Why Europe is ready to lift its weapon ban on China

By Daniel Dombey and Peter Spiegel

Financial Times

Published: February 10 2005

This week's first visit to Europe by Condoleezza Rice as US secretary of state had all the signs of an alliance mended: refined rhetoric on the Arab-Israeli conflict, surprising harmony on Iran and friendly remarks in France, which stood at odds with President George W. Bush's administration over Iraq.

But bubbling below the new-found common purpose is another transatlantic conflict that could stop any renewed co-operation in its tracks: China.

Largely out of the public spotlight, leading European Union members, led by France but recently joined wholeheartedly by the UK, have vowed to lift the arms embargo they imposed in 1989 in the wake of the massacres around Beijing's Tiananmen Square.

Today the issue will feature prominently when Ms Rice meets Javier Solana, the EU's foreign policy representative. The secretary of state was conciliatory yesterday, saying the Europeans "have tried to take account of our concerns . . . I do feel we are being listened to." But she has also emphasised the US's "deep concerns about the military balance in east Asia", referring to US arguments that ending the embargo could make it easier for Beijing to invade Taiwan and put the US Navy's seventh fleet in danger. "We [also] would not want to send wrong signals to the Chinese about human rights concerns."

For backers of an end to the embargo, the move would be a natural progression in relations with China. French officials note that Beijing's inclusion in the World Trade Organisation and help in bringing North Korea to the negotiating table have thawed relations and reintegrated China into the international order.

Indeed, the embargo has become a stumbling block to normalisation. One person close to the French defence ministry says that, on a recent trip to China, he was harangued on the issue at almost every meeting. Chinese officials noted that the only other countries on the EU list are true pariahs such as Burma, Sudan and Zimbabwe. Even North Korea is not on the list.

For the Americans, however, such a move is heresy. A China armed with weapons technologies from Europe facing American forces in the South China Sea, they argue, could forever change the post-cold war geopolitical order.

The UK plays down such fears. "British soldiers are currently fighting side by side with their American allies," says one Whitehall official. "I would be astounded if that fact was brushed aside because of the replacement of an ineffective embargo by real restrictions on exports."

Yet a recent Central Intelligence Agency assessment argues that growing links with China could eventually shift EU allegiance away from the 60-year-old transatlantic status quo: "An EU-China alliance, though still unlikely, is no longer unthinkable."

Despite the objections and alarm, the EU is expected to lift the embargo by midyear. Some in the Bush administration, particularly in the White House, have become resigned to the fact and have been working with the EU towards a face-saving solution.

Jack Straw, the UK foreign secretary, argued in an interview with the Financial Times last month that the arms embargo dispute was merely a "presentational problem". To him, the Americans had not yet understood that the cure could be better than the current state of affairs.

China hawks within the US administration find such arguments hard to stomach. One senior Pentagon official argues that the move is a cynical ploy to open doors to European industry and that, even if arms sales remain limited, the EU is tossing aside more than a decade of human rights concerns for economic gains.

Lift the embargo, some Bush administration officials warn, and the US will curtail military technology co-operation with European allies. The US administration has been advocating more opening of such technology transfers, particularly for the UK, despite an increasingly reluctant Congress. Last week the House of Representatives supported a resolution condemning the potential EU move on China by 411 votes to three.

The EU says a revised code of conduct will be put in place when the embargo is lifted. In December leaders of the 25 nations "underlined that the result of any decision should not be an increase of arms exports from EU member states to China, neither in quantitative nor qualitative terms". The new provisions, to crack down on arms brokering and software transfers, will be accompanied by a transitional regime to improve transparency for arms exports licences.

Privately, EU officials admit that trade and investment considerations are behind the arms embargo moves. The EU rivals the US as China's biggest trading partner, with two-way trade of €135bn ($173bn) in 2003. European companies are keen to do more business in what is set to become the biggest economy in the world. EU leaders know that favourable gestures towards Beijing can only help the private sector's case. Each EU member state also knows the potential economic cost of being seen by China as the country that stopped the embargo being lifted.

When the EU arms embargo on China was announced in 1989 the European Community, the EU's predecessor, had no formal foreign and security policy. The decision was taken along with other temporary steps, such as suspending bilateral ministerial contacts and reducing scientific and cultural co-operation. There was no formal mechanism to govern the embargo enforced by member states until 1998, when the EU introduced a code of conduct to regulate its arms sales to the rest of the world.

