Defend, Engage, Maximise - feps-europe.eu

Defend,Engage,Maximise:AprogressiveagendaforEU–Chinarelations

NicolaCasarini,SeniorFellow,IstitutoAffariInternazionali

AbstractThis paper examines the current state of play in EU–China relations and the future prospects for them. Itproposes a progressive framework to be applied to aselect list of issues of strategic importance for the nextfive years. Built around three key words — Defend,Engage, Maximise — the progressive agendarecommends the following: (i) Defend: Europe’s jobs,competitiveness, and technological sovereignty fromChina’s state-controlled economy and unfair tradepractices; EU fundamental values from Chineseauthoritarianism; (ii) Engage China to:meet the targetsof the Paris Agreement on climate change; strengthenthe multilateral trading system; address global securitychallenges;(iii)MaximiseEU–Chinarelationsto:savetheIran nuclear deal; reform the international monetarysystemandputlimitsonthedollar’sexorbitantprivilege.

FEPSPolicyPaper

October 2019

AprogressiveagendaforEU-Chinarelations NicolaCasarini

FEPS|RueMontoyer40,B-1000Brussels|Tel+3222346900|Fax+3222800383|[email protected]

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TableofContents

EXECUTIVESUMMARY..........................................................................................................3

1.INTRODUCTION.................................................................................................................4EUChinapolicy:threemainproblems..................................................................................................5

2.APROGRESSIVEAGENDA..................................................................................................7

3.EU–CHINARELATIONSINPERSPECTIVE.............................................................................8Keyfeatures...........................................................................................................................................8

4.CURRENTSTATEOFPLAYANDOPENISSUES...................................................................10Tradeandinvestment..........................................................................................................................10TheBeltandRoadreachesEurope......................................................................................................12Europe’sconnectivityplan...................................................................................................................13ScreeningChineseinvestments...........................................................................................................14FosteringEuropeanchampions...........................................................................................................15US-Chinarivalry...................................................................................................................................15Politicalvalues.....................................................................................................................................16Globalissues........................................................................................................................................17MaximisingEU–Chinarelations...........................................................................................................21

5.POLICYRECOMMENDATIONS..........................................................................................23DEFEND................................................................................................................................................23ENGAGE...............................................................................................................................................24MAXIMISE............................................................................................................................................25

6.CONCLUSION..................................................................................................................25

REFERENCES.......................................................................................................................27

ABOUTTHEAUTHOR..........................................................................................................28



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EXECUTIVESUMMARY

ThispaperexaminesthecurrentstateofplayinEU–Chinarelationsandthefutureprospectsforthem.ItproposesaprogressiveframeworktobeundertakenatEUlevelforthenextfiveyears.Builtaroundthreekeywords—Defend,Engage,Maximise(DEM)—itcombinesbothelementsofcontainment,aswellasofengagement,towardsChina.

ThisprogressiveEUChinapolicyaimstoachievethreeoverarchingobjectives: (i)Promoteastrong and united EU; (ii) Protect Europe’s socio-economic well-being and way of life; (iii)Advance EU fundamental values and principles, and foster an international order based oneffectivemultilateralismandtheruleoflaw.

ItinvitestheEUtofocusonaselectlistofissuesofstrategicimportanceinitsrelationswithBeijing so as to achieve maximum impact. The progressive agenda for EU–China relationswouldunfoldalongthefollowinglines:

DEFEND

• Europeanjobs, industrialcompetitivenessandtechnologicalsovereigntyfromChina’sstate-controlledeconomyandunfairtradepractices.

• EUfundamentalvaluesandprinciplesfromtheChineseauthoritarianpoliticalsystem.

ENGAGEChinato:

• MeetthetargetsoftheParisAgreementonclimatechange.• Strengthenthemultilateraltradingsystem.• Addressglobalsecuritychallenges, includingwaystofindasolutiontoNorthKorea’s

nuclearthreatandsupportforarules-basedorderintheSouthChinaSea.

MAXIMISEEU–Chinarelationsto:

• SavetheIrannucleardeal.• Reform the internationalmonetary system and put limits on the dollar’s exorbitant

privilege.

ThisprogressiveframeworkallowsEUpolicymakerstoidentifyanddistinguishbetweenthoseissueswhereChinaisachallenge—andthusneedstobecontained—andthosepolicyareaswhereBeijingcanbecomeapartner—andevenatemporaryally—toadvanceEUinterestsand fundamental values. If usedwisely, the China card could become the ace up the EU’ssleeve to advance a strong and united Europe, as well as promote a set of values andprinciplesdeartothemajorityofEuropeans.



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1.INTRODUCTION

ShouldtheEuropeanUnion(EU)enforceacontainmentpolicytowardsthePeople’sRepublicofChina(PRC–orsimplyChina),joiningeffortsundertakenbythePresidentoftheUnitedStates(US)DonaldTrump,whohasunleashedatradeandtechnologicalwaragainstBeijingwiththeaimofpermanentlysubordinatingtheAsiangianttotheWest?OrshouldtheEUcontinueitsengagementpolicytowardsBeijing–andeven seek tomaximiseSino-European ties toput limitson thoseUSunilateralpoliciesthataredetrimentaltoEurope’sinterestsandfundamentalvalues?Whatwouldbethebestpolicymixofengagementandcontainment forEU-China relations?And towhatextent should theEUalign itsChina policy with that of the US? Those are possibly some of the EU’s greatest foreign policychallenges.

The West and China continue to have very different economic and socio-political systems and adifferent understanding of the rules-based international order. Therefore, transatlantic cooperationmustbeakeyelementofEUrelationswithBeijing.TheEUandtheUSarecommittedtopromotinganopensocietybasedonmarketeconomyandtherespectofhumanrights,fundamentalfreedoms,goodgovernance, and the rule of law in China. Moreover, both hope that Beijing will be a responsiblestakeholderintheglobalsystemandthattheAsiangiantwillnotupendtherules-basedorder.

AlongsidemanysimilaritiesandanaturaltendencytoaligntheirChinapolicy,thetransatlanticallies’relations with Beijing show some important differences, not to mention the existence of EU-USdiverginginterestsandcompetitionforChina’smarketshares.Goingforward,theEUshouldmakethemost of the opportunity provided by the renewal of institutional leadership in Brussels to devise adistinctiveEUChinapolicywhich,on theonehand,buildson the transatlantic allies’ commonalitiesvis-à-visBeijingand,on theother,defends thoseEU interests and fundamental valuesunderattacknot only by an authoritarian China, but also by the America First policies of US President DonaldTrump.

A rich debate has emerged in Europe on these topics. In January 2019, the Federation of GermanIndustries(BDI)issuedthepolicypaperChina—PartnerandSystemicCompetitor,arguinginfavourofa more assertive position vis-à-vis China on trade and investment. In March 2019, the EuropeanCommissionandtheHighRepresentativeoftheUnionforForeignAffairsandSecurityPolicypublishedthedocumentEU–China—astrategicoutlookwhichputsforwardanapproachtowardsChinabasedoncooperationandrivalry.ThinktanksanduniversitiesacrossEuropehavealsoenteredthedebatethroughdedicatedpublications, conferencesandworkshops.Politicalparties,however,have tendedtoshyawayfromarticulatingtheirstandpointonEU–Chinarelations,eventhoughChinahasbecomeatopicofdiscussioninelectoralcampaignsinmanyEUmemberstates.

ThispaperintendstocontributetothedebatebypresentingthecontoursofaprogressiveagendaforEU–Chinarelations,includingdiscussionofthedifferencesbetweenaEuropeanprogressivestandpointonChinaandthatofconservative,hardright,sovereignistandpopulistforces.Hopefully,thisexercisewillhelpclarifyinghowdifferentpoliticalsensitivitiescanapproachtheEU-Chinarelationship.

ThefirstpartofthisstudyintroducesthereadertothemainproblemsthattheEUencounterswhenitattempts to develop a unitary and coherent EU policy towards China. It subsequently presents thecontours of a progressive approach to EU–China relations and its merits compared to otherstandpoints.Thefollowingsectionsetsthecontextbyprovidinganoverviewofthekeyfeaturesand



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majorturningpointsofEU–Chinarelationsinrecentdecades,beforemovingtotheexaminationofthecurrentstateofplayintherelationshipanditsmostcontroversialissues.TheconcludingsectionofferspolicymakersideasandrecommendationstobeconsideredbytheEUforthenextfiveyears.

EUChinapolicy:threemainproblems

Developing a coherent and unitary policy towards China is a major challenge for the EU for threereasons:(i)Chinaisbothaboon,aswellasathreat,toEurope;(ii)EUmemberstatesaredividedoverChina, which in turn exploits their division; (iii) There are differences between the various politicalfamilieswithintheEuropeanParliament.

1) Chinaisbothaboon,aswellasathreat,toEurope

Beijingrepresentsaseriouseconomicandtradechallenge,duetoitsstate-dominatedeconomyanditsunfairtradepractices,whichhavecontributedtode-industrialisationandadecliningstandardoflivingacross some parts of the old continent — a situation that European countries share with otherdevelopednations,includingtheUnitedStates.Atthesametime,China’shugedomesticmarketanditsexpandingmiddleclassrepresentaformidableopportunityformanyEuropeancompanies,someofwhichhaveshiftedproductiontoChinatotakeadvantageoflowerproductioncostsandglobalsupplychains.

