China in the balance: towards a mature relationship

January 17, 2007 - nr.55
Summary

This report by the Advisory Council on International Affairs on the significance of the rise of China for foreign policy has been written at the government’s request. The government has said that it will draw on this report as it develops its China policy.

A mature relationship with China (Chapter I)

With growth rates that have continuously averaged more than 9% for more than a quarter of a century, China is rapidly heading towards becoming the world’s second-largest economy in the not too distant future. Above all in the light of China’s enormous size and its population of 1.3 billion, its rise can only be described in superlatives. For example, its trade surplus with the US was over USD 220 billion in 2006; at the beginning of 2007 its foreign currency reserves totalled USD 1.1 trillion; it has in the last few years become the world’s secondbiggest oil importer; since 2006 it has been exporting more to the EU than the US and it is now Africa’s third-largest trading partner. Thanks to China’s growth, the number of people there surviving on less than one US dollar per day has declined by more than 500 million: an impressive result.

China’s economic rise is leading to irreversible shifts in the international landscape at both regional and world levels. The big question is: in what direction is the country heading? In other words: what will China do with its increasing power? Will the country play an active part in solving global problems within the existing framework of international institutions? Will it respect the existing rules of the game? Or will it form a threat to world peace? It goes almost without saying that everything possible should be done to ensure that China develops along positive lines and becomes a responsible stakeholder.

This report has been written on the assumption that the approach should be engagement with China, rather than the opposite approach of containment. The Council considers it of great importance for global stability that China’s diplomatic status, position and influence should be adjusted to match its growing economic and military might. In view of the uncertainty about the direction of China’s development, however, the AIV agrees that the concept of ‘hedged integration’ should guide Dutch China policy. In addition to this the Council favours promoting a mature relationship between China and Western countries: a relationship based on equality and mutual respect, in which it is also possible to call each other to account for ways of acting that run contrary to each other’s expectations.

China’s economic growth and societal problems (Chapter II)

China’s rapid economic growth is due above all to its own policies, which have aimed at closer integration into the world economy. One of this report’s main conclusions about Chinese foreign and security policy is that China’s economic growth will continue to be dependent on a stable process of economic globalisation. Economic growth is also essential to Chinese rulers’ efforts to prevent social unrest by delivering more prosperity for everyone. In any event in the near future, China will certainly continue to pursue policies aimed at maintaining a high growth rate of about 9%.

However, the country is increasingly encountering social problems that could be sources of political instability. These problems include growing inequality between urban and rural China and between eastern and western China, patterns of ownership (particularly in the countryside), demographic developments, migration to the cities, widespread official corruption, energy insecurity, environmental consequences of growth and the shortcomings of the financial sector. The Chinese Communist Party (CCP) is well aware of these problems, as was shown at the last session of the National People’s Congress in March 2007, but their seriousness must not be underestimated. The AIV’s conclusion is that China’s problems are more socio-political (institutional) in nature than financial and economic (policy-related). The CCP faces the enormous challenge of reforming the country’s political system without losing political control.

China: some domestic political developments (Chapter III)

Chinese foreign and security policy aims above all at safeguarding the country’s independence, sovereignty and territorial integrity (the one-China policy). The Chinese leadership is also striving to shape a propitious international environment for the country’s development and modernisation. Several major domestic factors play a role in this respect. Firstly, the CCP’s rule is currently not seriously endangered. Secondly, over the course of the past twenty years, China has been moving gradually towards accepting international human rights standards (which may conflict with old, deeply entrenched practices). However, account must also be taken of the possibility that domestic factors will give the foreign policy of the People’s Republic a sharper nationalist flavour. And full-fledged democracy is still a distant prospect.

China and the Asian region (Chapter IV)

Unmistakably China’s influence is growing in Asia. This has mainly taken the form of ‘soft power’. China emphasises its desire for ‘peaceful development’, except of course with regard to Taiwan, which it threatened with armed intervention in 2005. Nonetheless, relations with Taiwan seem to have calmed down in the past year. More generally, there are currently no developments in the region that are direct sources of instability. Although the US as the existing major power in Asia must prepare itself for a reduction in its regional power and influence, yet in the absence of regional security organisations it remains for the time being the indispensable guarantor of regional security. The emergence of the US and China as two hostile camps polarising the countries of the region must be avoided.

China at global level (Chapter V)

China aims at recognition as a global power. The problem is however that the existing system of global governance has not yet come to grips with the new reality of emerging powers, and therefore requires gradual adaptation. It would be reasonable to expand the G8 to include China, for example. China’s position in the IMF and World Bank should also be strengthened. Although this would inevitably be at the expense of the voting weight of countries like the Netherlands, the AIV considers it self-evidently in the Netherlands’ interest to promote a more accurate reflection of the new international balance of forces and therefore supports further adjustments of voting strengths.

