The European Union recently adopted its new framework program for research and innovation, entitled “Horizon Europe” . This plans to finance an original strategic action: “Upgrading independent knowledge on contemporary China in Europe”. The objective is to support the work of researchers in social sciences which will make it possible to decipher China in order to allow secure exchanges and collaborations in commercial matters between actors of the socio-economic world; that is to say, exchanges that will not be victims of little-known and embarrassing Chinese strategies, traditions or policies in commercial matters.
China has changed and is no longer the “developing country” sometimes described in the past. Apart from its importance in trade with Europe, it is an actor with which relations have intensified in the fields of research and development or in that of technology. For the EU, China is both an economic partner and competitor, and a system and governance rival or alternative .
The objectives of the partnership
The EU’s primary objective is to be united against the Chinese giant. In March 2019, the European Commission published a strategic plan for China including concrete actions such as, for example:
To defend the objectives of the United Nations in matters of human rights, peace and security;
Commit to reducing CO2 emissions for the climate (China being both the first emitter, a builder of coal plants in other countries, but also the country that invests the most in renewable energies);
Agree with China to ensure peace and security in areas or countries where Beijing has influence such as Iran, the Horn of Africa, North Korea or the Gulf of Aden. Potential conflicts are numerous, including in the China Sea;
Find reciprocity in trade by avoiding protectionism or excessive support for local industries (via the WTO), as well as the difficulties linked to state ownership of certain companies;
Take into account in public contracts not only the price criterion, but also the working environment;
Strengthen security related to new technologies (such as 5G) to prevent hacking and espionage.
The aim of this plan is to adopt a less “naive”, more pragmatic and more realistic approach to the PRC, without giving in to overbidding, escalation or trade war. Balance is therefore difficult to find. But it is true that on each of the above points, examples abound of European failures. Overall, China has captured many markets by adopting operating rules that have allowed it to exercise “unfair competition” . To maintain its exchanges with Beijing, the European Union must therefore adopt a more offensive strategy.
Lessons from the past
Historically, the first diplomatic relations were established in 1975. A first strategic partnership plan was adopted in 2003. Others followed, until the recent “EU-China 2020 Strategic Agenda for Cooperation” plan , adopted in 2013.
This, now replaced by new objectives, remained very political and not very economical. The areas dealt with concerned peace, security, information, urbanization, climate, social progress, culture, education … Of course, the major sectors such as transport, aeronautics, energy , agriculture and more generally science and innovation were also discussed, but often succinctly to indicate that the two entities will cooperate and develop “joint initiatives” (joint laboratories, data exchange, etc.).
Finally, it seems after a few years that this has been done for the benefit of China. The example of the development of aeronautics or biotechnologies in China shows that Western countries have lost more than gained, both in terms of market share and technology transfer.
In the early 2000s, for example, France sold hundreds of Airbus A320s under contracts signed during official visits, with production and assembly in China as a counterpart with transfer of knowledge. Today, the China Commercial Aircraft Corporation is able to produce a new C919 aircraft , which will compete directly with the Airbus A320. The certificate of airworthiness could arrive this year and nearly a thousand orders have already been placed.
Today’s relationships and instruments
Moreover, despite these strategic plans, economic relations remain dependent on current events.
Even if the latest plan mentions the situation in Xinjiang (Uyghur Autonomous Region), a few words at a press conference can deteriorate relations. Recently, the European sanctions linked to the fate of the Uyghurs provoked the anger of China, which reacted with counter-sanctions which can go beyond the diplomatic sphere and result in the calling into question of trade agreements and in particular of the “Comprehensive Agreement on Investments” . However, these advances are crucial from an economic point of view. For example, German (Volkswagen, Siemens, BMW) or French (banks in particular) companies expect a lot.
In addition, China remains very firm in its will to implement its famous “Belt and Road Initiative”, and the countries of Eastern Europe are on the way. Moreover, relations with the European Union are often referred to as “17 + 1” (or 16 + 1), counting the countries of the East as one, which allows China to negotiate directly with them.
Other disputes over 5G and Huawei or the origin of the Covid also disrupt these relations. Europeans Nokia and Ericsson could provide the EU with 5G infrastructure, but Huawei is better placed on the price / quality level. Also, beyond these economic questions, political choices are taken into account, particularly with regard to security conditions , such as those related to data protection or the risk of espionage. With diplomatic language, we indicate that the EU is not opposed to any company but must avoid dependence on risky suppliers … China, for its part, sees it as disguised protectionism.
Despite everything, trade is important: the EU is the second largest trading power and the largest exporter of products and services. Together, China, Europe and the United States account for 46% of international merchandise trade in 2019. EU trade in goods (exports and imports) with the rest of the world represents around 15% of trade global. For goods, Europe’s leading export partners are the United States (406 billion) then China (210 billion), and in terms of imports, China (394 billion) then the United States (267 billion) according to Eurostat:
China EU.
In trade matters, the European Commission negotiates free trade agreements with the rest of the world, but the Member States have their say, through the Council of the EU (consulted) and the Parliament (which has a power of veto). The official objective of the EU is set in the Functioning Treaty of the European Union which specifies in its article 206:
“The Union contributes, in the common interest, to the harmonious development of world trade, to the gradual abolition of restrictions on international trade and foreign direct investment, as well as to the reduction of customs and other barriers. “
As a result, economic policy with China is turned, as in other geographic areas (Canada, Japan, etc.) towards negotiations aimed at developing trade and not protectionism. Nevertheless, the EU has equipped itself with tools to defend against unfair practices with very extensive competition law. The examples of sanctions against American firms (digital giants) are emblematic of this power.
In addition, the EU has integrated into its new trade strategy adopted in February 2021 called “Trade policy review: An open, sustainable and assertive trade policy” the respect of the Paris agreements on the climate and the respect of European standards (environmental by example). Without explicitly targeting China, these rules are a way of guiding economic policy.
They are accompanied by the trade defense instruments mentioned above. Anti-dumping is a typical example. A product is considered to have benefited from dumping when its selling price in Europe is lower than the price in the exporting country. This practice, which aims to capture markets in order to find itself in a dominant position, is often criticized against China. European legislation therefore aims today to speed up decision-making before it is too late because the markets and shareholdings are changing very quickly.
A recent example can be cited with the leather shoes imported from China . In 2006, to counter this dumping, the EU took radical measures by imposing customs duties of 19.4% on Chinese exporters on the grounds that they benefited from state subsidies contrary to WTO rules.
In conclusion, the EU intends to show its strength in its economic relations with China. For this, in addition to bilateral discussions, it strives to play a leading role within the World Trade Organization (WTO) by giving the Commission a negotiating role for all the Member States and expressing itself with one voice when negotiating trade treaties, instead of lining up behind the United States or leaving in disarray.