The EU has never agreed to make the code of conduct legally binding. Instead, the rationale is that the increased transparency it establishes for member states' arms sales will ensure they abide by its other provisions, such as taking account of human rights, the security of friends and allies and regional stability.

EU officials say that by treating China as a respected interlocutor, they can encourage it to act as a partner on issues of global governance. They also expect Beijing to ratify the International Covenant on Civil and Political Rights, one of the main United Nations human rights treaties, in the near future. That should pave the way for greater international scrutiny of China and allow the EU to claim a concrete result from its policy of engagement.

China has frequently declared that it has no intention of buying weapons from Europe, the European officials add. Thus the end of the embargo would principally serve to show that the EU does not discriminate against Beijing but treats it on a par with nations such as Russia.

In some quarters of the Bush administration, however, these arguments cut no ice. If the move is purely symbolic, why do it, they ask - particularly given China's human rights record. Moreover, a tougher code of conduct would still have significant loopholes, they say, including the fact that it would remain voluntary. "The EU has made a nice statement of intent [not to increase arms sales]," says one US official. "But where's the beef? How is that going to stop people who want to sell?"

Recent history does not bolster the EU's case. Indeed, even some EU officials acknowledge that the EU's vow not to increase sales is barely credible, since both the embargo and the code of conduct have been varyingly and erratically applied by member states.

Although there are no full figures on completed arms sales, the EU's own annual reports on the code of conduct show that the value of licences for arms exports to mainland China increased from €54m in 2001 to €210m in 2002 and €416m in 2003. France, Italy and the UK, the EU's main arms manufacturers, accounted for almost all of the sales.

European arms manufacturers have been among the biggest backers of lifting the embargo. BAE Systems, which has arguably the most at stake (it is the largest foreign customer to the Pentagon, and any US retaliation could hit it particularly hard) says it backs the UK position, arguing that a new code of conduct will make arms sales more transparent. Privately, executives in continental Europe are less restrained. One recently cited China as a strong market if the embargo were lifted.

Still, it is not clear that any change in the embargo's status would lead to a spate of weapons sales. In Germany, for instance, Mr Schröder's parliamentary Social Democrats made him promise that Germany would not export weapons to China after the embargo ended. Yet France in 2003 granted licences for exports to China of €2m of bombs, torpedoes and rockets, €279,000 of chemical and biological toxic agents, tear gas or related products, €43m of military aircraft and €98m of electronic equipment for military use.

US officials worry that loopholes in any new regime would allow China to acquire subsystems and technologies to make their weapons far more accurate and deadly.They say they are most worried about high technology items that China cannot obtain from its traditional Russian suppliers.

Beijing is clever at finding loopholes, says a Pentagon official. "The Chinese are not going to buy fighter aircraft. They're going to look for software and command and control, things that improve the quality of their systems."

Last week, the Republican Policy Committee circulated a paper compiled by John Kyl, an Arizona Senator, which warned that "if . . . the EU ignores US security concerns, the US will once again be forced to reduce its reliance on collective institutions such as the EU and UN".

Congress is threatening to restrict technology transfers to EU countries by denying export licensing exceptions. Mr Kyl's paper added that the US should consider reviving Cold War-era export controls.

European officials say that such a response shows a lack of understanding of the nature of the embargo, which was never intended to block technology exports. Some Europeans also point out that the US's ally Israel has a history of selling Beijing arms, and claim that the transatlantic battle over the embargo is part of a no-holds-barred fight for Chinese contracts.

The hope in the EU's main capitals is that informal consultation with the US and Japan on what the EU sells China will prevent sensitive technology transfers and defuse the dispute. But this could underestimate the strength of feeling in the US.

US officials complain that the EU is acting irresponsibly towards a part of the world where it has few real interests of its own, but where the US's global role leaves it directly exposed.

The consequences of a rift in the west over the embargo, so soon after the Iraq war, could go much further than the defence industry. "If China is able to split the US and Europe, it is in the interest of China and not in the interest of the US or Europe," Wolfgang Schäuble, foreign policy spokesman of Germany's opposition Christian Democrats.

The risk is that the EU's decision, impelled by economics, and compounded by mutual misunderstandings over arms and technology exports, could bring such a rift into being.