TheBeltandRoadInitiative(BRI—alsoknownastheNewSilkRoad)—China’smassiveinfrastructureand connectivity project launched by Chinese President Xi Jinping in late 2013— is set tomobilisesignificant financial sumsthatareexpectedtosurpass$1 trillionover thenext twodecades.Europestands to profit from the BRI, since the old continent sits at the end point of it. However, ChineseinvestmentsmadeintheframeworkoftheBRIrarelyupholdWesternstandardsandprinciples.Thereisariskthatsomeoftheseprojectsbecome‘debt-traps’,helpingBeijinggainpoliticalinfluenceintheoldcontinent.TheBRIisthusbothanopportunity,andachallenge,forEurope.

Due to its non-democratic nature, the Chinese regime continues to be viewed with suspicion byEuropean public opinion, which raises questions as to what use Beijing leaders will make of theircountry’s increased capabilities. Yet, it is precisely this authoritarian Communist China, informedbyvalues andprinciplesquitedifferent from thoseof theEUand itsmember states, thathas come tosupporttheEU’sintegrationprocess,includingkeyinitiativessuchastheEuropeancommoncurrency.

ChinahasbecomeanimportantpartneroftheEUforaddressingregionalandglobalissues,includingsupport for initiatives such as theParisAgreementon climate change and the Joint ComprehensivePlan of Action (JCPOA) for Iran— also known as the Iran nuclear deal. Cooperation with China isessential for advancing effective multilateralism, although China’s engagement towards it issometimesselectiveandbasedonadifferentunderstandingoftherules-basedinternationalorder.

ChinaisthusmanythingstoEurope,andthiscomplicatestheadoptionofaclear-cutstrategytowardstheAsiangiant. TheEU’sChinapolicy thusneeds tobemultifacetedand flexibleenough to includebothelementsofengagementaswellasofcontainment,callingintoquestionthecapacityoftheEUanditsmemberstatestoworktogetherinaunitaryandcoordinatedway.



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2) EUmemberstatesaredividedoverChina,whichinturnexploitstheirdivision

The EU is not always consistent in its China policy since a unified line is often undermined by EUmemberstates,whichcontinuetocompeteagainsteachotherinsearchofcommercialadvantagesintheChinesemarketaswellasforattractingChineseinvestmentintotheirterritories.Beijingcontinuestoplayintothebloc’sdivisions,oftenhelpedinthisbynationalelitesmoreeagertodeveloprelationswith Beijing on a bilateral basis than in the EU framework. An example of such an approach is thecreation of the China-Central and Eastern European Countries (China-CEEC) grouping founded inBudapest in 2012 to push for China-CEEC cooperation outside the EU framework and to promoteChina’sBRI.Since2019thegroupinghascomprised17Europeancountries(including12EUmemberstates) andChina— it is thus commonly referred toas the17+1.TheEuropean statesare:Albania,Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Greece, Hungary, Latvia,Lithuania,Macedonia,Montenegro,Poland,Romania,Serbia,SlovakiaandSlovenia.

AnotherexampleofthetendencyofEUmemberstatestogoitaloneintheirrelationswithBeijingwasthedecisionofthepreviousItaliangovernment—apopulistcoalitionformedbythehardrightLeagueandtheanti-establishmentFiveStarMovementwhichruledItalyfromJune2018toAugust2019—tosignaMemorandumofUnderstandingonChina’sBRI.Italy’sofficialendorsementofChinesePresidentXi Jinping’s signature foreignpolicy initiative inMarch2019was takenwithoutconsultationwithEUpartners—actually,indefianceofcallsfromBrusselsandotherEuropeancapitalsnottosignuptotheBRI. Themovewas intended topromotean ‘Italy First’ setofpolicies.Bydoing this, Italy’spopulistcoalition clearly undermined EUefforts at finding a common stance vis-à-vis Beijing. It also showedthattherearedifferencesbetweenthevariouspoliticalfamilieswithintheEuropeanParliament—atrendthathasimplicationsforEUrelationswithChina.

3) DifferencesbetweenthevariouspoliticalfamilieswithintheEuropeanParliament

OnEU–Chinarelations, therearecommonalities,butalsodifferencesbetweentheprogressivecampandtheotherpoliticalfamiliesrepresentedintheEuropeanParliament.Inthisstudy,theprogressivecamp comprises forces thatwould traditionally sit on the centre-left of the political spectrum. ThiscampincludesthegroupofSocialistsandDemocrats,butalsotheGreensandsomeforcessuchasLaRepubliqueenMarcheofFrenchPresidentEmmanuelMacron.

Differences are evident between the progressive camp, on the one hand, and the hard right andsovereigntistforces—includingFrance’sNationalRally(RassemblementNationale) ledbyMarineLePenandItaly’sLeagueledbyMatteoSalvini—whichseektounderminetheEUforideologicalreasonsand emphasise the national level in foreign policy. Their anti-EU stance hinders their capacity toextractmeaningful concessions from Beijing as they lack the necessary clout that the UnionwouldhavewhennegotiatingwiththeAsiangiant.TheChinapolicyofhardrightandsovereigntistforcesisthusa lose-losegamefor thenational level (tooweak in the faceof theAsiangiant)and for theEUwhichisoftenbypassedandthusundermined.TheonlywinnerisChina—andthisisquiteremarkableforpoliticalforcesthatclaimtoputtheircountries’interest‘first’.

Differences also exist between the progressive camp and conservative forces with regard to theemphasis given to: (i) business vs. values; (Ii) confrontation vs. engagement; (iii) allegiance to vs.independencefromtheUS. Ingeneral,conservativepartiestendtoprioritisebusiness interestsoverthedefenceofvalues,althoughconservativeforcesintheNordiccountriesaretraditionallyprincipled.



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Conservativeforcestendtoadoptaconfrontationalstancevis-à-visChina,whiletheprogressivecampfavoursengagement.Finally,theconservativestendtosidewithWashingtonasamatterofprinciple;theprogressivecamprecognises the invaluable roleof theUSandofNATO,but it cancountenancesidingwithChinaonspecificissuesifthathelpspromoteEUinterestsandfundamentalvalues.

2.APROGRESSIVEAGENDA

A progressive EU China policy exploits relationswith Beijing to strengthen the EU, not the nationallevelonly.ConsultationwiththeEUonwhattodotowardsBeijingshouldcomefirst,evenincasesofdisagreementbetweenthenationallevelandtheEU.

Builtaroundthreekeywords—Defend,Engage,Maximise—theprogressiveagendacombinesbothelementsofcontainment,aswellasofengagement,towardsChina.Itaimstoattainthreeoverarchingobjectives: (i) Promote a strong and united EU; (ii) Protect Europe’s socio-economicwell-being andwayoflife;(iii)AdvanceEUfundamentalvaluesandprinciples,andfosteraninternationalorderbasedoneffectivemultilateralismandtheruleoflaw.

ThisprogressiveagendarecommendstheEUtofocusonaselectlistofissuesofstrategicimportanceinitsrelationswithBeijingsoastoachievemaximumimpact.ItinvitestheEUtodothefollowing:

DEFENDEuropeanworkersandcompaniesfromChina’sunfairtradeandcompetitionpractices,inlinewithwhatwasadvocatedbytheFederationofGermanIndustriesinitsJanuary2019paperandbytheEuropean External Action Service (EEAS) in its last document on the EU and China issued inMarch2019.AprogressiveagendawouldalsosupportanewversionofstateinterventionismatEUleveltocounterChina’s state-backed companies, asproposedby FrenchPresident EmmanuelMacron inhisManifesto of 4March 2019. A progressive EU China policymust also defend the EU’s fundamentalvalues and principles from the Chinese authoritarian political system, denouncing labour andenvironmentalconditionsinsideChina,aswellasviolationsofhumanrights—includingthoserelatingto minorities, gender and LGBTQI (lesbian, gay, bisexual, transgender, questioning or queer, andintersex)—bytheChineseregime.AprogressiveEUpolicytowardsChinaisaprincipledone.

ENGAGEChina to promotemultilateralismand international institutions, in contrastwith hard rightand sovereigntist forces — both inside Europe and abroad — which tend to prioritise bilateralrelations, often showing contempt for institutions and the ruleof law. The focusof EU cooperationwith China should be on a select number of policy areaswhere the two partnersworking togethercould make the difference, including on: (i) Climate change; (ii) Reform of the multilateral tradingsystem;(iii)Securitycooperation,inparticularinAfrica;(iv)NorthKorea’snuclearthreat;(v)TheSouthChinaSea.

MAXIMISEEU–Chinarelationstobuildamorebalanced internationalsystem,placing limitsonthoseunilateral attitudes of the US which are detrimental to EU interests and fundamental values. Twointerrelated policy areas could be the initial testing ground for the maximisation of Sino-Europeanrelations in the next five years: (i) Saving the Iran nuclear deal; (ii) Reforming the internationalmonetarysystemandputtinglimitsontheUSarbitraryimpositionofsanctionsandtheweaponisationof the dollar. A progressive agenda for EU–China relations is thus one of independence— and ofboldnesswhennecessary.



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Theabove framework identifiesanddistinguishesbetween issueswhereChina isachallenge—andthusneeds to be contained—andpolicy areaswhereBeijing canbecomeapartner—andeven atemporary ally— to advance EU interests and fundamental values. This progressive agenda buildsuponthemainachievementsinSino-Europeanrelationsoverthelastthreedecades.

The following section presents an overview of the key features and major milestones of therelationship in order to provide the necessary context — and historical perspective — for thesubsequentdiscussionof the current stateof play in, and futureprospects for, theBrussels–Beijingpartnership.

3.EU–CHINARELATIONSINPERSPECTIVE

KeyfeaturesEconomic considerations have traditionally been the main driving force of EU–China relations,althoughsecurityanddefence-relatedelementshavebeenaddedinrecenttimes.Since2004(afterEUenlargement) China has become the EU’s second biggest trading partner and the EU has becomeChina’sbiggesttradingpartner.Asof2019,ChinaandtheEUhavebeentradingmorethan€1.5billioningoodseachday—nearlyequivalenttowhatChinaexchangeswiththeUnitedStates.

