A study published by the Bruegel research centre calls on the EU to revisit its strategy with Beijing and to develop a “nuanced” approach to articulate conditions for fruitful systemic coexistence, without neglecting the development of more robust instruments to defend its values and interests.
Trade: growing rivalry
The evolution of the trade relationship between the parties is marked by a constant increase in the added value of Chinese exports to the Union, according to the authors of this study commissioned by the European Parliament’s Committee on International Trade (INTA) (link to the study: https://t.co/yu5LzqRRBa?amp=1 ).
In addition, the Middle Kingdom has become a competitor for EU exports to third markets due to China’s changing level of technological development. “This should be a wake-up call for Europe in its quest to remain globally competitive”, the researchers warn. Moreover, China is becoming increasingly central in global supply chains.
Moreover, the potential trade benefits that the EU could derive from the “Belt and Road Initiative”, China’s development and infrastructure plan, seem small compared to the challenges it poses to the EU. Indeed, China's “soft” power is increasingly becoming evident in the EU’s immediate neighbourhood - and even within the EU itself. Here, the authors call on the EU to take a more “unified” approach to improve its bargaining power.
As for their respective investments, European companies “have accumulated more foreign direct investment in China than the other way round”, the report points out. But Chinese investment in Europe is growing and is strongly focused on technology. “This raises the question of whether the EU should be concerned about losing its technological advantage, especially when Chinese state-owned enterprises can distort competition, not only in China but also abroad through acquisitions”, the report also states.
Priorities for the talks
Bilateral negotiations on a comprehensive investment agreement are crucial for the EU. They must be based on a few priorities, the report says, and the demand for reciprocity must be the central element.
Thus, China’s “negative list” for market access should be shortened and extended to the entire Chinese territory.
Market access, beyond the treatment of foreign companies, is another key issue for encouraging reciprocity.
The EU must also convince China to improve market access and to reduce subsidies to domestic companies.
Finally, the authors also believe the EU should build a “firewall” against potential problems related to Chinese investment in Europe through its competition policy and dispute settlement framework to regulate the operations of Chinese state-owned enterprises. These elements already seem to be taking shape with the forthcoming publication of the White Paper on Foreign Subsidies.
Dialogue in July
Civil society will also be invited to comment on these subjects, and more specifically on the bilateral negotiations concerning EU/China investment, at a dialogue to be held on 9 June: https://bit.ly/3hiTkdm (Original version in French by Hermine Donceel)