The Need to Establish a New Format for Trade Political Relations between European Union and China

In this research work, Author focus on the analysis the need to establish a new format for trade-political relations between European Union and People Republic of China. What indicates the importance and innovativeness of the research is the presentation of the technical progress especially in China, the growth of economic ties with the European Union and the benefits resulting from liberalised of the China foreign trade policy under WTO. Realistic point is important trends in the trade regime between EU and China. Their commercial relations are too important to become hostage to political grandstanding or airy rhetoric by politicians performing for domestic galleries. Europe is China’s largest export market, and China now ranks second on Europe’s list of key trading partners. Trade with China dwarfs any other trade relation Europe has with emerging Asia. Disturbing this relationship would have ramifications for sales, growth and employment. The Chinese government is less concerned today about Western criticisms of China’s autocratic system, but the Chinese people have grown more nationalistic and represent a potentially greater threat to commercial relations. Commercial interests in autocratic regimes cause political dilemmas. The main aim of the paper is the presentation the need to establish a new format for trade political relations between European Union and China.


Introduction
European Union and People Republic of China need to establish a new format for trade-political relations.
European Union trade with China dwarfs any other trade relation Europe has with emerging Asia.
Carrefour, the French food chain, recently experienced a boycott after the French critique of China's policy towards Tibet. Any Western multinational company operating in China is cautious in its approach to Chinese politics in order to avoid hostile political reactions from Beijing as well as consumer boycotts.
Commercial interests in autocratic regimes cause political dilemmas. On the one hand, European and other Western governments need to voice their criticisms and tailor. On the other hand, they have commercial interests to defend. Furthermore, their overall policies must be measured in order to avoid diplomatic brinkmanship, which risks leading to the opposite outcome: a slowdown, or even a reversion, of freedom-enhancing reforms. It must be emphasis that on a theoretical level, understanding the choice of trade policies between liberalism and protectionism in EU and China is very important.
Traditionally, political economy models of trade policy have tendent to focus on the demand for protection, with factor endowments driving political reactions to exposure to international trade. Such model simply assumed that adversely affected economic agents would organize to seek protection, which would be afforded to them by their elected representatives in the political system. The supply side for trade policy was either ignored or underspecified in most model (Thies & Porche, 2007).
In the new model of the foreign trade policy theory interesting are the reviews of Alt et al. (1996) and Nelson (1988) about the demand for trade policy in terms of the theoretical importance of factor specificity (Alt, Frieden, Gilligan, Rodrik, & Rogowski, 1996;Nelson, 1988). Factor specificity refers to the ease with which factors (land, labour, and capital) can move from one sector to another in an economy. The two dominant approaches to explaining the demand side of trade policy used radically different assumptions about the specificity of factors. The Heckscher-Ohlin model, used by Rogowski (1989) in his seminal contribution "Commers and Coalitions", assumes very low-factor specificity (Rogowski, 1989). The low specificity of factors means that factor returns are equalized throughout a region's economy. Producers should export goods that intensively use their abundant factors and import goods that intensively use their scarce factors, with the result that owners of abundant factors will favour free trade and owners of scarce factors will favour protectionism. Trade policy coalitions will therefore be organized along factor or class lines. On the other hand, the Ricardo-Viner assumes that some factors are stuck in their present uses; therefore, factor returns are not equalized throughout a region's economy, but are industry specific. Trade policy coalitions should form along the lines of exporting versus import-competing industries.
