statement, the first of its kind issued between China and another country, China and France both reiterated their commitments to the aims, principles and provisions of the UN Framework Convention on Climate Change and the Kyoto Protocol. The two sides will establish a bilateral consultation mechanism and hold consultations once a year in turn in the two countries, to strengthen dialogue and cooperation on climate change, in the principles of Common and Differential Liability, respective capability and equity.

The two sides pledged in the joint statement to strengthen cooperation in the relevant fields, including bio-diversity, water resources, desertification, natural disasters, forests, garbage treatment, pollution prevention and environment-friendly economic measures, and promote the cooperation on the development, extension, application and transfer of technologies. The two countries will cooperate on the major technologies of energy saving, renewable energy, hydrogen energy and fuel battery, clean coal and nuclear power for civil use.

The statement said the two countries will encourage the establishment of joint ventures to encourage technological innovation on responding to climate change, and will also encourage their enterprises and financial organizations to participate in more climate change and sustainable development cooperation projects of each other.

The two countries will promote world attention to the climate change issue and devote to a series of projects on the research on climate change, and increase the possibility of common cooperation with other countries, in a bid to benefit the least developed countries, especially African countries. The two countries promised to attend a meeting of contracting parties to the UN Convention and Kyoto Protocol, scheduled for December in BaliIndonesia.

While Sino-French ties bask in warmth and friendliness, Sino-German ties are troubled. China and Germany can remain friends as long as Chancellor Angela Merkel admits making a mistake in meeting with Tibetan spiritual leader the Dalai Lama, China's Premier Wen Jiabao said. "We oppose European leaders in an official capacity to meet the Dalai Lama," Wen told journalists following the annual China-European Union summit here. "Germany is also a friend of China and a strategic cooperative partner. "Friends and partners often say and do the wrong things, but as long as they recognise and correct (their mistakes) we will always remain friends."

"The Chinese government has all along maintained that as long as the Dalai Lama acknowledges that Tibet is an inseparable part of China and that Taiwan is an inseparable part of China, then the door for dialogue with him will always be open," Wen said. "We are watching the Dalai Lama, we not only watch what he says, but more importantly what he does," Wen added. "His words and deeds fully show that he aims to take Tibet and the greater Tibetan area and separate it from China." German chancellor Merkel met with the Dalai Lama on 23 September 2007 which Beijing said had "seriously damaged" bilateral relations. In retaliation, China has cancelled a series of high level exchanges with Germany, including a planned December trip to Beijing by German Finance Minister Peer Steinbruck.

Merkel remains defiant and has refused to bow to China's pressure. "As German chancellor I will decide who I meet and where," she said. "In foreign politics, we cannot allow our principles and our economic interests to contradict each other."

Maybe Merkel should learn from Sarkozy? Although Mr Sarkozy is travelling with seven ministers, for example, the French human rights minister is not one of them. There has been little evidence that Mr Sarkozy had raised other difficult issues such as Tibet and China's relationship with Iran. Mr Sarkozy politely used a state dinner to urge China to employ the death penalty less frequently. In return for such face-saving sensitivities, France is rewarded handsomely.


EU, China confront each other on trade dispute (Channelnewsasia, 28 November 2007)

China PM: Merkel should say Dalai Lama meet was error (AP, 28 November 2007)

ChinaFrance ink about US$30b in deals: officials (Channelnewsasia, 26 November 2007)

French President Sarkozy kicks off China visit, stressing close ties (People’s Daily, 26 November 2007)

Chinese president proposes more co-op with France on energy, aviation (People’s Daily, 26 November 2007)

ChinaFrance sign joint statement on climate change cooperation (People’s Daily, 26 November 2007)

ChinaFrance sign 8-bln-Euro nuclear energy deal (People’s Daily, 26 November 2007)

Sarkozy wins China 20bn euro deal (BBC News, 26 November 2007)

Related Article