With regard to China’s position at the UN, the AIV notes that in the past several years China has gradually been moving towards active, constructive participation, as witness its increasing role in international peace operations. While non-intervention is still a central Chinese theme at the UN, China is also visibly assuming greater responsibility for such issues as North Korea and Iran. This provides an opening to explore the possibility of strengthening other arms control regimes besides nuclear non-proliferation by involving China more closely in upholding them.

China’s military reforms (Chapter VI)

The greatest obstacle to assessing China’s military reforms is the lack of transparency on the Chinese side. Through their secrecy, Chinese leaders are themselves contributing to other countries’ uncertainty about China’s peaceful intentions. As a result, a justifiable increase in the Chinese defence budget to USD 45 billion – a fraction of the US defence budget – for a 2.3-million-strong military has fuelled an inconclusive debate about China’s military intentions. The country’s most recent Defence White Paper lays out an ambitious strategy for creating armed forces that would be capable by the mid-21st century of holding their own against the US. It is impossible to assess just how realistic these plans are. What is clear is that the Chinese navy is changing from a ‘brown water navy’, active chiefly in China’s own coastal waters, to a ‘blue water navy’, also active on the high seas. In the near term, the placement of medium-range missiles aimed at Taiwan is the main cause for concern.

External influence on China: the Netherlands, the EU and NATO (Chapter VII)

This summary began with the argument that China should be encouraged to play an active part in internationally agreed frameworks while respecting the corresponding rules of the game. The Netherlands, the EU and NATO should aim by all appropriate means to reinforce and extend cooperation with China. At the same time, any Chinese action contrary to generally accepted international principles and legal norms should be opposed. In principle the best way for the Netherlands to proceed is through international institutions, particularly the EU.

The Netherlands

While acknowledging that the Netherlands has very little scope for a bilateral policy of its own towards China, the AIV nevertheless recommends that the government contributes bilaterally as well as multilaterally, to the extent of its ability, to reducing the societal problems mentioned above about the course of Chinese society. In this connection, the Netherlands has its own specific interests: winning contracts and investment opportunities for Dutch companies and attracting Chinese investments to the Netherlands. In particular, the Netherlands must be conscious of the areas (‘niches’) in which it has something to offer China and where our country can develop an economic or cultural profile there. Take for example water, agriculture, sustainable energy, and Dutch experience with and knowledge of public/private partnerships in the fields of social security, health care and pensions. To safeguard political leadership in the conduct of policy, the Ministry of Foreign Affairs should be in permanent dialogue with the other ministries concerned. The Ministry of Defence would also be well advised to monitor the development of Chinese policy and strategy intensively and in depth and to maintain existing contacts with the Chinese military authorities.

The EU

In advancing the process of preparing China for a role as responsible stakeholder, the Netherlands should focus its efforts as much as possible on the EU. After all China cannot avoid dealing with the EU as a global economic power. In addition to promoting democracy and human rights, the EU should concentrate for the time being on its strong suit, where it has proven its ability to get results. This is ‘low politics’, the domain of economic, social and technical cooperation. The EU should also help diminish the uncertainties in Chinese society mentioned above, which could lead to unpredictable political reactions. The AIV notes with approval that EU-Chinese dialogue has again gained momentum since late 2006.

Considerable attention has been paid lately to the closer relations that China has been developing with many countries on the African continent. As its interests in this part of the world – investments, exploitation of natural resources, logistical links, loans – increase, China stands to gain more and more from a stable, secure Africa. This means that there are opportunities for trilateral cooperation between Africa, China and the EU. The AIV favours a pragmatic, businesslike approach. Cooperation should focus not so much on programmes founded on general conditions and principles as on specific projects that take as much account as possible of the different countries’ wishes and needs. A differentiated approach seems most likely to succeed in improving the local conditions in African countries.

Lifting the arms embargo

In the AIV’s view, the time has come to lift the EU’s arms embargo on China, but after the entry into force of a new, tougher EU Code of Conduct for arms exports and the conclusion of the decision-making process on the Toolbox. The Council is assuming here that China will not heighten tensions with Taiwan and that there will be no serious deterioration in the human rights situation in China. The AIV recommends that the Netherlands work actively in the EU for lifting the export ban.