Neither of these models explains how preferences over trade policies are actually translated into political action (Alt, Frieden, Gilligan, Rodrik & Rogowski, 1996). In a discussion of the endogenous tariff literature, Nelson (1988) notes that the mobility costs of the specific-factors model may be a result of productivity differentials, labor union activity, or individual preferences for membership in a given geographical area, industry, or firm (i.e., some form of solidarity) (Nelson, 1988). In all of these cases, between China and Europe. A virtuous cycle of openness will not be created by default. What should China and Europe do to ensure that the new dialogue and the forthcoming PCA negotiations do not become a talkfest? Firstly, the talks must start from a proper appraisal of current trade and investment relations. More than anything else, this requires that Europe drops its obsession with its bilateral trade deficit with China. This deficit has grown rapidly and hit approximately 190 billion euros in 2007. Yet, Europe has benefited much from trade with China and the notion that a bilateral deficit represents a problem which must be corrected is simply bad economics. In contrast to the USA, Europe's overall current account is in balance and has remained consistently in the one-plus or one-minus region (percentage of GDP) for the last 10 years. If bilateral deficits really constitute a serious problem, Bulgaria, A large part of China's exports are therefore based on imports-and these imports are necessary for China to export. Processing trade, which is economic jargon for the refinement of an imported good before it is re-exported, has been a core part of China's outward-oriented export-development model and is estimated to represent between one-half and two-thirds of China's total exports. Thus, China's increased exports to Europe do not equal a fall in Europe's production. In fact, the typical export good of China to Europe is from a sector in which Europe has not had a comparative advantage for a long time, which means that Europe could only resume its own production at the expense of its own welfare (as it would need stop producing some of its current production). Furthermore, globally-oriented firms in    (Prodi, 2000). Indeed, it has long been argued that the normative element is one of the key features of power possessed by the EU as an international actor. This influence resides in the EU's capacity to shape positive perceptions of key values that other states then internalize, enabling these ideas to become constituent elements within international relations, and since its inception the EU has committed itself to "placing universal norms and principles at the centre of its relations with y the world" (Manners, 2002, pp. 240-241;Mattlin, 2009;Geeraerts, 2011;Men, 2011).
The EU has therefore carved for itself an ambitious role and has tried to be distinctive from the United States in its approach to global order through promoting a vision of multilateral rules and world-order principles, projecting itself as a civilian power and aiming to construct the very definition of what is "normal" into international behaviour. This helps to explain why the ideals of democracy, equality, the rule of law and a respect for human rights are formally encapsulated into the Preamble of the Treaty of Lisbon as core values of the EU (Treaty of Lisbon, 2007;Foot, 2010a). The driving force behind this kind of evangelical outlook has inevitably spilled over into relationship building with key bilateral partners. Such a strategy has led to the EU promoting a foreign policy outlook that appears to have been focused far more on effecting behind-the-border change in societies as an outcome from dialogue rather than building interests-based cooperation as an objective from engagement. Significantly, although such an approach may have been successful when linked to the lure of prospective membership in Central and Eastern European states over the last decade, there is growing evidence to show that when moved beyond the confines of its near-neighbourhood, positive outcomes from this approach are far harder to achieve. This is particularly the case with China. Despite over three decades of positive statements since the establishment of full diplomatic relations between the People's Republic and the (then) European Community in 1975 and the subsequent crafting of a relationship that has now become "both extensive and intensive" in both political and economic affairs (Shambaugh et al., 2008, p. 303), there is now growing criticism about the efficacy of prioritizing this kind of values-based approach to dealing with China as a reemerging global power and a state that has its own particular priorities to promote and interests to defend (Filippini, 2009;Zhang, 2009;Wu, 2010;van Ham, 2011;Wang B, 2011). What is needed now is a better understanding of China's strategic positioning and a re-appraisal by EU leaders of engagement options. Over the years a complex web of relationships has been assembled, with this hierarchy topped by political summits attended by the post-Lisbon Treaty "troika" of European Council President, European Commission President and the EU's High Representative for Foreign Affairs, yet unfortunately, despite activism on both sides, it cannot be said that this has led to either long-term harmony or increased mutual understanding. A plethora of meetings progresses down the chain of importance through a myriad of more than 50 different dialogues covering a mosaic of economic, legal, technical and social policy areas (Cameron, 2009;Brown, 2012). In 2003, the commencement of an historic strategic partnership between the two economies was announced, followed by an extensive series of bilateral meetings and EU Commission-issued policy papers, all of which seemed to be laden with good intentions and optimistic outlooks.
