Courage, foresight needed for China-EU dialogue

In a series of meetings culminating in June, China and the European Union agreed to create a consultation mechanism aimed at renewing their mutually beneficial economic relations. Consequently, four "workstreams" were established, covering trade and investment balancing, export controls, intellectual property rights and reform of the World Trade Organization.

If successful, these workstreams will pave the way toward stable trade relations between China and the EU, which will have positive effects on the global trading system as a whole. Discussions under these workstreams will continue until October, when further decisions will have to be taken.

It would be a serious mistake if the importance of the emerging opportunity were underestimated. What is needed now is a shift in the mindset: from excessive caution to careful optimism — from the mindset of a "China Shock 2.0" to recognition of "China Opportunity 2.0".

There are reasons that justify cautious optimism. Let us consider three of them — two immediate and one systemic.

First, in September 2025, China announced that it would not seek new special and differential treatment in current and future WTO negotiations, while maintaining its status as a developing country. This decision signals a genuine willingness to build a new type of relationship between China and the developed world, including the EU.

The second immediate reason relates to China's recognition that the era of heavy reliance on exports is ending and that a different balance must be struck in the interest of its own growth. The concerns raised in some Western countries about what has been described as Chinese "overcapacity" therefore merit careful and balanced consideration, alongside China's own efforts "to generate sufficient domestic demand to absorb much more of what its factories produce".

But more is required to ensure that "shock" becomes opportunity. In his speech at the Summer Davos conference in Dalian, Liaoning province, on June 25, Premier Li Qiang proposed that "what China's technologies and products in emerging industries bring to the world is not a shock, but an opportunity; not a threat, but empowerment". The data for 2025 showed that the number of foreign-funded enterprises established in China in the fields of scientific research and technological services grew by 27.2 percent year-on-year. This means 14,000 foreign-funded enterprises, including those with investment from Europe, were established that year in China. The transformative potential of this development is substantial, and it justifies the hope for a change of mindset from "China Shock 2.0" to "China Opportunity 2.0".

In addition to the immediate, current signs of change, there is also a need to promote systemic changes in the global trading system. One of the four workstreams established by the EU and China is focused on reform of the World Trade Organization.

This looks like a long shot, since reform of the organization depends on many actors, including, importantly, the United States. However, let us not underestimate the possibility of WTO reform being carried out. It is useful to recall that the international trading system has been reformed practically every other decade since its creation in the aftermath of World War II. In the 1950s and 1960s, two successful rounds of trade negotiations under the General Agreement on Tariffs and Trade substantially reduced tariffs.

Subsequently, in the 1970s, the Tokyo Round of GATT negotiations produced a number of agreements designed to reduce nontariff barriers to trade such as state subsidies and countervailing duties. The Uruguay Round, launched in 1986 and concluded in 1994, added agreements on trade in services, trade-related investment measures and intellectual property rights. Later still, an elaborate dispute settlement mechanism was established.

This dynamic history of the global trading system should inspire the European and Chinese negotiators of all four workstreams to approach the issues with courage and foresight and produce proposals for a new, reformed global trading system. A high-level ambition for reform, commensurate with the existing needs, makes the emerging opportunity worthy of serious and determined negotiations.

The author is former president of Slovenia (2007-2012) and emeritus professor of International Law at the University in Ljubljana.

The views do not necessarily reflect those of China Daily.

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