In support of this position, the AIV would argue that maintaining the embargo indefinitely is a form of conditionality that does not do justice to the spirit of partnership that has grown up between the parties concerned over the last twenty years. The effectiveness of the ban can also be questioned, to the point that it has degenerated into a purely symbolic policy that does not actually contribute in any way to greater respect for human rights. Furthermore, the human rights situation in China has gradually improved since the Tienanmen Square tragedy. Finally, the political situation in relation to Taiwan now seems to have stabilised.

The great advantage of an EU Code of Conduct on arms exports, in the AIV’s eyes, is that it has an ‘equal for all’ effect. China therefore could not view it as discriminatory.

NATO

The AIV opposes extending NATO’s sphere of operations to the entire world. While the Council can sympathise with NATO’s desire to work more closely with countries such as Australia, Japan, New Zealand and South Korea – ‘contact countries’ that the alliance works with in ISAF – it also believes that NATO should not exclude any country from such relationships. The AIV therefore recommends that a formal dialogue be launched with China at the highest level, parallel to the consultations with the contact countries. Strategic consultations on China in the framework of article 4 of the North Atlantic Treaty would also be desirable to arrive at a joint policy.

The EU and the US/NATO

A stable China is in the interests of the countries on both sides of the Atlantic. The Netherlands should therefore work where possible towards a transatlantic consensus on relations with China. The strategic dialogue between the EU and the US on East Asia policy should be intensified to this end. The Netherlands could endeavour to give the question of the relationship with China a central place in the regular consultations between the EU and the US as part of the New Transatlantic Agenda.

Advice request

Ministry of Foreign Affairs                                                 Ministry of Defence
Postbus 20061                                                                      Postbus 20701
2500 EB  Den Haag                                                              2500 ES  Den Haag
Tel.: +31 (0)70 348 6486                                                      Tel.: +31 (0)70 318 8188

 

Mr F. Korthals Altes
Chairman of the Advisory Council
on International Affairs
Postbus 20061
2500 EB Den Haag
 

Date                 13 October 2006
Our ref.             DAO-0778/06

Re: Request for advice on ‘The significance of the rise of China for foreign policy’


Dear Mr Korthals Altes,

Rapid economic developments in China, and the country’s increasing prominence on the world stage, are having major consequences for international relations. China has an increasingly influential voice in global issues such as conflict management, energy supply security, the use and supply of resources, sustainable development and the promotion of world trade. The security policy aspects of China’s rise also require special attention.

Relations between the Netherlands and China are good. It is in the Netherlands’ interests to strengthen these good relations. On 13 June 2006 the government presented its policy memorandum on China, Shaping a relationship for bilateral cooperation with China, for 2006-2010 to the House of Representatives. The memorandum sets out an integrated, coherent view of China that will allow the continued concerted and effective promotion of Dutch interests.

Given China’s growing global role, the government believes that an advisory report on the meaning of its rise for foreign policy is relevant to further policy development. The same is true of advice on how the Netherlands can respond to the rise within bilateral and multilateral frameworks. The guiding principle should be the importance the Netherlands attaches to a stable, responsible, prosperous and sustainable China and our wish to contribute to this through our foreign and defence policy. The government would therefore like the AIV to produce an advisory report on two main themes, namely the significance of the rise of China for both global and security policy.

In this light, we would like to put the following questions to the AIV:

The significance of China’s rise for global policy (focusing on China’s role in multilateral forums)

China can largely thank its economic development and its consequent increased economic weight for its global political influence. Chinese policy is aimed at continued economic growth. In 2001 China joined the World Trade Organisation (WTO). This encompasses requirements to make markets more accessible to foreign businesses, which creates opportunities for Dutch businesses. At the same time shortcomings, such as in the labour rights area, need to be raised in a constructive manner.

In the Netherlands’ view, the increasing size of the Chinese economy and the country’s relative prosperity should be reflected in its playing a constructive global political role. As a permanent member of the UN Security Council, China is gradually accepting more responsibility for international peace and security. China’s foreign policy also seems more focused on active participation in multilateral forums, such as the UN and the WTO, than in the past. On occasion it still exercises caution; for example when, in its opinion, the international community goes too far in interfering in countries’ internal affairs, as in Sudan, Iran and Burma. In other cases, including North Korea, China adopts a more active stance. In this respect, China’s self-interest seems to be an important additional factor; see, for example, the relation between Chinese energy interests and the country’s position on the Sudan/Darfur question.

In recent years China has increasingly relied on global markets for oil, gas and other resources. It is generally accepted that Chinese demand will continue to grow in years to come. China's economic growth and quest for oil and other natural resources has consequences for sustainable development in other regions, particularly developing countries. Although Chinese activities are important for the economic development of the countries in question, internationally adopted development goals seem to be of secondary importance in Chinese policy. It also seems that there is no dialogue on development strategy, either with the individual countries involved or with donors active in those countries. One aspect of this problem is the fact that China makes loans to countries which are already struggling with sizeable debts, African countries in particular.