That year, the Chinese also issued their own first ( (Amado Mendes, 2010;Breslin, 2011;Men, 2011;ECRAN, 2012). The requirement to include a "democracy and human rights clause" in the PCA exacerbates problems in attempting to build trust between the two sides as this whole area continues to be resonant with great symbolism in the Sino-European relationship. For the EU, the clause can be seen by supporters of its inclusion as an indicator of the norms that Europeans are seeking to project, while on the Chinese side, its existence acts as further evidence of the EU's tendency to "point fingers" at the However, such a compromise seems difficult to achieve, as its inclusion also lays bare tensions within the Brussels institutional network over attitudes towards human rights in the Chinese bilateral dialogue.
There are differences in emphasis about the importance of this clause between the European Commission, for whom it represents perhaps more of a procedural requirement to overcome, and the European Parliament, for whom the whole issue is far more serious, encapsulated by the Parliament's ongoing activism in hosting regular debates that are largely critical about China's human rights record.
Given Parliament's strengthened post-Lisbon Treaty powers of consent on accords such as the PCA, these differences complicate the creation of a unified and coherent approach across EU institutions to securing progress with China. Coupled with divisions in Europe, the Chinese themselves have become increasingly confident and forceful at promoting their own distinctive perspective on a number of these politically sensitive issues, and this mismatch between different visions of political principles helps to explain many of Europe's difficulties dealing with China (Foot, 2010b; Crookes, 2013).

An Opportunity to Achieve Further Deepening of Commercial Relations
Yet the EU-China talks cannot end there. If the ambitions are not higher than implementation of WTO commitments the likelihood that China will change its policy in these areas will certainly be smaller.
More importantly, both parties will sign off an opportunity to achieve further deepening of commercial and demands on both sides. Europe particularly wants increased access to Chinese service markets, which are heavily protected, and better tailored policies to prevent infringements of intellectual property rights in key areas of innovation, such as pharmaceuticals and through forced technology transfer. These two areas also hang together. For European services to enter the Chinese market, or sign contracts with Chinese service input suppliers, there needs to be a better enforcement of key intellectual property rights as many services have IPRs at the centre of their business model. For many firms in the financial, software and telecommunications sectors, it is today too risky to invest in China as their intellectual property is likely to be infringed. Better and targeted enforcement of IPRs are also in the interest of China.
If Chinese firms want to climb the value-added chain and become a hub for trade in services, Beijing must give better assurances of IPR protection. China desires better discipline in the EU's anti-dumping policy and wants to be granted so-called Market Economy Status, which would prevent the EU from using some of the "innovative" and highly dubious techniques available to motivate anti-dumping duties. immediately slow the acquisition process down when a foreign investor is involved. Other countries, like Germany, toy with the idea of introducing more far-reaching legislation.
Europe and China's core commercial concerns are legitimate and can be addressed in bilateral negotiations. These negotiations should be sequenced: a smaller bargain can be achieved in the new EU-China dialogue and a larger bargain can be facilitated in the forthcoming PCA negotiations. To make such progress possible, however, it is also necessary for political leaders to adopt a constructive approach and stay away from political grandstanding and empty phraseology (Erixon & Messerlin, 2009 In an online review by Human Rights Watch in China of perspectives from NGO representatives, EU official involvement was characterised as having become "progressively inhibited" for the sake of ensuring at least some semblance of a successful outcome. Even the most experienced international human rights organisations continue to face formidable challenges in trying to operate in China, after years of EU activism on this issue, with the best progress being achieved by these bodies through patiently building links with domestic Chinese civil society groups rather than through the rhetoric of political elites. Moreover, the very continuance of such dialogues appears to empower the Chinese side with an ability to constrain European behaviour through the constant threat of them being publicly postponed as some sort of punishment for errant actions by the EU in its human rights discourse.
