Subject: The US-China 'reset': An opportunity for the EU - Charles Grant - CER
From: "Michael Andrews" <[email-masked]>
To: "Hunter Biden" <[email-masked]>, "Eric Schwerin" <[email-masked]>
Date: Fri, 30 Jul 2010 13:53:38 -0400

Charles Grant is a friend who runs a think tank started originally by  
David Milliband former UK Foreign Minister on behalf of Tony Blair.  
Charles travels extensively and is in China three or four times each  
year.
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> August/September 2010 - CER BULLETIN, ISSUE 73
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> The US-China 'reset': An opportunity for the EU
>
> by Charles Grant
>
> Europe faces few bigger questions than how to handle China. Recent  
> shifts in the Washington-Beijing relationship, together with changes  
> in the EU itself, give the Europeans a chance to rethink their own  
> relations with China.
>
> In 2008 and 2009 China's foreign policy became more assertive. Deng  
> Xiaoping's advice to his fellow Chinese to "bide our time, hide our  
> capabilities and never take the limelight" seemed to count for less.  
> China redoubled its claims to the Indian state of Arunachal Pradesh,  
> as well as islands and oilfields in the South China Sea, punished  
> Europeans for meeting the Dalai Lama, spurned binding commitments at  
> the Copenhagen climate change conference, and rebuffed American  
> demands that it revalue the renminbi. Foreign investors in China  
> felt less welcome. Proud of their economic success and aware that  
> the financial crisis had weakened the West, Chinese leaders appeared  
> to be on a high.
>
> China's stridency provoked reactions. India sent more forces to  
> Arunachal Pradesh and strengthened ties with the US, Japan and South  
> East Asian countries. Singapore, Vietnam, Malaysia and Indonesia  
> urged the US to reinforce its commitment to Asian security. The EU,  
> though virtually incapable of being tough with anyone, started to  
> debate a new China strategy. Early this year, Obama approved a big  
> arms sale to Taiwan and met the Dalai Lama. Congress moved towards  
> imposing sanctions on China for manipulating its currency.
>
> China's leaders realised they had a problem. In March they began a  
> deliberate effort to improve relations with those whose feathers  
> they had ruffled. Though they have treated Indians and Europeans  
> more softly, their main focus has been the US. President Hu Jintao  
> attended Obama's nuclear weapons summit. Then China backed a new  
> round of UN sanctions against Iran and said it would unhook the  
> renminbi from the dollar. Premier Wen Jiabao called in foreign  
> business leaders and asked what he could do to help. His government  
> announced that it would postpone implementing the 'indigenous  
> innovation' regulation which, if enforced, would require foreign  
> firms to hand over intellectual property before being allowed to bid  
> for government contracts.
>
> This 'reset' of US-China relations seems built on shakier  
> foundations than that between Washington and Moscow. Many Chinese  
> complain that they have made all the compromises and the Americans  
> none. Leading academics have criticised the government for backing  
> sanctions on Iran, which many in China consider a key strategic  
> ally. The People's Liberation Army seems oblivious to the reset, and  
> has blocked the US defence secretary from visiting China. There are  
> growing tensions in the South China Sea, which the Chinese  
> government has declared to be a 'core national interest' and where  
> China's navy is increasingly active. Kim Jong-il's tottering regime  
> could also upset the reset. China fears the consequences of the  
> regime collapsing and so will not criticise North Korea for sinking  
> the Cheonan, a South Korean vessel.
>
> But despite these problems, Deng's line that China's economic  
> development requires good relations with the US, and hence  
> occasional concessions, seems to be prevailing. The US-China reset  
> gives the Europeans an opportunity to rethink their own relationship  
> with China. They can more easily take a common line when China's  
> relations with the US are good (conversely, stormy relations may  
> prompt the US's best friends in Europe to take Washington's side,  
> which tends to divide the EU). In September the European Council  
> will hold a strategic discussion on partnerships with emerging  
> powers like China. Meanwhile, the creation of the new External  
> Action Service (EAS) should provide more expertise and help EU  
> governments to develop a common analysis of China.
>
> The Chinese tend to be disdainful of the EU, because of its  
> divisions, irrelevance to Asian security and recent economic  
> travails. The Europeans often disagree on how to deal with China –  
> for example on the importance of human rights and whether to protect  
> EU markets. This encourages Beijing to play them against each other.  
> But the Europeans' fundamental interests are similar: they want  
> China to be richer and freer, as well as stable, peaceful and more  
> open. So when European ministers and officials visit Beijing they  
> should be able to convey a similar set of messages and priorities.  
> EU governments should also agree on how to handle the Dalai Lama  
> (they meet him in different ways, making it easier for China to  
> punish individual governments).
>
> Not only more unity but also streamlined structures would enhance  
> the EU's clout with China. For example, the EU runs a series of  
> dialogues with China, yet many member-states duplicate these with  
> their own dialogues on issues like Africa, human rights and  
> proliferation. This creates extra work for the Chinese. When the EAS  
> has proven its worth, some member-states may choose to deal with  
> China through it. Britain, France and Germany will surely want to  
> maintain full bilateral relations, but they should do more to co- 
> ordinate positions on China – as they have done over the Iranian  
> nuclear diplomacy.
>
> When the Europeans deal with China, they should be prepared to give  
> as well as take, showing respect for what China regards as its core  
> interests. They should also be ready to attempt trade-offs between  
> questions of foreign policy and economics, as the US sometimes does.  
> The EAS may make it easier to link, say, Chinese help on combating  
> proliferation with European funding for the transfer of energy- 
> saving technology.
>
> The EU's top demand of China should be the removal of barriers to  
> trade and investment. But it would be a mistake to threaten to close  
> EU markets unless China obliges. The EU's best calling card is that  
> it is China's biggest export market (and also less restrictive than  
> the US on technology transfer). If Beijing fails to offer better  
> market access, Brussels should take it before WTO panels more often  
> (Chinese compliance with WTO commitments is patchy). Rather than  
> taking unilateral measures, the EU should show China that it values  
> international rules and institutions.
>
> The EU should also team up with the US in trying to open China's  
> markets. They have brought a few joint WTO cases, and their  
> diplomats in Beijing lobbied together against the indigenous  
> innovation regulation. But the US and the EU have not made much  
> effort to work together on the big trade, investment and currency  
> issues at a strategic level, where each has its own special forum  
> for meeting China’s leaders.
>
> Undoubtedly, closer EU-US collaboration would provoke a scornful  
> reaction from China that the Europeans were once again displaying  
> their dependence on 'big brother'. But China's approach to  
> international relations is hyper-realist, so it respects strength. A  
> united US-EU stance on better market access would be more likely to  
> get results than the various governments acting on their own.
>
> Charles Grant is director of the CER.
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> Centre for European Reform © CER 2010