AlargenumberofsectoraldialoguesunderpintheSino-Europeanpartnership,whichischaracterisedby a high degree of institutionalisation. Since 1998, there has been a yearly EU–China Summitcomplemented,since2008,byanEU–ChinaHigh-LevelTradeandEconomicDialogue—whichfollowsontheheelsoftheUS-ChinaStrategicandEconomicDialogue.In2013,thetwopartnersadoptedtheEU–China2020StrategicAgendaforCooperation,whichprovidestheframeworkoftheirrelationship.TheStrategicAgendareaffirmstheEU’srespectforChina'ssovereigntyandterritorialintegrity,whileBeijingreiteratesitssupportforastrongandunitedEU.

Since2010,followingtheentryintoforceoftheLisbonTreatyandthecreationoftheEEAS,therehasbeenayearlyEU–ChinaHighLevelStrategicDialoguebetweentheHighRepresentativeoftheUnionfor ForeignAffairs and Security Policy (HR) and the Chinese State Councillor responsible for foreignaffairs–anopportunityforthetwosidestodiscussregionalandglobalissuesofcommonconcern.

Since2011,theEU’sHRhasalsometannuallywiththeChinesedefenceminister,whiletheheadof theEUMilitaryCommitteehasengaged inaparalleldialoguewithher/hiscounterpart inthePeople’sLiberationArmy(PLA).ThereisstillanEUarmsembargoinplaceonChina, imposedbytheEuropeanCommunity30yearsagofollowingthePLA’scrackdownonstudentsinTiananmenSquareinJune1989.

Therearenomajorconflict issuesthatcouldbringthetwosidestoamilitaryconfrontation–unlikethe caseofUS-China relations,where theTaiwan factor andUS commitment toAsia’s securitymaylead toamilitarystand-off.However, should tension in theSouthChinaSeaescalatedue toChina’sexpansiveterritorialandmaritimeclaimsinthearea,someEUmemberstatesmaydecidetointervenealongsidetheUSandotherlike-mindedpartnerstodefendtheregion’srules-basedorder.

TheEU’sChinapolicy ispredicatedonadivisionof labourbetweenBrusselsandthememberstates:ontheonehand,theEUtraditionallyadoptsatougherstancetowardsBeijing, inparticularontradeandinvestment,whilealsoengagingChinaintheinternationalarena,actingasanormsentrepreneur



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byfundinganumberofprogrammes,projectsanddialoguesacrosstheboard.Atthesametime,EUmember states tend tomaintain good political relations with Chinese leaders, shying away from aconfrontational stance, in particular on sensitive issues pertaining to China’s sovereignty (Tibet,Xinjiang,humanrights,democratisation)andnationalpride(Taiwan).Inrecentyears,however,someEUmemberstates,inparticularFranceandtheUnitedKingdom,havesailednavalvesselsintheSouthChinaSea’s internationalwaters—amoveviewedbyBeijingasan infringementon its ‘sovereigntyrights’overlargeswathsoftheSea.Besidesthisandafewotherexceptions,EUmemberstateshave,ingeneral,adoptedanon-confrontationalapproachtowardsChinasoasnottoputatrisktheawardoflucrative contracts for their national companies. At the same time, the member states have alsoretainedacertaindegreeofcriticalpressureonBeijingatEUlevel.

Majormilestones

TherearethreemajormilestonesincontemporaryEU–Chinarelations:1995,2003,and2019.

1995:ConstructiveEngagement.InitsfirstpolicypaperonChina,theEuropeanCommissiondeclaredthat‘relationswithChinaareboundtobeacornerstoneinEurope’sexternalrelations,bothwithAsiaandglobally’ (EU,1995). Inthedocument,theterm‘constructiveengagement’wasusedtodescribetheEU’sdistinctiveapproachtowardsBeijing,combiningeconomicengagementwithcriticalpressureon human rights violations. Throughout the 1990s and early 2000s, the hope was that a firmengagementpolicy,coupledwithglobalisation,wouldunleashforcesinsidethecountrywhichwould,in turn, transform China along liberal-democratic lines. It was this context — and hope — thatconvincedEUleaderstofurtherdeveloprelationswithChinathroughastrategicpartnership.

2003:StrategicPartnership. InOctober2003,BrusselsandBeijingestablishedastrategicpartnershipenlargingtheircooperationtopoliticalandsecurity-relatedfieldsofpolicy, includingcollaboration inbighigh-techprojectssuchasthejointdevelopmentofGalileo,theEU-ledglobalnavigationsatellitesystemalternativetotheUS-controlledGlobalPositioningSystem(GPS).Moreover, inAutumn2003,the majority of EU member states, led by France and Germany, put forward a proposal to startdiscussionsonliftingthearmsembargothathadbeenimposedonChinabytheEuropeanCouncilofJune1989.

Autumn2003canrightlybeconsideredthepoliticalheydayofEU–Chinarelations,asitalsocoincidedwith one of the most serious transatlantic rifts, due to US President George W. Bush’s unilateralpoliciesanddifferencesovertheIraqWar.In2005,EUmemberstatesdecidedtoshelvetheproposaltoliftthearmsbanonChina,followinginternalcriticismfromtheEuropeanParliamentandanumberofnationalparliamentsaswellasstrongoppositionfromtheUnitedStates,whichfearedthatsuchamovewouldputatriskAsiansecurityandWashington’sstrategicinterestsinthearea.

Since the late 2000s, EU–China political relations have deteriorated. The opening ceremony of theBeijing Olympic Games in August 2008 was boycotted by many European leaders. This mirroredgrowing negative perceptions by European public opinion vis-à-vis China,whichwere based on theidea that the Asian giantwas invading Europeanmarketswith cheap products, taking away jobs inmanufacturingsectors,andacceleratingthede-industrialisationoftheoldcontinent.Thediscourseon‘China’seconomic threat’hasbeenstrengthened in the lastyears, followingpublicationof ‘Made inChina2025’,adocumentissuedbytheChinesegovernmentin2015aimedattransformingtheAsiangiant from being the world’s ‘factory’ into producing higher value products and services. In other



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words, a strategy to upgrade China’s manufacturing across the board – a move which directlychallengesmanyindustrialsectorsacrossEurope.

2019: Cooperative Rivalry. In its last paper on China issued in March 2019, the EU makes a shifttowardsamoreassertive–anddefensive–approach,callingChinaan ‘economiccompetitor’anda‘systemicrivalpromotingalternativemodelsofgovernance’.Inthedocument,theEUaccusesChinaofwithholdingitsdomesticmarketforitsnationalchampionsandrestrictingEuropeancompanies’accesstoit;subsidisingdomesticcompetitors;andfailingtoprotectintellectualpropertyrights(EEAS,2019).Inthesamevein,theEuropeanCouncilof21-22March2019voicedharshcriticismonissuesrangingfrom theBRIandChinese investments into thebloc, to the challengeposedbyBeijing state-backedcompaniestoEurope’scompetitivenessandprosperity.

4.CURRENTSTATEOFPLAYANDOPENISSUESThemostrecentEUpolicypaperonChina—issuedinMarch2019—containsalonglistoftopicsandareasforcooperationbetweenthetwosides.Forthenextfiveyears,theEUshouldinsteadfocusonaselect listof issuesofstrategicsignificance inordertoattainthethreeoverarchingobjectivesof theprogressiveagenda,namely: i)PromoteastrongandunitedEU;(ii)ProtectEurope’ssocio-economicwell-being and way of life; (iii) Advance EU fundamental values and principles, and foster aninternationalorderbasedoneffectivemultilateralismandtheruleoflaw.

Accordingly,theEUshouldfocuson:

(i) Trade,investmentandtechnology,aswellasdemocracyandhumanrights;(ii) Global issues, including climate change, reform of the multilateral trading system and

internationalsecurityissues;(iii) Irannucleardealandthereformoftheinternationalmonetarysystem.

The remaining part of the paper examines these issues in more detail, beginning with trade andinvestment,whichhavetraditionallybeenthebackboneoftheSino-Europeanpartnership.

TradeandinvestmentIn2019,ChinaandtheEUtradedmorethan€1.5billioningoodseachday.TheEUisnowChina’smostimportant trading partner, although China ranks number two for the EU, after the United States.Between2007and2017,totalEU–Chinatraderosedramatically,fromaround€306billiontoroughly€573billion,accordingtotheEuropeanCommission. In2017,Chinahadashareof11% inextra-EUexportsofgoods(€198billion)andinextra-EUimportsofgoodsChinawasthelargestpartnerwithashareof20%(€375billion).TheresultwasanEUtradedeficitof€177billionwithChina(Figure1).

The surge in two-way trade has been accompanied by a growing number of European companiesinvesting and relocating production in China, increasing the current stock of EU foreign directinvestment(FDI)there.Inrecentyears,investmentshavealsobegunflowingintheotherdirection,asChinesefinancialinstitutionsandcompaniesincreasinglyacquirestakesofEuropeanassets.

2016wasarecordyearforChineseinvestmentintheEU,reachingarecordhighof€35billion,morethan four times higher than the European FDI in China (€8 billion). According to the China GlobalInvestment Tracker, a joint project between the American Enterprise Institute and the Heritage



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Foundation,China investednearly$164billion inEuropebetween2005and2016.During thatsameperiod, it invested $103billion in theUnited States. According to theRhodiumGroup, aNewYork-basedconsultancy,ChineseFDI intheEUhas increasedbyalmost50times inonlyeightyears, fromlessthan$840millionin2008toarecordhighof$42billion(€35billion)in2016.

