China and the “other” West: The European Union, Australia, Canada and New Zealand

While the world is focused on China’s relations with the United States following Chinese President Hu Jintao’s visit to Washington, China’s relations with the “other” West—the European Union, Canada, Australia and New Zealand—have been of increasing importance in recent years, especially in achieving China’s foreign policy goals of gaining access to markets, raw materials and creating a multi-polar world.

Relations Grounded in Economics

China’s relationship with Europe has always had a strong focus on economic and trade interactions via the Silk Road; the Cohong system of the 18th and early 19th centuries; and under Beijing’s unequal treaty relationship during the “100 years of humiliation” in the 19th century and first half of the 20th century. In the post-Cold War period, China’s relationship with Europe has been guided by economic considerations. In 2005, the European Union emerged as China’s leading trade partner while Canada and Australia were China’s ninth and tenth largest trading partners respectively (Chinese Ministry of Commerce). New Zealand is the first Western state to grant China the status of “market economy” while Premier Wen Jiabao’s visit to New Zealand in April reaffirmed China’s commitment to implementing a free trade agreement with New Zealand within two years, making New Zealand potentially the first developed Western country to reach a free trade agreement with China. China is New Zealand’s fourth largest trading partner and is second-largest for the EU, Canada and Australia (New Zealand Ministry of Foreign Affairs and Trade, December 2005; World Trade Organization; Australian Department of Foreign Affairs and Trade, October 2005; Strategis, Industry Canada, January 2006).

Australia and Canada are also fast emerging as a major source of raw materials for China, including uranium, oil and coal. In line with its goal of diversifying its source of oil imports beyond the volatile Middle East, China has signed several deals with Canada to gain access to its vast deposits of oil sands, as well as investing in infrastructure to transport these resources to Canada’s Pacific coast from where they can be transported to China. Canada has the world’s second-largest oil reserves after Saudi Arabia and investing in oil sands remains a lucrative venture as long as oil prices remain high. In May 2005, China Petroleum and Chemical Corporation (Sinopec) acquired a 40 percent stake in Canada’s Northern Lights oil sands project and in April 2005 China National Offshore Oil Corporation (CNOOC) acquired one-sixth of MEG Energy Corporation. PetroChina has also signed a preliminary agreement to buy half of the crude transported through the Gateway project, an oil pipeline being developed by Enbridge to connect Alberta to Canada’s Pacific coast (Dow Jones News, April 8). Some in the United States have expressed concern over China’s growing energy interests in its backyard, especially as the U.S. is Canada’s leading oil export market.

Australia and China are also deepening their relations in the energy sphere with a deal on the sale of Australian uranium to China for its civilian nuclear power program. Australia holds 40 percent of the world’s uranium while China intends to build an additional 40 nuclear power plants from the current nine within 15 years. During the visit by Premier Wen Jiabao to Australia in April 2006, Beijing and Canberra signed a deal on the sale of Australian uranium to China, although shipments are unlikely to begin until 2010 (Xinhua, April 3). Australia is already a major supplier of iron ore, coal and copper to China.

Converging Interests Beyond Trade and Resources

These growing ties have not been confined to the economic arena as burgeoning trade relations have spilled over into political and security arenas. China has used its improving relationship with the European Union to work toward achieving its long-term goal of creating a multi-polar world to dilute U.S. influence and predominance. This has been illustrated by Sino-EU cooperation on the Galileo satellite navigation project, which is challenging the U.S. Global Positioning System (GPS), and shared opposition to the U.S.-led invasion of Iraq by China and numerous European countries, most notably France and Germany. Meanwhile, Beijing’s deepening relationship with Canberra fueled the initial reluctance of the Australian government to grant asylum to defectors from the Chinese Embassy in June 2005 and Foreign Minister Alexander Downer’s statement in August 2004 that Australia is not obliged to assist the United States in a conflict with China over Taiwan under its 1951 ANZUS treaty alliance. Downer was quoted as saying that “the ANZUS obligations could be invoked only in the event of a direct attack on the United States or Australia. So some other activity elsewhere in the world…doesn’t invoke it” (The Australian, August 18, 2004). Following the passage of China’s anti-secession law in March 2005 Downer further stated that although the ANZUS Treaty could be invoked if war broke out in the Taiwan Strait, “that’s a very different thing from saying we would make a decision to go to war.” In the security sphere, China held joint maritime exercises with France, Britain and Australia in the East China Sea in 2004.

