EU Arms Embargo on China: A Frozen Opportunity?

During the last EU-China summit, Chinese premier Wen Jiabao strongly urged the end of the arms embargo, imposed on China after the Tiananmen crisis in 1989. Wen said, among other things, the following words: „On the issue of lifting the arms embargo on China and recognising China’s full market economy status. We have been working hard for ten years but the solution has been elusive. I deeply regret this.“

If we look into the history, there were many attempts to lift the embargo, but every single one failed. We can ask several important questions: What the embargo means for China? Who is for and who is against the embargo, and how big would the opportunity for European companies be in the event that the embargo is cancelled in the near future?

To answer the first question, the European arms embargo is, in the first place, a symbol and sign for China. The more than 20-year-old sanction is no longer an adequate measure for today´s Chinese reality. In one of his statements, Wen Jiabao even said that China would not buy European arms if the embargo was lifted. Of course, China would especially welcome European advanced arms technologies, but Beijing has proven that Europe and the United States (which has also imposed an arms embargo on China) can´t stop Chinese armament and the technology boom. In this point of view, it is important to say that an arms embargo imposed by the most technologically advanced actors – the USA and the EU – can have, and in the case of China actually has, paradoxically counterproductive effects. The Chinese arms industry has been forced into massive investments in research and development and can now produce modern weapons without foreign assistance. Even more dangerous, in the future newly developed Chinese weapons may be as effective as their Western counterparts, but unknown in the United States and Europe.

Moreover, besides its own research and development, the Chinese arms industry utilizes the dual use of civil technologies as well as imports arms, heavily from Russia, to help overcome the technological gap. In official documents, Beijing sets an ambitious target to catch up with the most developed armies by 2020. It is also important to note that even some European countries, such as France, supply China with arms. According to the SIPRI database, France is the second largest arms exporter to China after Russia.

Now I will answer the second question about who is for and who is against the embargo. Naturally, China is strongly against it for several reasons. First, it perceives the sanction as large political discrimination. Second, China wants to benefit freely from the European technological advantage in the arms industry. Third, as the sanction is viewed as a grievance, it is one of the main obstacles to deepening the cooperation between China and the European Union, from the Chinese point of view.

Since the imposition, stronger voices have grown in Europe demanding the cancellation of the embargo. The first of these occured in 1997. In the following years, states such as France, Spain, Greece, the Czech Republic and some others labeled the embargo as „outdated“ and showed a willingness to talk about its cancellation. This stance was sometimes used to win the favor of Beijing for potential future business cooperation. It is not a surprise that one of the most active European actors in the efforts towards the embargo cancellation was France, which was the second biggest arms importer to China (as mentioned in the previous section).

Of course, not every European country was willing to agree with the cancellation of the embargo. Notably, Germany and Sweden have been in opposition of the efforts of France and Spain, calling for the improvement of human rights in China.

Nevertheless, the main supporter of the preservation of the embargo does not reside in Europe. The United States of America seems to be a key player in this issue. One of the reasons to preserve the embargo, given by Washington, concerns the fact that arms transfers would potentially destabilize the situation in the South China Sea and diminish Cross-Strait relations. As the United States has its own strong interests in this area, it is obvious that they want to avoid the possibility of facing advanced European arms in a potential conflict. Last but not least, human rights organizations and activists have to be taken into consideration as another important actor that opposes the lifting of the embargo. Members of this group often argue that lifting the embargo would send the wrong signals to Beijing about the importance of improving human rights policies.

At this point I will examine the last question, whether the European arms embargo imposed on China could be perceived as a frozen opportunity for EU-PRC relations, the European economy and the European arms industry, in particular.

The Chinese arms industry has been strongly reformed in the last twelve years. Despite the introduction of these reforms, this industry showed long-term loss. The situation changed in 2007, when it showed a sharp rise in profits. One year later, another important measure came into force. The Chinese arms industry was opened to foreign investment in an effort to reduce its significant dependence on the state, through wide scale foreign and domestic investments. What is more important, since the beginning of the reforms, the Chinese military budget is on the rise with a steep upward tendency. Between 2000 and 2012, the budget almost tripled, now worth approximately $ 106.4 billion, according to Chinese government. According to different NGO´s, the budget is even higher.

Apart from the impact on the mutual relations between the EU and the PRC, which may be questionable due to the long term growth of bilateral trade, it is clear that the real impact of the embargo lies strongly on European arms industry companies, which have limited opportunities to profit from China’s vast military budget. Chinese ambassador within the EU Song Zhe has spoken similarly, stating that: „It doesn’t make any sense to maintain the embargo … With it [in place] we will develop our own arms even faster. So, at the end of the day, it is the [arms] companies in Europe that are losing out.“ On the other hand, as the Chinese arms industry was forced to develop independently, and now has a solid basis including its own research, the opportunities for the European arms industry are declining day by day, proportionally with the Chinese development. According to the SIPRI analysis, China has become less dependent on arms import in recent years.

Summing up, it is very important to say that most of the experts agree on the fact that the European embargo is largely a symbolic element which cannot stop Chinese armament and does not influence Chinese attitudes towards human rights. Thus, although some experts such as Richard Wietz still argue for maintaining the embargo, these voices come mainly from the United States and human rights organizations. As there are no indicators that the embargo will be lifted in the near future, we can henceforward call the Chinese arms industry a frozen opportunity for European economies and firms.

Jiří Suchánek

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