Lord Teverson
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Lord Teverson
To move that this House takes note of the Report of the European Union Committee on Stars and Dragons: The EU and China (7th Report, Session 2009-10, HL Paper 76).
Lord Teverson
My Lords, at the moment we in the western world are inward-looking. What we see as a global financial and economic crisis makes us in the western economies and societies look inwards more than we have done for many years, and we have not been paying as much as attention as we did a few years ago to the rise of many other economies around the world, particularly China. Yet the Chinese economy has been growing at some 10 per cent per annum and has become effectively the third largest economy in the world behind the European single market and the United States. It still has a very large trading surplus with the western world, including the European Union, and it is continuing to spread its influence, investment and tentacles across the developing world. It is a country, an economy and a trading nation that we cannot afford to ignore, let alone forget about. We need to keep the focus on it.
For this report, we intended to look at the broad relationship between Europe and China and ask ourselves what the nature of that relationship should be, what it should include, and in which areas the European Union should take action to make sure that the relationship is more effective. For the benefit of the House, I shall give a little of the history of the relationship between the European Union and China. It is perhaps staggering that the current formal legal relationship, in the form of a trading and co-operation agreement, was made between the EU and China in 1985. Although it is 25 years old, it is still valid and is the basis on which EU-China relations formally work. Since then we have seen the introduction of annual summits and, more recently, regular high-level dialogues between Ministers and their equivalents on both sides. Indeed, in 2007 it was agreed that there should be a new partnership and co-operation agreement that would cover a far broader range of subjects than just that of trade as covered in the original agreement. The negotiations towards it continue, but three years later, the agreement is yet to be fulfilled.
The headline from the report and the view of the sub-committee is that, given the important nature of the two entities—one a sovereign state and the other a collection of member states—the agreement needs to be of a much more strategic nature than at the moment. Europe comprises some half a billion people, while China has 1.3 billion. Along with the United States, between us we account for over 50 per cent of global greenhouse gas emissions, and we are major players not just in the world economy but in how the world will work in the future. We believe, therefore, that we should have a much better and more strategic relationship with China.
One of the themes that came up repeatedly throughout our studies was the concern whether Europe had already lost the game and was being left out in terms of future global relations, so that we would have a G2—the two being, of course, China and the United States. We considered this many times, but the committee felt that that was not the case at this point, that it certainly should not be the case, and that the G20 model, in which China participates strongly, would provide a much better role in terms of future inter-governmental co-operation at the global level. The G8 is clearly moving on; it is important to include the developing nations within that, and China could play a strong role. At the moment our relationship with China is not a strategic one. It was described by one of our witnesses—and agreed by the committee—as more representative of a collaborative relationship.
Looking back on the history of EU-China relations, up until 2003 China saw Europe as an important player on the world stage generally. It saw it as a balance to the power of the United States—in an economic if not a military or security sense—and it took great time to understand Europe and invest in the relationship. In 2003, a small incident changed the nature of the relationship. This was when a number of major member states within Europe started to make it clear to China that the EU arms embargo should be removed. That expectation moved to the brink and, although it may not have made a great difference to the way in which the arms trade worked, it was an important policy decision. However, because of the intervention of the United States, negotiations stopped and the arms embargo remained. It was felt by a number of witnesses that at that point China no longer saw the EU as having a pivotal role in its relationships, particularly with the United States, and that, in many ways, it was a partner to the United States in a different way to China. We still have to recover from that situation.
Indeed, one of the lessons that we learned from that episode is that the EU must never again put itself into a position where it is directly in conflict with the United States in its relationship with China—and certainly not into a position where it changes its own policies. There needs to be much greater consultation and co-operation in that area.
It came through from a number of witnesses that the EU, a major economy—among the world’s largest—and a large market for China, failed generally to put leverage on to China in regard to certain decisions. To say that the EU rolled over on every occasion is clearly not the case, but we felt that, given our strong trading position, our market and our position in the world, the EU failed to use its natural power to sufficiently influence Chinese policies in areas such as human rights, trade negotiations, intellectual property and access to markets.
An example of when the EU did not help itself was described by a number of our witnesses. This was when the Heads of Government of three major member states—the United Kingdom, France and Germany—entered into a dialogue with the Dalai Lama. China took diplomatic action and, at the same time, other member states tried to take advantage of the situation. We showed no solidarity whatever and the rug was taken from under the feet of the European Union as a whole—this happened during the French presidency under President Sarkozy—when the Chinese cancelled a summit that was due to take place between the EU and China. The committee asked itself whether China would ever have done what it did to the European Union if the United States had been its strategic partner. There is a great need to show strength of unity and to use leverage wherever possible.
The sub-committee also felt that there was a mismatch of understanding within the relationship. The Chinese embassy in Brussels has some 70 or 80 staff and it sends a large number of students to European and other western countries to understand their culture and the way in which they work. There is much greater understanding of the English language in China than of the Chinese language in Europe. There needs to be much greater investment in our understanding of China.
A possible outcome of that lack of understanding is that we look upon China as a single entity. To a large degree, it is clear that it is. It is a centralised, unitary state, with one-party rule everywhere apart from in Hong Kong. However, we forget that there are 31 different provinces in China whose provincial Governments have many powers, even within international investment projects. There are also some 55 minority populations, of which the Han Chinese are by far the largest. The EU therefore needs to have a more complex view of China as a nation, particularly in its dealings on development issues.