EuropeiscurrentlythetopdestinationforChineseforeigninvestments,surpassingtheUnitedStates.However, in2016 theshareofChineseFDI inEurope,at2.2%, remained lowrelative to theUnitedStates’market-leading38%.Similarly,theEUcountriesheldonly4%ofthetotalFDIinChinain2016,versus 36% of the total FDI in the United States. Although Chinese investments in the EU are stillcomparativelylow,theyhavebeenevolvingrapidlyandincreasingatunprecedentedgrowthrates.

Figure1–EUtradewithChina2007-2017(billionsofeuros)

Source:EuropeanCommission.

China invests in Europe for several reasons: (i)Moving up the value chain by acquiring technology,know-how and brands in sectors where Europe has achieved global competitiveness; (ii) Acquiring



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logistical bases and direct access to Europe’s internal market for Chinese products; (iii) Gainingentrancetothirdmarkets(suchastheUnitedStates)viaEuropeancorporatenetworks;(iv)EnhancingBeijing’s political and diplomatic influence in Europe— since investments are traditionally seen asbeneficial for job creation, leading in turn to positive perceptions of China. The implementation ofChina’s BRI has added an additional element to this picture, sinceChinese investors are aware thatoutward investment in the BRI framework tends to receive smoother approvals, and finance, fromChineseauthorities.

The EU has, however, repeatedly voiced its criticism of China’s lack of reciprocity. Beijing restrictsforeign investment in its domesticmarket for almost all sectors,with the exception of banking andfinance. European businesses consistently face difficulties in entering the market, while Chinesecompanies often receive help from the government, through subsidies or simpler procedures, forexample. Foreign companies, meanwhile, particularly those with recognised brands andtechnologicallyadvancedproducts,arerequiredtosharetheirexpertisebeforetheyareallowedintothemarketatall.EuropeaninvestorsroutinelypointouttheregulatoryandadministrativeburdenthatforeigncompanieshavetofaceinChina.WhilethecountryistheEU’ssecondlargesttradingpartner,it also has the second most investment barriers in the world after Russia, including joint venturerequirements, market entry restrictions, obligations of technology transfer as well as unjustifiabletechnicalregulations.

Growing imbalancesbetweenEuropeandChina ledFrance,Germany,and Italy toask theEuropeanCommission,inFebruary2017,torethinktherulesonforeigninvestmentintheEU.ItwasamessagetoBeijingaboutopeningupaccess to itsmarkets, ata timewhen the twosideswerenegotiatingabilateralinvestmenttreaty,whichismeanttoaddressthequestionofreciprocity.TheEU–China2020StrategicAgendaforCooperationputsanEU–ChinaInvestmentAgreementascentraltotheEU’slong-term bilateral relations with China. Negotiations for the Investment Agreement began in 2013,althoughprogresson the treaty continues to stall, owing toChina’s reluctance to removenon-tariffbarriersinarangeofsectorsthatareofinteresttoEuropeanbusinesses.

AccordingtoareportbytheRhodiumGroupandtheBerlin-basedMercatorInstituteforChinaStudies(MERICS)published in2019,Chinese foreigndirect investment in theEUfell40%to€17.3billion in2018.ThereportexplainsthisdeclinebyatighteninginChina’scapitaloutflows,butalsobygrowingregulatory scrutiny in host European economies andmounting criticism vis-à-vis China’s BRI, whichtodayhasbecomethemainframeworkthroughwhichChineseinvestmentsreachEurope(Hanemann,HuotariandKratz2019).

TheBeltandRoadreachesEuropeThe Belt and Road Initiative is China’smost ambitious geo-economic and foreign policy initiative indecades,combiningaland-basedSilkRoadEconomicBeltandasea-based21stCenturyMaritimeSilkRoad, which together connect China to Europe through South-East Asia, Central Asia, the IndianOcean, the Middle East and Eastern Africa. The stated aim of this grandiose project is to boostconnectivityandcommercebetweenChinaandmorethan70countriestraversedbytheBeltandRoad(Casarini,2019).

China’s total financial commitment to this initiative is expected to surpass $1 trillion over the nextthreedecades.Beijinghasalreadycommittedaround$300billion for infrastructural loansandtrade



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financing, a sumwhich includes a $40 billion contribution to the Silk Road Fund for infrastructuraldevelopment and the $100 billion initial capital allocated to the China-initiated Asia InfrastructureInvestmentBank(AIIB).

TheBRIispresentedtopotentialpartnersasanopenandunconditionalplan,withemphasisgiventoeconomic considerations and infrastructure. Unlike the US, which opposed it from the start, theEuropeanshaveshown interest inChina’s initiative.AllEUmemberstateshave joinedtheChina-ledAIIB,which isdesignedto lendfinancialsupporttoBRI-related initiatives.Severalprojectssupportedby the AIIB are co-financed by the European Investment Bank (EIB) and the European Bank forReconstructionandDevelopment(EBRD).

China’sconnectivityinitiativehas,however,attractedcriticismfromtheEU.InApril2018,theGermanbusinessnewspaperHandelsblattrevealedthat27of28ambassadorsfromtheEUinBeijingcompiledareportaccusingtheBRIoflimitingfreetradeandprovidingsubsidisedChinesecompanieswithunfairadvantages. TheHungarian ambassador inBeijingwas theonly one to refuse to sign thedocument(Heide,2018),possiblyduetotwofactors: (i) thehigh levelofChinese investments inHungary (asapercentageofGDP);(ii)tosendamessagetoBrussels,withwhichtheHungariangovernmentatthattimehadanumberofgrievances.

TheEU is concerned that through theBRI, China seeks to tackle industrial overcapacity at homebydumpinggoodspricedbelowproductioncost,astrategythatcouldbringsomeindustriallinesacrossEurope to their knees. Moreover, Brussels fears that Beijing wants to revise the global rules oncommerce and investment, worrying that the Chinese initiative lacks transparency and that theopaque financing dealsmay threaten the competitiveness of European companies. It is increasinglyevidentthatChinesecompaniesareawardedcontractswithlittlerespectforopenprocurementrules.This raises the question of reciprocity.While Chinese companies find an open-door environment inEurope, it is quite difficult – if not impossible – for a European company to succeed in winning acontracttobuildinfrastructureprojectsinChina.

EuropeisalsoworriedthatthroughtheBRI,Chinaisencouragingindebtednessinvariouscountriesinordertogaincontrolofstrategicassetswhendebtorsdefaultonrepayments,althoughBeijingdeniesthis.BoththeUSandtheEUhaveactedtorespondtowhattheyseearethenegativeaspectofChina’sBRI.Washingtonhascreatedanagency,theUSInternationalDevelopmentFinanceCorporation,whichcouldinvestupto$60billiontocounterChina’suseofdebt-trapprojectstogaininfluenceabroad.TheEUhasadopted itsownconnectivitystrategyfortheEuro-Asianregionandan investmentscreeningmechanismclearlyaimedatBeijing.

Europe’sconnectivityplanThe 2016Global Strategy committed the EU to strengthening relationswith a ‘connectedAsia’ andcalled for a ‘coherent approach’ to connectivity (EEAS, 2016). In this vein, on 19 September 2018Federica Mogherini, High Representative for Foreign Affairs and Security Policy, and CeciliaMalmström, the European Commissioner for Trade, unveiled the EU’s connectivity strategy. Theinitiativetouchesonallmodesoftransport links—land,seaandair—aswellasdigitalandenergylinksintheEurasianarea(EuropeanCommissionandEEAS,2018).

The EU’s plan seeks to promote a shared concept of connectivity that respects labour, social andenvironmentalstandardsandfollowstheprinciplesofsustainability,transparency,freemarket,open



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procurement,andequaltreatmentandequalaccess—principlesthatChinesecompaniesinvestingintheframeworkoftheBRIrarelyuphold.ThisisparticularlyimportantinCentralandEasternEuropeaswell as in theWesternBalkans (the countries forming the17+1grouping),where someEUmemberstates—suchasHungaryandtheCzechRepublic—andsomeaccessioncountries—includingSerbiaandMontenegro—have received significant Chinese investments. There is a risk that some of theprojectsendupin‘debttraps’,withimplicationsforthefinancialstabilityofthesecountriesthatareeitheralreadymembers,orareintheprocessofbecomingmembers,oftheEU.

TheEU’s connectivity strategy is linked tonew legislationaimedat limitingChina’spenetration intokeyindustrialandstrategicsectorsinthebloc:thescreeningmechanism.

ScreeningChineseinvestmentsTheEuropeanCommissionfirstproposedtoestablishaframeworkformemberstates,andincertaincases the Commission itself, to screen foreign direct investment in the EU in September 2017(EuropeanCommission,2017).After18monthsofnegotiations,theEuropeanCouncilof21–22March2019gavethegreenlighttothescreeningmechanism.Itisworthnotingthatduringthevoteonthedraft text in the EU Council on 5 March 2019, 26 out of 28 EU members approved the screeningmechanism. The twooutlierswere theUnitedKingdom,which is halfwayoutof thebloc, and Italy.Especiallywhenitcomestothelatter,thepopulistcoalitioninRomeatthattimereversedthepositionofthepreviouscentre-leftGentilonigovernment,whichhadjoinedGermanyandFranceinsendingalettertotheEuropeanCommissioninFebruary2017tobackcallsforanEU-wideinvestmentscreeningmechanism.

ThescreeningmechanismwillhelptheEuropeanCommissionandtheEUmemberstatestoevaluatewhetheraforeigninvestorisinrealitycontrolledbyathirdcountrygovernment.Thisisclearlyaimedat Chinese state-backed enterprises. The screening mechanism makes it more difficult for foreigninvestors to acquire expertise and technology that could be used to produce goods sold at lowerprices.

