Wang Huiyao: Towards a New Pattern of China-EU Partnership with Global Vision

Horizons | September 08 , 2024

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By Wang Huiyao | Founder of the Center for China and Globalization(CCG)

 

The year 2024 has witnessed several surprising developments that raise significant concerns about the future of the world—the growing influence of far-right movements in the European Parliament and EU member states, the attempted assassination of Donald Trump, and the ongoing conflicts in Ukraine and the Gaza Strip. As Winston Churchill famously predicted in 1942, “Now this is not the end…But it is, perhaps, the end of the beginning.” In this context, we must look forward and work to minimize the risks posed by shifting geopolitical dynamics, where the EU and China must transcend their traditional trade relations and build a new pattern of cooperation.

The EU’s Turning Point

The EU is undoubtedly facing a challenging period, characterized by economic and security dilemmas. Since the beginning of the Russia-Ukraine war, the EU has had to prioritize security on its eastern border, which has had wide-ranging economic impacts. The sanctions imposed on Russia—a double-edged sword—have forced the EU to abandon its traditional source of cheap energy. At the same time, it must increase its military budget while grappling with rising energy prices, all of which weaken its ability to manage post-pandemic recovery. According to the World Bank, real GDP growth in the Eurozone was just 0.4 percent in 2023, a significant drop from the previous 3.4 percent. Meanwhile, total defense spending by EU member states in 2023 was 12.5 percent higher than in 2021 and is expected to continue to rise in the coming years. This budget reallocation has clearly undermined the EU’s investment in its ambitious Green Deal, despite its longstanding commitment to global climate change efforts.

A turning point is approaching. Domestically, the EU must address the challenge posed by right-wing parties, whose nationalist and populist agendas may threaten the core values of the union. As the U.S. presidential election brings further uncertainty into the transatlantic relationship (and the rest of the world), Europe needs to broaden and diversify its partnerships. By reaffirming its commitment to multilateralism—a principle that has traditionally underpinned its international leadership—Europe should continue to pursue strategic autonomy, which the European Parliament defines as “the capacity of the EU to act autonomously… without being dependent on other countries.” This does not mean the EU must abandon its transatlantic relationship. However, shaken by the Trump Administration, the relationship has become increasingly insecure, and Brussels must seek reliable partnerships elsewhere. As one of the EU’s largest trading partners, China cannot be overlooked. The EU needs greater coordination with China and the Global South to reinvigorate its economic dynamics and geopolitical influence.

China recognizes the EU as a key player in a multipolar world, alongside a self-isolating United States and a rising Global South. The EU is one of the world’s largest economies, with a consumer market of 500 million people, an innovation hub, a manufacturing powerhouse, and a central role in global value chains. The EU also exercises significant soft power, known for its rule of law, democracy, respect for human rights, and active participation in global affairs. In addition to its leadership on climate change, the EU plays a leading role in the WTO and other international institutions. The leadership and multilateralism that the EU has championed over the past decades have contributed to the free flow of international trade and increasing cultural diversity during the era of hyper-globalization.

China and the EU are not immune to disagreements. The recent tariffs imposed on Chinese electric vehicles (EVs) by the EU indicate potential trade tensions between two of the world’s largest economies. The EU’s concerns over trade deficits have led it to seek alternative markets in recent years. As a result, the EU has significantly increased its exports to the United States, rebalancing its trade deficits with China. In 2023, the EU’s trade deficit with China decreased by 26.7 percent year-on-year, while its trade in goods balance with the United States showed a surplus of €38 billion, compared to a €436 billion deficit with China. Despite these headwinds, the trade relationship between China and the EU, rooted in a long-term partnership and mutual benefit, will not be easily rewritten at this turning point.

China and the EU: Partners Without Geopolitical Disputes

The partnership between China and the EU dates back to 1975, when China first established diplomatic relations with the European Economic Community. In 2003, China and the EU established a comprehensive strategic partnership. The “EU-China 2020 Strategic Agenda for Cooperation” further solidified this relationship by introducing more areas of collaboration. As previously described, the relationship can be summarized in two key aspects: trade relations and collaboration on global governance.

However, changing geopolitical circumstances have led the EU to redefine this relationship in 2019, labeling it as one of “rivalry, competition, and partnership.” These paradoxical concepts have driven the relationship in a confusing direction, with the EU hesitant to engage with China in pursuing its strategic interests in common areas such as trade, climate, and global governance.

