EU-China Archives

Back to the future?

Beijing rightly stands condemned for its massive over-reaction to problems in Xinjiang of Uyghur separatism and associated terrorism. Equally its reneging on the deal with the UK that in accordance with the ‘once country, two systems’ principle Hong Kong’s existing system and way of life would be unchanged for 50 years until 2047 is shocking and disconcerting. Yet while condemning both, we need to be all too careful of fellow travellers’ intent on whisking us to war.

Donald Trump, all of whose decisions are calculated to promote his re-election, after first fawning over China’s President Xi – even endorsing Uyghur internment – has reversed course now initiating a trade war with Beijing. He attempts the military encirclement of China with a new nest of military alliances and put an embargo on Chinese trade. Johnson took the shilling and signed up to this new ‘coalition of the willing’.

He jumped to avoid being pushed, by rebel backbenchers in the China Research Group (CRG) colluding with a Labour Front Bench mating ethics with expediency. Johnson concluded that with the US now denying sales of key components to China’s telecom giant Huawei his decision in January to let the company supply up to 35% of Britain’s 5G network must be reversed at a cost of a cool £7 Billion. Simultaneously the armed wing of the CRG floated the UK’s new aircraft carrier Queen Elizabeth off to the South China Sea to help enforce America’s ‘Free and Open Indo-Pacific’. A foreign policy priority missing from December’s Tory Manifesto.

Here, according to Washington, a new maritime front line is necessary with Beijing making impossible territorial claims – contrary to the Law of the Sea Convention – to the Paracel and Spratly islands that stretch in a long tongue past Vietnam and the Philippines to Malaysia. True China did sign the Convention, while the US still hasn’t. in 1945, after the victory over Japan, Washington ordered the return of both sets of islands, occupied by Tokyo during the war, to the Republic of China. It was only with Mao’s victory that the island’s ownership became problematic.

Britain is not alone in being sucked into this swamp. Japan’s Shinzo Abe and Australia’s Scott Morrison have recently signed a bilateral military co-operation agreement, while talks are underway with Modi’s India to pull them into the package. After all China has been provoking clashes in the last months in the Galwan Valley. The first mover is less clear. Back in 1962 the two sides were briefly at war with Beijing blamed. It was only in 1970 that Neville Maxwell (India’s China War), a scholar leaning in the direction of Delhi, concluded that in fact they were responsible.

While in South Korea the Pentagon is threatening ‘your money and your life’, simultaneously demanding Seoul pays cost plus 50% for the US troops on the Peninsula and pushing for the development of a ‘blue water’ navy to join the flotilla helping to ensure a ‘Free and Open Indo-Pacific’.

It’s only par for the course to see that Donald Trump’s deeply unloved G7 Group busily being re-purposed in Washington, transmuting this intergovernmental economic organisation into a security driven Democratic 10 (D10) in opposition to Beijing. Surprise, surprise Trump unilaterally decided the new members – to join Japan – will be Australia, India and South Korea. One wonders quite why Australia gets the nod. Its population is smaller than Madagascar and right in the centre of the action is Indonesia, the world’s fourth largest country and largest Muslim state.

As for trade, the pandemic woke up the UK – and EU – to its criminal over-dependence on China and India for PPE. That was neither the fault of Beijing or Delhi, but London and Brussels. Diversification of supply and strategic stockpiling makes as much sense now as it did a decade ago, but then Tory austerity was shouting too loud for it to be heard. The idea that Huawei should have a 100% ban on security grounds is frankly laughable. It is certainly not inconceivable that Huawei’s technologies might have backdoors, although no intelligence agency in the US has found one as yet. Yet it was only a decade ago we all discovered that the National Security Agency and the National Reconnaissance Agency with the help of GCHQ in Cheltenham via their Echelon system were routinely intercepting the world’s telephone calls and emails. You can’t swing a stick in Cheltenham without hitting a fluent mandarin speaker! Certainly at the EU level you’d want to ban Huawei and the US competition and rely on indigenous technology. If you’re going to pay over the odds for an inferior product at least make it domestic.

Back in 1940 the US embargoed all oil exports to Japan which ushered Japan’s military planners to Pearl Harbour. The attempt by Washington to interdict Beijing’s high tech sales around the world, if even partially successful, will have us back to the future with a new over-arching cold war around which proxy wars kill millions. It’s in the EU and UK interest to leave well alone. Labour’s Front bench should protest, not pander.

Ford, G. (2020). Back to the future?, Chartist, September/October.

September 1, 2020/by Glyn Ford

EU-China

EU must see China with fresh eyes

The new European commission must do more to align trade and political cooperation with Beijing

The next 18 months to two years will be a watershed period in relation between the European Union and China. At the end they will either be flying high or they will have failed to take off. There is a new European Commission whose dynamics and direction will be set in the coming months. Trade Commission Cecilia Malmstrom’s perceptions will be crucial. If China is to get the attention it warrants – and deserves – Europe’s institutions need fresh eyes.

