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EUChina and EUIndia: A Tale of Two

Strategic Partnerships
Gulshan Sachdeva
Published online: 28 Jul 2014.

To cite this article: Gulshan Sachdeva (2014) EUChina and EUIndia: A Tale of Two Strategic
Partnerships, Strategic Analysis, 38:4, 427-431, DOI: 10.1080/09700161.2014.918415
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Strategic Analysis, 2014

Vol. 38, No. 4, 427431, http://dx.doi.org/10.1080/09700161.2014.918415

Commentary
EUChina and EUIndia: A Tale of Two Strategic Partnerships
Gulshan Sachdeva

ore than a decade has passed since the European Union (EU) signed strategic
partnerships with China (2003) and India (2004). The EUs honeymoon with
China was over within a few years while cooperation on truly strategic issues with
India is yet to emerge. The core of both these relationships is still economics. While
China has taken full advantage of the EUs institutional mechanism through more than
56 sectoral dialogues to promote its geopolitical goals and also to neutralise European
concerns about democracy and human rights, Indian policy makers and analysts
remain sceptical about Europes role in global affairs. As a result, they have not
bothered to use European capacities to promote their own interests through this
partnership.
The EUs 2001 communication Europe and Asia highlighted many objectives.1
These include strengthening of peace and security, increasing trade and investment,
enhancing development cooperation, promotion of human rights, democracy, good
governance as well as raising EU awareness in Asia. In its 2003 Security Strategy, the
EU argued that the transatlantic relationship is irreplaceable and it has to work for
closer relations with Russia.2 In addition, it has to build strategic partnerships with
many Asian partners. Today, the EU has 10 official strategic partnerships including
four in Asia (China, India, Japan and South Korea). Other partners are Brazil, Canada,
Mexico, Russia, South Africa and the US. China, on the other hand has signed about
40 strategic partnerships. Similarly, India has about 25 strategic partners.
Summarising its initial documents on ChinaBuilding a Comprehensive
Partnership with China (1998); EU Strategy Towards China (2001); A Maturing
PartnershipShared Interests and Challenges in EUChina Relations (2003)3 as
well as later communications, the EU has officially declared that its objectives in
China are (1) to engage China further, both bilaterally and on the world stage, through
an upgraded political dialogue; (2) to support Chinas transition to an open society
based upon the rule of law and respect for human rights; (3) to support Chinas
transition to an open society based upon the rule of law and respect for human rights;
and (4) to raise the EUs profile in China.4 Chinas own EU Policy Paper (2003)
argued that there is no fundamental conflict of interest between China and the EU
and neither side poses a threat to the other. China acknowledged that given their
differences in historical background, cultural heritage, political system and economic
development level, it is natural that the two sides have different views or even
disagree on some issues. Still, it was argued that the common ground between

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Dr. Gulshan Sachdeva is Professor and Chairperson, Centre for European Studies, School of
International Studies, Jawaharlal Nehru University, New Delhi.
2014 Institute for Defence Studies and Analyses