At the moment, the EU is seeking to build an economic paradigm underpinned by emerging digital economies and green technology while at the same time struggling to resolve the Russia-Ukraine conflict. China remains one of the EU’s most important trading partners and is also a potential mediator in the war.

Despite their differences, the two sides share a great deal of common ground in their future visions, presenting a potential for joint cooperation that could benefit not only the EU but the world at large at this critical turning point.

China and the EU have no historical disputes, territorial conflicts, or sovereignty issues—the geographic distance between them provides a solid foundation for expanding collaboration in various dimensions, from climate change to the WTO, the digital economy, and even cultural exchanges. Both sides pride themselves on having magnificent ancient civilizations that have survived critical historical periods, which only enhances their potential for cooperation. Nowadays, they should extend their vision to encompass the breadth of the Eurasian continent and the regions where they share critical, intertwined interests.

As a strong believer in the potential of this partnership, I think the EU and China can continue to build a relationship that greatly benefits the world. However, we may need to make some updates to ensure the China-EU relationship is better suited to the changing global context. Specifically, there are several dimensions the two sides need to focus on moving forward.

Mediators of Wars and Conflicts

The changing geopolitical structure in recent years, marked by two significant conflicts, may reshape the political map of Europe. The first is the war in Ukraine, a brutal ongoing conflict that might have already claimed more than half a million lives and narrowly avoided the risk of nuclear warfare. The second conflict is the quasi-Cold War between China and the United States. Since the outbreak of the trade war in 2018, Sino-American relations have deteriorated significantly. The administration of U.S. President Joseph Biden has not reversed this trajectory; if anything, it has worsened it. However, the complicated relationships between the EU and Russia and China and the U.S. have left some room for the EU to maneuver, should it choose to improve its geopolitical position.

China, as Russia’s largest trading partner, has a significant role in mediating the Russia-Ukraine war. In 2022, China reiterated its stance against any nuclear country unilaterally exercising nuclear warfare. Importantly, China collaborated with Europe during this process. When German Chancellor Olaf Scholz visited Beijing in November 2022, the two sides jointly issued a statement against the use of nuclear weapons in war. This position was seen as a successful effort by China and the EU to deescalate the conflict. China has consistently worked with the international community to end the war. It participated in the 2023 Peace Summit held in Jeddah, Saudi Arabia, where representatives from 42 countries agreed to continue discussions toward peace. After releasing its 12-point peace plan in early 2023, China reached a six-point consensus with Brazil in May 2024, followed by an invitation to Ukraine’s Foreign Minister, Dmytro Kuleba, to visit China in July to meet with his counterpart, China’s Foreign Minister Wang Yi. This increasing engagement with stakeholders demonstrates that China is serious about mediating the war and is following its own plan.

Meanwhile, the EU faces another challenge in the Middle East. The deepening conflict there could potentially spread to Israel’s neighboring countries, triggering a new round of migration crises at the EU’s eastern border. On July 23rd, 2024, the unity declaration signed in Beijing by 14 Palestinian factions, including Fatah and Hamas, brings a glimmer of hope to the war-torn region. However, China will need more support from the EU when the final two-state peace solution, backed by both sides, is presented at the G20 Summit and the UN Security Council.

There is no doubt that China stands to gain if it can help broker an end to these conflicts. Under these circumstances, if China continues its mediation in wars and conflicts of concern to the EU, could the EU, in turn, attempt to mediate the conflict between the United States and China as a reciprocal gesture toward China’s goodwill? The win-win scenario is that both parties could take advantage of their unique geopolitical positions rather than mutually weakening them.

Economic and Green Transition

In the economic dimension, China introduced the concept of “new quality productivity” earlier in 2024, prioritizing green development and digital innovation to drive sustainable growth. Similarly, the EU is also a world leader in digital innovation and regulation. Through its Green Deal, the EU aims to reduce net greenhouse gas emissions by at least 55 percent by 2030 compared to 1990 levels.