Normative-led engagement, to all intents and purposes, appears to have failed and it would not be an illogical response for the EU to cancel further exercises in futility. Indeed, the very symbolism of such a public cancellation could carry its own message internationally. This would not mean that the EU renounces the importance of human rights in the wider philosophy of European society, nor does it mean inhibiting the ability of EU elites to promote these principles in speeches and policy documents to the wider world, and to the Chinese leadership in particular. Instead it eliminates the need to perpetuate the pursuit by the EU of an unlikely transformation in China's social system at an official dialogue level, thus redirecting effort to make more headway in other policy areas. It should also be remembered that democracy has previously taken root within East Asian societies through a number of interconnected influences, as in Taiwan and the Republic of Korea.
Structurally, factors of socio-economic development have favoured traction of democratic principles, which have been coupled with both actor-centred elite commitments supporting democratic transition and the dissemination of self-expressed (internalised) values that coalesce within a citizenry around democratic ideas. Although external influences may play some part in such transformations, the driving forces appear to be endogenous, and no such trend can be observed within China that could currently overlap with the combination of these conditions (Horowitz et al., 2007;Rich, 2007;Wang, 2008;Karackattu, 2010). Indeed, in an internationally respected survey of domestic attitudes by the Pew Research Centre, over 80 per cent of Chinese citizens expressed satisfaction with their country's direction and their own sense of personal progress (Bell, 2011). Given these realities, any kind of offensive normative strategy by the EU would seem bound to fail (Crookes, 2013).

China in the Process of Rebalancing Its Economy
China will enter a world market in which many of the spoils have already been appropriated. But fewer and fewer major firms may actually dominate the world economy. Some countries, like Mexico, will posses few, if any, decreasing cost industries. They will have to send their labour elsewhere to retain economic advantage. China will be studded with United States, Japanese, and European firms contributing high technology to Chinese development.
China is already in the process of rebalancing its economy towards greater reliance on domestic drivers of growth, in particular consumption. This transition was underpinned by the 12th Five-Year Plan (FYP) and has been encouraged by the development of social programmes, such as public health and pension systems, which are also helping make growth more inclusive. In order to continue its fast convergence in living standards with more prosperous societies, China will also need to increasingly rely on multifactor productivity gains as the key engine of growth. Labour productivity in both manufacturing and services are under 10% of the US level, demonstrating the distance to the technology frontier. Although the agriculture sector is a much smaller share of the economy than in the past, there is also ample scope to improve its productivity while easing resource constraints by strengthening agriculture innovation. A possible policy roadmap for sustaining this transition towards a more inclusive, high-productivity.
Under these circumstances, even very strong countries economically will be at least partly dependent on industries headquartered somewhere else. Even today, America does not represent the attainment of unipolarity in economics, whatever its military might. It is dependent upon money market and foreign direct investment from China, Japan, and Europe. Economic concentration today has three or four different nodes, not just one. The same will be true in 2020 or 2030. Decreasing cost (increasing returns) industries will be located in different zones and no one Great Power will monopolize them all. Europe will boast the London-Frankfurt and Zurich-Milan corridors. America will find large-scale competitive champions in two zones-Boston to North Carolina and San Diego to Seattle. China will have industrial or software concentrations in north China, Fujian, and Guangdong terminating in the Pearl River Delta.
But no country, however powerful in terms of GDP, will incorporate all worldwide industrial or service potential. It is even possible that the defence industry on an international basis is one of increasing returns to scale. Under the circumstances, there will be overlapping zones of economic competency among Great Powers, and some countries will be left out altogether.
The assumed result of one Great Power hegemony replacing another and a shift between unipolarities will not be obtained in the next few decades. Thus, even very powerful countries militarily will find themselves needing the products and markets of countries (and corporations) located somewhere else.
In theory, a very strong power militarily might be able to expand to take over the industries on which it has become dependent, but for a host of reasons this is unlikely. Again, cost-benefit reasons would cut against any attempt at conquest-opens would provide access to such industries much more efficiently than seizure that would not be successful in the longer term (Rosecrance, 2006, p. 35).
History shows that states sometimes engage in war for insufficient reasons, neglecting the ties that bind nations together. Short-term motives take procedence over long-term maximization. But they are not likely to do so between the United States and China, both long-term maximizers. China is especially sensitive to the advantages of intensive growth and will not wish to disrupt essential economic arrangements that have been crucial to her success.
