Trade occupies a special place in international relations and it is at the very top of priorities. It is not only an exchange of goods and services, but also an opportunity to develop peace, prosperity and improve living standards. Today, the money is a new weapon in achieving relative or absolute gain, and diplomacy is a new territory. It is of great importance to maintain continuity in the continuous search for solutions for successful cooperation and balance of international relations. Since international cooperation is of great importance for the leading economic powers, it is especially important for developing countries. Not only for the sake of profit and success in inter-trade relations, but also for the sake of maintaining peace and improving living standards. The need for trade analysis in this direction stems from the fact that existing theories do not provide a complete picture on the basis of which we could understand the essence of the behavior of this trade relationship, with the aim of tracking global trends. To understand precisely this interdependent and causal trade relationship, we will perform an analysis with a paradigm consisting of three essential units that make up the theory of international relations: institutionalism, liberalism, and constructivism. None of these theories alone fully explains the whole we need, so we will consider all three theories as one paradigm to identify the precise engines of this relationship.

The European Union and China are building their trade ties, as both sides point out, with mutual respect and understanding. The economies of the European Union and China are the two largest in the world. China is the EU’s second largest trading partner after the United States, while the EU is China’s largest trading partner. In 2013, the EU and China, in order to further strengthen economic ties, launched negotiations on an investment agreement. The aim was to provide investors on both sides with predictable and long-term access to their markets and to protect their investments. The trade relationship between China and the EU is best understood in the context of the general balance, rather than from a narrow bilateral perspective. EU-China trade and investment ties are very important to both sides. China’s growing domestic market and economic weight represent significant business opportunities for European companies, while the EU allows China to market their goods.

Bilateral relations between the European Union (then the European Economic Community) and the People’s Republic of China were established in 1975. The relations meant focusing on cooperation in the field of peace, prosperity, sustainable development and mutual exchange. The involvement of international economic institutions in defining world trade plans has been particularly visible in the last three decades. Today’s dominant international economic institutions, the World Trade Organization (WTO), the International Monetary Fund (IMF), the United Nations Conference on Trade and Development (UNCTAD) and the Belt and Road Initiative (BRI) are part of the platform on which the EU and China base their cooperation, significantly influencing the overall global trends.

After the fall of the Berlin Wall and the collapse of the bipolar world, a new order was created in which relations are still defined. The new situation provides various actors with the opportunity to contribute to the definition of new relationships, but it also provides many challenges in the traditional understanding of behavior. States have no more longer an exclusive role in shaping international relations. Today, the creation of overall relations in the world is increasingly influenced by various actors, namely domestic and international economic institutions, various multilateral organizations, large international corporations, the media, the Internet, non-governmental organizations, etc. All of them play a significant role in defining both trade relations between countries and between various blocs of countries. Given the presence of these different actors, who have different goals and interests, the process of making many political decisions on the global stage is highly dependent on these players.

Organizations in the theory of international relations

The study of international relations began as a theoretical discipline with the publication of two basic texts: The Twenty Years Crisis (EH Carr’s, first published in 1939 and Hans Morgenthau’s, Politics Among Nations), first published in 1948. Each of these articles sets out the essence of international politics to understand general patterns and procedures, as well as the struggle for power. Both sought to clarify the nature of misunderstandings in international politics. Belief in the struggle for power and the pursuit of personal interests could be replaced by a common objective improvement of security for all.

Much of the theory of international relations focuses on the interests of states as one of the main causes of cooperation or conflict. Interests, like power and security, are understood in their most realistic form when they are built by socialization in international organizations or when they are achieved as relative or absolute gains. As for the relationship between international organizations and the expansion of power, opinions can be divided into two schools. The first tells us that international organizations are conservatively designed to freeze existing configurations of power. If they do their job, then they don’t spread power. The second is that international organizations are expected to pluralize power. The world consists of radical inequalities of power, with some states having absolute profits and others lacking. International organizations are necessary for global governance, as they help to level the playing field by giving the weak the opportunity to vote as well as neglected issues to be addressed. Both directions are right, international organizations can be defenders of power and agents of reform. The center of Martha Fennimore’s research is classical international organizations. Fennimore turns to a constructivist approach in international politics, arguing that understanding what states want requires insight into an international social structure in which states are embedded in dense networks of transnational and international social relations that consistently shape their perceptions and preferences. The focus is on international organizations as one important component of social structure and exploring the way they redefine state preferences. Cecil Landau Heftel, on the other hand, conducts a detailed study of the precise characteristics of international organizations and explains the extent to which they mitigate the conflict. In the meantime, there has been a spread of institutional theories and their application. At the very beginning, there were discussions about institutions between (neo) realists and (neo) liberal institutionalists about whether institutions are important at all and what can be important. Realism, which became increasingly important during the Cold War, focused attention on the distribution of state power and argued that institutions were epiphenomenal roles of power and interest.

In this regard, patterns of institutional change and stability will be explained exogenously by changes in the distribution of power. Liberals argue that patterns of interdependent preferences are among the most important structures that influence state behavior. For liberals, peace is the normal state of affairs: In Kant’s words, peace can be eternal. Natural laws required harmony and cooperation among people. War is therefore both unnatural and irrational, an artificial invention, not the product of some peculiarity of human nature. Liberals believe in the progress and perfection of the human condition. Through their faith in the power of human reason and the ability of human beings to realize their inner potential, they remain convinced that the stain of war can be removed from human experience.

Free trade – the end of the war?

