- Hubert Walas
Deal with it.
The long-awaited opening of the Chinese market to European companies. The establishment, in Asia, of the largest ever trading block. The trade agreements drawn up in recent months between China and the European Union, as well as China and the countries of the Asia Pacific region are a sign that the process of decoupling with China, which the United States is trying to conduct, is not going according to plan. In addition, we have recently observed Beijing's increasingly assertive policy towards both Washington and Brussels.
Level Playing Field
The Comprehensive Agreement on Investment (CAI) between the European Union and China had been first proposed seven years ago and works on its shape have lasted since then. The deal that the EU promotes as 'the most ambitious deal China has with anyone' differs from the bilateral deals that Beijing has with many EU members in that it not only covers post-market investment protection, but also facilitates entry into the market itself.
At first glance, the CAI looks like an overwhelmingly unilateral deal with Beijing making significant concessions to Brussels, while the EU offers little more than what was stipulated in the General Agreement on Trade in Services (GATS) treaty back in 1995. This is due to the current imbalance between the EU and China. The EU market opened its door to Chinese capital, while in China, European companies have faced many barriers - they had to form joint ventures with Chinese companies, were excluded from many industries, and faced unequal competition from centrally supported companies. Now that is about to change. The automotive industry, medical services and telecommunications industry in China - companies in these 3 sectors in particular - will benefit from the new opening.
The time of the agreement was not accidental. The signing of the CAI was particularly demanded by the German automotive business for which China is the largest selling market - every third car produced in Germany is sold in China. Therefore, when Germany took over the presidency of the Council of the European Union in the second half of 2020, Angela Merkel made sure that the negotiations on the investment agreement with China were completed. And so it happened - on December 30, 2020 - the day before the end of Berlin's term of office.
However, the window of opportunity did not only coincide with the German presidency. It also matched the presidential election in the United States. At that time, President-elect Joe Biden announced his intention to create a common front against China with Europeans. Getting the deal right after Biden was sworn in was a slap in face for Washington. However, EU officials say, “we have been creating this agreement for over 7 years; you knew about it; why should we now adapt to the US presidential cycle and wait several months or even years? In addition, did Washington consult with Brussels when concluding its own highly profitable agreement with Beijing in early 2020?” In a broader context, the agreement is a sign of a gradual decline in US supremacy as perceived by Europeans. And its conclusion is a victory for the faction opting for the 'strategic autonomy' of Europe, led by the French.
France, whose business interests in this agreement include the liberalization of the medical sector in China, is to take care of completing the entire initiative. That is, ratifying the agreement. This is expected to take about a year and next year Paris will take over the Presidency of the Council of the European Union. However, there might be problems with this, as Spain, Italy, and Poland complained that the deal was quickly pushed under their noses.
However, even if the agreement is not ratified, Beijing has already achieved success. The Chinese moved a few stones on the proverbial 'Go' board and it turned out that by making small concessions, as many experts assess CAI, they have the opportunity to strongly undermine the US position in the key to US-China rivalry - Europe. Moreover, it is not the first time that Beijing has made such a move.
The Biggest Trade Block in History
On November 15, 2020, 15 countries in the Asia Pacific signed a trade agreement, by doing so created the largest trading bloc in history. The RCEP, or Regional Comprehensive Economic Partnership, brings together 15 Asia-Pacific countries, including Australia, Indonesia, Japan, South Korea, Vietnam and, above all, China. The member states account for 30% of the world's population - 2.2 billion people and 30% of global GDP - $26.2 trillion. What do CAI and RCEP have in common? Lack of US membership. While Washington was invited to join the RCEP, as was India, the Trump and Modi administrations withdrew from the deal. The Asian agreement brings with it enormous economic benefits. According to computer simulations, the RCEP is expected to add $209 billion to global revenue and $500 billion to global trade by 2030.
Regardless of the specifics of both agreements, both the CAI and RCEP show that despite the declaration of a strategic partnership at the security level, close allies of the United States do not want to stop globalization and still want to continue to trade with China. That fact is that, signing these agreements testifies to the weakness of American decoupling and the lack of an attractive replacement plan. However, Beijing's usually calculating and pragmatic diplomacy also shows nervousness, which betrays the mood and perception of the current world order within the Chinese Communist Party.
One of the arguments proving China's success after signing trade agreements such as the CAI or RCEP is the depreciation of the importance of violations of human rights in China, in particular the rights of the Uighurs and the existence of forced labor camps in western Xinjiang. To clear up the accusations of hypocrisy, on March 22, the European Union, in coordination with the US, UK and Canada, imposed minor sanctions on 4 Chinese officials and one organization, which contributes to the breaking of human rights. These were the first EU sanctions against China since the Tiananmen massacre in 1989.
China's retaliation was much larger and asymmetrical. It included 10 high-ranking officials, including members of the European Parliament, as well as the Political and Security Committee at the Council of the European Union, and one of the largest European think tanks dealing with China, the Mercator Institute for China Studies. Such a tough response caused consternation in Europe and put the ratification of the recent agreement under a big question mark. European officials claimed that with such decisions, Beijing presents itself in Europe not as a strategic partner, but rather as a strategic rival. In turn, Lithuania, by way of objection, decided to abandon the 17 + 1 format, that is the platform for China's cooperation with Central and Eastern European countries. The situation remains in development.
Change in Balance
China's disproportionate, even allergic, reaction may have been caused, in part, by an event that took place a few days earlier. When, in Anchorage, Alaska, the Biden administration met China for the first time. The new Secretary of State, Anthony Blinken, continued the policy of the previous administration saying: "We express deep concern over the actions of China, including in Xinjiang, Hong Kong, Taiwan, cyber attacks on the United States and economic coercion against our allies." In response, the highest-ranking diplomat representing the Chinese side, Yang Jiechi, strongly questioned the strength of the American alliances, recalled the successes of the Chinese economy, and rejected American attempts to interfere in China's internal affairs. He spoke all of this in Mandarin, even though he defended his diploma at the London School of Economics. Finally, he added that the United States did not have the potential to talk to China from a position of strength. It doesn't get any clearer. In the report from the event, journalists describing the meeting wrote that it "smelled like dust," while the Chinese Internet enthusiastically received Yang Jiechi's emotional statement.
The CAI and the RCEP are clear evidence that the plan to deglobalize and cut China off in the name of solidarity with the United States in the fight against China is not in the interest of even Washington's closest allies. The Biden administration must learn a lesson from this and offer a strategy that, instead of fighting the interests of the whole world, will go with them in synergy. After all, when the allied interests - that is, the basic motive of international relations - are taken into account, the cultural, civilizational and ethical closeness of the broadly understood West will make the United States continue to be considered its core.
While China, showing its darker side more and more it causes more stir in the international arena.
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