The sub-committee was in China for one week. You cannot see a great deal of the country within that time, but we did visit one of the industrial areas in Guangzhou and the Pearl River Delta. Although this is a major industrial area, and although a very effective UK trade delegation is there, we were surprised to find that EU representation was concentrated within Beijing and that it did not have any trade delegations or staff in the provinces. A presence in the provinces is important not just for promoting trade, which is much more a national issue, but also for market access and for making sure that WTO rules are applied and that the writ of trading rules in Beijing is felt out in the provinces.
However, we were not as utterly pessimistic as I have sounded so far. We were encouraged that China is starting to take on a broader role as a world citizen. It is still finding its way in this area and we felt that it was in many ways hesitant to take on that broader responsibility, let alone a regional responsibility. Yet we were surprised, as might be many of your Lordships here, that China is the largest contributor of peacekeeping troops of the permanent five members of UN Security Council, P5. While it has participated independently in the Somali counterpiracy operation, its naval force has co-operated with the EU’s Operation Atalanta and the NATO force. We welcome this taking-on of responsibility, while understanding that there is nervousness among the western security community about what that might lead to in the future. We welcome China’s increased world citizenship.
It is clear that China’s main relationship with Europe is through trade. In 2008, there was a €170 billion deficit between the EU and China. Ironically, one of the outcomes of the recession is that the trade deficit has gone down, but we were reminded that an important aspect of the international recession is imbalances such as that in trade between China and the western economies. The undervaluation of the Chinese currency has enabled China to have very high savings at a time when the West has consumption and very much a trade deficit. So what we see there is a balance that has not changed but needs to change, for future economic stability. With the United States, Europe needs to ensure that there is a resolution of that problem over time before it again becomes a major problem to world trade.
Many noble Lords will be particularly concerned with the human rights issues. We were concerned that there was too much rhetoric and grandstanding and not enough effect in that area, and I know that a number of noble Lords will wish to talk about that. One area that we found very positive, which was never mentioned by the Commission in Brussels but which we saw on the ground, was a number of practical justice and rule-of-law policies, investments and developments that were EU-financed and that found success and were welcomed at a provincial level by provincial Chinese government. We felt that those should be particularly strongly invested in. As for the broader human rights issues, it was pointed out to us by China’s Government that, through their economic development, social rights have been improved as at no other time in history. Several tens of billions of Chinese citizens had been taken out of poverty by the current growth and regime within China. We do not dispute that—we welcome it. However, clearly it is not acceptable that that still comes at the level of restriction of human rights and democracy that that still represents.
On climate change, we saw the shift of power from west to east at Copenhagen. Although China signed up to reducing energy intensity at the Copenhagen accord, it was a great sign to us of Europe’s failure in that negotiation that it was hardly involved in the Copenhagen accord, while China chaired it and influenced how it worked. We are still in a position of having great challenges as we move towards the next meeting on climate change at the end of the year in Mexico.
I shall leave the description of our report at that. The clear message that came over to us was that in the 21st century, as China clearly improves its economic performance even more and its importance in the world increases, it was essential that the EU had a proper strategic relationship with China. Is the Lisbon treaty, which came into force while we were looking at this relationship, going to enable that? It could do—but we were far from convinced that it would. The summit that took place this May was positive, but I do not think that it moved that relationship forward very much. The challenge is with the European Union to use its power, influence and moral authority to create a strategic relationship that works for the rest of the global community. I beg to move.
Lord Teverson
My Lords, I thank the Minister for his response and also for his undertaking to come back to us with a full Government response. We have had a response already from the previous Government and I want to thank the now Opposition for their positive response to our report when they were in government.
I particularly thank non-Sub-Committee C members for contributing to the debate. Their contributions were as excellent as those from members. Two noble Lords talked about the importance of the parallel role of EU and member states. That is absolutely right but most importantly, both understand what each other’s roles are. They are consistent on that and it is not all about the way in which it is written in a legal treaty—Lisbon or whatever. It is around making that work in practice.
I take the point made by the noble Lord, Lord Faulkner of Worcester, about the death penalty in China. That should have been covered far more strongly. We did not cover Taiwan because this report was broad enough as it was, but the plain fact is that Europe has no effect on the strategic relationship and the risk of that conflict between Taiwan and China. That is an entirely Chinese-United States issue and, regret it or not, the EU has no leverage in any defence way over it.
I shall respond briefly to the noble Baroness, Lady Kinnock. I take her point about the European Parliament. I am not absolutely sure that we did not ask for help when we went to Brussels and asked for an interview. I may be incorrect. She is absolutely right about all these reports.
I was interested in the idea, which I take particularly from our history, that we might have a paternalistic attitude towards China. What concerned us most as a committee was the opposite of that—as if Europe in many ways has already said, “Game over. China is the future; Europe and the West is the past”. It was that fatalism about the future that concerned us. We wanted to see Europe as a major player in the future. Various development issues are important and in many ways we were positive about China’s future role there.
Finally, I join many fellow committee members in thanking our committee clerk, Kathryn Colvin, and Oliver Fox and Bina Sudra who gave us a huge amount of positive clerical and organisational assistance. In particular, I thank our special adviser, David Kerr, who gave us superb assistance during this assignment. I commend the Motion.