Vice-President of the Commission, Jyrki Katainen, presented on Tuesday 12 March in Strasbourg the strategy called “EU-China – A Strategic Outlook”, which aims to correct the imbalance in the Sino-European relationship.
“The EU and China are both strategic economic partners as well as competitors”, he said. However, the conditions of this competition are not balanced, the Commission notes.
The EU's economic relationship with China, its second largest trading partner behind the United States, is undermined by asymmetry as a result of the lack of reciprocity on the Chinese side. Indeed, while China is taking full advantage of the opening of the European market to massively invest in EU infrastructure – a quarter of its foreign direct investment (FDI) in 2017 – in line with its One Belt One Road strategy in place since 2013, it is actually one of the least open economies for FDI.
In response to these findings, the EU is therefore supporting its diplomacy with new tools which, although they remain somewhat timid, will aim to force China's power to be more reciprocal and to better defend key sectors of activity for the EU.
Nevertheless, this policy is being resisted in the north of the EU, where there is a more liberal tradition, and in the south, where Greece, Portugal and Italy are all competing for Chinese investment.
This strategy therefore promotes a “realistic, assertive and multifaceted” policy towards Beijing, which is being translated into ten actions. The result is the demand for better compliance with European standards and EU market economy principles, in addition to a greater global commitment by Beijing in respect of issues of common interest.
A more balanced commercial relationship
On the trade front, the Commission is asking Beijing to put in place a greater commitment to reform the World Trade Organisation. The Commission has, in effect, addressed forced technology transfers to China under the WTO dispute settlement mechanism (see EUROPE 12164/12) and further intends to strengthen multilateral rules on business subsidies (see EUROPE 12098/8).
The EU is also calling on China to show more goodwill; in 2020, it wants to tie down negotiations on a Comprehensive Agreement on Investment (CAI), which have been doing the rounds since 2013. The next few weeks should also see the conclusion of agreements over geographical indications and aviation safety, the communication notes.
The Commission is also calling on European institutions to return to work on its proposal for an international instrument on public procurement. Proposed in 2012 and once again in 2016, this mechanism would allow for greater reciprocity in access to public procurement abroad. Member States have so far failed to define a common line, thus brushing the proposal under the carpet.
The EU should also tighten the screw on market access before the end of 2019, warns the Commission. In response to the outcry over the rejection of Siemens’ proposed acquisition of Alstom, the Commission regrets that European state aid rules do not allow it to control concentrations of non-European companies, or to intervene against the acquisition of a European company on the sole grounds that the buyer has received foreign subsidies.
The institution proposes that any gaps in the current regulatory framework be filled in order to better understand the distorting effects of government subsidies and in order to revise its guidelines, particularly with regard to labour and environmental standards.
In respect of the security of 5G networks, the Commission should build on the conclusions of the Spring European Council and therefore propose a common approach. The risk posed by Chinese equipment manufacturers, such as Huawei in particular, was highlighted by Parliament on the same day (see other news).
Finally, the EU has recently adopted a foreign investment screening mechanism: the Commission is urging Member States to effectively and fully implement this regulation as soon as possible.
A more extensive offer of cooperation on major international issues
The strategy is also focussing on cooperation on the international scene. The Commission is proposing to strengthen cooperation with this permanent member of the United Nations Security Council, “in order to assume common responsibilities in respect of all three pillars of the United Nations, namely human rights, peace and security, and development”. Human rights are a subject of tension and the strategy considers that the ability of both sides to engage effectively in this area “will be an important measure of the quality of bilateral relations”. While EU Member States constitute the main contributors to the UN peacekeeping budget, China, on its own, is second only to the United States and the Commission considers that “opportunities to share operational experience in this field should be identified”.
The Commission also intends to deepen the dialogue on peace and security issues, and in the words of the strategy, “building on cooperation in support of the Common Comprehensive Action Plan for Iran”. The denuclearisation of the Korean Peninsula, the future peace process in Afghanistan, and the Rohingya crisis in Burma are other possible subjects for cooperation, according to the document. “Continued cooperation remains important for strengthening political confidence”, said the Commission. However, it does not hide China's ambiguous role. While Beijing is a “strategic partner of the EU in meeting global and international challenges”, and has “the ability and responsibility to play an important role in addressing regional security issues”, there are also “security concerns and differences regarding the application of international law, a respect for good governance, and sustainable economic development”, in particular the situation in the South China Sea. “Cross-sectoral hybrid threats, including information operations and major military exercises, not only undermine confidence but also threaten the security of the EU and must be addressed as part of our mutual relationship”, the strategy adds.
Finally, when it comes to the fight against climate change, the EU calls on China to respect its commitments under the Paris Agreement.
The Communication is expected to feed into discussions at the Foreign Affairs Council to be held on 18 March and then at the European Council on 21 and 22 March in preparation for the EU-China Summit on 9 April. (Original version in French by Hermine Donceel with Camille-Cerise Gessant)