Thescreeningmechanismcanalsobeusedtosafeguardthenational interest,aquestionofgrowingimportancewithregardto5Gtechnology, theworld leaderofwhich isHuawei,aChinesecompany.TheEuropeanshavesecurityconcernsregardingHuawei,howeverthemajorityofEUmemberstatesseemorientedtowardsasofterline—comparedtotheUnitedStateswhichhasbannedtheChinesecompany— that would allow Huawei to continue operating inside their countries alongside otherproviders, includingUS-basedCiscoandEuropeancompaniessuchasEricssonandNokia.Thiswouldavoid giving the Chinese company a leading position in the nationalmarket. Regarding the securityaspects of the 5G network, European policymakers are considering whether to grant securityauthoritiestherighttoaccessthesourcecodeofHuawei,aswellasthatoftheotheroperators,soastosafeguardthenationalinterest.

ThescreeningmechanismhasbeensupportedbymanyindustrialassociationsacrossEurope,includingthe powerful German business federation which put forward a proposal in January 2019 aimed atlimitingmarketaccessforChinesecompaniesthatreceivebigsubsidies,andatblockingtheirabilitytobuyEuropeancompaniesinkeytechnologicalandstrategicsectors(FederationofGermanIndustries,2019)—astancethathasfoundsupportfromtheFrenchpoliticalelite.



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FosteringEuropeanchampionsInhisManifestoaddressedtothe ‘citizensofEurope’on4March2019,FrenchPresidentEmmanuelMacronputsforwardplanstocombataggressiveChinesecompetitionwithnewinterventionismattheEUlevel. Inparticular,MacronbelievesthatEuropeneedstoactbyenforcingpoliciesthatallowtheEUtodefenditstechnologicalsovereigntyandcreateEuropeanindustrialchampions(Macron,2019).

A recent report by the European Political Strategy Centre (EPSC)— the European Commission’s in-housethinktank—lendssupporttothisrevampedstateinterventionism,includingplanstomergetherailassetsofFrance’sAlstomandGermany’sSiemenstoavoidbeingoutcompetedbyBeijing-backedChina Railway Rolling Stock Corp (CRRC), a publicly traded rolling stockmanufacturer, which is theworld’slargesttrainmaker(EuropeanPoliticalStrategyCentre,2019).

Behindthisproposal,thereistheidea—madeclearinMacron’sManifesto—thatEuropeiscaughtingreat power rivalry between China and the United States and that should Europe fail to act, itsindustrialfuture—andjobs—wouldbeatstake.

US-ChinarivalryThe EU and the values it stands for are currently under attack fromboth theUS and China. UnderTrump, theUShasbecomea disrupter of the liberal international order, including the fundamentalnormsofatradingsystembasedonmultilateralagreementandbindingrules,asystemcreatedaftertheendof the secondworldwar andever since ledby theUS.Moreover, theadministrationofUSPresidentDonaldTrumpisshowingcontemptformultilateralismandinstitutions,preferringbilateralbargainingandpowerrelationsinstead.Concurrently,China’srisehasnotbroughtaboutthedomesticchangeshopedforbytheWest.China’sstate-controlledeconomyrepresentsaseriouschallengeforEurope’s competitiveness and well-being, while the Chinese regime now presents itself as analternativetoliberaldemocracy.

US PresidentDonald Trumphas responded to an increasingly powerful China by unleashing a tradeandtechnologywar,seekingtosubordinateBeijingtoUSinterests.TheUSisaskingtheAsiangianttosubstantially cut its bilateral trade deficit, reduce tariffs on US goods and diminish subsidies foremerging industries. A study from the Peterson Institute for International Economics (PIIE) – aWashington-basedthinktank–publishedinMay2019maintainsthatTrumphasthreatenedtariffsonChinathatarenotfarfromtheaveragelevelofdutiestheUSimposedwiththeSmoot-HawleyTariffActof1930.PIIEexpertsarguethattariffsmayevenstaythishigh,becauseUSnegotiatingdemandsaretoohumiliatingforChinatoaccept(BownandZhang,2019).

The Trump administration has also decided to restrict China’s ability to invest in, or acquire, UScompaniesandstart-upsinsectorssuchasrobotics,aerospaceandartificialintelligenceidentifiedbyBeijing in its so-called Made in China 2025 plan. China has responded by imposing tariffs on USproductsandbyblacklistingsomeUScompaniesfromdoingbusinessinChina.

Washington has adopted a tough approach vis-à-vis Beijing, seeking to change China’s practices inorder to boost US exports, protect intellectual property and technological edge, and counterdiscrimination against overseas investors. The more hawkish elements inside the Trumpadministration want to decouple the US economy from China, through the imposition of tariffs,



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barriers to cross-border investment and initiatives that would compel companies to break supplychains.

For instance, Washington has decided to blacklist Huawei — China’s only world-leading advancedtechnologymanufacturer—preventingUScompaniesfrombuyingitsproducts,thoughinAugust2019Trump softened his stance, limiting the restriction to products that are considered significant fornational security reasons. The source of friction is competition to build and deploy 5G architecturewhich will underpin a vast array of commercial and military technologies. Huawei has gained anundisputededgein5GtechnologyoveritsWesterncompetitors,attractingtheireoftheUS.

The Trumpadministration’s tough approach towardsChina enjoys– to varyingdegrees – bipartisansupportinWashington.ItalsogoeshandinhandwithadeepeninghostilityamongordinarycitizenstoarisingChinawhichchallengesUSprimacy.

TheEUhasquiteexplicitlysaid itdoesnotagreewiththeconfrontationalmethodsemployedbytheTrump administration in its tradewar with China, althoughmany Europeans would agree with thesubstanceoftheaccusationsthattheUSmakesofBeijing.Nevertheless,theEUanditsmemberstateshaveneverconfrontedChinaasopenlyastheUS.

TherearealsodifferencesinhowtheEUandtheUSdealwithHuaweiand5Gtechnology.Infact,theEuropeans have so far resisted pressure from Washington to ban the Chinese company from thedevelopmentof5Gnetworks.

Notwithstandingdivergencesovertradeand5G,theEUandtheUSsharethesamepoliticalvaluesandarecommitted topushing fordomesticchange inside theAsiangiant–bypromoting the respectofhumanrights,fundamentalfreedoms,goodgovernance,andtheruleoflawinChina.

PoliticalvaluesTheEUwasfoundedontheprinciplesofhumanrights,democracyandtheruleoflaw.Moreover,theLisbonTreatyof 2007 stipulates that theEUand itsmember states shouldpromote these values intheirexternalrelations.SincetheChinesegovernmentpresentsitsauthoritarianpoliticalsystemasanalternative to liberal democracy, friction over political models increasingly shapes the relationshipsbetween the EU and China. For instance, the two sides look at human rights from differentperspectives: while for Europe all human rights are universal, indivisible, interdependent andinterrelated, China on the other hand emphasises social and economic rightswithin the context ofgovernment action—but not the rights of the individual,which continue to be violated inside thecountry.

Thepictureisquitegloomy.AnestimatedonemillionUyghursandotherTurkicMuslimsaredetainedin political re-education camps. There is extensive abuse of surveillance technology and systematictargetingofhumanrightslawyersandcivilsociety.Deepandpersistentinequalitiesinaccesstoqualityhealthcare and education continue.More recently, Beijing has adopted expansive cross-border lawenforcement that catches non-nationals, including EU citizens, in its net. The future of Hong Kongremains in thebalance, followinga seriesofdemonstrations inHongKongandsolidarityprotests inothercitiesabroad.Thesebeganinmid-2019withtheaimofwithdrawinganextraditionbillproposedbytheHongKonggovernmentbutthatinrealitywasinspiredbyBeijing.



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ThefuturestatusofTaiwan-whoseofficialnameistheRepublicofChina-remainsinthebalancetoo.The‘oneChinapolicy’assertsthatthereisonlyonesovereignstateunderthenameChina,asopposedtotheideathattherearetwostates,thePeople’sRepublicofChina(PRC–orthemainland)andtheRepublicofChina(ROC–orTaiwan).TheEUandallitsmemberstatesabidebythe‘oneChinapolicy’–anecessaryconditionforentertainingofficialdiplomaticrelationswithBeijing.However,Taiwanhasgained‘defacto’statehoodandthequestionofreunificationwiththemainlandremainsopen.Taiwanisafully-fledgeddemocracy-buttheEUhastendedtoshyawayfromshowingsupportfortheisland,forfearofcommercialreprisalsfromthemainland.

TheEUisoftenunabletofindthenecessarycohesiontodenounceChina’shumanrightsviolationsandaggressivebehaviourtowardstheneighbouringcountries—helpedinthisbyBeijing,whichcontinuestoputpressureonmember states soas toundermineEUprincipledpositions. For instance, in June2017Greece succeeded inpreventing theEU from takinga clear critical stanceagainstChinaat theUnitedNationsHumanRightsCouncilinGeneva.GreecehasreceivedsignificantChineseinvestmentsin recent years. For example, themajority of theGreek port of Piraeus inAthens is nowownedbyCISCO,aChinesestate-ownedcompany.

Anotherexampleoccurred in2016, followingthedeliberationbythePermanentCourt inTheHagueon the Arbitration between the Philippines and China regarding the latter’s extensive claims tomaritime areas in the South China Sea. The Tribunal found the claims to be incompatiblewith theUnitedNationsConventionontheLawoftheSea(UNCLOS)andthereforeillegitimate.TheEUissuedamilddeclaration inJuly2016,stressingtheneedforthepartiestoresolvethedispute inaccordancewith international law. An earlier— andmore principled— declaration, which clearly mentionedChina,hadbeenblockedbyGreece,HungaryandCroatiainJune2016.

