It is hard to believe that the trade volume of US$177 billion between China and the European Union (EU) last year was achieved based on a simple four-page document signed in 1985.

But this is likely change soon as both sides are expected to kick off negotiations on a new generation partnership, possibly within the year.

A comprehensive agreement to govern bilateral relations will be inked to replace the old one signed in 1985 between China and the EU's predecessor, the European Economic Community, says Philip Bartley, EU co-director of the EU-China Trade Project.

"It (the present document) just reflects the main relationship at that time," he says. It is no longer big enough to cover all aspects of relations between China and the EU, and both sides are calling for a new agreement with larger scope and more flexibility.

The Chinese side initiated the move two years ago. The new partnership it envisaged is expected to include all elements of co-operation between the EU and China, including economic, social, political, scientific, technological and legal aspects.

"It will not be a trade agreement, but will involve a range of issues," says Li Zhongzhou, the leading World Trade Organisation (WTO) expert of the EU-China Trade Project, a trade-related technical corporation programme supported by both the Chinese and EU governments.

Li says that the topics in the negotiations will include dialogues ranging from general topics of a political and economic nature to co-operation and policy discussions. Also on the agenda are exchanges on technical issues such as the protection of intellectual property rights (IPR), trade disputes and environmental protection policies.

Bartley says progress has been made within member states of the European economic bloc and in the Chinese Government to start negotiations for the next generation partnership. But he admitted that it might take a long time to finish the negotiations. "Probably a few years," Bartley says.

"It is complex because the EU has 25 member states and China has a considerably large bureaucracy."

He explains that the negotiations are a step-by-step process and are not something that can be decided upon quickly.

"The new agreement will reflect the maturing partnership between China and the EU," Bartley says.

The new agreement, which is to be reached at the highest political level, will strengthen both bilateral and multilateral relations between the EU and China.

"It will be the laws of relationship," Bartley says.

As an improvement of the 1985 trade and economic agreement, the new accord will also undoubtedly facilitate bilateral trade and investment. In fact, it is expected to cover all aspects of these issues.

"Although the EU has become one of the major foreign investment sources for China, we would also expect for more investment flow from the country as Chinese companies are maturing and growing stronger," Bartley says, adding that it is already happening.

"It will increase the European engagement with China," he concludes.

The two sides will carry out a number of projects and programmes under the new partnership covering political, economic and scientific issues.

"In fact, the two sides have added a number of dialogues and agreements to the original document," Bartley says.

The added agreements helped them to extend the Sino-EU relationship to much broader areas, including the Galileo project (a co-operative satellite navigation initiative), a tourism memorandum of understanding and a maritime agreement.

Meanwhile, Li believes that closer EU-China co-operation can even make a contribution to the World Trade Organization's (WTO) Doha round of negotiations.

"Although WTO members dropped several topics, China can still co-operate with the EU in areas such as investment, trade facilitation, competition and government procurement," he explains.

Li adds that a promising generation of partnership between the two major world economies is also expected to please the world community as a whole.

The experts predict that besides boosting the overall EU-China relationship, the agreement will also create a better environment for specific companies in both regions, which promises to hold both opportunities and challenges.

"Companies should pin more importance to the situation so as to adapt themselves to it," Li says. "They should have a global perspective instead of just eyeing the domestic market."

He hopes that Chinese enterprises will become active participants in global business activities even as the Chinese market opens to foreign competition.

Bartley is pleased that many companies acknowledged the changes and are preparing for them.

"With the increasing awareness of the EU-China relationship, many EU companies are repositioning their businesses," he says.

Enterprises will be more confident about working under political guidance, he adds.

"The agreement will make that (the strategic opportunities and impacts) clearer and encourage enterprises to adapt to the changes."

Li says the world has changed dramatically since the two parties signed the present agreement in 1985. "So have China and the European Union."

There was no WTO in 1985. At that time, the General Agreement on Trade and Tariffs (GATT) focused exclusively on trade issues.

In fact, China signed the 1985 trade and economic agreement with the EU's predecessor, the European Economic Community, when the European economic bloc had only 10 members and China was in its earliest stages of reforms.

Over the past several decades, the Sino-EU relationship has developed quickly.

When they first established relations in 1975, trade volume between the two economies was only US$2.4 billion.

Things have changed dramatically since then. In 2003, China and Europe set a trade target for 2007. They achieved it within a year, topping US$177.3 billion. China's exports to the EU hit US$107.2 billion in 2004, while the country's imports from the EU stood at US$70.1 billion.

"The EU-China relationship should become the most important relationship in the world," Bartley says.

Perhaps it already is. In 2004, the EU actually replaced the United States to become China's largest trading partner.

The two economies are always eager to find mutually acceptable solutions to conflicts between them. A recent disagreement over textile imports that lasted from April to June provides a clear example.

The United States and several other countries had imposed limitations on Chinese textile and garment imports. The European Commission, the EU's executive body, chose to solve it through active negotiations and consultations with its Chinese counterpart.

The two sides eventually reached an agreement allowing Chinese textile exports to the EU to grow at specified rates.

"The EU has always been supportive of China's integration into the world economy," Bartley says.