Wednesday, 28 November 2007

EU-China Summit

The EU and China have shared interests in a large number of areas - exchange rates, climate change, commodity prices to name just three.

The current US political aggression towards China gives the EU a window of opportunity to take a more conciliatory approach. This will not be easy, but as Sakozy has shown (previous article), China can benefit greatly from closer ties and cooperation with Europe.

Given our interest in education, this is an interesting statistic.

More than 100,000 Chinese students studied at European universities in 2003 and 2004; there were 60,000 at US universities in the same years.

The UK and Europe should build on this strength and increase Europe's lead over the US. This means looking carefully at visa costs and access to higher education.

Stumbling towards mutual understanding [FT]

Whether it is commodity prices or exchange rates, nuclear non-proliferation or climate change, the European Union and China are discovering that there is virtually no economic topic or international security issue these days on which their interests do not intersect – and sometimes collide.

In the 32 years since China and the then European Economic Community established diplomatic ties, the Beijing-Brussels relationship has evolved from a one-dimensional, trade-based affair into a complex partnership that combines growing interdependence with various points of friction and residual misgivings.

From a European perspect­ive, a sense of awe at the rapid expansion of China’s global economic power is matched by uncertainty over how Beijing will cope with the domestic consequences of growth and shoulder its ever greater international responsibilities.

“Even if the EU assumes that China will remain a success story, it is not clear what kind of power it will become,” says Charles Grant, director of the Centre for European Reform, a think-tank.

“Europeans will hope that China takes its place in the multilateral sort of world that they would prefer. But China may not want a rules-based international system with strong multilateral institutions.”

There is no fundamental conflict of interest between the EU and China, and the EU has been China’s biggest foreign trade partner since 2004. Each would like to put the partnership on a solid strategic foundation rather than lurch into rivalry.

But with the EU’s trade deficit with China growing by €2bn ($2.97bn) a week, economic tensions threaten to become serious. Other misunderstandings persist, deriving in the final analysis from the two sides’ different political systems and cultures.

While both embrace economic pluralism, the EU sees itself as a bloc of 27 democracies with a commitment to human rights and the rule of law, quite distinct from China, with its one-party state and communist ideology.

But a more subtle difference is China’s emphasis on the integrity and sovereignty of the nation state, which contrasts with the pride that many EU member states take in having diluted their own sovereignty in favour of European reconciliation and co-operation after the past century’s two world wars.

“China sees sovereignty and non-interference in domestic affairs pretty much as non-negotiable, whereas the EU thinks its success is built on pooling sovereignty and going beyond the principle of the nation state,” one European diplomat says.

This difference of outlook explains why the European leaders who are visiting China this week intend to tread carefully when they talk about the need for a revaluation of the renminbi or more effective Chinese action to protect intellectual property rights.

“What we are aiming for is structured macroeconomic dialogue with China, because we don’t have one yet,” Jean-Claude Juncker, chairman of the eurozone’s finance ministers’ group, said last week. “We will be explaining why the Chinese economic leaders should perhaps change tack. We will make sure we are very explicit this time round.”

Mr Juncker and the eurozone’s two other highest-level officials – Joaquín Almunia, the EU’s monetary affairs commissioner, and Jean-Claude Trichet, the European Central Bank president – will set out the case that it is in China’s own interests to permit a stronger renminbi, boost domestic demand and reduce the huge savings levels in the banking system.

“I don’t think we should be lecturing them on how to grow economically, but surely it is they, not we, who are saying they need a different balance in their growth model. That’s not an idea that we came up with. They came up with this idea,” Mr Almunia told a European parliament hearing last Wednesday.

“China has constantly increased its foreign reserves. That is the backdrop to the dialogue, which we trust will be fruitful, and which we trust will also take place on a regular basis. We are not going to solve all the problems on a one-off trip. That would be unrealistic.”

EU officials acknowledge the eurozone leaders’ visit and the EU-China summit on Wednewsday will be test cases of how much progress Europe is making in speaking to China with a single voice.

Leaders of individual EU member states, especially France, Germany and the UK, have long made a habit of promoting their own political and commercial relationships with the Chinese at the expense of a common position.

Like Russia and the US, China sometimes seems ­frustrated with the internecine squabbles and convoluted decision-making procedures that often constitute EU policymaking. Slowly, however, Europeans and Chinese appear to be learning more about each other. More than 100,000 Chinese students studied at European universities in 2003 and 2004; there were 60,000 at US universities in the same years.


minka said...

"The current US political aggression towards China gives the EU a window of opportunity to take a more conciliatory approach."

I think this is out to lunch. The USA is more corporatist than the EU. The fact that workers face stagnant incomes, declining benefits, a chilly job market and the like can be ignored by the powers that be in the USA. That is why there has been complaint by no action wrt the peg from the USA. Since the corporations make money in China, there is domestic opposition to any effective moves on the currency front.

In the EU on the other hand, corporations are just one player, and voters have real power. The level of insecurity and stagnation and declining wages that characterizes the American economy for ordinary workers wouldn't be tolerated by EU workers. That means the Europeans will be much more tougher on the Chinese than the Americans. With regards to currency issues, the 'teeth' will be European.

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