DifferencesofvalueshaveneverthelessnothinderedEU–Chinadialogueandcollaborationonglobalissuesofcommonconcern.

GlobalissuesThis authoritarian China - whose values are often at loggerheads with those of Europe - can be aformidablepartneroftheEUtoadvanceeffectivemultilateralismandaddressglobalchallenges,suchas climate change and the reform of multilateral trading, although China’s engagement towardsmultilateralism is sometimes selective and based on a different understanding of the rules-basedinternationalorder.

Climatechange

ChinaandtheEUare,respectively, thefirstandthirdgreenhousegasemittersandtwoofthethreeleadingactorsoftheinternationalclimatechangeregime.WhiletheEUhaspossiblydevelopedsomeof the most ambitious climate and energy legislation to implement the Paris Agreement, China isdeveloping a far-reaching climate and energy agenda andhas become a global leader in renewableenergiesandreforestation.

ChinawasoneofthemainbrokersoftheParisAgreementonclimatechange.ThefinaldeclarationoftheEU–ChinaSummit in2017markedakeypoint inBrussels–Beijingcooperationonenvironmentalissues,asitcoincidedwithTrump’srejectionoftheParisAgreement.TheEUandChinahavepledged



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tocontinueeffortstoreducepollution,combatrisingsealevels,andbolsterresearch,innovation,andtechnologicalprogress,evenwithouttheUS.BrusselsandBeijinghavealsoagreedtocutbackonfossilfuels,developmoregreentechnology,andraisefundstohelppoorercountries,particularlyinAfrica,cuttheiremissions.

While there continue to be differences, and conflicting interests, between the two parties, climatechange is nevertheless an area where China can become a key partner of the EU. Likewise,collaborationwithChinacanprovidetheEUwithadditionalstrengthtosavethemultilateral tradingsystemandreformtheWorldTradeOrganisation(WTO).

WTOreform

ThereisnodenyingthatChinachallengesWesternnormsandprinciples.Yet,todayitistheUSunderTrump that has become a disrupter of the fundamental norms of a trading system based onmultilateralagreementandbindingrules,whichtheUSitselfcreatedinthewakeoftheSecondWorldWar.Asaresult, theEUandChinahavebeenforcedtocollaboratemorecloselywithintheWTOtosavethemultilateralsystem.

TheEUhasatvarioustimes indicatedthat itdisagreeswithUSresort totariffs—whichare inclearviolationof the rulesof theWTO— in its tradedisputewithChina.TheEUcan thus find inChinaapartner touphold thecentralityof theWTOandtheprinciplesof themultilateral tradingsystem. In2018, the EU and China set up a working group to revamp the WTO in order to counter USunilateralismandsendapositivesignaltothosewhowanttomaintainthemultilateraltradingsystem.However,thetwosidesremaindividedonthornyissuessuchasBeijing’sindustrialpoliciesandmarketaccess.

BothBrusselsandBeijingarecommittedtoreformingtheAppellateBody,astandinggroupofsevenpeople thathearsappeals fromreports issuedbypanels indisputesbroughtbyWTOmembers.TheAppellate Body is central for the very survival of the WTO’s dispute settlement mechanism. It iscurrently facingoneof itsmost acute crises, due to theUSblocking the appointments ofAppellateBody members to replace those whose terms have expired. China can thus become a formidablepartner of the EU to defend the norms and principles on which the multilateral trading system isbased. Similarly, there is great potential for EU–China cooperation on global security issues, inparticular in those parts of the world where collaboration with China can make a difference forpromotingEUinterestsandvalues.

Internationalsecurity

BoththeEUandChinaagreeonavisionof internationalaffairsandglobalgovernancethatputstheUnitedNationsatthecentre.Thetwopartnershavebeenabletofostercooperationonissuesrangingfrom peacekeeping operations and antipiracy missions to non-proliferation and disarmament,including the question of North Korea’s nuclear threat. Differences remain, however, on how toaddressterritorialandmaritimedisputesintheSouthChinaSea.

Since theearly2000s,EUmemberstates, includingFrance, theUnitedKingdom,Germany, ItalyandSpain,haveeachsetupa ‘strategicdialogue’withBeijing,complementedbythetrainingofChinese



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militaryofficersandexchangesofhigh-levelvisits. In2015,Sino-FrenchandSino-Britishcooperationalsoincludedportcallsandjointnavalsearchandrescueexercises.

Since 2010, there has been a yearly EU–China High Level Strategic Dialogue between the HighRepresentativeof theUnion for ForeignAffairs andSecurityPolicy and theChineseStateCouncillorresponsibleforforeignaffairs.Furthermore,since2011therehasalsobeenayearlymeetingbetweentheEU’sHighRepresentativeandtheChineseDefenceMinister,paralleledbyadialogueonmilitaryaffairsbetweentheChairoftheEUMilitaryCommitteeandhis/hercounterpartinthePLA.

TheEUandChinaalreadyworktogetheronconflictprevention,crisismanagement,andpost-conflictstabilisation.EUNAVFOR,theEU-ledantipiracyoperationoffthecoastofSomalia,hasalreadytestednavalcooperationbetweensomeEUmemberstatesandChina.InOctober2018,forthefirsttime,EUmilitaryforcescompletedacombinedexercisewiththePeople’sLiberationArmyNavy(PLAN) intheGulf of Aden. Peacekeepers from both China and EUmember states operate under the UN flag inLebanon as well as in other UN-EU operations, such as in Congo,Mali, and South Sudan. There ispotentialforfurtherEU–ChinasecuritycooperationinAfricaandtheMiddleEast,aswellas inthoseareas— such as Afghanistan—whereUS presence is retreating and closer EU–China collaborationmay be needed to fill the void and support regional stability. Another area of great potential forBrussels–BeijingrelationsisNorth-EastAsia.

NorthKorea

The EU and China regularly discuss the question of North Korea, advocating a peaceful resolutionthrough increased dialogue at the multilateral level. This is in direct contrast to the Trumpadministration, whose hawks have tended to respond to Pyongyang’s missile launches withbelligerence—anattitudethatbothBrusselsandBeijingseeastroublingforregionalpeace.

The EU and itsmember states are the biggest donors of development and humanitarian aid in theDemocratic People’s Republic of Korea (DPRK) andhave recently adoptedharsher sanctions againstPyongyang—inlinewiththerestoftheinternationalcommunity.Concurrentwithsanctions,theEUcontinuestobackdiplomaticinitiativesaimedatpromotingregionalcooperation,multilateralismandtrustbuilding—suchasRepublicofKoreaPresidentMoonJae-in’sengagementpolicywiththeNorth.

ThequestionofNorthKorea is linked to the futureof theKoreanPeninsulaandof the surroundingregion—oneofthemostimportantfortheEUfromaneconomicperspective,sinceitincludessomeof Europe’s biggest trading partners— China and Japan— and countries with which Brussels hassigned important FreeTradeAgreements (FTAs)—SouthKoreaand Japan. TheEUhasbecome thestaunchest supporter of Trilateral Cooperation — a process that aims to foster dialogue andreconciliationamongChina,JapanandSouthKorea.

China supports theTrilateral Cooperationprocess since it is an ‘Asianonly’ initiativemarkedby theabsenceof theUS. TheEUandChina shouldwork together tobolster TrilateralCooperationeffortsaimedataddressingNorthKorea’snuclearthreat—butalsomountingnationalismwhichputsatriskNorth-EastAsia’speaceandstability.NationalismisalsoontheriseinSouth-EastAsia,aregionmarredbyterritorialandmaritimedisputesamongitsresidentcountries.



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SouthChinaSea

IfNorth-EastAsiaishomeofsomeoftheEU’sbiggesttradingpartners,theSouthChinaSeaisanareathroughwhicha largepartofEurope’sglobaltradepasses.Thesecuritysituation intheSouthChinaSeahasbeendeteriorating inrecentyears,mainlyduetoBeijing’sdecisiontostepupterritorialandmaritimeclaimsoverlargeareasoftheSea.Theseclaimsarebasednotonlyoneconomicandsecurityconsiderations,butalsoonnationalidentityandtherenewalofChina’spastglories.

Chinacontinuestochallengetherules-basedorderintheareabybuildingseveralartificialislandswithmilitary facilities andweapons systems, drilling for oil and gas, and chasing off its South-East Asianneighbours’fishingvesselsfromwaterswheretheyhavetherightstofishinaccordancewithUNCLOS.

Inrecentyears,someEUmemberstates,inparticularFranceandtheUnitedKingdom,havesteppeduptheirinvolvementintheareabysailingnavalvesselsintheSouthChinaSea’sinternationalwaterstosendthemessagethatEuropecaresabouttheregion’sstabilityandtherules-basedorder.

France,GermanyandtheUnitedKingdomissuedastatementon29August2019expressingthethreecountries’concernaboutthesituationintheSouthChinaSeaandtheirsupportfortheapplicationofUNCLOS. EU member states continue, however, to sell military equipment in the region. French,German,Britishand Italianarmsmanufacturershavedevelopeda strongmarketpresence inSouth-EastAsia,especiallyinsalesofnavalunits(submarines,frigates,corvettes)andjetfighters.

EuropeanarmssalesrepresentanexcellentexampleofthedilemmafacingEUpolicymakers.Ontheone hand, Europe’s defence sector is the source of highly paid jobs, contributing to the bloc’scompetitiveness and international technological excellence. To survive, the sector needs marketoutlets. Yet, the sale of arms, weapons systems and dual-use goods has the potential to producedestabilisingeffectsinapartoftheworldsuchastheSouthChinaSeawheretensionbetweenChinaanditssmallerSouth-EastAsianneighboursisincreasing.