The two sides can jointly explore their potential in the areas of the digital economy and green transition, which are seen as key drivers of future economic growth. The digital economy now accounts for nearly 60 percent of global GDP, according to the China Academy of Information and Communications Technology, a Beijing-based research institute. Additionally, new data from 43 countries, representing about three-quarters of global GDP, demonstrates that business e-commerce sales grew nearly 60 percent from 2016 to 2022, reaching $27 trillion, according to UNCTAD’s Digital Economy Report 2024. In 2023 in particular, an average of 28 percent of ICT firms in the OECD used AI, a higher percentage than in any other sector, according to the OECD.

Key issues in this domain include cross-border data flow, privacy protection, digital monopolies, and AI regulation, with the EU keen to catalyze a global consensus. China is willing to engage with the EU in discussions to help form a global coalition on these issues. Reflecting this shared interest, the ambassadors of France and Germany in China jointly initiated an AI regulation symposium with Chinese experts at the headquarters of the Center for China and Globalization in May 2024, ahead of the AI Summit in Seoul. This demonstrates the common interests of the international community in this area.

Regarding the green transition, the EU and China might consider a new reciprocal model—which I call “investment to reduce tariffs.” China now has a strong capacity to produce renewable energy devices, manufacturing 90 percent of global solar panels in 2023 and selling 60 percent of global EVs. However, this capacity is still insufficient to meet global market demand. The International Energy Agency (IEA) forecasts that global demand for new photovoltaic installations will reach 820 gigawatts, approximately four times that of 2022, if the goals set by the Paris Agreement are to be met. Instead of fearing China’s “overcapacity,” which could undermine the EU’s competitiveness, the two sides should cooperate to boost productivity and explore markets together, rather than raising tariffs and resorting to trade protectionism. A feasible solution to their disputes could involve allowing more Chinese green manufacturers to invest in the European market by lowering investment thresholds, avoiding investigations under the guise of national security, and reducing Sinophobic rhetoric. In return for China increasing its investment in the EU market, the two sides could negotiate lowering tariffs on imported EVs from China.

And here comes the ultimate vision—with the European Parliament having just completed a new round of elections, we have a new mandate for EU leadership. It is expected that the sanctions imposed by both sides since 2021 could come to an end. The two sides should consider lifting the sanctions simultaneously or at least suspending them to facilitate new rounds of trade and investment negotiations. We urgently need to build a new framework to guide the future China-EU relationship in this turbulent context.

Connecting the EU with the Global South

The EU’s foreign policy is more focused on the Global South than ever, as seen in the €300 billion Global Gateway strategy released in 2021, extending Europe’s olive branch to Africa and ASEAN countries. The EU is also seeking to reach free trade agreements with ASEAN and MERCOSUR in recent years. The EU’s ambition to deepen its relationship with the Global South and the rising “middle powers”—defined by the World Economic Forum as “influential states that sit below superpowers and great powers”—is evident. However, cost-effectiveness is equally important. China’s Belt and Road Initiative (BRI), launched in 2013 to enhance global connectivity, could also serve the interests of the Global Gateway and other EU connectivity efforts, reducing costs and increasing practicability. Additionally, international financial institutions like the IMF and World Bank could facilitate a global banking platform that includes regional development banks such as the ADB, AIIB, and EBRD, helping to fund both the BRI and the Global Gateway.

Many middle powers, benefiting from the China-U.S. trade and technology war, are now receiving industrial capacities and investments that once targeted the Chinese market. This relocation is accelerating their industrialization. However, the global supply and value chains, meticulously built during the era of hyper-globalization, are becoming fragmented. The EU itself is experiencing deindustrialization. Looking ahead, the EU and China could collaborate through third-party cooperation to stabilize and reshape these global chains, potentially creating a more sustainable and interconnected global economic system.

A New Globalization?

The EU is struggling to maintain the lifestyle of the “good old days,” when security was guaranteed by the United States and cheap resources were supplied by Russia. This era, characterized by the EU’s prosperous lifestyle as the largest economy in the world, including 27 member-states and the UK, must transform in response to changing geopolitical realities and domestic economic challenges.

Therefore, the EU needs to expand its relationships with other parts of the world. As mentioned in previous sections of this essay, there is significant potential for cooperation between China and the EU. This collaboration could help both sides establish a new pattern of partnership that extends beyond mere trade relations.

A global China-EU partnership would involve increasing engagement, entanglement, and integration of their systems of values, ideologies, and civilizations. This would initiate a new process of globalization—a higher level of globalization—between and among great civilizations.

 

From Horizons Summer 2024, Issue No. 27