Free trade was a more peaceful means of achieving national wealth, according to the theory of comparative advantage, any economy would be materially better by than striving for nationalism and self-sufficiency. Robert Keohane argues that the ability of states to communicate and cooperate depends on man-made institutions, which have developed differently throughout history and in different political contexts. Free trade would break down divisions between states and unite individuals in one community. In 1848, John Stuart Mill also argued that free trade was a means to an end to the war. Trade would create relationships of interdependence, which would foster understanding among people and reduce conflicts. Liberals believe that international institutions play a key role in cooperation between states. While emphasizing the growing importance of international organizations and multinational corporations, this theory is said to have predicted what is known today as globalization. Robert Keohane and Joseph Samuel Nye argued that in the era of interdependence, the very nature of international relations had changed and the world had become more interdependent in everything, especially in economics. This theory attempted to synthesize a realistic and liberal perspective. It did not completely reject realism, but tempted us by the fact that sometimes certain situations arose in which the assumptions or explanations of the realists were not sufficient.

Keohane sought to synthesize a liberal and structural direction by which he intended to create a perspective for explaining the role that international actors play given their influence on the behavior of states. Keohane basically disagrees with Kenneth Neal Waltz’s idea that states rely only on the means they can create and the arrangements they can make for themselves. Keohane recognizes the exact degree of anarchy in Waltz’s sense, but not that a system of anarchy inevitably leads to states predisposed to conflict by acting solely out of self-interest and profit. In constructivist thought, norms and rules are conceptualized as constraints. If we do not notice limited behavior in a particular example, we cannot conclude that rules and norms are out of place. Therefore, power can be understood as a social relationship, not as a more primitive notion of resources, because power can be embedded in social understandings and practices.

A key element of constructivism is the belief that international politics is shaped by compelling ideas, collective values, culture, and social identities. Constructivism argues that international reality is socially constructed using cognitive structures that give meaning to the material world. The earliest emergence of constructivism in the study of international organizations and global governance stemmed from the application of Grotian traditions in the study of world politics, mainly among students of English schools such as Hedley Bull. The international order in this tradition is based on rules, supplemented by Roman ius gentium and existing contract law. Barbara Koremenos argues that early institutionalist literature, beginning with Setphen D. Krasner in 1982 and Keohan in 1984, had to wage a difficult battle over whether international institutions mattered, given a more thorough discussion of the possibility of cooperation. Prominent realists Joseph M. Grieco and John Joseph Mearsheimer argued that states’ concerns about relative gain and their position in the international system greatly hamper the prospects for international cooperation. In contrast, institutionalist theory emphasizes the possibility of an absolute gain from cooperation, that is, cooperation could be shaped as a positive sum rather than a zero sum of play. Abramo Fimo Kenneth Organski  in his book World Politics argues that a nation can increase its power by making the right choice of allies. If the new modern age is outside the terrestrial institution, institutional cooperation would increase world peace and enable conflict avoidance. Robert Glipin in his book Global Political Economy, Understanding the International Economic Order argues that any belief in free trade is superior to trade protection. The era of free trade lasted for thirty years from 1846 to about 1870. The impending wars and the Great Depression in 1930 led to the need to find solutions in the sustainability of peace and prosperity, and in 1993 to major market liberalization with new rounds of trade negotiations.

Sino – European Trade Relations

EU – China relations have far surpassed the comprehensive strategic partnership defined in 2003. Mutual relations were also regulated in the EU-China Agreement on Trade and Cooperation in 1985. A comprehensive investment agreement between the EU and China has been negotiated since 2014. Finally, in January 2021, Brussels announced the EU-China Comprehensive Investment Agreement: Milestones and Documents, which seeks to define cooperation between the two economies.

EU – China 2020 Strategic Agenda for Cooperation was adopted in 2013. Given the changes in the EU and China, joint communication on the elements of the new EU strategy on China was adopted on 22 June 2016. This overall shift has led the EU and China to think about how to deepen the range of bilateral economic relations – strengthening trade and investment, promoting cooperation in climate change, energy, environment and global governance, cooperation in science, technology, innovation, infrastructure, financial services and participation in human exchange. At the level of global governance, the Sino – European Strategy focuses on finding common solutions to global challenges such as climate change and environmental challenges, migration, humanitarian crises, promoting effective multilateralism and an international order based on rules and respect for international rights and universal values. The EU is China’s largest trading partner, and in 2020, China overtook the United States and became Europe’s largest trading partner. On December 31, 2020, the European Union announced that negotiations on a comprehensive investment agreement have been concluded and the agreement is awaiting ratification in the European Parliament. The agreement is seen as a significant step towards market liberalization in China and the most ambitious agreement China has ever concluded that results in a significant opening of its internal market to EU companies. Certainly, China and the EU are facing a series of challenges in 2021 and the years to come, and the most sensitive challenge is in the field of human rights. International economic institutions are one of the most important factors in the development of the world community and the flow of goods, people and capital, but also the sustainability of peace in the world. The European Union and China are aware of the importance of economic institutions in the development of their relations and have started mutual elaboration and upgrading. Institutions have played an important role in shaping Sino – European relations, both in diplomacy and in trade. Aware of their mutual importance, they are ready to continuously find new and upgrade existing strategic solutions. Even bilateral relations are now at the highest level through the annual EU – China summit, and as a result of recent meetings, China expects to strengthen cooperation with the EU in the fields of education, science and technology, culture, media, youth development, women and tourism. Mearsheimer’s conclusion that institutions have very little impact on conflict mitigation, or Kohene’s response that in fact institutions operating on the basis of reciprocity will be part of any lasting peace, are only part of this great discourse of the importance of the role of international economic institutions.