Alongsidegreateractivismintheareabymemberstates,theEUhasalsosteppedupitsinvolvementbutmoreasanormativeactorintentonfindingasolutiontotheongoingtensionsinthearea.Inthiscontext, the EU hasmade itself available to facilitate ASEAN–China dialogue on devising a code ofconduct for the South China Sea. The EU has also given its support to EU member state navaloperations that are aimed at reaffirming the rule of law. For instance, in June 2018 there was anofficial from COASI— the EU Council’sWorking Group on the Asia-Pacific— on board one of theFrenchvesselsthatjoinedtheUSandothercountriessailingthroughinternationalwatersintheSouthChinaSea.TheEUmustcontinuetoengageChinaonfindingamultilateralsolutionfortheSouthChinaSea,includingsupportforanASEAN–Chinacodeofconduct,whileretainingalevelofcriticalpressureon Beijing through support for EU member states — in particular French — naval activities ininternationalwatersintheSouthChinaSea.

Insomepartsoftheworld,Chinaisasourceoftension.ButBeijingcanalsobeanelementofsupportforregionalstabilityandinternationallaw,asinthecaseoftheMiddleEastandtheIrannucleardeal.



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MaximisingEU–ChinarelationsA progressive agenda should make the best use of EU–China relations to build a more balancedinternationalsystem,placinglimitsonthoseunilateralattitudesoftheUSthataredetrimentaltoEUinterestsandfundamentalvalues.Inthisrespect,thetwointerrelatedpolicyareastofocusonforthenextfiveyearsshouldbetheIrannucleardealandthereformoftheinternationalmonetarysystem.

TheIrannucleardeal

SavingtheIrannucleardeal–initsactualformorinanamendedversionfollowingthereturnoftheTrumpadministrationtothenegotiatingtable–isastrategicimperativeforEurope.TheEUinvestedconsiderablecapital insupportof thenegotiations for the JCPOA,whichwassigned in2015.Europeconsiders theaccordas thebestpossibleattempt tobringstability inanarea—theMiddleEast—where competing nationalisms can trigger an arms racewith significant destabilising effects for theregionaswellasfortheoldcontinent.

ThefutureoftheIrannucleardealremainsuncertainfollowingtheunilateralwithdrawaloftheUSanditsreimpositionofsanctionsonTehran—andonanycompaniesfromothercountriesthatdobusinessthere— inMay 2018. Trump walked out from the JCPOA accusing the previous administration ofBarackObama to have negotiated a ‘bad deal’. The Europeans acknowledge that the Iran’s nucleardealisnotperfectandthattheIslamicRepublicofIrancontinuestosupporttheSyrianregimeaswellas other forces that destabilise the region. However, for Europe the JCPOA - a multilateral accordincorporatedinaresolutionoftheUNSecurityCouncil–remainsthebestdiplomaticattempt,sofar,toadvancethenon-proliferationregimeintheMiddleEastandcontributetobringstabilityinaregionmarredbyconflictsandcompetingnationalisms.

EuropeisnowworkingonaseriesofmeasuresaimedatshieldingEUcompaniesinvolvedinIranfromthethreatofsecondaryUSsanctions.TheEUiscommittedtoengagingIranandtheothersignatoriestotheJCPOA—France,Germany,theUKplusRussiaandChina—tosalvagetheagreement.TehranhasagreedtoconsiderremainingintheagreementiftheothersignatoriesoffsetthebenefitslostduetoUSwithdrawal.Shouldthedealfallthrough,thereistheconcretepossibilitythatIranwouldresumedevelopingitsnuclearprogramme,withtheriskoftemptingothercountriesintheareatoemulateit.

The three European signatories to the deal— France, the United Kingdom, and Germany— haveformallyregisteredaspecialpurposevehicletohelpfacilitatetradewithIranandthussavetheJCPOA.This new mechanism is called the Instrument in Support of Trade Exchanges (INSTEX) and beganoperations in Spring 2019.However, trade is limited to humanitarian goods, and the effects on theIranian economy have so far been quite limited. At the end of August 2019, France proposedestablishing an international credit line worth US$15 billion— guaranteed by Iranian oil sales andbackedbyFrance,GermanyandtheUK—inabidtoreducetensionbetweenIranandtheWestandtosave the JCPOA.Thismaynotsuffice,however,as thecredit linemayencounteropposition fromWashington,whichmaintainsa‘maximumpressure’policytowardsTehran.

Saving the Iran nuclear deal is also a strategic imperative for China. Beijing is today Iran’s mostimportanttradingpartnerandthemainbuyerofIranianoil.Moreover,Iranisacrucialcountryforthedevelopment of China’s BRI in Central Asia. China is the only signatory to the JCPOAwhich has theeconomicandpoliticalclouttoeffectivelyhelptheEUbypassUSsanctionsandthussavethedeal.



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TheUSadministrationofDonaldTrumpwasabletoreimposesanctionsagainstTehran—andthusputat risk the JCPOA—becauseWashingtonhas thepower to cutoff foreign companies’ access toUScapital markets and dollar transactions. This demonstrates how the US dollar — as a currency,together with the infrastructure of the global payments system— can be weaponised. It is in thiscontext that EU–China collaboration on saving the Iran nuclear deal must go hand in hand with areformoftheinternationalmonetarysystemthatwouldputlimitsonthedollar’sexorbitantprivilege.

Reformoftheinternationalmonetarysystem

Thedollarhasbeentheworld’sreservecurrencysincetheendoftheSecondWorldWar.Thereservestatusofthedollarmeansthattheworldneedsgreenbacksformakingpayments,andthishasallowedtheUS government aswell as Americans to borrow at lower costs. This has alsomade possibleUSarbitraryimpositionofsanctionsandtheweaponisationofthedollar.

Since 2010, following the crisis triggered by US sub-prime mortgages, there have been variousattemptsatreformingtheinternationalmonetarysystemandcreateanindependentglobalcurrency,includinginitiativesbysomecountriestopromotetheirowncurrenciesasanalternativetothedollar.

TheEUhassteppedupeffortstodeveloptheglobalroleoftheEuropeancommoncurrency,reflectingtheeuroarea’seconomicandfinancialweight.InitsCommunication:Towardsastrongerinternationalroleoftheeuro,theEuropeanCommissionstatesthatstrengtheningtheinternationalroleoftheeurowould‘providemarketoperatorsacrosstheglobewithadditionalchoiceandmakingtheinternationaleconomy less vulnerable to shocks – and political decisions - linked to the strong reliance ofmanysectorsonasinglecurrency’(EuropeanCommission,2018,p.5).AsimilardiscourseisputforwardbyChinainrelationtoitscurrency,therenminbi.

ChinaandtheEUhavedevelopedstrongtiesinthemonetaryfield.Beijinghastraditionallysupportedtheeuro,which is theonly seriousalternative to thedollar,andhasdiversified its foreignexchangereserves—theworld’slargest—sothatitnowholdsoverone-thirdineurosandslightlymorethanhalf in dollars. This dollar reserve has decreased by around 30 % since 1999, when the Europeancommoncurrencycameintocirculation.

China’s diversification of its foreign reserves has accelerated since August 2011, when Standard &Poor’s downgraded the credit rating of the US federal government from AAA (outstanding) to AA+(excellent). Sino-European financial andmonetary links deepened as a result, because China begandivestingawayfromdollar-denominatedassetsandpurchasedgrowingquantitiesofeurozonebonds,inparticularGermanBunds,whichwereperceivedtobesaferthanUSTreasuries.

China is trying to internationalise its currency as it weans itself off its dependency on the UnitedStates’ economic cycle and monetary policy. The fact that China supports the European commoncurrencyattheexpenseofthedollarthushasmajorgeostrategicimplications.

Chinahastraditionallybackedtheeurozoneforreasonsofnational interest.Bykeepingthevalueofthe currency of its first trade destination up, Beijing has benefited from the competitiveness of itsproductsandfurtheraugmentedtheEU’stradedeficitwithChina.Chinesesupportfortheeurozonewasparticularly importantduring theeuro crisisof2009–11,when theEuropeancommoncurrencybecame the targetof speculativeattacksmainly stemming fromWall Street-basedbanksandhedgefunds.Chineseleadersintervenedonvariousoccasionsatthattimetoreassurethefinancialmarketsbybuyingeurozonebonds.



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Europe has, in turn, supported many of China’s monetary ambitions. The Europeans unanimouslybackedthedecisionbytheInternationalMonetaryFundinDecember2015toincludetherenminbiinthebasketofcurrenciesmakinguptheSpecialDrawingRight(SDR),aninternationalreservecurrencythatincludestheUSdollar,theeuro,theBritishpound,andtheJapaneseyen.Thedecisionwasclearlypolitical,takenindefianceofWashingtonwhichhadvotedagainsttheinclusionoftherenminbiintheSDR basket. The decision of the Europeans to back China’smonetary aspirationswas also taken inrecognitionofwhatBeijinghaddonetosupporttheeuroduringtheeurocrisis.Today,EuropeishometothelargestnumberofrenminbibankclearingsoroffshorehubswheretheChinesecurrencycanbetraded.Inthesamevein,mostofEurope’scentralbankshaveaccepted—orareconsideringaccepting—China’scurrencyasaviablereserve.

Buildinguponwell-establishedEurope–Chinamonetaryties,theEUshouldfurtherworkonthereformoftheinternationalmonetarysystemandplacelimitsonthedollar’sexorbitantprivilege.

