The year 2020 marks the 45 years of establishment of the European Union (EU)-China relations. It was expected to be an important year for both as diplomatically four summits were planned and there were expectations that the EU and China would finally conclude the Comprehensive Agreement on Investment after seven years of intensive negotiations. In a press brief released after the EU-China Summit on 22 June 2020, European Council President Charles Michel said “Engaging and cooperating with China is both an opportunity and necessity. But, at the same time, we have to recognise that we do not share the same values, political systems, or approach to multilateralism. We will engage in a clear-eyed and confident way, robustly defending EU interests and standing firm on our values.”[i]This statement sets the tone of future relations between the two partners. The paper looks at the recent developments in the EU-China relations and tries to analyse whether the EU has a comprehensive outlook towards China.
For long, the European policy towards China was driven by the idea of ‘reciprocity’, where the expectation was that as China would have access to the European market, EU would have the same level of access to the Chinese market. Also, EU expected China to adopt international liberal norms like human rights, rule of law etc. 2019 marked the beginning of a renewed European approach with the publication of ‘EU-China – A Strategic Outlook’ which called China “a strategic competitor for the EU while failing to reciprocate market access and maintain a level playing field.” It goes on to note that China is “an economic competitor in the pursuit of technological leadership, and systemic rival promoting alternative models of governance.” Economically, the EU is China’s biggest trading partner while China is the EU’s second largest, with trade in goods between partners worth over Euro 1.5 billion per day in 2019[v]. The Chinese investment in Europe in 2019 amounted to almost $13.4 billion. Major investments were seen in countries like Finland ($5.3 billion), Italy ($0.7 billion), Sweden ($1.3 billion), Germany ($0.7 billion) and UK ($3.8 billion).
Stumbling Blocks in the Partnership
Following are some of the main issues in the EU-China partnership:
The 17+1 mechanism refers to 17 EU and non-EU states and China. It was launched in 2012 to boost cooperation between China and Central and Eastern European countries (CEEC) countries through transportation, infrastructure, trade and investment. It began with a meeting of 16+1 prime ministers in 2012 at Warsaw, with Greece joining in 2019. The addition of Greece in this mechanism was significant, because it diluted the regional dimension of the cooperation where the 16 European members are post-Communist states. EU has viewed this mechanism with suspicion and as an attempt by China to undermine the solidarity of the Union. The EU strategy on China emphasised that “all Member States, individually and within sub-regional cooperation format such as the 16+1, have a responsibility to ensure consistency with EU law, rules and policies.” It goes on to highlight China’s business and investment activity in the Western Balkans acknowledging the contribution of these investments in boosting growth but adds that these investments neglect socio-economic and financial sustainability, which may result in indebtedness and transfer of control of strategic assets from European hands to Chinese.
Stemming from the concerns regarding growing Chinese footprints in the continent and that it is trying to create a wedge in Europe, the EU has also remained apprehensive about Beijing’s Belt and Road Initiative (BRI). The BRI has split the opinion in EU with countries like Italy, Greece, and Hungary in favour of the project along with countries in the Balkans. Under various projects, China has acquired a majority stake in the Piraeus port for US $312.5 million in Greece, which provides China the access to the Aegean Sea to the east, the Ionian Sea to the west and the Mediterranean Sea to the south. The China-Europe Land-Sea Express route connects the port of Piraeus through the railway line through Serbia to Hungary. Similarly, China has heavily invested in Serbia, which is not yet an EU member - therefore the stringent conditionalities imposed by EU rules do not apply. There is a growing debate regarding the BRI as undermining the European interests and flouting the rules regarding environmental standards, non-transparent financial regulations etc. Development of these projects has raised alarm in the Union where there is a growing realisation that the EU woke up late to the increased Chinese presence in the continent as highlighted by French President Macron’s statement that “the period of European naivety is over”.
The EU, for its part, released its strategy on “Connecting Europe and Asia – Building Blocks for an EU Strategy” in 2018 which aims to unlock the economic opportunities and build sustainable, transparent and efficient connectivity between the two continents. It also signed an agreement on Sustainable Connectivity and Quality Infrastructure with Japan in 2019 to promote and work on all dimensions of connectivity – bilaterally and multilaterally – including transport, energy, digital and people to people.
