With their wish lists made public, neither Brussels nor Beijing gets what they want from the relationship, which has been demoted from one of "common values" to "converging interests."

"No longer on a honeymoon but having moved on to being married."

The honeymoon for EU-China relations is over and has moved on to a marriage, according to David Shambaugh, director of the China Policy Program at the Elliott School of International Affairs at George Washington University, speaking at a seminar at the University of Florence on 20 May.

Then again, Shambaugh added, "EU-China relations have in recent years undergone an impressive development and there are far more and deeper institutional links between the EU and China than between the US and China."

Indeed, Brussels has invested enormous political, diplomatic and financial resources into expanding its relations with Beijing in all thinkable areas, referring to China as a "strategic partner" since 2003.

The roughly 25 EU-China "sectoral dialogues" are part of this, taking place on either working or ministerial levels and covering areas such as energy, environmental protection, civil aviation, competition policy, intellectual property rights (IPR), consumer product safety and maritime transport.

Even if all dialogues do not meet with the same level of progress, they are nevertheless evidence of EU-Chinese willingness to tackle the issues on their bilateral agenda.

Crisis? What Crisis?

So far so good, but it still takes two to tango and the EU is not making the right moves, Bingran Dai of the Centre for European Studies at Fudan University in Shanghai tells ISN Security Watch.

"The problem is that the atmosphere has changed drastically since 2006 and the Chinese public and the government feel quite frustrated about the changes in Europe, of its attitude towards China," he says, referring to the EU's October 2006 China trade and policy papers.

Those papers had presented Beijing with a long list of requested changes in areas ranging from human rights, freedom of speech to intellectual property rights and economic and financial deregulation. At the time, Chinese officials and scholars were offended by that list and wondered openly if this was how the EU treated its strategic partners.

The EU Commission, for its part, is having none of this pessimism - although it did not go unnoticed in Brussels that few of the issues (skeptics would argue none) have been addressed let alone solved by Beijing since the papers' publication.

The so-called EU-China Partnership and Cooperation Agreement (PCA), which the Commission has been lauding for some time, will be the next big bang of bilateral relations.

While the EU insists that PCA will take EU-China relations to the "next level" (without ever defining what exactly that means), outside observers often refer to the PCA as yet another codification of existing institutional ties as opposed to one of substance that would truly upgrade EU-China cooperation.

Seeing gunboats, again

To be sure, Beijing seems in no hurry to sign this new agreement with Brussels, and Olympic torch disruptions in Europe haven't helped to increase China's trust in Europe, Shambaugh says.

"When the Olympic torch relay was partly spoiled in Europe, China saw extra-territoriality," he said at the conference, referring to western imperialism and colonialism leading to the collapse of China's last imperial dynasty (Qing dynasty) in 1912.

There were more gunboats on the horizon as the EU Parliament (Beijing's arch-enemy for the past few years) adopted a legally non-binding resolution condemning China's heavy-handed response to the recent turmoil in Tibet in the strongest possible terms, asking among other things, to discuss an EU boycott of the Beijing Olympics.

The EU Parliament - typically with the strong support of the parliament's "Taiwan lobby" - and Beijing have in recent years clashed numerous times over the parliament's human rights resolutions and its outspoken criticism against China's move to increase the number of missiles directed at Taiwan.

"The European Parliament has very rarely passed any constructive resolutions regarding China," Zhongping Feng, director of the Institute of European Studies at the China Institute of Contemporary International Relations in Beijing, told ISN Security Watch.

Discussing human rights, Chinese-style

Brussels' increasing outspokenness on what it refers to the lack of progress in discussing human rights with Beijing has also annoyed China. The EU has been discussing human rights with China on an institutional level since 1996 and the 25th EU-China human rights dialogue took place in Slovenia on 15 May.

According to China's state-controlled media outlets, the recent dialogue round led to "great dissatisfaction in Beijing." The EU's official press release on the dialogue explains why. The EU "underlined its deep anxiety about the human rights and humanitarian situation in Tibet following recent events," the 16 May Slovenian EU Presidency press release read.

Beijing has until the second half of 2008 to digest EU complaints when it hosts the dialogue's next round in Beijing. Human rights in Tibet, for sure, are very unlikely to again make it to the top of the agenda with China hosting the dialogue.

Realistically, the EU does not have the instruments to influence the human rights course in China.