Questions:

  • What is the AIV’s assessment of China’s position within multilateral forums, with particular reference to China's position as one of the five permanent members of the UN Security Council? What are the implications of this for in particular the functioning of the UN and UN Security Council?
  • How should the Netherlands treat China as a player on the international political stage? Within the EU framework, do the Netherlands' interests differ from those of other EU member states?
  • What is the AIV’s assessment of China’s position in the WTO, and China’s adherence to WTO requirements?
  • What is the AIV’s assessment of the changes in China’s relative global economic weight, not only as ‘the workshop of the world’ (due to low labour costs), but also, increasingly, as an investor and high tech researcher? How can the EU and the Netherlands respond to these changes?
  • Can the AIV indicate whether or not (and, if so, how) China's energy and natural resources policy in the different producing regions affects Dutch and European foreign policy goals, particularly security, regional stability, good governance, poverty reduction and sustainable development? How should the Netherlands and the EU respond? On what can mutual interests be founded?
  • How can China be more closely involved in international agreements and initiatives for cooperation with developing countries? What channels can be used to achieve this? Could China’s interests in developing countries’ stability and the development of their market form a basis for intensifying contacts with development partners such as the Netherlands and the EU?

The significance of China’s rise for security policy

China’s rise raises a number of particularly important security policy questions. Its ever-increasing defence spending, the Taiwan question, the sensitivities on both sides in its relations with other countries in the region such as India, Japan and North and South Korea, and the European and transatlantic debate on relations with China all play a role.

Questions:

  • How can the Netherlands encourage China to behave as a constructive partner on the world stage in terms of peace and security, including arms control and non-proliferation? Which new or existing initiatives could help?
  • What is the AIV’s assessment of China's influence in the region, including how it relates to the US? Should shifts be expected?
  • What is the AIV’s assessment of the modernisation of China’s armed forces? Is this modernisation accompanied by the development of a new strategic vision or doctrine relating to China’s role in regional and global security?
  • What role do regional organisations such as the Shanghai Cooperation Organisation (SCO) and the Asean Regional Forum (ARF) play in China's foreign and security policy?
  • What do the abovementioned security and military aspects of China’s rise mean for regional and international security? Should this influence EU and Dutch policy and the organisation of Dutch armed forces?
  • What position should the Netherlands take in the EU on strategic dialogue with the US on China? Does the AIV believe that NATO should seek closer ties with China?

We would appreciate receiving the AIV's report by April 2007 at the latest. This deadline takes into account the anticipated evaluation of the policy memorandum’s implementation, which will take place around one year after completion.

 

Bernard Bot                                                     Henk Kamp
Minister of Foreign Affairs                                Minister of Defence

 

Agnes van Ardenne-van der Hoeven
Minister for Development Cooperation

 

Government reactions

Ministry of Foreign Affairs                                       Ministry of Defence
P.O. Box 20061                                                          P.O. Box 20701
2500 EB  The Hague                                                 2500 ES  The Hague

 

Mr F. Korthals Altes
Chairman of the Advisory Council
On International Affairs (AIV)
P.O. Box 20061
2500 EB  The Hague

 

Your ref.       AIV-069/07
Our Ref.       DAO-414-07
Date              12 July 2007

Re: Response to the AIV Advisory Report “China in the balance: towards a mature relationship”

 

Together with the Minister for Development Cooperation and the Minister for Foreign Trade, we are writing to present the government’s response to the AIV advisory report “China in the balance: towards a mature relationship”. A copy of this letter has been sent to the Presidents of the House of Representatives and the Senate of the States General.

Introduction
We would like to thank the Advisory Council on International Affairs for its advisory report “China in the balance: towards a mature relationship”. This report considers a number of issues raised in the government’s policy memorandum concerning China of June 2006, which needed to be fleshed out. These issues include security and defence policy.

The report also examines aspects of Dutch-Chinese cooperation, such as political cooperation, which have already been interpreted within the framework of the policy memorandum, but which would now benefit from further evaluation.

The government is pleased to note that the advisory report is broadly in line with current policy as laid down in the memorandum mentioned above. This policy is primarily based on the assumption that China is a country that presents opportunityies rather than a threat. Cooperation on policy, wealth creation, sustainability and social issues are central to government policy, while the Netherlands continues to call China to account in areas of which it is critical, such as human rights.