Chinese investments in Europe have increased in the past few years resulting in increasing concerns over growing influence of China and how should the EU respond to it. According to a report by NPR, various Chinese companies, in the past decade, have acquired stakes in almost 13 ports in Europe including in Spain, Italy, Greece, and Belgium. These ports cater to 10% of Europe’s shipping container capacity. The European Commission’s report on ‘Foreign Direct Investment: Continuous Rise of Foreign Ownership of European Companies in Key Sectors’ - released in 2019 states that 9.5% of the companies investing in EU were based out of China, Hong Kong and Macao in 2016, up from 2.5% in 2007. In order to protect its strategic assets, the EU in 2019 introduced new mechanisms for screening foreign investments which were aimed at “safeguarding Europe’s security and public order in relation to foreign direct investments into the Union”.’
During the coronavirus pandemic, both the NATO Secretary General and the EU Trade Commissioner warned the member states to stay vigilant against the buying of strategic assets and sensitive technologies due to the price-fall during the pandemic. This led European Commission to adopt a White Paper on Foreign Subsidies in the Single Market on 17 June 2020. With the increasing concerns regarding foreign subsidies facilitating the acquisition of EU companies or market operations, this white paper is perceived to fill in the regulatory gap. Under this, the Commission and member states will be able to assess the role of the subsidies granted by the non-EU governments and their respective impact on European Economic Area. Although the white paper says that the proposed instruments would apply equally to all non-EU countries and would not discriminate against any, there is a clear indication that these regulatory measures are aimed towards the increased investment competition from the state-owned Chinese companies.
With Trump administration pushing for banning of Huawei network, European countries have been debating the security implications of reliance on Chinese technology. The concerns range from privacy issues, economic impact, security, and presence of Chinese suppliers in critical communication networks. Attitude towards Huawei has been ranging from acceptance to increased scepticism–member states like Hungary have welcomed the network in their country saying that it finds no merits in US claims about security breach. On the other hand, in Germany, the opinions are split between the lawmakers across the party lines that support US arguments that Huawei network cannot be trusted and the automobile industry which fear that ban on the network could lead to trade retaliation from China – its largest export market. Pressure is also high on the UK to settle its 5G decisions. The UK has broken ranks with US and has formulated its policy to allow limited role to Huawei in its 5G networks, and has allowed the company to bid for non-core parts of 5G infrastructure.
Despite the divergence of approach between the member states, the EU has been trying to promote a common European approach to the 5G security risks. In March 2019, European Commission in a report on Cybersecurity of 5G Networks elaborated on three objectives – “risks affecting 5G networks at national level; coordination risk assessment; and to identify common set of measures to mitigate Cybersecurity risks.” This was followed by a report published by the Member States in October 2019 on coordinated risk assessment of 5G network security. The report identified the main threats, actors, sensitive assets, main vulnerabilities and a number of strategic risks associated with 5G network. This led to the endorsement of a joint toolbox to mitigate the security risks. Under this member states agreed to assess the risk profile of suppliers, strengthen their security requirements, exclusions for key assets considered as critical and sensitive, and to have strategies in place to ensure the diversification of vendors. While these recommendations provide a framework for mitigating the risks of 5G Huawei network, it remains highly unlikely that the member states would make similar choices and as the issue is of national security, the decision making lies in the hand of national governments and not with EU.
China has taken advantage of the lack of coordination among the EU member states at the beginning of the pandemic. While the EU’s responses appeared to be faltering in terms of aiding its member states, China has gone ahead in promoting its assistance in providing the hardest hit countries like Italy and Czech Republic with medical aid and expertise. Calling out the Chinese propaganda on its role as a reliable partner, High Representative Josef Borrell countered the narrative by highlighting that Europe had sent medical equipment and other necessary material required by the Chinese authorities at the beginning of the pandemic. He warned that “…we must be aware there is a geo-political component including a struggle for influence through spinning and the ‘politics of generosity’.”
