Online Commentary

September 16, 2020

The EU-China Relationship

Take-Aways from the Leaders’ Meeting

A main goal of the recent EU-China summit was a trade deal. China urgently needs one but will not – and cannot – offer the truly level playing field Europe requires. That would challenge its economic and political control at home. Europe has real bargaining power and must insist on political, not just economic, concessions. China may be prepared to make some, but if they are not forthcoming, Europe should walk away. Doing so would help address systemic problems and challenges between China and the world.

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Screenshot of participants in the EU-China leaders' meeting, which was held via video conference on September 14, 2020
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China is determined to keep Europe as an ally in globalization. It needs a counterweight to the United States and other countries, such as Japan and Australia, which are growing skeptical about the lopsided relationship and are withdrawing at varying speeds. China’s eagerness was visible in the optimism, even drama, of a series of statements it made on September 14, 2020. These statements came as a response to the leaders’ meeting that day, but more than two hours before EU leaders even began their twice-delayed press conference in Brussels and Berlin.

In addition to some sloganeering in the classic style of the Communist Party of China (CPC), the statements – as well a longer account by Xinhua, the state news agency – contained a real message. China will continue to use the COVID-19 pandemic to try to forge a bond between it and Europe, thereby deepening its global political influence and interference.

According to Xinhua, President Xi said: “The Novel Coronavirus Pneumonia Pandemic has accelerated the evolution of major changes not seen in a century. Humanity stands at a new crossroads. China and Europe must unswervingly promote the healthy and stable development of their overall strategic partnership and achieve the ‘Four Persists.’ [These are] persist in peaceful coexistence, persist in openness and cooperation, persist in multilateralism, and persist in dialogue and consultation.”

In CPC parlance, “multilateralism” is code for cooperating with China, which requires not posing questions that could be too awkward or making demands. By using this word, China is playing a card it knows works. Who in Europe or the Democratic Party of the United States wants to argue against multilateralism?

The line-up at the leaders’ meeting on the Chinese side was high-level, demonstrating the imortance of the event: Xi Jinping, the general secretary of the CPC; Liu He, his special adviser on economics; Yang Jiechi, head of the party’s foreign affairs commission (which is more important than the Ministry of Foreign Affairs) who is often involved in security or defense matters; and He Lifeng, head of the National Development and Reform Commission, which steers China’s Belt and Road Initiative, among other measures. The European side was represented by German Chancellor Angela Merkel, President of the European Council Charles Michel, and President of the European Commission Ursula von der Leyen.

Europe Needs to Press Its Advantage or Walk Away

EU leaders are increasingly aware of the risks of naïve, uneven engagement – the norm to date. As Michel said at the press conference, the EU is seeking “a more balanced relationship.” There were “concrete” discussions on the EU-China Comprehensive Agreement on Investment (CAI), and, according to the EU leaders, some progress. Merkel announced an agreement on the geographical origin of products, which she said was good for German winemakers and Bavarian beer brewers. She could have mentioned its benefits for Irish whiskey distillers as well.

But these steps were small. Significant obstacles remain, including in the key areas of market access, overcapacity, state subsidies, and climate. “China needs to convince us that it’s worth having an investment agreement,” said von der Leyen. The possibility of a trip by EU diplomats to Xinjiang or Tibet was touted as an achievement, yet Beijing views such events as manageable. A dictatorship that can surveil and speedily mobilize people and resources – and that has built the biggest censorship system in history – can, and does, manipulate what visitors see. As Tahir Mutällip Qahiri, a Uighur living in Germany, tweeted, “please also visit the underground prisons.”

Some noticed that Germany appeared to particularly want to placate China despite having an increasingly strong hand to play. Referring to Merkel, the United Kingdom-based academic Andreas Fulda tweeted, “She spoke for six minutes. Only *ten seconds* were devoted to #HongKong, #minorities, and #humanrights. What does this tell us about Germany’s priorities vis-à-vis China?”

Thus, in a sense, by soft-pedaling, European leaders broke a cardinal rule of politics: if you are in a hole, stop digging. Instead, Europe should put its energy into focusing on trade within the EU and with allies such as the United States and like-minded countries in the Asia-Pacific and other regions. The EU should not only identify dependencies on China and work to unbuild them, but it should also counter the genocidal activities underway in Xinjiang with concrete steps – by, for example, sanctioning forced labor products from there such as cotton, tomatoes, and auto parts. An “anti-slavery” declaration, with teeth, would fit well with the EU’s values-based domestic and foreign policy. Daily trade of about 1 billion euro is heavily skewed in China’s favor. This gives Europe bargaining power it has long failed to use – which makes it clear why China wants to keep Europe close.