The AIV’s advisory report, which, in line with the government’s request, is aimed specifically at the significance of the rise of China for foreign policy, provides a clear picture of the different aspects of China’s increased global role and ways in which the international community can respond. The government shares the AIV's view that engagement with China should be the cornerstone of Dutch policy. The AIV also rightly notes that there is little scope for the Netherlands to develop its own bilateral policy where foreign policy and defence are concerned.

Economy
The AIV concludes that China’s domestic problems are of a sociopolitical (institutional) rather than financial-economic (policy-related) nature. The AIV questions whether China’s current leaders are ‘willing and able’ to radically reform institutional ‘practices which have subsisted for millennia’.

The AIV is also convinced that opportunities exist for the West, and particularly the European Union, to help solve potentially politically destabilising social problems through targeted cooperation programmes. These problems include the growing inequality between urban and rural areas and between the east and the west, conditions of rural ownership, demographic trends, urbanisation, widespread corruption among leaders, energy supply security, the effect of growth on the environment and shortcomings in the financial sector.

The government shares the AIV’s opinion that institutional reforms concerning legal certainty and transparency are needed, and that economic development should be tied to social reform. The Netherlands can contribute through a two-pronged approach combining targeted support from the EU and others for legal and institutional reforms, democratisation and transparency with a simultaneous intensification of bilateral economic relations. This latter would also provide an opportunity to promote Dutch values on a more practical level.

The government and business community can contribute further to reforms with specific input based on Dutch expertise. This approach can be seen, for example, in promoting corporate social responsibility (CSR). The government stresses the importance of CSR to businesses on trade missions to China, specifically supply chain accountability and responsibility. By emphasising these issues, we are paying attention to institutional practice, alongside strengthening our economic ties. Cooperation agreements in this area could be drawn up with the Chinese government as well as the Chinese business community. By the same token, the government recognises that while Dutch businesses are receptive to government influence, Chinese businesses will not be so easy to persuade. Yet it is among the latter group where the most change is needed. The recent harrowing images of slaves being freed from Chinese brickworks illustrate the point.

The government agrees with the AIV that China is lagging behind in meeting its obligation to bring its legal systems and legislation into line with WTO standards. Membership of the WTO requires China’s legislation on intellectual property to conform to the minimum standards set by the WTO TRIPS Agreement. While these standards are now generally reflected in Chinese legislation, the main problem concerns enforcement. The government holds the view that China must improve enforcement of intellectual property law and deal with violations strictly. The Netherlands believes in taking a positive and constructive approach to the issue: in October 2006, for example, the Ministry of Economic Affairs, together with Philips and the Shanghai Intellectual Property Agency (SIPA), organised a seminar on the subject. The Netherlands also offers training to local authorities to strengthen their knowledge of intellectual property enforcement. This shows that there are opportunities for cooperation with China in this area. The government believes that international cooperation, together with the fact that Chinese brands also suffer from the inconsistent enforcement of legislation, should lead to gradual improvements in the implementation of intellectual property policy.

The government recognises the AIV’s picture of Chinese economic development, including trade flows and investment. It shares the view that trade flows between China and the Netherlands must be prevented from falling, or remaining, too far below expected levels. For this reason, the government is implementing a programme-based approach to help Dutch companies develop the Chinese market. Dutch policy is explicitly tied to China’s ambition to become an innovation-driven economy.  And where there is specific Chinese demand in areas in which the Netherlands excels, bilateral cooperation programmes are being established, together with the business community and research and educational institutions. The Dutch Innovation Platform has already identified areas such as food and nutrition, biotechnology and health, and the creative sector. Efforts are also being made to attract more Chinese investment to the Netherlands, partly by promoting the country as a branch office location, but also by fostering working relationships between Dutch and Chinese companies. There are approximately 120 Chinese businesses in the Netherlands, mainly small trading representatives, but also a number of large companies. It is safe to say that in the coming decades, China will develop into one of the world’s key sources of foreign direct investment.  

Political Problems
The government broadly shares the AIV’s view of internal political developments in China and the challenges that the Chinese Communist Party (CCP) leadership faces. The government does not anticipate that the CCP’s power will be threatened in the near future, despite frequent expressions of public discontent.

The AIV rightly notes that the political system needs to be reformed so that decisions taken by the central government are in fact implemented at local level. An improved, more reliable legal system is also needed, one that ensures that everyone has equal access to the courts to assert his or her legal rights (rule of law). Without such reforms, not only are human rights not adequately safeguarded, but countless necessary measures relating to environmental protection, social services, trade and investment cannot be effectively implemented. Of course, it will be a major challenge for the Chinese authorities to achieve this level of change.