At the recent EU-China summits, Beijing has proposed, in various forms, an EU-China comprehensive partnership. But it takes two to tango. The EU has shown a marked reluctance to even go to the party, let alone dance. Brussels even rejected bilateral “scoping exercises” to establish levels of ambition on both sides for a possible future free trade agreement.

First, some will argue that the 2012 agreement to open negotiations on a Bilateral Investment Treaty was a proxy for that commitment to future wider engagement. That would be to critically misread the situation. The decision was as much driven by narrow political calculations as it was by visions of burgeoning investment.

The EU adheres to the one-China policy. Under political pressure from the European Parliament and with the support from European industry, the commission was able to square the circle by announcing the simultaneous opening of Bilateral Investment Treaty negotiations with the Taiwan region and the Chinese mainland. The Beijing deal had the objective of further market opening accompanied by a robust legal framework protecting Intellectual Property Rights and the dismantling of institutional and other barriers to EU investors entering the Chinese market.

When Xi Jinping, the Chinese president, took office at the beginning of 2013, he announced his desire to see the economy opened further to foreign investors to boost innovation and competitiveness. The BIT was the perfect vehicle, but the early omens are not auspicious. Yet January’s fourth round of talks has been postponed while there is neither a text, nor any discussion of the vital aspect of market access. This procrastination could have serious consequences. If the two get “out of sync” there may be trouble for Beijing as any notion of the two as a “package” will unravel with the European Parliament considering them consecutively and not concurrently.

The second issue is China’s market economy status. In December 2016, the transitional agreements agreed in China’s accession protocol to the World Trade Organization come to an end. The arrangements allowed discriminatory treatment against Chinese industry by utilizing third country “surrogates” to establish “fair prices” for Chinese products involved in dumping complaints. It was this that exacerbated the recent EU-China dispute over the “dumping” of solar panels in the European market, with the commission’s arbitrary choice of India as the designated stand-in.

Many assumed, and some still do, that market economy status after that date will be granted automatically. However, that fails to take into account the ratification of the EU’s Lisbon Treaty in December 2009. This gave the European Parliament a veto over all trade agreements. Consequently, the commission will need to prepare a proposal on granting market economy status to China for the European Parliament’s consideration toward the end of 2015. This will be no mere procedural detour from the pre-Lisbon arrangements, but rather a serious hurdle to be negotiated. The European Parliament has already demonstrated its willingness to get tough on trade. The Anti-Counterfeiting Trade Agreement, despite the backing by all member states and the commission, was overwhelmingly rejected by the European Parliament.

In November 2013 the European Parliament’s China resolution was a catalogue of complaints and criticism: “European enterprises deplore the existence of numerous tariff and non-tariff barriers to the Chinese market, such as certain forms of discrimination against foreign operators, as well as the complexity of the tariff structure and the technical barriers to trade.”

The EU-China relationship in terms of trade and political cooperation bilaterally and at the global level are too important to be left to chance. Brussels and Beijing must act in concert to ensure the right outcome. The commission in Brussels must start the heavy political lifting required with the council and Parliament.

This is no mere trade issues, rather a fundamental decision that will shape Europe’s relations with China for decades to come. The European Parliament has strong views on the need to address climate change, global piracy and the proliferation of weapons of mass destruction. To address these, Brussels needs Beijing. That needs to be made crystal clear. At the same time, China has to show that it is serious in delivering on Xi’s promise to use foreign investment to spur innovation and competition.

Ford, G. (2015). EU must see China with fresh eyes, China Daily, 23-29 January.

January 23, 2015/by Glyn Ford

EU-China

Lost in the forest, Europe needs some direction

The compass the EU uses as it looks for the right path in dealing with China is faulty.

Last month in Brussels the Chinese Premier Wen Jiabao attended his last China-EU summit. On the surface, it was a resounding success, with a joint statement of 49 paragraphs and seven pages promising consultation, dialogue and the preparation of mandates for future talks on everything from agriculture and risk management to space and nuclear power via the Arctic and ocean energy. The atmosphere was warm and cordial as the two sides celebrated Wen’s birthday and the EU-China comprehensive strategic partnership. One EU diplomat waxed lyrical that this was the second summit this year – conveniently forgetting last year’s summit was never held because of bad blood at the time between Brussels and Beijing seeming to think, like the drafters of the final statement, that quantity can substitute for quality.

