Troubled times call for firmer trade and military ties, experts says

The eurozone debt crisis is an opportunity for China to step up trade and military ties with the European Union, Chinese experts and scholars say.

Xia Youfu, an economics professor at the University of International Business and Economics in Beijing, believes that both sides must explore the possibility of a free trade agreement even though the EU still refuses to consider China a market economy.

Song Zhe, head of the Mission of China to the EU, reads Premier Wen Jiabao's message at the Brussels Sino-EU forum. Provided to China Daily

Meng Xianqing, deputy director of the Strategic Research Institute at the National Defense University of the People's Liberation Army, says that both sides should treat each other as strategic partners and explore opportunities for military, security and defense exchanges to shore up trust.

The experts made the remarks during a one-day forum in Brussels on Nov 29 organized by the think tank Friends of Europe and China Mission to EU.

"If we are friends and strategic partners, why not think about starting a free trade agreement between China and the EU?" Xia said during a panel discussion on opportunities for economic cooperation. Given China's huge market potential and a combined population of about 1.9 billion in China and the EU, Xia says it is time for both sides to consider the suggestion.

"At least we should start feasibility studies on the subject."

The EU and South Korea have already ratified a joint free trade agreement this year, while talks with ASEAN countries are under way.

In reality, Xia's comments underscore the one-sidedness of the EU vis--vis market economy status first. "The EU gives Russia and Ukraine such treatment, so why not China?" he asks.

The World Trade Organization will accept Russia's accession some time next month but China's application for market economy status in the EU has remained stuck for years. This year bilateral trade volumes are expected to surpass $500 billion (375 billion euros) while 36 years ago, when the bilateral ties were established, the volume was just $400 million, according to official statistics.

When China joined the WTO 10 years ago, it was agreed that the EU would grant Beijing market economy status by 2016. But in the last few years, Beijing has made tremendous efforts to improve rule of law, transparency, and business environment and has repeatedly asked Brussels to consider approval. But with no common voice emerging from the EU member states, the decision on market economy status has been delayed.

Wang Yiming, vice-president of the Academy of Macroeconomic Research under the National Development and Reform Commission, says that China's urbanization and industrialization process will offer a lot of opportunities to help EU get out of the woods by creating the jobs and boosting economic growth.

The growing consumption of the middle class in China, roughly 300 million, about the population of the US, will greatly increase imports from the EU if trade barriers are removed.

China has also been transforming its resources and moving from an investment-driven development model to a low-carbon and environmentally friendly path. This means advanced European technology has a huge market in China.

Domestic businesses have also expressed their intention to invest in Europe, and this will help invigorate the real economy and create new jobs.

"All of these are new opportunities but the EU should have the political will to remove obstacles and respect China as a strategic partner," Wang says. "For example, it should give China market economy status as soon as possible."

Joaquin Almunia, vice-president of the European Commission, believes that the signing of a free trade agreement between the EU and China is an important objective, but "we are not there yet". He admits that the major obstacle is still the hesitation from some member states about giving China market economy status.

Almunia says the EU and its member states need to move fast on this matter. "By 2016 means that we have very little time to lose. It is a very short deadline for China. We should try to solve the problem before 2016."

Even as the EU holds market economy status as a bargaining card and tries to politicize the issue, some Chinese experts feel that the EU should accord market economy status as soon as possible so that China appreciates the move.

Apart from business and trade relations, Meng of the National Defense University of the People's Liberation Army, says that the most sensitive part of Sino-EU relations is military issues, and boosting defense and security exchanges between the two sides is still a challenge.

"I think the EU should move faster in this regard to boost our mutual trust politically," Meng says, adding that the EU should remove its arms embargo against China.

"This does not necessarily mean that China will import advanced weapons and equipment from the EU. This is a political signal, instead," he says. "An embargo itself means mistrust and does not show any kind of strategic partnership."

Pang Zhongying, professor of new global governance at the Renmin University of China, says the world is facing such dilemmas with "more problems but fewer solutions" and the EU should also be aware of this.

Pang says that it is imperative to reform the current global governance regime, including the International Monetary Fund, the World Bank and the WTO.

"China and other emerging economies should have their due say in the new regime," he says.

Top voices

Leaders of China and the EU strengthened their commitments on Nov 29 to tackle the worsening global crisis jointly to realize mutual benefits.

Premier Wen Jiabao and European Council President Herman Van Rompuy sent the messages in their congratulatory letters to the Brussels Sino-EU Forum.

"The international situation is undergoing profound and complicated changes and the world is faced with many severe challenges," Wen said in the letter.

"As two key strategic forces in the world, China and the EU should continue to stand together in the face of difficulties, pursue mutually beneficial cooperation and expand the deepening cooperation so as to achieve common development," Wen said.

In reading Van Rompuy's message, his principal advisor Zoltan Martinusz said strengthening strategic partnership is the lasting personal commitments of the president, who visited China in May.

After finishing his summit with the US, Van Rompuy was supposed to visit Beijing in October to hold an annual summit with China. But it was canceled as the EU had to focus on solving the debt crisis, and Beijing and Brussels have not finalized an alternative date for the meeting which has been pushed back to the next year.

On China, Martinusz said: "The EU's strategic choice is not rivals or partners; the strategic choice is about what kind of partners we will be."

Martinusz said the two sides should be active but also realistic about the comprehensive partnership as it is not easy for the EU, with 27 members, to form common foreign policies toward China even if the EU has been working in that direction.

Hua Chunying, an official from China's Ministry of Foreign Affairs, said both sides must deepen the partnership with "confidence, tolerance and patience. With a population twice that of the EU, Hua said it is also not easy to make decisions towards China," Hua said.

Hua's comments came amid differing views in China about its deep involvement in helping the EU and its member countries tackle the debt crisis. Some feel that China is still a developing country and there is no need to help the EU, which is richer.