With regard to human rights, the government endorses the AIV’s analysis that the Chinese government is gradually starting to recognise international human rights standards and no longer shies away from the international debate. The human rights dialogues and consultations are primarily intended to promote tangible improvement in the human rights situation in China. However, the Chinese response to Dutch and EU concerns about specific human rights violations has not appreciably changed since the dialogues began, and China’s political will to achieve progress in this area varies. When measured against the criteria set by the EU when it established the dialogues, the human rights situation in China is mixed, without a dominant positive or negative trend. What is clear is that the Chinese government still faces a huge challenge if it is to bring the situation in China into line with international standards, in terms of both legislation and implementation.

Some progress has been made: human rights have been included in the Chinese constitution, and new guidelines have been issued regarding review procedures in cases where the death penalty has been imposed. In other areas, however, there has been no improvement, while further causes for concern have emerged. The government would point out, for example, the increasing repression against human rights activists in the run up to the Communist Party’s 17th Party Congress in the autumn of 2007 and the Olympic Games in the summer of 2008. In addition, the treatment of prisoners, the absence of fundamental reform of the re-education camp system, restrictions on freedoms of speech and religion, inadequate compliance with labour law (including union freedoms), the position of migrant workers and the situation in Tibet are all areas of ongoing concern. The Chinese authorities still have a long way to go in many areas. In this respect, the government shares the AIV’s expectation that there will be no swift ratification of the International Covenant on Civil and Political Rights. As noted above, it is important for human rights that decisions made at central government level are implemented and enforced by local authorities. This is currently only true to a limited extent, which means that legislative improvements do not always lead to actual improvement of the human rights situation in China.

The AIV’s recommendation that bilateral policy be aimed at niche areas, where the Netherlands has something specific to offer China, has been fully adopted in the human rights arena. The Netherlands supports strengthening the rule of law through the Sino-Dutch Legal Cooperation Programme. These and other activities within the framework of the Facility Strategic Activities Human Rights and Good Governance will, in keeping with the AIV’s report, be continued and where possible expanded.

China and the Asian region
China’s influence in the Asian region is unmistakably increasing, as the AIV rightly notes. The emphasis has mainly been on ‘soft power’. At the same time, the government believes that China’s military expansion will gradually influence the regional balance of power. The fact that Chinese military spending has recently exceeded that of Japan could be seen as the writing on the wall. While the government, like the AIV, does not consider that there is any immediate destabilising shift in influence in East Asia, it is important that China maintains constructive relations with the US and Japan and that it increases transparency in defence so as to avoid any destabilising shift in the future.

The situation in the Strait of Taiwan also warrants continued attention. Recent years have shown that tensions can escalate rapidly. The Netherlands continues to call on China and Taiwan, both bilaterally and through the EU, to pursue a peaceful solution through constructive dialogue, to refrain from unilateral acts which may jeopardise the status quo or be seen as provocation, and to take initiatives which will contribute toward building trust on both sides.

The AIV notes that the importance of the Shanghai Cooperation Organisation (SCO) as a regional security organisation should not be overestimated. The government agrees that China and Russia’s goals for the SCO differ and that in this respect the organisation’s importance is limited. The government nonetheless believes that certain issues which fall under the scope of the SCO, such as combating terrorism and regional stability and security, also affect EU interests. For this reason, the government shares the AIV’s view that the EU should strengthen its relations with the SCO in order to give more substance to the regional security dialogue.  The same can be said for the ASEAN Regional Forum (ARF). It is also possible that NATO will link up with the SCO eventually.

China at global level
As noted by the AIV, China’s profile at the UN has risen in recent years. It is more active not only in the Security Council but also in the UN Human Rights Council, whose role as a critical organ it has been trying to limit as far as possible.

The government agrees with the AIV’s estimate that China’s position in the various international forums should be adjusted to reflect its growing economic and political weight. Of course, this will need to be a gradual process, which should depend in part on the degree to which China conducts itself as a responsible global player, willing to shoulder global responsibilities. We may reasonably expect China to play a fuller, more active role in the WTO for example. And the government believes that membership of the G8 should be considered at the end, rather than the start, of this process. There must also be guarantees that inclusion of China in the G8 will not undermine its effectiveness. And there should be a further guarantee: that the G8 does not gradually become an alternative to the existing multilateral system in which the voices of countries such as the Netherlands could be ignored or not sufficiently heard. In such a situation, China’s inclusion in the G8 would clearly not be in the Netherlands’ best interest.

It is also time for a change in China’s position in the IMF and World Bank. In the past, China was primarily the recipient of World Bank loans, but it has since also become a substantial international donor, especially in Africa, where it has now has a major influence. The relationship between the World Bank and China should reflect this change. Harmonising the interests and requirements of the World Bank and China, as both donor and financier, therefore warrants attention. It is also important that the Netherlands encourages China to respect agreements made by the international donor community.