Damned if you do, damned if you don't

The "Taiwan issue" is another subject Beijing wants to deal with alone, and so far the EU has honored that request. The Commission does not have a position on the "Taiwan issue" beyond declaring that it is in favor of a peaceful solution.

Beijing bars the EU (and anybody else for that matter) from "interfering" in the "Taiwan issue," but being a believer in the projection of force through military power Beijing tends to be more impressed by robust US-style security policy rhetoric and conduct backed by military capabilities.

Ironically, it might just be the EU's refusal to have anything resembling an outspoken position on a security issue with potentially global implications that has Beijing taking the bloc less than seriously as a global security player.

Like it or not (and EU bureaucrats don't) Brussels finds itself in the middle of a "damned-if-do-damned-if-you-don't" setting of international politics charged with making the right calls with a quick-tempered emerging economic and military superpower looking over its shoulder.

The trouble with trade

While Europe become China's biggest trading partner in 2004, the EU still exports more to Switzerland than to China, which is not least a result of market access obstacles for European business in China, the Commission maintains.

The EU's trade deficit with China is growing by €15 million per hour having reached € 160 billion in 2007, with total bilateral trade amounting to more than € 300 billion.

However, non-Chinese (i.e. largely EU and US companies) account for 60 percent of exports out of China - meaning in essence that European multinationals are producing part of its trade deficit themselves.

That of course is only part of the problem, and the 120 European anti-dumping cases against China at the World Trade Organization (WTO) in Geneva are dealing with what Brussels refers to as "excessive" state subsidies for Chinese exporters distorting fair trade and competition.

Settling some of the trade disputes in Geneva, however, remains only one (admittedly the most effective and legally binding) option for the EU.

An EU delegation headed by Commission President Jose Manuel Barroso traveled to Beijing on 25 April to launch the newly established "EU-China High Level Economic and Trade Dialogue Mechanism" (HLM) - a dialogue meant to deal with trade and investment cooperation, innovation and technology transfers and other issues related to trade facilitation.

Not surprisingly, in view of complaints by European businesses operating in China, the Delegation of the European Commission in Beijing has a slightly different take on what the dialogue should be.

"The dialogue will be a new tool for dealing with the problems confronting European companies trying to establish themselves in China, especially in the fields of investment, market access and protection of intellectual property rights," reads an April press release, calling the dialogue what it really is for the EU: a forum to remove the remaining WTO non-compliant market access obstacles and violations confronting European businesses in China.

Either way, the HML is unlikely harmonize differing definitions of "as soon as soon as possible" in Brussels and Beijing in the short run, Dai maintains.

"China is a developing country in every sense, and will compromise on that base. It will honor its WTO commitments, but I think the Commission is expecting too much too soon from China. However, I am not worried, compromise will come."

Maybe, but the EU is clearly running out of patience, and European protectionism and additional tariffs on goods made in China is slowly but surely moving up the EU's China agenda, Shambaugh fears.

"European protectionism could be part of EU-China relations before too long and the Chinese will scream and complain. But it's not that they have not been warned," he said.

Wish lists

What does China want from the EU? Well, that's easy: No human rights resolutions; advice on global and regional foreign and security policy behavior and conduct; and substantive technology and know-how transfers and technical and financial assistance helping to promote a more sustainable, geographically more balanced and above all environmentally less damaging Chinese high-speed economic growth.

Brussels is equipped to provide China with just that, and will be investing €224 million from 2007 to 2013 in China on what is known as "capacity-building" in EU lingo, providing China with economic, financial and technical assistance.

But there is more on China's EU wish-list - for starters, the lifting of the EU weapons embargo imposed on China after Tiananmen in 1989 and the granting of market economy status (MES) to Beijing.

The EU, for its part, has yet to make sure that European business is not loosing € 20 billion per year in China through copyright and trademark infringements and encourage a significant increase of Chinese foreign direct investment (FDI) in Europe beyond the currently very modest level.

In sum, neither Brussels nor Beijing gets what they want from each other and earlier rhetoric of allegedly "common values" has recently been replaced by a less fancy one suggesting "converging interests."

By Axel Berkofsky for ISN Security Watch (29/05/08)

Dr Axel Berkofsky is Adjunct Professor at the University of Milan and Advisor on Asian Affairs at the Brussels-based European Policy Centre (EPC).

Source: www.isn.ethz.ch