Geared to go

Left: Chi Fulin, president of the China Institute for Reform and Development. Right: Hans-Josef Fell, member of the German parliament. Photos Provided to China Daily

China and Europe will take significant steps to bolster bilateral ties during Premier Li Keqiang's visit

China's commitment to peaceful global development will be the main focus of talks Premier Li Keqiang will have with European leaders during his first trip to the continent since taking office.

Though bilateral relations between China and the European Union have more or less been on a strong footing, trade disputes have recently marred prospects for smooth relations. Though Brussels' latest salvo of planned punitive action against Chinese solar panel exporters does pose short-term problems, observers suggest Li may choose to focus more on the biggest picture of strengthening bilateral ties.

During his four-day visit to Switzerland and Germany, he is likely to use "clear language" to promote smooth trade flows and prevent escalation of trade disputes between China and the EU, they say.

"It is an important visit and I am confident that Li will unveil several visionary messages to show the strong inter-dependency between the two sides and China's willingness to maintain policy consistence in Europe," says Chi Fulin, a political adviser and president of the China Institute for Reform and Development.

"Of course, he will also warn the Europeans subtly that trade wars do not benefit anyone," Chi says. "His message would also be to forge good examples of harmonious China-EU ties."

Hans-Josef Fell, a member of the German parliament, welcomes Li's visit to his country and feels that the European Commission's recent decision to levy 47 percent punitive provisional tariffs against China's photovoltaic products, worth $20 billion annually, was inappropriate.

"Brussels' decision does not have the backing of any German political party. I expect Li to reiterate his commitment to support fair and free trade and also China's desire to fight protectionism," Fell says, adding that Li's message may extend beyond trade issues.

Official sources in Beijing have labeled Li's four-nation tour as an important diplomatic initiative of the new leadership following Chinese President Xi Jinping's visit to Russia and Africa in March. Li's visit to Switzerland and Germany follows visits to India and Pakistan, two crucial neighbors of China.

During Li's visit, China is also expected to conclude a free trade agreement with Switzerland, a non-European Union bloc country, after nine rounds of tough negotiations. In Germany, China is expected to sign several multi-billion-dollar agreements, look to strengthen bilateral relations across all fronts and build closer bonds with top German politicians including Chancellor Angela Merkel.

FTA prospects

Li's visit assumes significance as Switzerland, after Iceland, is expected to become the second European country to sign a free trade agreement with China.

Though final negotiations are still under way even after nine rounds of talks at the time of going to press, observers indicate that "both sides are fighting hard to gain more last-minute benefits from the negotiations". Indicating that such scrambling is normal in FTA talks, the sources indicated that there are no major hurdles for a deal.

Zhang Haiyan, professor of trade and investment at the Antwerp Management School in Belgium, says that China's FTA with Switzerland is of great importance. "This is because of the bigger trade volume between China and Switzerland, compared with that of Iceland," Zhang says.

Iceland, the first developed European country to recognize China as a full market economy as well as the first European country to negotiate a free trade agreement with it, signed its deal with China during Prime Minister Johanna Sigurdardottir's visit to Beijing last month.

According to official statistics, China-Iceland bilateral trade was worth $180 million last year, up 21 percent year-on-year. China's exports to Iceland amounted to $95.39 million, up 24.6 percent, while imports from Iceland stood at $88.96 million, up 17.7 percent.

However, trade between China and Switzerland had already surpassed $30 billion in 2011. The main aim of the FTA with Switzerland is to promote trade and investment between both countries by eliminating or reducing tariffs on most goods, removing non-tariff barriers, improving market access for goods and services, and intensifying economic cooperation.

However, food and agriculture continue to be thorny issues, as Switzerland wants to increase exports to China. Zhang says that the FTA between China and Switzerland will be the cornerstone for more FTAs with other European nations.

Pierre Defraigne, executive director of the Brussels-based Madariaga-College of Europe Foundation, says Switzerland is an interesting country for China as it is strong in high-tech and sophisticated financial services, has a strong interest in multilateralism and has a grass-roots democratic tradition.

"An FTA with Switzerland which might make sense as a bilateral deal, would, however, not provide Beijing with enough insurance to make inroads into the broader EU market," Defraigne says.