• The EU wants to make relations with China less awkward by ending an arms embargo in place since 1989

• The EU rivals the US as China’s biggest trading partner, with two-way trade of E135bn in 2003

• The value of EU arms export licences to China was E416m in 2003, in spite of the embargo

• The EU insists lifting the arms embargo should not mean an increase of arms exports from EU member states to China

• The US worries that loopholes could allow China to obtain technology that could be used on the battlefield

Additional reporting by Guy Dinmore and Demetri Sevastopulo

ASIAN NEIGHBOURS LOOK BEYOND SYMBOLISM

Beijing has been careful to present the issue of the European Union’s arms embargo as one of symbolism rather than substance.

Scrapping the export ban would not lead to any rise in arms sales, Chinese officials say, while keeping it in place would undermine the healthy development of the Sino-European “strategic partnership”.

For some of China’s neighbours and for the US, however, ending the ban is much more than a matter of mere form.Officials in Washington, Taipei and Tokyo are concerned that lifting an embargo imposed after the 1989 massacre of demonstrators around Beijing’s Tiananmen Square will accelerate China’s emergence as a military power.

There is no doubting China’s determination to turn its 2.3m-strong People’s Liberation Army into a modern and effective fighting force, or its willingness to go shopping abroad for the advanced weapons and technologies it lacks.

Over the past decade Beijing’s biggest purchases have come from Russia, which accounted for 90 per cent of the estimated $20bn in arms sales to China from former Soviet Union states since 1991, according to a US defence department report last year.With sales from Israel - China’s other big high-technology weapons supplier - vulnerable to US pressure, there is little doubt Beijing would like to reduce its dependence on Moscow.

The official World News Journal recently noted that China was unable to take advantage of a glut in the global arms market that had strengthened other buyers’ hands. “China can only sheepishly accept a sellers’ market and let Russia have a banquet for one,” it said.

Lai I-chung, an international relations analyst at Taiwan Thinktank, says that even if scrapping the embargo did not result in immediate additional EU weapons exports to China, it would give Beijing more leverage in its negotiations with Moscow.

“Russia will possibly agree to sell cheaper, and thus China will be able to purchase more weapons for the same money,” Mr Lai says.

Concern in Taiwan about China’s increasing military power is understandable, since Beijing backs its claim to sovereignty over the island with threats of war and analysts warn that Taipei’s superiority in training and advanced weapons is eroding fast.

Beijing’s latest defence policy paper, released late last year, took pains to stress its commitment to regional stability. “China needs a peaceful international environment for its own development,” it said. “China will never go for expansion, nor will it ever seek hegemony.”

But the same paper also lists “stopping separatism and promoting reunification” as the top goals of Beijing’s national security policy. “Should the Taiwan authorities go so far as to make a reckless attempt that constitutes a major incident of ‘Taiwan independence’, the Chinese people and armed forces will resolutely and thoroughly crush it at all costs,” the paper said.

Such threats provoke little reaction from European leaders, who have never shown much interest in backing Taiwan against its giant Communist neighbour, but they are taken seriously in Washington and Tokyo. Not only is Taiwan an important trading economy and a poster-child for liberal democracy in the region, it also guards a vital sea-lane linking Japan to its western markets and Middle Eastern oil suppliers.

Concerns that Beijing might use force to end Taiwan’s half-century of de facto independence have prompted US and Japanese defence planners to revise guidelines on military co-operation to include possible crises involving the island. They have also helped to fuel a disquiet about China’s growing power among Japan’s policymakers and public that was demonstrated last year by Tokyo’s unprecedented decision to name its neighbour in a defence review as a country requiring “careful scrutiny”.

Japanese concerns have been exacerbated by Chinese exploitation of undersea gas reserves contested by Tokyo and by the discovery late last year of a Chinese submarine deep within Japanese waters.

Any move to lift the EU arms export ban would be of concern to “all east Asian countries”, Nobutaka Machimura, Japan’s foreign minister, told Jack Straw, his UK counterpart, last month.

Officials in Taipei are much blunter. Chen Tan-sun, Taiwanese foreign minister, warns that China could grow into an “evil power” if its rise is not handled correctly. “History has shown in the case of Nazi Germany that appeasement does not work,” he says.

Mure Dickie and Kathrin Hille