The AIV does not seem to consider China’s role as threatening to destabilise the Horn and the rest of Africa. It advises that solutions should be sought through EU-China cooperation. The government concurs that a dialogue between the EU and China on Africa is important and notes with satisfaction that the dialogue between Beijing and Brussels has developed in this past year. The first official EU-China dialogue on Africa took place on 15 June 2007 and the talks proved that even politically sensitive subjects could be discussed. Although China’s public stance is one of absolute non-intervention in countries’ internal affairs, the government has the impression that behind the scenes, China is now more willing to call governments to account regarding their domestic policies and is prepared to exert pressure when necessary. This can be seen in the talks between China and Sudanese President Bashir regarding acceptance of a joint UN-AU mission. China also appears to be distancing itself from the regime in Zimbabwe, albeit without openly condemning Mugabe’s government. With such moves, China seems to be recognising the necessity of accepting greater responsibility on the world stage.

At the same time, the government is of the opinion that a dialogue between Beijing and Brussels alone is not enough. In particular in the different African countries, policy talks between the international donor community and China need to be intensified. Such talks should include all donors, not only the EU, if they are to bear fruit.

It is open to question whether China’s Africa policy should be considered purely ‘Machiavellian’. The government believes that although China’s own interests play a major role, it is precisely those interests, specifically maintaining a steady supply of raw materials, that should motivate China to promote stable governments. Furthermore, due to its ambitions for greater political power, China now seems more sensitive to international pressure to step up as a responsible player on the world stage. China’s approach in these areas, therefore, appears to be a pragmatic one. It has also expressed willingness to cooperate with the EU on infrastructure projects and security sector reform, among other areas. In its relations with Africa, China has expressed a clear preference for economic development and has not yet shown much interest in genuine development cooperation (and the attendant pre-conditions of the international donor community). The government echoes the AIV’s doubts about whether the kind of trilateral cooperation supported by the EU is realistic. The Netherlands has tried this approach in the past, but these efforts have never really got off the ground.

Any comprehensive dialogue with China must include one of the key motivations behind Chinese policy on Africa: China’s increasing need for energy sources and raw materials. According to the AIV’s report, China’s approach to energy supply security is based, not on free market forces, but on ensuring supply through state-run enterprises. This includes investing in aid relationships with supplier countries. The AIV rightly notes that this approach does not offer genuine security. Nevertheless, the international community should engage with China about its energy supply concerns and, especially important, its energy consumption and the consequences for the climate. We must try to prevent China from making the same mistakes that the West has made in the past. As the AIV indicated, this could be achieved within the IEA framework, alongside other bodies. In fact, the IEA is already considering the issue of Chinese and Indian involvement and plans to invite representatives from both countries to specific meetings. It is too early to talk about entry into the IEA itself, however, as this is tied to membership of the OECD.

Defence
The government endorses the view that China should be included as a responsible player on the world stage whilst at the same time remaining vigilant and taking less positive scenarios into account. The government concurs with the AIV’s conclusion that China’s rise and the modernisation of its military are not, in themselves, grounds for adjusting the Netherlands’ military capabilities.

The government shares the AIV’s concerns regarding the expansion of China’s military and supports the need for transparency of both the army’s strategic objectives and its expansion, taken together with the continued increase in Chinese defence spending. The current lack of transparency is not conducive to regional security or stability. The government will therefore urge the Chinese authorities to make improvements in this area, in part as a confidence-building measure with respect to Taiwan.

Current military cooperation between the Netherlands and China is limited and consists solely of reciprocal visits and student exchanges. In mid-2006, a Dutch defence attaché was appointed to the Beijing embassy. Future military cooperation with China should be aimed chiefly at contributing to the responsible involvement of the Chinese army at international level, especially in UN and humanitarian missions, as well as to embedding the army in society, with special focus on respect for human rights and transparency. Possibilities include participation in seminars, training programmes and a general exchange of information. Visits from and to China, at ministerial and other levels, would be welcome. There is currently no plan for any form of technological or operational cooperation with the Chinese military.

Although the EU arms embargo against China was not a subject of the government’s request for advice, the AIV recommends that the Netherlands actively promote lifting the embargo at EU level. In the AIV’s opinion, maintaining the embargo indefinitely ‘is a form of conditionality that does not do justice to the spirit of partnership that has grown up between the parties over the last twenty years’. The AIV also questions the embargo’s effectiveness, while acknowledging gradual improvements in the human rights situation. Finally, it suggests that the political situation regarding Taiwan has stabilised. The advisory report presents two key conditions tied to support for lifting the embargo: that China does not increase pressures on Taiwan and that ‘there is no serious deterioration in the human rights situation’.