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Gulshan Sachdeva

China and the EU far outweighs their disagreements as both stand for democracy in
International Relations (IR) and an enhanced role of the UN and are committed to
combating international terrorism and promoting sustainable development through
poverty elimination and environmental protection endeavours.5
The timing of their strategic partnership was also important. This was the period
when the economic relationship was booming and it coincided with one of the worst
periods in transatlantic relations (the Iraq war; the unilateral foreign policy stance of the
Bush administration). The relationship was institutionalised with an annual summit and
a wide range of sectoral dialogue was in place.6 To tackle unilateral Americanism, some
within the EU wanted to develop close relations with China. French President Chirac
and German Chancellor Schroeder even supported lifting the EUs arms embargo on
China. Chirac called it unjustifiable and Schroeder argued that China is no longer the
China of 1989.7 The importance of China and the EU for each other cannot be
underestimated. Both are economic heavyweights and affect each other significantly.
Both are powers within their own region and have deep global ambitions. Both want a
transition to a multipolar world and would like to play a significant role in global
economic governance.8 Realising this, many analysts between 2003 and 2005 argued
that an EUChina axis was in the making or that theirs was a relationship of the 21st
century.9 The then EU trade commissioner, Pascal Lamy, also asserted that in terms of
future development of the world economy and indeed international relations EU
China relations will be pivotal to the century which has just begun.10
The mood, however, was already changing by 2006. The European Commission
(EC) paper EUChina: Closer Partners, Growing Responsibilities (2006) argued that
the relations are increasingly mature and realistic and adjusting to the competitive
challenge and driving a fair bargain with China will be the central challenge of EU
trade policy in the decade to come.11 Moreover, democracy, human rights and the
promotion of common values remain fundamental tenets of EU policy and of central
importance to bilateral relations. There were leadership changes in Germany and
France. Both Chancellor Merkel and President Sarkozy put transatlantic relations at
the top of their foreign policy agenda. There were official meetings with the Dalai
Lama and win-win talk was replaced by trade imbalance, democracy, human rights
and so on. China even cancelled a summit with the EU under French presidency.
Although in 2007 they started negotiations on a Partnership for Cooperation
Agreement (PCA), nothing concrete has yet emerged. As China expected, the lifting
of the arms embargo and the granting of market economy status to China have not
materialised. The relationship has become more realistic. So far there have been 16
summits; the last one was held in Beijing in November 2013. In 2013, the two
countries celebrated 10 years of strategic partnership and announced a grand plan
called the EUChina 2020 Strategic Agenda for Cooperation.12 Major objectives are
highlighted under different headings: peace and security, prosperity, sustainable
development and people-to-people exchanges.
After the end of the Cold War, rising Indias global vision of a democratic,
multicultural and multipolar world somehow coincided with priorities outlined by
the EU and its Member States. Similarly, when the new economic and security
architecture was evolving in Asia, European policy makers thought their engagement
with Asia would be incomplete without partnering with India. Realising the importance, the institution of annual summit meetings was established (supplemented by
business summits) in 2000, resulting in the IndiaEU Strategic Partnership in 2004
and the Joint Action Plan in 2005. Encouraged by positive economic trends, both

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429

started negotiations for a broad-based trade and investment agreement in 2007, which
have not yet concluded. The recurring postponement of the conclusion of trade talks
has become a regular feature of IndiaEU summits. At the 12th summit in 2012, both
sides could only declare that negotiations on the trade deal are close to completion.
Although both have started many dialogues, including on energy and security, serious
cooperation in these matters is yet to emerge. Despite many positive developments in
the economic sphere, Indian policy makers remain sceptical of Europes role as a
major strategic player in Asia. The EU is hardly a factor in Indias foreign policy
debates. Despite this understanding, India has growing economic and political ties
with major European powers like the UK, France and Germany.13
In both these partnerships it is trade and economics that dominate. EUChina
goods and services trade, which was just $6 billion in 1980, grew to $650 billion in
2012. The EU is Chinas biggest trading partner while China is the EUs second
biggest after the US, with trade in goods of 434 billion, and in services of 50 billion
in 2012 (totalling 484 billion, or about $650 billion). This means that about $1.8
billion worth of goods and services are exchanged every day between China and the
EU. Today, over 300 European standards form the basis of Chinese standards. Indias
trade with the EU may not match the Chinese figures but it is still quite impressive by
Indian standards. In 2012, the EU was Indias biggest trading partner with about 76
billion goods trade (80 billion in 2011) and about 23 billion services trade (total
about $133 billion). Apart from trade in goods and services, the EU has also been
important for two-way investments, particularly for India. China attracted about $845
billion in inward investments between 1995 and 2009, according the Asian
Development Bank (ADB). Of this, Foreign Direct Investment (FDI) from Europe
accounted for only about $67 billion (less than eight per cent).14 In comparison, FDI
in India from the countries of the EU is higher than investments from the US and
Japan put together. According to the Indian government, between April 2000 and
February 2014, cumulative FDI inflow from EU countries amounted to about $57
billion, which was about 26 per cent of the total FDI into the country.15 In addition,
Europe is becoming an important destination for cross-border investments and overseas acquisitions for Indian companies. A recent study indicates that Indian companies have invested $56 billion in Europe since 2003. Of this, $38 billion was spent on
Mergers and Acquisitions (M&A) while $18 billion was for greenfield projects.
During this period, Indian investors financed 511 greenfield projects and acquired
interests in 411 companies.16 As a result of the crisis in some Eurozone countries,
Indian investment in Europe has declined significantly in the last few years.
In comparison, China seems to have discovered Europe in the last few years.
Many Chinese companies previously felt that investments in Europe were safe but it is
a difficult place to work. Now it seems the Chinese government feels that because of
low asset prices this is the right time to invest in Europe. A recent report shows that
there is a profound post-2008 surge in Chinese FDI to Europe. It jumped from less
than $1 billion yearly in 20042008 to roughly $3 billion a year in 2009 and 2010
before tripling again to almost $10 billion in 2011. More than 70 per cent of these
investments are financed by Chinese state-owned companies.17 European companies
are clearly now on Chinas radar for technology and brand image. Sensing this, in
2013 China and the EU agreed to start negotiations for a Bilateral Investment Treaty
(BIT). China and the European Central Bank (ECB) have also signed a currency swap
agreement worth 350 billion Yuan ($57 billion). China has signed these deals worth
$358 billion with 22 countries including Hong Kong, South Korea, the UK, Australia

