LEGITIMATE INFLUENCE

Is there really a ‘union’ in the EU-China relations?

Today the 21st EU-China bilateral summit is taking place in Brussels. Li Keqiang, Premier of the State Council of the People’s Republic of China is received by Donald Tusk, European Council President and Jean-Claude Juncker, European Commission President, who co-host the summit. Since the EU and China established formal diplomatic ties in 1975 the EU-China relations encompass an annual summit. Based on the previous one in July 2018, where a joint statement was signed – reaffirming the Leaders commitment to deepening their partnership for peace, growth, reform, and civilization-a similar outcome could be expected now.

However, issues related to fair competition, equal market access, free trade, intellectual property rights or obligations as a member of the World Trade Organization endanger the agreement. The last EU28 ambassadors’ meeting on April 3 brought to light that negotiations to draft a joint summit statement have been “slow and difficult”. And of course, some of the latest Chinese investments, Huawei security issues, Italy’s plan to join China’s Belt and Road Initiative or 5G development are topics that have been overflying the debates these weeks, while China has been touring Europe seeking its preferred bilateral deals, instead of a united European front. Moreover, China, considered a systemic rival promoting alternative models of governance, could now be prioritizing an agreement with the United States of America.

Not too long ago, Europe’s attitude towards China’s rise could be almost described as indifference and carefreeness: China was not perceived neither as a threat nor a rival. But its economic power and political influence skyrocketed last decade as the European Commission recognized in a strategic communication last March. Recently, both sides have shown their commitment to open trading relations. China and the EU are two of the biggest traders in the world: the EU is China’s biggest trading partner and China is the EU’s second-biggest trading partner behind the United States. However, the relationship is not really on an equal footing: practices such as subsidized dumping create prize distortions and sectors such as telecoms, finance, or logistics, are restricted to foreign investors in China but open to Chinese investors in the EU. In 2016, the EU adopted a new strategy on China mapping out the European Union’s relationship with China for the next five years and, already in 2013, an EU-China Investment Agreement started being prepared, which is central to the EU-China 2020 Strategic Agenda for Cooperation setting the EU’s long-term bilateral relations with China. China joined the WTO in 2001 and agreed to reform and liberalize its economy. What is expected from these agreements? Reciprocity, a level playing field and fair trade and competition across all areas of cooperation. For the EU, market barriers, industrial subsidies, technological leadership or transfer of technology to China are friction points.

However, there has been no progress at all on three main agreement of the last summit: a working group on reforming the World Trade Organization, more favorable respect for geographic indications and civil aviation, according to what Juncker said in a March summit.

Moreover, the recent rise of Chinese political influence and of Chinese giants like the world’s largest supplier of rail transit equipment CRRC or the multinational telecommunications equipment and consumer electronics manufacturer Huawei which are taking over European companies’ place  as the world’s biggest companies awaken the need for a EU reaction: some argue it is necessary to change existing competition rules to promote the creation of European champions (the Siemens-Alstom railway-operations merger which could have given way to the creation of a European champion  Siemens AG (Germany) and Alstom SA (France) Siemens-Alstom was blocked by the European Commission) whereas others favour boosting cooperation with China in aspects such as the development of 5G.

Nevertheless, some European countries refuse to see the need to act jointly and they act instead as independent atoms: Italy was eager to join the so-called modern-day Silk Road, the Belt and Road Initiative, a Chinese investment programme of infrastructure projects, despite France and Germany’s opposition to the trade deal. Already in 2015, Italy became the top destination of Chinese direct investment in Europe with the acquisition of Pirelli.

Other countries are taking a different perspective: AI companies from Sweden, Finland and Norway are taking the lead and forming a “Nordic AI Alliance” industry consortium;  they are joining forces instead of atomizing, to better compete in the global race for AI.

What is clear from these examples is that the different Member States are far from united in their approach to China and the Asian giant is using this to its advantage. If the EU is looking for reciprocity, for reciprocal access to Chinese market, a common European front is necessary in order to show China that there is a new balance of power and that the Chinese market should be as open as the European alleges to be.