Unlike the talks with Iceland, China's FTA talks with Switzerland started more than a year ago and have been progressing steadily. In an earlier interview, Swiss President Ueli Maurer had indicated that the FTA would give a new and added boost to the already well-developed economic relationship between the two sides.

Glyn Ford, former member of the European Parliament, says the FTA with Switzerland is important for China, as it would be the "pilot" for other such agreements in Europe. "Though this may set an important precedent, it could well see some resistance from within the EU," Ford says.

Beijing has already sent feelers to Brussels on doing a feasibility study for a free trade agreement, but Brussels seems to be more keen on investment pact negotiations, experts say.

"On the free trade agreement, I was told that Brussels is closely watching for possible negotiations between Beijing and Washington," Zhang says. "Brussels wants to learn more from the negotiations between the world's biggest economies before pressing ahead."

However, with no clear indications of either Washington or Beijing making progress on the issue, Brussels and Washington are looking to launch the Transatlantic Trade and Investment Partnership (TTIP) negotiations quickly.

"There is no doubt that China like many other Asia countries is concerned about the TTIP and its impact on global trade relations," says Shada Islam, the Asia head of Friends of Europe, a Brussels-based think tank.

Islam says that though European business leaders are pushing for a EU-China FTA, there seems to be no appetite for this in Brussels among trade officials. "There is a feeling that as a first step, the EU and China should negotiate and sign the Bilateral Investment Treaty and then see if an FTA is worth pursuing," Islam says.

However, Defraigne says that he feels uncomfortable with the very idea of the TTIP for three reasons. First of all, two big players setting up between themselves a joint "internal market" undermines the very purpose of the World Trade Organization. Second, the TTIP will not deliver the expected growth, but will instead harm Europe's interests and societal values. Finally, the TTIP can also be misinterpreted as a coalition of two relatively declining blocs trying to constrain China's peaceful rise as a global player.

Germany

Despite the growing trade ties between China and Germany, both sides need to take more concerted steps to increase their commercial engagement, especially exports, Chi, of the China Institute for Reform and Development, says.

"I think at a bilateral level, China and Germany should start strategic research on how to further boost trade relations and avoid disputes," says Chi, whose institute works with Germany on policy research.

The German parliamentarian Fell, while admitting that Chi's proposal is good, says both sides should strive for smooth trade relations. At the same time, the two countries should not also push for an FTA for now, as Germany is strongly pushing for a global multilateral and global trade regime.

"There is no doubt that Germany is an important economic partner for China and that Premier Li wants to keep the relationship on an even keel, especially after the recent successful visit to China by French President Francois Hollande," Islam says.

"Germany will be flattered that it is among the first European countries that Li chose to visit."

This, Islam says also indicates that China will continue to pursue relations with EU member states at a high level.

Alice Ekman, a researcher at the French Institute of International Relations, says Hollande's visit was important as it provided him an opportunity to build a personal relationship with top Chinese leaders.

Jean-Marie Le Guen, a member of the foreign affairs committee of the French National Assembly, says France is undoubtedly a key partner for China within the EU and strengthening ties with China looks more a move to facilitate market access for EU companies within China.

Ford, the former member of the European Parliament, says Germany is the single most important member state of the EU both in terms of size and political influence and both countries have been keen on keeping the relationship on the right track.

Sources in Berlin indicate that Chancellor Merkel has taken a personal interest in finalizing the detailed agenda for talks with the Chinese leader.

Indications are that she will receive Premier Li at the Meseberg Palace, north of Berlin, as part of her efforts to boost bilateral ties and maintain good ties with China. Merkel had met former premier Wen Jiabao at the same venue in 2010. Such courtesies on the part of the German chancellor are supposed to be a rare honor and something that is rarely extended to other European or global leaders.

Experts say Li would urge Merkel and her colleagues to match rhetoric with action and refrain from political actions like punitive tariffs.

"Germany is also the member state that could do the most to head off a potential trade war triggered by the European Commission's recent actions of imposing penalties on Chinese solar panels," Ford says.

Defraigne says Germany is not only an important bilateral partner for China but also the anchor country of the eurozone. "Germany needs to be reminded by its prominent friends such as China that it must do whatever it is to keep the eurozone united and to boost economic growth in Europe."