Climate, Business, and Technology

Climate change was another focus of the summit. Here, it was helpful to hear EU leaders spell out that China uses 50 percent of the world’s coal and is responsible for corresponding emissions. This was a welcome change because Europe’s climate ire is usually directed toward the United States, where overall emissions are sinking as they are in Europe. In China, however, they continue to rise, nixing global gains. Perhaps it is time for Greta Thunberg to turn her attention to Xi Jinping, too.

Further underscoring the impression that the leaders’ meeting was a mouse that roared rather than a lion, the EU’s statement on business and technology could have been written at any point over the last seven years of negotiations: “The EU called on China to step up its ambition on these issues. The two sides reaffirmed their objective of closing the remaining gaps before the end of the year.” Yet von der Leyen downplayed that deadline at the press conference, saying a deal was not about when, but what. In other words, she does not want it to be a propaganda victory for China, but for it to have meaningful content.

China wants the opposite – more of the same on the old terms. Before the EU’s press conference even began, Xinhua reported that the meeting “pushed Sino-European relations to a higher level.” And, somewhat mysteriously, it added: “We maintained justice by injecting more positive energy.” For those familiar with CPC parlance, the phrase “positive energy” means “see and do things the CPC way.”

Response to China’s Growing Influence

Concerns over China’s growing power and increasingly aggressive dictatorship are deepening around the world – from Australia to the United States to India. These concerns are also spurred by the crushing of Hong Kong’s autonomy and military threats against Taiwan, as well as nosediving trust in China after the COVID-19 disaster. Nine months after it began, there has still been no independent, verifiable investigation of the origins of the virus that emerged in Wuhan.

In a sign of tensions, Xi told the Europeans he was “closely” watching 5G policy in Europe. In other words, his regime is framing any security-related restrictions as a market access issue to use against the EU. On human rights, Xi turned the tables by saying, “I believe Europe can resolve its own existing human rights problems.”

In Europe, doubts are growing about whether a long policy of engagement – that a trade deal would only deepen – is the right way forward. After all, such a path takes Europe ever further away from its key ally, the United States. At the EU’s press conference, one journalist asked Merkel, who has long pushed closer engagement, if she wished she had handled China differently during her 15 years in power. She grimaced.

It was the kind of legacy question that is bound to bite. Sources say Merkel acknowledges the systemic problems and challenges in the EU-China relationship. When speaking with Merkel and German officials, Xi and Chinese officials like to point out that Germany’s automotive industry is partly dependent on China. Although this is a barely veiled threat, Merkel is unwilling to set aside her policy of Wandel durch Handel (“change through trade”) with only a year left in office, believing there simply isn’t time to change it successfully. She is hoping to pull a deal out of the hat that will help Germany and Europe through the economic crisis caused by the coronavirus – and secure her legacy. Merkel spoke of measuring overall success in “millimeters”; she insisted there was the “political will” for a trade deal despite the paucity of results.

Take-Aways from the Summit

What even prompted the September 14 leaders’ meeting and was it worth it? The EU already has a regular, annual EU-China summit led by Chinese Premier Li Keqiang. The last one took place in June 2020, also online.

The answer lies in China’s internally changing power dynamic. In 2018, Xi acquired the legal right to rule for life. Because he has accumulated more personal power than any leader since Deng Xiaoping, any agreement needs to go through him to be effective, German leaders reasoned. Thus, the leaders’ meeting both mirrored, and furthered Xi’s increased influence – including in Europe. It is unlikely, however, that the summit furthered the EU’s goal of being “a player not a playing field,” which Michel had called for.

China’s overriding goal is to secure Europe as an essential partner in globalization and a source of high-level technology. It wants to maintain the status quo as long as possible; uneven trade and systemic divergences fuel opportunities for it to grow richer and more powerful. It is, perhaps, ironic that Europeans, who have often protested globalization driven by the United States, should largely ignore the controversy when the driver is another global power. The even deeper irony, however, is that a country run by a Communist party is – on its own terms –a main source of consumerism and capitalist-style globalization in the world today.

China wants to import what it needs, such as oil, food, and computer chips. It wants to control its trade and political environment in order to achieve global dominance that preserves the power of the CPC. It does not want foreign companies offering information-related products or services unless it can neutralize them. China may offer the EU a few bones – or drinks, as it did – but China plans to manufacture and export ever further up the production chain, making increasingly high-quality goods and remaining “the world’s factory.” Ultimately, that will squeeze more expensive Europe out of its markets anyway. In its post-summit statement, the EU said there would be another leaders’ meeting next year. If so, this could become a controversial tradition and a burden to Europe.

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DGAP Online Commentary, September 16, 2020

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