The government believes that any lifting of the EU arms embargo should be handled carefully. The government considers it advisable to engage with China as a responsible world player, fully involved in global affairs. The government thus understands the AIV’s contention that such a step may be appropriate to a mature relationship with China. The government is therefore not opposed to the lifting of the EU arms embargo, provided that prevailing conditions justify such a decision. Those conditions include the human rights situation in China, the level of stability and security in the region, and relations with our allies.

The government attaches importance to receiving a positive signal from China on human rights. This will be a key factor in further consideration of the embargo. Currently the situation is mixed, with a number of positive developments but also areas which have seen little or no progress. The AIV also strikes the government as quite optimistic about the regional situation, as discussed above. Both EU and Dutch cooperation with China have included considerable discussion of various factors that will play a role in deciding whether lifting the embargo would be desirable, such as the human rights situation and strengthening the rule of law.

The government agrees with the AIV that the EU must complete its review of the EU Code of Conduct and conclude the decision-making process on the Toolbox, as a precondition for any decision on the embargo.

In light of these factors, the government believes that developments have not yet reached a point where a decision can be taken on the embargo. The AIV’s report does not give the government grounds for amending its current policy. Most EU partners and other allies share the view that the time is not yet right to lift the embargo. As the AIV noted, a great majority of EU member states were against lifting the embargo in December 2006, and pushing for such a move now would meet with fierce resistance in Washington.

Furthermore, the government believes its current focus should be on what further progress can be achieved in the areas which will determine the context for a decision on the arms embargo, to create a situation in which the embargo could be lifted. The government considers it would be useful to start a strategic dialogue between the European NATO member states and the United States in order to agree on which technologies each wishes to protect. After all, a one-sided lifting of the arms embargo is not a viable option.

The government shares the AIV’s assessment of China’s nuclear policy, non-proliferation and arms control. The AIV’s recommendations are in line with existing policy in this area.

The government concurs with the AIV that there are currently no grounds for an operational role for NATO in East Asia. The government further supports the recommendation that NATO should initiate a formal dialogue with China at the highest level. Both recommendations are in harmony with NATO’s position that it cannot and should not seek to police the world, but that given the nature of contemporary threats, it would benefit from developing a worldwide network of partners.

NATO made overtures towards China in the wake of the attacks in the US on 11 September 2001. Since then, there have been a number of high-level visits back and forth, most recently in the week of 18 June 2007 when a NATO Assistant Secretary General visited China. Topics for discussion included regional security, non-proliferation and scientific cooperation. The government agrees that this form of dialogue could also be used to address Chinese concerns about NATO enlargement (with new members, partners or ‘contact countries’) and promote cooperation on peace operations and combating terrorism. Other possible subjects for discussion include security sector reform and energy supply security. Such dialogue can also, of course, be initiated through other channels, such as the EU.

The decision, taken in Riga, to strengthen ties with the existing contact countries is a result of the pressures of demanding operations, especially ISAF in Afghanistan, and resistance from some members to broadening the network too far. This process is limited to countries that contribute to NATO operations, whether in a military or other capacity. Yet even if the term ‘contact country’ becomes more broadly defined in the future, China will remain a special case due to the size of its population, economy and military apparatus. For this reason, the government agrees with the AIV that a channel should be created for a high-level strategic dialogue with China, as was done with Russia in the past.

Establishing a strategic dialogue at the highest level, however, will not be without its difficulties. The government envisages a number of problems, including:

  • NATO is a values-based organisation and cannot ignore the human rights situation in China;
  • Chinese security and defence policy is not transparent. NATO would need to ensure that the provision of information does not become one-sided;
  • the United States views China more as a potential threat (primarily in economic terms) than as a potential partner;
  • not all members are convinced that a NATO role here would be either useful or necessary. They consider that the EU would be more appropriate for such a role.

This last objection touches on the AIV’s recommendation that the Netherlands should initially work through the EU where general political issues are concerned. The government agrees with the recommendation, albeit for a different reason. Regardless of the US position, NATO remains a security policy forum, while the EU, and the EU in cooperation with the US, can deal with a broader range of issues in the relationship with China. The government does not consider it necessary to choose between these two forms of strategic dialogue with China, however: as long as there is mutual understanding, and provided countries in both forums hold the same position, these forms of dialogue can complement each other.

 

Maxime Verhagen                                                   Eimert van Middelkoop
Minister of Foreign Affairs                                        Minister of Defence

 

 

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