In addition, should she decide otherwise, there are neighbouring power that would present barriers to extensive expansion. Japan, a unfied Korea, India, and Russia all border on China. Even if the United States were not a major power guarantor of the existing settlement, these powers would make Chinese external expansion difficult if not impossible. Japan, perhaps, has traditionally underused her power, but this is not true of Russia or India. A unified Korea will represent another uncertainty for China. Again, economic ties with these nations will be preferable to military expansion against them. And the presence of the United States and its military bases will occasion additional hesitation. No one can be certain that relations among Great Powers will be peaceful ones over the long term. But the current economic, political, and military relationships make that prospect much more likely than it has been in the past (Rosecrance, 2006, p. 35).
It is important underline that intensive development through economic growth is generally preferable to military and extensive expansion. With new investments, a country can transform its position through industrial expansion at home and sustain it through international trade. Access to the economies of other nations is sufficient; a rising nation does not need territorial control of them. Peaceful development can thus take the place of aggressive expansion. Since World War II, a number of economies have adopted this principle, including Germany, Japan, China and other East Asian Nations (Rosecrance, 2006, p. 33). Afterwards, Asian demands for modification to the international system will likely increase, and unless resolved, will be increasingly likely to be imposed by force. The question raised by this empirically grounded extrapolation is whether the West will see China's rise as an opportunity for cooperation (as former European enemies did when responding to the post-World War II resurgence of Germany by creating the EU) or for conflict (Kugler, 2006, p. 39).

The Current Position in Relations between EU and China
The important question is how can the EU better understand the Chinese and their perspectives? One particularly apposite description of China is as a country with a "dual identity", combining a "developing country reality and world power aspiration" that creates "issue-oriented national interests", which can easily conflict with the type of values-based relationship most preferred by the EU (Crookes, 2013).
Others have pointed out that China is not only "becoming more assertive by the day", but it is also www.scholink.org/ojs/index.php/rem Research in Economics and Management Vol. 4, No. 3, 2019 148 Published by SCHOLINK INC.
"undeniably becoming a regional power". The EU needs to respond to these changes in the international order, but its policy engagement strategy with China indicates that it may not have yet recognised these current realities. One starting point is to appreciate just how important the role of history continues to be in shaping Chinese attitudes to the outside world, perhaps best described by one scholar as a strategic emphasis on "keeping the past alive". Historically, China learned about the principles of European society during the nineteenth and early twentieth centuries through the barrel of a gun, as powers such as Britain, France and Germany sought to carve out by force not only economic gains across the country but also to impose a sense of social and cultural superiority over the traditions of Chinese society and of the East Asian international system of which China was at the centre (Suzuki, 2009;Ringmar, 2011 (Yuan, 2006;Heath, 2012;Zhang F., 2012a). Taking these as the basis for an examination of China's strategic concerns, there are a number of recurring themes, such as defending sovereignty, maintaining social stability and fostering economic growth (Wang J., 2011). Indeed, these principles are at the heart of the country's proclaimed "core national interests" that have been projected by official sources over recent years (Crookes, 2013) and which underpin the focus of many in China's political elite on achieving what has been termed the "rejuvenation of the Chinese nation" into a recognised re-emerged regional power.
In this way, China's policy priorities become clearer: first, the empowerment of the government to prioritise economic development over political pluralism as a function of the CCP's modern-day legitimacy with the people; second, safeguarding the absolute leadership of the CCP within the political system in China that it controls; third, the necessity of maintaining social stability across different provinces through reducing material inequality by promoting further domestic economic development and sustainable growth; and fourth, safe-guarding the integrity of the motherland through an intolerance to separatist unrest in Tibet and the secession of Taiwan.
Viewed through a Chinese prism, ongoing policy tensions with the EU are perhaps easier to understand.
