Principled Pragmatism: Understanding the EU Position on Economic Relations with China

The Eu-china relations have been experiencing noticeable changes in recent years, with the EU turning realist and putting more emphasis on interests in its interactions with China. This “principled pragmatism,” reflected in the EU’S position on China’s Belt and Road Initiative, heralds the crossroads of bilateral relations.

Both the EU and China are undergoing noticeable changes. On the one hand, the good old days seem to be gone for the EU. Despite positive economic growth rate, the European economic recovery is incomplete and still faces a lot of challenges such as low investment and youth unemployment. As Brexit needs to be concluded by the end of this year in order to give time for the European Parliament to ratify it, the negotiations are ongoing with very tight agenda. Nobody denies that Brexit serves as a heavy blow to the EU, which gives rise to Euroscepticism and populism. The refugee/migration issue is not solved yet either – the fact that the Czech Republic, Hungary and Poland stubbornly rejected refugee quotas brought the EU’S refugee policy into a deadlock. Furthermore, both Bulgaria and Romania challenged the EU’S rule of law and European democratic norms that gave big headache to Brussels. If these problems won’t be properly handled before the end of this year, faith in the EU would be seriously questioned, which may affect negatively the general European election scheduled in 2019.

On the other hand, China has been on the rising track for several decades, becoming the world’s second largest economy by nominal GDP and the world’s largest economy by purchasing power parity. Chinese President Xi Jinping stated a set of goals at the 18th Party Congress in 2012: first, by 2021 at the 100th anniversary of the founding of the Communist Party of China, Men Jing is the Baillet Latour Chair of European Union-china Relations and the Director of Eu-china Research Centre in the Department of EU International Relations and Diplomacy Studies, College of Europe.

a moderately well-off society would be achieved in China; second, by 2049 at the 100th anniversary of the founding of the People’s Republic of China, the goal of a strong, democratic, civilized, harmonious, and modern socialist country will be realized. In the most recent National People’s Congress held in March 2018, the amendment to the Chinese Constitution would no doubt help push forward President Xi’s ambitious agenda of building a world-class strong and powerful China.

As a consequence, the Eu-china relations have been experiencing noticeable changes in the most recent two years, with China being more assertive and the EU more defensive. The EU and China used to talk about a relationship of mutual benefit – supported by a set of institutional arrangements between Brussels and Beijing, both parties in the cooperation promoted a positive-sum game. Yet, the increasing deficit in the EU’S trade with China in the 21st century has somehow gradually changed the EU’S understanding of the nature of the game.1 When talking about Eu-china economic and trade relations, the European Commission, on its webpage of trade policy with China, criticized the latter for its lack of transparency, its discrimination against foreign companies in industrial policy and non-tariff measures; its strong government intervention in the economy; and lack of protection and enforcement of intellectual property rights.2

Corresponding to its statements, the EU has taken a series of actions to deal with the unbalanced trade and investment relationship with China, including introducing anti-dumping measures against Chinese import, passing new anti-dumping and anti-subsidy legislation, and discussing a regulation establishing a framework for screening foreign direct investment (FDI) inflows into the EU. The EU attaches great importance to reciprocity and level playing field, trying its best to defend its economic interests. This paper examines these changes from the EU’S position by taking the Belt and Road Initiative (BRI) as a case study, and provides analysis on the reasons of 1 Jing Men, “Yes or No? It is Time for an Answer – Analysis of the EU’S Position on China’s Accession Protocol to the WTO (Art. 15),” Eu-china Observer, No.1, 2016, p.18.

2 See the webpage of the European Commission.

such developments from the European perspective. The explanation behind these changes is that the operating principles of the EU, which used to be liberal, giving priority to norms and values and focusing on human rights and democracy, has changed to a more realist approach that puts more emphasis on the EU’S interests in its relations with China – in the EU’S words, “principled pragmatism” has become the guiding principle since 2016.

The EU’S Economic Relations with China Since 2016

Up till now, the EU published in total five policy papers on its relations with China, in 1995, 1998, 2003, 2006 and 2016. Compared with the previous policy papers, the most recent one of 2016 distinguishes itself in several ways. All the previous policy papers were published on a rather regular basis, updating in time the EU’S policy towards China, with clearly defined normative objectives – almost all these papers included the sentence as “supporting China’s transition to an open society based upon the rule of law and the respect for human rights.” In contrast, the paper of 2016 is set to “promote respect for the rule of law and human rights within China and internationally,” which turns the focus from pushing China to follow the European model to giving more emphasis to the general European principle in global governance. The policy paper goes further to acknowledge European interests in its relations with China by stating that “(t)he EU’S engagement with China should be principled, practical and pragmatic, staying true to its interests and values.”3 Although the words “value(s)” appear in the policy paper on several occasions, its frequency is much less than that of the words “interest(s).” Throughout this policy paper, the importance of defending European “interests” in its relations with China is clearly demonstrated. Such changes in the EU’S policy are certainly not groundless. As the EU pointed out in its 2016 policy paper, China has been developing rapidly 3 European Commission, “Elements for a New EU Strategy on China,” Joint Communication to the European Parliament and the Council, Brussels, June 22, 2016, JOIN (2016) 30 final, p.5.