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Photo: Reuters
Photo: Reuters

The EU’s China deal doesn’t enhance its global stature

Brussel’s faith in China fulfilling its end of the pact reveals a myopia that will weaken the EU geopolitically

Just as 2020 was ending, the European Union (EU) announced the ‘in principle’ conclusion of an agreement with China to open the Chinese market further to its investors, bringing to an end a process that began way back in 2013. The EU declared that “this agreement is of major economic significance" as “China has committed to an unprecedented level of market access for EU investors, giving European businesses certainty and predictability for their operations." Chinese President Xi Jinping reciprocated by underlining that the deal shows “China’s determination and confidence in fostering high-level external openness" and that the pact would lead to a “brighter future for cooperation" with Europe.

This investment pact, which comes into force in early 2022, is aimed at addressing a longstanding European demand for greater access to the Chinese market and fairer competition with Chinese companies. It removes joint-venture requirements in financial services while phasing them out in the automobile sector, even as it opens up the Chinese markets for health services, cloud computing and electric vehicles. At least in theory, the agreement commits Beijing to end forced technology transfers and improve transparency over how it subsidizes firms.

Last year was a turbulent one in EU-China relations, with Brussels reacting strongly to China’s imposition of a new security law in Hong Kong, even as it accused Beijing of trying to spread disinformation on the novel coronavirus. The EU has been trying to position itself as a global geopolitical player, and several member states have enunciated their ‘Indo-Pacific’ policies, a nomenclature strongly objected to by China. And in its recent transatlantic strategy, the EU also made a case to the US to work with it to meet the “strategic challenge" posed by China.

But the new EU-China investment deal underscores the prioritization of short-term economic opportunities over any long-term strategy vis-à-vis a rising global power that is intent on challenging the fundamentals of the global order, which the EU is keen to preserve. So while human rights and liberal values are paid lip-service to, they won’t be allowed to cloud the economic engagement with China, with Europeans suggesting that the pact provides advantages similar to those that the US gained when it signed its “phase-one" trade agreement with China last year.

For all the hyperventilation in European capitals about US President Donald Trump’s unilateralism, the EU decided to make a move without taking its most important ally into consideration. The incoming US administration under President-elect Joe Biden had expressed its reservations over it, with Biden’s to-be national security adviser Jake Sullivan calling for “early consultations with our European partners on our common concerns about China’s economic practices", days before the pact was signed. But the EU, it seems, was in the same hurry as Beijing to conclude the deal before Biden took office. German Chancellor Angela Merkel played a key role in mobilizing support for the deal in Europe, and Xi Jinping missed no opportunity in responding fast by acceding to some of Europe’s demands.

And so, while the Biden team is still trying to work out mechanisms for a coordinated approach to China and its unfair economic practices, Beijing outmanoeuvred Washington and managed to highlight the transatlantic divide in full global glare. This has again shown that the US-EU divide is not a Trump creation but traceable to differing priorities on both sides. China has been warning that the EU should not be influenced by external forces while dealing with it, and it is clear that Brussels has taken heed.

Given China’s track record, it is appropriate to question the EU officialdom’s confidence in China fully implementing the commitments it has made under this pact. It is ironical that in a year when China went back on multiple commitments, the EU decided to put its faith in Beijing’s word, rather than on empirical facts. Forget its territorial commitments in the South China Sea or in the Himalayas, China’s approach on economic issues has been equally problematic. It tightened foreign investment rules and used administrative barriers to constrain foreign firms in key domestic markets. Never shy of using trade and economic ties for geopolitical ends, its conduct at the height of the covid crisis and the particularly egregious treatment of Australia in recent months should have been enough to raise alarm bells in the corridors of power in Brussels.

Instead, the EU decided to give China a morale booster, which could deepen a belief held by the Communist Party of China that democracies have no stomach for a long-term fight, and this moment of economic weakness is too good an opportunity to miss. There is still time for the EU to reflect upon its short-sightedness, as the deal requires the European Parliament’s approval. Yet, whatever happens in the future, China has once again displayed a remarkable sense of timing, and the EU has demonstrated that it is nowhere close to emerging as a serious geopolitical player on the world stage.

For India, there is much to consider here. New Delhi is trying to build a strategic partnership with the EU. But with Brussels’ inability to think strategically, this engagement is unlikely to reach its full potential. India would like very much for the EU to pull its weight as a global geopolitical player, but with the EU looking uninterested, New Delhi will have to find partners elsewhere.

Harsh V. Pant is professor of international relations, King’s College London

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