www.madariaga.org
China Needs a
Predictable and Reliable European Partner
Madariaga Speech – 20 March 2012
Pierre Defraigne
Executive Director, Madariaga – College of Europe Foundation Honorary Director-General, European Commission
The relationship between China and the EU is vital for the stability of the Eurasian continent and therefore for the world at large. But the EU has become the land of self-questioning and irresolution. We are so imbued with incrementalism, which is our second nature, that we are unable to envisage proceeding through great strides forward and leapfrogging. And yet the moment of truth has come. Once we are tired of calming down the changing mood of the financial markets, we might just move into "a federation within the Union" which Valery
Giscard d'Estaing saw as the most promising and least risky course for Europe.
China's Central Bank Governor, Zhou Xiaochuan, recently remarked that the EU is today the largest source of uncertainty for the international markets. I cannot think of another answer to this remark other than that we should put an end to this uncertainty. I am confident that we will. What the EU needs most today is a unifying principle, a political one!
This speech was delivered by Pi erre Defraigne at a conference organised by the Madariaga – College of Europe Foundation and the EU-Asia Centre entitled "The EU and China: Next Steps" on 20 March 2012 in Brussels.
14, Avenue de la Joyeuse Entrée Tel: +32 2 209 62 10 B-1040, Brussels, Belgium E-mail: [email protected] It is a great honour and a privilege for all of us to welcome Ambassador Wu Hailong, a seasoned diplomat with a prestigious career, whose appointment in Brussels is evidence of the importance given by Beijing to the European Union. Dear Ambassador Wu Hailong, I am confident that your mission here will be a successful one. Allow me to share with you three reflections on the EU-China relationship.
The relationship between China and the EU is vital for the stability of the Eurasian continent and therefore for the world at large.
But our nascent partnership has to confront three serious challenges:
The first challenge is to buttress the basis of our economic relationship, which is also the lifeline of our partnership. Logically, the most effective way to strengthen our growing economic interdependence is to add cross FDI to trade flows so as to build up tens of thousands of bridges across the Eurasian continent. This would create in our respective countries a powerful pro-trade constituency. Cross investment should be the main target of our joint efforts. We should aim at the same degree of cross investment as that which exists today between the US and the EU. A myriad of micro-economic deals channelling flows of technology and know-how and allowing for cultural interaction would enhance the transformational power of our trade and economic relationship; contain protectionism and create a favourable context for keeping our trade disputes under control.
The second challenge is for Europe to understand and to accept as a fact the Chinese way. We readily acknowledge China's unique performance in fighting back poverty for a large proportion of its population. But we encounter a serious intellectual difficulty in accepting that in this formidable accomplishment, the Chinese Communist Party has been part of the solution and not part of the problem. Our ingrained and legitimate preference for democratic pluralism makes it hard to accept that China takes another route. But who has a better idea for overcoming China's impossible task of pulling 1.3 billion people out of poverty against the backlog of severe physical constraints and the forbidding financial, technological and institutional barriers to entry into the club of advanced countries? In order to revive its ancient glory in a challenging world, China had to pioneer its own development path. To achieve this, it needed to combine three specific governance features: first, developing a long-term vision to exploit to the full two main sources of growth: the incredible energy of the Chinese people and the advanced technology of Western market capitalism. Secondly, then creating an institutional and political capacity able to experiment, test and constantly adjust to changing economic realities through a continuous flow of economic and political reforms. China has had to maintain the unity of a large country subject to major economic, environmental and social shocks which must be absorbed and shared by all provinces and social and ethnic groups. Nobody has asked Europeans to condone the CCP's monopoly of power. But we should admit that in the case of China it works, and we should therefore leave the matter to the inner dynamics of Chinese society. Our dialogue over Human Rights must factor in this reality.
The third challenge is for both China and the EU to respond to the new international economic order instituted by the fast rise of China and the other BRICs. For China it means seeing through the very ambitious goals of the 12 th Five Year Plan, which would smooth out the most serious obstacles to a harmonious relationship with the rest of the world by refocusing growth on domestic consumption and by tackling the very serious local and global environmental problems of China. The change in leadership should ensure that the dynamics of economic and political liberalisation will go on and that Xi Jingping and Li Keqiang will pursue and deepen the reforms carried out under Chairman Hu Jintao and Prime Minister Wen Jiabao .
1 | Madariaga Speech – China Needs a Predictable and Reliable European Partner, (Mar., 2012)
With regard to the EU, I am afraid the reform agenda is this time far more challenging. The EU is indeed confronted with a twin crisis of unprecedented nature and magnitude:
First, our economic system has been put on standby mode because of the financial crisis, which has left Europe with a daunting public and private debt overhang. As long as we do not improve the debt/GDP ratio, there will not be any return to significant growth rates in Europe. Yet in order to tackle the debt overhang we must first retake control of it at the eurozone level. The real challenge behind the prospect of a "lost decade" for growth is unemployment, which is undermining our Welfare State and is giving birth to a new a precarious class within our middle class, the so-called new working class "precariat". As Mario Draghi put it in a recent interview with The Wall Street Journal : With youth unemployment in countries such as Spain topping 50%, the Welfare State is gone. But if the Welfare State crumbles in Europe, protectionism both within the EU and vis-à-vis the rest of the world will be soon around the corner. A serious challenge for our partnership!
Second, the difficulty in tackling the economic crisis is that it has a prerequisite: we have indeed first to solve a major political crisis which goes far beyond the problem of governance mechanics within the eurozone. The real issue is that our model of integration through economic liberalisation and national legislations is exhausted. It is obsolete. Period. We must change gears and either disband or take the political route which unavoidably means more federalism. This implies necessarily a two- speed Europe. We do not like it. We resist it. But we do not know what we really want: neither on our Eastern borders, nor on a common social model, nor on the degree of autonomy of our foreign and defence policies. Beyond democracy and the Single Market, we share no sense of purpose, no sense of commonality of destiny. We do not know and our leaders do not know either.
The EU has become the land of self-questioning and irresolution. We are so imbued with incrementalism, which is our second nature, that we are unable to envisage proceeding through great strides forward and leapfrogging. And yet the moment of truth has come. Once we are tired of calming down the changing mood of the financial markets, we might just move into "a federation within the Union" which Valery Giscard d'Estaing saw as the most promising and least risky course for Europe.
China's Central Bank Governor, Zhou Xiaochuan, recently remarked that the EU is today the largest source of uncertainty for the international markets. I cannot think of another answer to this remark other than that we should put an end to this uncertainty. I am confident that we will. What the EU needs most today is a unifying principle, a political one!
2 | Madariaga Speech – China Needs a Predictable and Reliable European Partner, (Mar., 2012)
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