China has also utilized its relationships with these countries to further isolate Taiwan on the world stage. The most visible sign of this is the ongoing discussion for the Vatican to switch diplomatic recognition from Taiwan to the PRC. The Vatican is the only European state that still grants diplomatic recognition to Taiwan since Macedonia switched diplomatic recognition from Taipei to Beijing in 2001. Both sides have made numerous symbolic gestures to demonstrate their growing willingness to improve relations such as Beijing’s appointment of Donald Tsang, a devout Catholic as Hong Kong’s Chief Executive in 2005.

Limits of Rapprochement

Yet China’s relations with the European Union and other industrialized countries have not been without pitfalls. Like the United States, the European Union has emerged as a popular market for Chinese-made goods. Chinese-made clothing exports to the EU increased by 47 percent in 2005 following the expiry of the Agreement on Textiles and Clothing on January 1, 2005 (AFX News, April 9). This has led to accusations of Chinese textiles undermining European-made textile products and putting European producers out of business. A deal that was reached in June to limit the growth of Chinese textile imports to 8-12.5 percent until the end of 2008 had to be renegotiated as clothing shortages occurred across Europe and Chinese textile products piled up in European ports. Most recently, on March 23 the European Commission imposed anti-dumping duties on Chinese-made leather shoes and a week later Canada, the United States and the EU filed a complaint with the WTO regarding China’s tariff policy on auto parts. Western states are putting pressure on China to further open its $19 bn auto parts market as China has emerged as one of the world’s largest auto markets. This is the first time the EU has brought a complaint against China before the WTO since China joined the World Trade Organization in 2001 (Reuters, March 31).

The EU and the UK in particular have also continued to voice complaints over the slow pace of democratization in Hong Kong since the territory reverted to Chinese control in 1997. Meanwhile, China has maintained that Hong Kong is a domestic issue that should not be subject to the interference of foreign governments. The Vatican’s appointment of the outspoken Joseph Zen as Cardinal of Hong Kong is also likely to slow a rapprochement in Sino-Vatican relations, as is Beijing’s recent ordination of two bishops without approval from Rome, which has drawn criticism from Pope Benedict XVI.

There are also limits to China’s cooperation with these states due to their close relationship with the United States. For example, under U.S. pressure and in the wake of the Anti-Secession Law being passed by the National People’s Congress in March 2005, the EU agreed to maintain the arms embargo on China, which was imposed following China’s suppression of the 1989 Tiananmen protests. U.S.-EU security cooperation also has the potential to conflict with Beijing’s interests as seen by the NATO presence in Afghanistan and the Partnership for Peace program, which is attempting to spread democratic principles and expand the NATO alliance to China’s western borders. While China has strengthened relations with Australia in recent years, the first ministerial-level meeting of the Australia-Japan-U.S. Trilateral Strategic Dialogue in March 2006 reaffirmed the close security relationship between Australia and the United States and is regarded by many as an attempt to “balance” China’s growing influence in the region. With respect to the uranium deal between Beijing and Canberra, while China has vowed to abide by the nuclear Non-Proliferation Treaty (NPT), there remain concerns in Australia about uranium being diverted to China’s nuclear weapons program or pariah regimes. In the ongoing attempt to address Iran’s nuclear ambitions, China and Russia have also adopted a more conciliatory approach than the EU and United States, which has been demonstrated by discussions to admit Iran to the Shanghai Cooperation Organization as a full-fledged member in June.

At a fundamental level, there remains a difference in values between the West and China as demonstrated by the significant concern over China’s human rights record and widespread support for the Tibetan cause across Europe, Australia, Canada and New Zealand. China and Russia remain committed to traditional norms of international conduct such as non-interference and respect for national sovereignty, while the West is more willing to violate these norms in favor of humanitarian intervention, preemptive action and supra-nationalism in the case of the EU.

Steady Improvement in Relations

Interest in China’s foreign policy has tended to focus on its relations with the United States, countries on China’s periphery and with the developing world. Yet Beijing is also actively engaging the EU, Australia, Canada and New Zealand in order to gain access to their markets, raw materials and achieve the longer-term goal of creating a “multi-polar” world. Public opinion surveys in these states reveal that China is increasingly held in a more positive light than even the United States. Relations with the EU have improved to such an extent that it is no longer a question of “if” the EU arms embargo on China will be dropped but rather “when.” China has demonstrated it’s good-will toward Europe by its restrained criticism of the EU’s trade policy relative to its negative rhetoric on U.S. protectionist policies. The Sino-Australian uranium deal has been sweetened by the fact that Australia has refused a similar deal with India, China’s traditional strategic rival, even though the United States agreed to assist India’s civilian nuclear program. China’s relations with the “other West” is likely to continue to improve, even as these states remain firmly embedded within the U.S.-led security structure, with strong cultural, historical and economic links to the United States.