Before the summit, Beijing had proposed that the comprehensive cooperation agreement between the two sides should be upgraded to incorporate a series of broad and deep agreements on trade – even a free trade agreement – political partnership and cooperation on global common issues, such as climate change, water and maritime security. Brussels responded that it needed more time, but failed to specify whether it was weeks, months or days.

The problem is Brussels does not see the world as it is and is becoming, but instead sees some reflection of the world as it was and how Brussels wishes it would remain. The emerging global economic architecture has three powers, the EU, the US and China, with the potential to shape the world for good or ill in the coming decades. The US is a military superpower with an economy in decline and in hock to China, Europe is the world’s biggest and richest trading block, and China is the emerging economic superpower with a growing military capacity.

Traditionally the EU has been a junior partner to the US as Brussels slowly created industrial, economic and monetary union from the building blocks of the small and medium-sized nation states left over from the two European ‘civil wars’ of the first half of the 20th century. Europe’s politics have echoed and resonated with those of Washington. European exceptionalism – but a vitally important one for its population – has been limited to its social model. But even this is now under attack with the neo-liberals’ claim of inevitable necessity to resolve the financial crisis.

During the Cold War, Europe was crouched under the Pentagon’s nuclear umbrella waiting for the day when Soviet tank battalions were going to stream across the German plain. But the Soviet empire collapsed under its own contradictions nearly a quarter of a century ago. Even so, Europe has failed to notice that it has stopped raining. The constraints, real and imaginary, from the short half century have long gone. Europe and its politicians frame their decisions inside a paradigm that the rest of the world has long discarded. The future global triangular relationship and Europe’s self-interest are served by ensuring balance and simultaneous cooperation as much as competition.

Yet many would argue that bizarrely the EU’s common foreign and security policy is closer to Washington’s best interests than its own. At the summit, one of the issues was ending the arms embargo imposed in China in 1989. China is one of only three countries to face such an EU embargo. The other two are Myanmar and Zimbabwe, and one suspects that the first of these will soon be swept away by the political wind blowing there. Europe has an arms export control policy that is seen as capable of managing this process for every other country outside the EU, including Syria and Iran. The spin in Brussels was it would have made the EU look weak to lift the embargo.

In fact, it might have been seen as a gesture of friendship to a strategic partner, to remove China from that list of embargo. In fact it was the weakness rather than strength not to lift the embargo – weakness toward Washington.

At least at the summit, the Commission did not give priority to complaints about the undervaluation of the Chinese yuan when its value against the euro has risen steadily.

Instead this time, trailing Washington again, days before the summit the Commission launched a dumping investigation into the import of solar panels from a group of Chinese companies after complaints from competitors in Germany, now compounded by a further complaint of unfair state subsidies implicating the whole of the Chinese government. Now, photovoltaic cells are not advanced technology, and the companies complaining have generally been run to maximize profit rather than longevity. As a result, in order to protect thousands of jobs – yes, they are really at risk – the EU may impose draconian dumping duties that will cost 10 times more jobs in the installation industry and its dependent sub-contractors while simultaneously undermining its ability to achieve its own renewable energy targets. As Nietzsche said, ‘madness is rare in individuals, but common in parties, groups and organizations.

China is in a period of transition, as new leaders prepare to take the helm. The future direction for Beijing will be a choice made during their mandate. There are those who want to see China look outward not just in trade, but in political and economic cooperation with its partners. But for this to happen, the rest of the world must be prepared to signal its willingness to engage. China increasingly feels embattled at all levels. The US drive to create a Trans-Pacific Partnership in trade that will literally circle China has not gone unnoticed, and Beijing’s more assertive stance in the South China Sea is not unconnected: who fired the first shot is not the answer to who started the war.

History is moved by broad forces. Europe needs to look to its own longer-term interests as the tape of history unwinds. Is it in our interest for China to retreat into isolationism, one might wonder. With more than a sixth of the world’s population, China may even be able to sustain a semi-autarchy that would be devastating for global trade, but in particular for the EU as the world’s largest and richest trading bloc. When China sneezes Europe gets a cold.

Europe shares many values, certainly not at all, with China. Both are secular societies that, with all their failings, still cling to the commitment of providing social safety nets to protect the old, the sick and the poor. We have complementary industrial economies and between us more than a quarter of the world’s population. Yes, it is good news that Europe and China will look to negotiate a new investment treaty that will incorporate the two sides’ concerns in investment protection, market access and equal treatment, and that they will work together in innovation, intellectual property rights and cybersecurity, but there is a danger that both parties miss the larger picture absorbed in the detail.

As the 17th century English writer Matthey Henry wrote, ‘None so blind as those that will not see’. Europe does not need a comprehensive strategic partnership with China; Europe needs a strategy.

Ford, G. (2012). Lost in the forest, Europe needs some direction, China Daily, 10 December.

October 28, 2012/by Glyn Ford