The impact of the COVID-19 epidemic on the global economy is a stark reminder of how dependent the world economy is on Beijing. Questions are being asked within the European Union on rethinking relations with China.
For Sébastien Jean, Director of the Centre d'Études Prospectives et d'Informations Internationales (CEPII) in Paris, “the COVID-19 epidemic is also a crisis of globalisation”. “This crisis may change the way in which companies assess the risk associated with their suppliers or subsidiaries in China”, he told EUROPE on Wednesday 11 March.
20% of world trade in manufactured intermediate products originates from China (see EUROPE 12442/5). Nevertheless, European efforts to rebalance trade relations seem to have run out of steam and there is currently no cause for optimism. The hope of concluding a global agreement on investment by 2020 is increasingly tenuous, admits the European Commission (see EUROPE 12437/11).
The EU will therefore need to explore other avenues in order to once again enjoy a level playing field (see EUROPE 12441/12).
“European citizens don't understand that we are dependent on Chinese and Indian subcontractors for our medicines”, German MEP Manfred Weber (EPP) told the plenary the previous day. “This means that in future discussions on competition law, we will have to define which products we have to supply independently”.
Strategic Sectors
Indeed, for the European Union and its Member States, “the primary question concerns strategic sectors, such as medicines, where an excessive dependence on foreign countries is problematic”, explained Sébastien Jean. During this current health crisis, the issue of dependence on imported medicines is among the most acute.
“Beyond that, it only serves to further underline the importance of strategic autonomy, an issue that is already widely debated”, emphasised Sébastien Jean. “This crisis underscores the fact that dependency on suppliers can go beyond a strict economic framework”, even though it is “combined with an ever increasing geopolitical risk”, he said.
The same concerns are being expressed across the Atlantic—and perhaps in an even more radical way—with a revision of the “Buy American” laws aimed at encouraging the purchase of American pharmaceuticals and medical equipment.
The consequences for international, economic and political relations will therefore come together within the context of geopolitical rivalry and the US/China trade war.
The right time
But for Hosuk Lee-Makiyama, Director of the European Centre for International Political Economy (ECIPE) in Brussels, if the debate on the relationship between security and trade is to take place, then the timing is particularly bad.
The world economy is “at risk” as the OECD has pointed out, and global growth is expected to continue contracting sharply over the coming months, losing 0.5 to 1 percentage point of growth.
This is a reflection that will therefore have to be pursued, but only once the world economy is back on the right track, said Mr Lee-Makiyama. (Original version in French by Hermine Donceel)