The Chinese see the arms embargo as "an insult to the strategic partnership" at best (Wang B., 2011, p. 38) and deliberate political discrimination and the pursuit of a containment strategy against China at worst (Xia, 2010). Similarly, the issue of MES is typically interpreted by China as one of prejudice, inequality and a lack of respect by the EU towards China as an equal that engenders memories of long-expired but still emotionally charged unequal treaties of past centuries, coupled with concern over how its application is used to constrain China's current economic prosperity (Chen, 2011). Moreover, it can now be more clearly seen why dialogues with China over issues such as human rights, political pluralism, Tibetan nationalism and the Chinese state's activism in the economy are likely to have very limited effect in realising significant policy shifts as they represent the bedrock issues on which the legitimacy of the CCP's right to rule continues to be maintained (Crookes, 2013).

EU Responses to Reset the Engagement Strategy
Question is what options exist for the EU to recast its engagement with China in such a way that meaningful progress can be made? Before addressing this directly, some practical assessments are needed of just how much of an effective foreign policy actor is the EU today, so as to put options and outcomes into context. The EU's role in foreign affairs is made particularly challenging by the method though which priorities in foreign policy are constructed within the Union. The Common Foreign and Security Policy emerged from the Lisbon Treaty as a special competence, whereby engagement could be categorised into two distinct levels. sometimes mutually competing, initiatives that "reflect a lack of faith among Member States that the EU can act as a guarantor of their national interests" (Fox & Godement, 2009, p. 30;Smith, 2011).
This arrangement has been characterised as inadequate for effective strategic decision making, and the largely intergovernmental nature of foreign affairs renders the Union's contribution as unhelpful at best and counterproductive at worst. The system has been criticised as having led to unwieldy complexity that has led some to posit that "there is no European position on the growth of Chinese power" and that in terms of effective power projection and decision making coherence, the European project "is on the verge of collapse" (Simms, 2012, p. 49).
Nevertheless, it is impossible to ignore the very real progress that has been made over the last few years to enhance and consolidate the Union's credibility and capability in the foreign affairs domain. There is now a greater opportunity for the EU as an international actor to create and defend an effective foreign policy position on a range of matters. For example, the EEAS was brought into being by the Lisbon Treaty in January 2011 and has a budget of EUR464 million, employing more than 3600 staff both in Brussels and spread over 140 diplomatic delegations around the world (EUinsight, 2012, p. 1).

Conclusion
Accordance to the foreign trade policy theory further trade liberalisation and improved framework policies would increase trade and promote growth. With new investments, China can transform its position through industrial expansion at home and sustain it through international trade. With or without further trade agreements between two partners, services will be more traded and trade policies will have to adjust to changes in the organisation of global value change. China may continue their development to specialise in innovation especially in electronics and increasingly in services and knowledge based economy. China is especially sensitive to the advantages of intensive growth and will not wish to disrupt essential economic arrangements that have been crucial to her success. The bilateral trade relationship also between EU and China is undoubtedly a strong one, and has considerable opportunity for expansion and further development.
The current position in relations between the two sides begs two questions: why have EU policies to secure a closer partnership in so many areas with China manifestly failed, and what should the response in Brussels be to such failure? On the first question, a couple of reasons appear to stand out in answer. On the one hand, there has been a failure by EU actors to properly understand how Chinese strategic interests overlap with different policy areas in ways that make Europe's normative strategy almost bound to collide with immovable positions on certain matters of national importance. On the other hand, there has also been an inadequate attempt by the EU to embrace areas of potential com-promise with the Chinese in ways that could more effectively link to Europe's own policy priorities on a broad range of bilateral concerns within a wider interests-led foreign policy positioning.
The physical infrastructure is coupled with greatly enhanced visibility in international affairs, which include a defined legal status in all international institutions for the EU as a whole, its special status at the United Nations, its role at the annual Asia Europe Meeting, the EU's presence at ASEAN Regional Forums, and the forthcoming EU membership of the East Asia Summit facilitated by the anticipated ratification of The Treaty of Comity under the Plan of Action of the Nuremberg Declaration. All of this could represent a potentially formidable arsenal to use in asserting European interests into the Asia region, and with China in particular.