Similarly, German Chancellor Angela Merkel had downplayed the Chinese provision of equipment and other resources to European countries by calling it a “gesture of reciprocity”, adding that EU had sent the medical equipment when China had asked for this in the early stages to pandemic. A diplomatic spat between France and China emerged over the publication of an article on the Chinese Embassy website. The article titled ‘Restoring Distorted Facts – Observations of a Chinese Diplomat Posted to Paris’ suggested that the “care workers in Western nursing homes had abandoned their jobs, leaving residents to die.” This led the French Foreign Office to summon the Chinese ambassador to express their disapproval over the article.
Pointing out the spread of disinformation regarding the pandemic, the EU on 10 June 2020 accused China of spreading misinformation and clubbed both Russia and China together as parties seeking to create divisions in European society. The European Commission’s Vice President Vĕra Jourová said in a statement said that “China and Russia were running a targeted influence operations and disinformation campaigns in the EU, its neighbourhood and globally…What we also witnessed is a surge in narratives undermining our democracies and in effect our response to the crisis”. This represented the first time that China was named as a source of disinformation and the harshest criticism in recent times by the EU over handling of the pandemic and subsequent spread of misinformation by Beijing. An earlier report of April 2020 by European Union External Action (EEAS) on ‘COVID-19 Disinformation – Special Report’ had noted that “…to a lesser extent – China, have continued to widely target conspiracy narratives and disinformation both at public audiences in the EU and the wider neighbourhood”. It noted that “there is evidence of a coordinated push by official Chinese sources, to deflect any blame for the outbreak of the pandemic and publicising announcements and deliveries of bilateral assistance…there is also significant evidence of covert Chinese operations on social media”.
Strategic Reassessment of Relations
Even before the pandemic started to change the dynamics of EU-China relations, Europe’s position towards China was shifting because of several reasons like consolidation of power in President Xi’s hands, its economic policies under BRI, acquiring of strategic assets in third countries, and lack of economic reforms. Although European policymakers have tried to reformulate their policy towards China through instruments like investment screening, mitigation of risks posed by 5G networks - they have been deemed too little and too late. Also, the EU is split over what policy on China to follow.
Member states are divided with countries like Hungary, Italy and Greece which are enthusiastic about the BRI and infrastructural developments and investments made by China and countries like France and Germany which are more wary. This has made it extremely difficult for the EU to find a comprehensive position towards China. For example, Greece in 2017 blocked an EU statement at the UN which criticised China’s human rights record undermining the efforts to confront Chinese crackdown on dissidents and activists. It was observed that it was the first time the EU had failed to make a statement at the UN Human Rights Council. Regarding the Hong Kong national security law, EU’s High Representative, JosepBorrell, said on 29 May 2020 that sanctions were not the solution “to our problems with China.” On the other hand the Members of the European Parliament on 20 June 2020 called the law as “comprehensive assault on the territory’s freedom” and demanded that the EUadopt sanctions and freeze Chinese assets. The resolution is not binding on the member states.
EU is keen on reassessing and re-formulating a coherent approach towards China. With the US withdrawing from its international role in multilateral forums, there is a realisation within the EU that it needs to cooperate with China on various issues like climate change, reforms of WTO, WHO etc. What is visible is that the pandemic has led the European countries to make strategic choices in terms of their partnerships. Europe’s relations with the US have been severely strained under President Trump and his America First policy. EU has been trying to rebalance the partnership with China, with a clear message that as the world’s largest trading bloc - it would not be easily pushed around. It is becoming increasingly evident that the EU is trying to balance its relations with the two partners.
A major concern for the EU today is to not get involved in the power-struggle between the US and China. Although it is difficult for the EU to stay completely neutral, nonetheless it is of critical importance that the Union formulates its own independent policy towards China based on its strengths and weaknesses. The lingering issues like 5G network, apprehensions over BRI, spread of disinformation, issues relating to investment treaty, increasing Chinese purchases of strategic infrastructure are going to dominate the future EU-China debates. But the EU needs to start planning for a future where the US is no longer the guarantor of either European security or international order and China is an economic powerhouse backed by its enormous military might.
*Dr. Ankita Dutta is a Research Fellow at Indian Council of World Affairs.
Disclaimer: The views expressed are personal
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