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Gulshan Sachdeva

and Brazil. These deals will promote use of Chinese currency in global commercial
transactions.
As there is a lack of consensus on many foreign policy and strategic issues within
the EU, both China and India know the value of bilateral relations with individual
member states of the EU. Apart from the EU, India has signed three more strategic
partnerships within the EU with France, Germany and the UK. In comparison, China
has signed nine individual strategic partnerships within the EU. These include partnerships with France, Italy and the UK in 2004, with Spain and Portugal in 2005 and later
with Denmark in 2008, Germany in 2010 and Poland in 2011. It seems that China has
also identified Central and Eastern Europe (CEE) as an area from where it would be
more useful to produce products for the European market. In 2012, the China Central
Europe Forum was announced in which 16 countries from CEE participated. China
announced $10 billion of support for Chinese investment in the region as well as a $100
billion trade target with the region by 2015. In addition, 5,000 scholarships to CEE
were announced, 1,000 for CEE students to study Chinese in China and 4,000 for
Chinese students and scholars to visit CEE within the next five years.
While looking at both these partnerships, it is clear that the US angle has also
played a significant role in shaping the EUs relations in Asia, particularly with China.
Initial enthusiasm in Europe to forge closer ties with China was to an extent
discomfort with US unilateral policies. Chinese policy makers also felt that Europe
would be an important partner to achieve multipolarity. European leaders, however,
have realised that it is not easy to ignore broader US designs in Asia. Europeans had
to abandon their clear intention of removing the arms embargo against China because
of US displeasure. Closer IndiaUS ties on the other hand have provided encouragement to the EU leadership to move further with India on strategic issues.
Overall, despite strategic partnerships, both EUChina and EUIndia relations are
nowhere close to strategic. The core is still economics. The immediate focus is on an
IndiaEU broad-based trade and investment agreement and on a ChinaEU investment treaty. For China, the arms embargo has also been an emotional and psychological issue, so it has been a disappointment to China. As the EU has also not granted it
market economy status, China has been vulnerable to anti-dumping cases. Between
2007 and 2011, the EU initiated 37 investigations against China. Despite all these
problems, China has clearly identified the EU as a main export market and a possible
source of technology. In recent years, it has also focused on Europe for investment and
identified Central and Eastern Europe as a production base for the European market.
In comparison, due to the uncertain economic climate in Europe, private Indian
companies have become more cautious about their European investment plans. Unlike
India, China has invested much more in political, economic, sectoral and people-topeople dialogues. It has effectively tackled European concerns through some of these
dialogues on human rights, intellectual property rights and so on. Apart from two
dozen economic dialogues, it has a wide range of political dialogues on Asia, Africa,
Latin America, security and defence and so on. Recently, dialogue between the Euro
area troika (the ECB, chair of the Euro group and the commissioner for economic and
monetary affairs) and China has also become important. Indian policy makers still
need to discover the value of many dialogues and working groups initiated under the
Joint Action Plan. Although bilateral relations with important member-states and the
US factor will always be important, the Chinese leadership have valued the EU
significantly and have tried to understand its institutions much more than India has
done. Rather than thinking of it as a mere talking exercise, India needs to invest more

Strategic Analysis

431

in existing dialogue mechanisms as in the long run the EU may share more with India
than with China in the evolving global geopolitics and security and economic
architecture in Asia.
Notes
1.
2.

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17.

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en.pdf.
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