Broader agenda

Beyond trade issues and bilateral ties, Islam says Li will probably be asked by his European interlocutors to enlighten them more on how his government is going to realize the so-called Chinese dream.

Islam also says that European experts would also be keen to understand how the new leadership in China pursues its plan of improving its people's lives and how it would tackle important challenges such as pollution, food safety and corruption.

Li will also face questions on how China plans to press ahead with its ties with Japan and other ASEAN countries in light of the recent territorial disputes. He is also likely to be pressed on China's stance regarding nations such as Syria, Iran and Democratic People's Republic of Korea.

"Above all, the EU would also want to know whether it will continue to remain an important trade partner for China in the coming decade," Islam says.

Jiang Shixue, deputy director of the European Studies Institute at the Chinese Academy of Social Sciences, says the new leadership attaches great importance to Europe based on the tremendous progress achieved in previous years.

Trade disputes with Brussels will pose problems for smooth bilateral ties, he says. "There is no doubt that bilateral trade will continue to grow between the two sides as the two depend on each other heavily."

Jiang says that Li, like his predecessor Wen, will strongly express China's concerns such as market economy status, arms embargo and trade disputes during his talks with European leaders.

Islam says that trade squabbles should not be allowed to cloud the prospects for smoother trade ties. Though trade problems will always exist, trade is just one aspect of the multi-faceted EU-China relationship, she says. "Both sides have much to talk about, especially on global and regional challenges as well as quality-of-life issues. Trade disputes should not distract the strength and diversity of the overall relationship."

Defraigne says the relationship between the two sides is wobbling because of the weakening of the EU in terms of governance and growth. He adds that the commercial and strategic rivalry among the big three - France, Britain and Germany - eventually undermines the EU's external capacity especially relating to China, which is not in China's long term interest.

The most serious threat against the unity of the eurozone comes from the surreptitious rise in structural unemployment, which is causing growing anxiety among the labor and middle class, he says. Social instability can fuel political tensions and raise social demands for protection against foreign competitors both from within and from outside EU.

"China is especially targeted as the main manufacturing competitor and also as a serious threat for European industrial jobs."

Defraigne feels that Li should stress political unity of Europe and encourage cross-investments, as it would provide the best anti-protectionism buffer.

Though the current status quo of EU-China relations is not too good and worsening, Ford says, Brussels' plan to levy tariffs on Chinese solar panels may queer the pitch further.

Ford says China and Brussels need to work out a coordinated strategy over the coming months and years to change perceptions and rebut inaccurate portrayals of China.

Oliver Brauner, a researcher at the China and International Peace and Security Project of the Stockholm International Peace Research Institute, says former premier Wen had attached great importance to strengthening China-EU ties. With the leadership change there are some concerns on the European side that the new leadership will focus less on the EU and more on the US.

"I think that most people in Europe would like to see some sort of a statement by Li that would underline the continued Chinese commitment to a strong and truly strategic partnership between China and the EU," Brauner says.

Commenting on the current problems between China and Europe, Men Jing, a professor at the College of Europe in Brugge, Belgium, says it is normal to see ups and downs in bilateral relations.

It is important to have a clear vision from both sides, she says.

"This is Li's first visit as premier to Europe and I hope he can really do something to map out the future course of bilateral engagements. I want to see an encouraging start."

Men says that this year marks the 10th anniversary of the EU-China Strategic Partnership and she wants policymakers from both sides to use the opportunity to further boost relations when the leaders meet in Beijing at the end of the year.

Islam agrees. "I think Li should not dwell on long-standing irritants for too long - these questions are unlikely to be solved in the short/medium term and instead of looking at the past, the EU and China should look ahead to the future."

Rana Mitter, professor of history and politics of modern China at the University of Oxford, says Li will need to understand that China has a new role in global affairs, and that includes relations with the EU. The two sides will agree on many issues and disagree on others.

"It is necessary to understand that principled disagreement is a healthy part of a relationship, and it is not possible only to work with partners who agree with you on all points."

Zhang Chunyan in London and Li Xiang in Paris contributed to this story.

fujing@chinadaily.com.cn

(China Daily 05/24/2013 page1)