5.POLICYRECOMMENDATIONS

Forthenextfiveyears,theEUshouldfocusonthefollowingissues:

(i) Trade,investmentandtechnology,aswellasdemocracyandhumanrights—DEFEND(ii) Global issues, including climate change, reform of the multilateral trading system and

internationalsecurityissues—ENGAGE(iii) Irannucleardealandreformoftheinternationalmonetarysystem—MAXIMISE.

DEFENDEuropemuststandupforitsfundamentalvaluesbyensuringthatitsengagementwithChinaremainsprincipled.InthefaceofunfaircompetitionfromChina,Europeneedstoactbyenforcingpolicies—including the creation of European industrial champions — that would allow the old continent todefend its jobs, competitiveness, technological sovereignty andway of life. The new EU leadershipshouldalso findwaystomitigatethemostadverseeffectsofgrowingUS–ChinarivalryonEuropeaninterestsandthebroaderinternationalrules-basedorder.TheEUshouldthusdothefollowing:

• Defend EU fundamental values and principles by adopting majority voting, and resistattempts by China to undermine EU unity. Adopting Qualified Majority Voting on issuespertaining to human rights and international law would contribute to defending thoseprinciplesonwhichtheEUhasbeenfounded.

• Defend Europe’s jobs and industrial competitiveness by combating aggressive ChinesecompetitionwithnewinterventionismattheEUlevel.AprogressiveEUChinapolicyshouldseriously consider the idea of creating European champions able to compete on an equalfootingwith China’s giant state-backed companies. This is essential for defending industrialjobsthatcouldotherwisebeatriskfromChina’sunfaircompetition.

• DefendEurope’stechnologicalsovereigntybyfullyendorsinglegislationaimedatdissuadingChinese companies from the acquisitionof strategic assets in Europe. The adoption of thescreeningmechanism is awelcomeaddition to the instruments at thedisposalof theEU toprotect its industrial assets and limit China’s attempts – todaymade through the BRI— to



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acquireEuropeantechnologyandknow-howandsubsequentlyimposeChinesestandards.Thisisparticularlyimportantinlightofthedevelopmentof5Gtechnology–anareawhereChinesecompanies are world leaders. Close scrutiny of Chinese acquisitions should not be at theexpenseofgood,greenfieldinvestmentsthatcreatejobsandeconomicgrowth.

• Defend Europe’s well-being and the rules-based order from the US–China trade war byaligningtemporarily—anddependingontheissue—witheitheroneortheother.Bydoingso, the EU candefend its interests aswell as the norms andprinciples onwhich the liberalinternationalorder, includingthemultilateral tradingsystem, isbased. Inthisregard, theEUshould not support US attempts to thwart China, as this would put Europe in an openconfrontationwithBeijingandelicitabacklashthatwill likelybedetrimentaltoEUinterests.Instead, theEUshouldclearly indicate those issuesonwhich it agreeswith theUSon tradeandtechnology,seeking—whenpossible—tofindacommonpositionwithWashingtonbutwithoutdisruptingglobalnorms.

ENGAGEChina, whose values are often at loggerheads with those of Europe, can however be a formidablepartneroftheEUtoadvanceeffectivemultilateralismandaddressglobalchallenges,suchasclimatechangeandthereformofmultilateraltrading.

TheEUshouldthusENGAGEChinato:

• Fight climate changemoreeffectivelyandmeet the targetsof theParisAgreement.Whiledifferences remain between the two sides, the EU should seek China’s commitment for thecountry’semissionstopeakbefore2030,inlinewiththeParisAgreement.TheEUshouldalsofostercooperationongreenenergies.

• LimitUSattacksonthemultilateraltradingsystemandsustainliberaltrade.TheEUshouldengageBeijing in upholding the centrality of theWTOand the principles of themultilateraltrading system, including the reform of the Appellate Body, which is central for the verysurvivaloftheWTO’sdisputesettlementmechanism.

• Fosterinternationalsecurityandpromotetheruleoflaw.TheEUshoulddothefollowing:(i)Broaden and deepen security cooperation with China and consider involving Beijing intargetedjointmilitaryactivities,suchascounterpiracydrillsandhumanitarianrescueexercisesand operations; (ii) Step up collaborationwith China on finding a solution to North Korea’snuclearthreatandinsupportoftheprocessofTrilateralCooperationamongNorth-EastAsiancountries;(iii)EngageBeijingindevelopingamultilateralsolutionforterritorialandmaritimedisputes in the South China Sea — but also enforce a rules-based order in the region bysupporting those EUmember states that arewilling to sail naval vessels in the South ChinaSea’s international waters. The EU should givemore consideration to the region’s strategicbalance,coordinatingcloselywiththosememberstatesthatsellarmsinthearea.



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MAXIMISEA progressive agenda should make the best use of EU–China relations to build a more balancedinternationalsystem,placinglimitsonthoseunilateralattitudesoftheUSthataredetrimentaltoEUinterestsandfundamentalvalues.

TheEUshouldthusMAXIMISErelationswithChinato:

• SavetheIrannucleardeal.KeepingtheIrandealaliveisastrategicimperativeforEuropeandChina.BrusselsandBeijingshouldfurthertheircollaborationonthisissue,usingthefullarrayof their bilateral partnership to keep the Iranian economy afloat and save the JCPOA.Initiatives could include using the euro and the renminbi for transactionswith Iran, invitingChina to become part of INSTEX, and having Chinese cargo ships transport Iranian oil toEurope.

• Reform the international monetary system and put limits on the dollar’s exorbitantprivilege.BuildingonEU–ChinamonetarytiesandtheirpastcollaborationwithintheIMF,thetwosidesshouldworktowardsthecreationofamorebalancedmonetarysystem.

6.CONCLUSION

This study has sought to answer the questions set out at the beginning: Should the EU enforce acontainmentpolicytowardsChina,joiningWashington,whichhasunleashedatradeandtechnologicalwaragainstBeijingwiththeaimofpermanentlysubordinatingtheAsiangianttotheWest?Orshouldthe EU not only engagewith China, but even seek tomaximise Sino-European ties to put limits onthoseUSunilateralpoliciesthataredetrimentaltoEurope’sinterestsandfundamentalvalues?

The progressive approach presented here and built around three key words — Defend, Engage,Maximise—providesananswer intheformofapolicymixofcontainmentandengagementwhich,whenappliedtoaselectlistofissuesofstrategicsignificanceforEU–Chinarelations,shouldguideEUpolicymakersinachievingthreeoverarchingobjectives:(i)PromoteastrongandunitedEU;(ii)ProtectEurope’ssocio-economicwell-beingandwayoflife;(iii)AdvanceEUfundamentalvaluesandprinciplesandfosteraninternationalorderbasedoneffectivemultilateralismandtheruleoflaw.

Thisprogressiveframeworkbuildsonthetransatlanticallies’commonalitiesvis-à-visBeijing,includingtheircommitmenttopromotinganopensocietybasedonmarketeconomyandtherespectofhumanrights,fundamentalfreedoms,goodgovernance,andtheruleoflawinChina.However,aprogressiveagenda for EU-China relations recognise that EU interests and fundamental values are now underattack not only by an authoritarian Communist China, but also by the America First policies of USPresidentDonaldTrump.

Toachievemaximumresults in itsapproachtowardsChina,thisstudy invitestheEUtofocusonthefollowingselectlistofissuesforthenextfiveyears:

(i) Trade,investmentandtechnology,aswellasdemocracyandhumanrights—DEFEND(ii) Global issues, including climate change, reform of the multilateral trading system and

internationalsecurityissues—ENGAGE(iii) Irannucleardealandreformoftheinternationalmonetarysystem—MAXIMISE.



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AprogressiveagendaforEU–Chinarelationswouldthusunfoldalongthefollowinglines:

DEFEND: European workers and companies from China’s unfair trade and competition practices;supportanewversionofstateinterventionismatEUleveltocounterChina’sstate-backedcompanies;protecttheEU’sfundamentalvaluesandprinciplesfromtheChineseauthoritarianpoliticalsystem.

ENGAGEChinatopromotemultilateralismandinternationalinstitutions,focusingonaselectnumberofpolicyareaswhereBrusselsandBeijingworkingtogethercouldmakeadifference.

MAXIMISEEU–Chinarelationstobuildamorebalanced internationalsystem,placing limitsonthoseunilateralattitudesoftheUSwhicharedetrimentaltoEUinterestsandfundamentalvalues.

The progressive framework presented here allows EU policymakers to identify and distinguishbetween those issues where China is a challenge— and thus needs to be contained— and thosepolicy areas where Beijing can become a partner— and even a temporary ally — to advance EUinterestsandfundamentalvalues.

Hopefully, this exercisewill help clarifying how different political sensitivities can approach the EU-Chinarelationship. It is time, indeed, forpolitical forces inEuropetostep inandhavetheirsayonatopicofincreasingimportanceforthefutureoftheEU.



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ABOUTTHEAUTHOR

NicolaCasarini,SeniorFellow,IstitutoAffariInternazionali,Rome

NicolaCasarini is Senior Fellowat the IstitutoAffari Internazionali (IAI) inRome. Prior tothis,hewasVisitingProfessorattheGraduateInstituteinGeneva;PublicPolicyScholarattheWilsonCenter,WashingtonDC;SeniorAnalystattheEUInstituteforSecurityStudiesinParis; Marie Curie Research Fellow and JeanMonnet Fellow at the European UniversityInstitute inFlorence.HeholdsaPhD in internationalrelationsfromtheLondonSchoolofEconomicsandPoliticalScience.Dr.CasarinihaspublishednumerousworksonEU–Chinarelations,Chineseforeignpolicy,Asia’ssecurity,andtransatlanticrelations.HehasadvisedEU institutions and various European governments. Dr. Casarini is a regular mediacontributor.

Defend, Engage, Maximise - feps-europe.eu

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