Thanks to Germany’s decisive role, China accelerates trade with Europe, but also with Asia and Africa. Le Monde in-depth analysis
In an attempt to overcome its differences with the United States – we read in Le Monde – China is rushing to conclude the first trade agreements in Asia, Africa and Europe.
To negotiate with China or not
The issue has long been the subject of reflection in many chancelleries, since Beijing, in the midst of a trade and technological war with Washington, made gestures of openness to the whole world to find less hostile growth solutions. After signing, in November 2020, the Regional Comprehensive Economic Partnership (RCEP) with fourteen countries in Asia and the Pacific, the largest free trade agreement in the world, China hastened to greet “the victory of multilateralism and free trade ”, as if to better underline the isolation of the United States.
A few weeks later, it stepped up negotiations with the European Union (EU) to conclude an investment agreement that has been under discussion since 2013 in late December. the door will open wider and wider ”, Beijing immediately congratulated its embassy in Paris. It is also a diplomatic victory for China: it has managed to dissociate its relations with the United States from those with the Old Continent, thus avoiding a common front between the two Western powers.
A few days later, on January 1st, the free trade agreement between Mauritius and China entered into force. The deal “strengthens [their] economic relations with Africa,” said Wu Peng, director of the Africa Department of the Chinese Foreign Ministry, which has promised more on the continent. And it’s not over yet. RETORTION MEASURES
In a January 8 interview with the Xinhua news agency, China’s new trade minister, Wang Wentao, said he wanted to speed up negotiations with Japan and South Korea and hold talks with Israel, the Gulf Cooperation Council and Norway. “We have more and more business partners,” the minister said.
Beijing now has nineteen free trade agreements, signed with twenty-six countries, covering 35% of its foreign trade.
“China wants to multiply partnerships before the new US administration takes office on January 20,” says Alice Ekman, senior analyst for Asia at the European Union Institute for Security Studies (IUESS). An increasing number of Chinese companies have been forced off the Wall Street lists because they have been blacklisted by the US Department of Defense.
Recently: phone maker Xiaomi, blocked in mid-January by Washington due to its alleged ties to the Chinese military. Chinese oil giant CNOOC has been added to the Commerce Department blacklist for alleged harassment and threatening behavior in hydrocarbon exploration activities in the South China Sea. Washington thus intends to limit their ability to import key technologies and halt their international development.
The fact remains that the agreements signed with China do not protect against its wrath, or even its utter hostility. The Asian power has thus multiplied the retaliatory measures against Australia, even though both signed the RCEP treaty in November 2020.
Above all, despite these numerous free trade treaties, the Middle Kingdom is not ready to open up its economy. In reverse. “The Party is tightening its control over the economy,” says Alice Ekman. “There is therefore a contradiction between the internal rigidity of its economic system and the openness provisions shown internationally.” TRADE SURPLUS
Democracies do not betray their values by signing agreements with China
In the fall of 2020, Canada gave up negotiating a free trade treaty with China. Relations between the two countries had deteriorated after the arrest in Vancouver in late 2018 of Huawei’s chief financial officer, Meng Wanzhou, and the subsequent Beijing detention of two Canadians, Michael Kovrig and Michael Spavor. Ottawa even decided in mid-January to ban imports from Xinjiang and punish companies involved in forced labor, as the UK has done.
The United States, which is trying to isolate Beijing with a violent tariff war, is currently finding it very difficult to reap the full benefits. As of November 2020, China had only imported $ 86 million (€ 71 million) worth of US products, just a third of what it pledged to buy earlier this year. In the opposite direction, the US continues to import massively from China.
The latter still recorded a trade surplus with the United States in 2020, increasing from 7.1% to 316.9 billion dollars, Chinese customs announced on January 14. Worse still, the tariff war between the two powers has prompted carmakers Tesla and BMW to move some of their US production to China to circumvent customs duties.
For the moment, China is doing more than parrying US policy, it is also scoring points with the EU. In the first nine months of 2020 – in the midst of the Covid-19 pandemic – trade between the two partners reached € 425.5 billion, compared to € 412.5 billion between the EU and the US, according to Eurostat. Indeed, Brussels intends to exploit Beijing’s dynamism by focusing on dialogue.
“We share the same planet. Without engaging China in a system of rules, both on climate and on trade, we will not be able to address the global challenges we face, ”EU Director-General of Trade Sabine Weyand said on Twitter on 5 January.
On December 30, 2020, with news of Uighur forced labor arriving from Xinjiang and intensifying repression in Hong Kong, the EU welcomed the conclusion of a “values-based” investment agreement with China. INTERNAL REMINDER
“This agreement will give European businesses a boost in one of the largest and most dynamic markets in the world,” said EU Trade Commissioner Valdis Dombrovskis, adding: “We have secured binding commitments for the environment, climate change and fight against forced labor. ” The text, which has not yet been made public, would guarantee European companies greater access to the Chinese market by imposing respect for intellectual property, transparency of the numerous State aid measures and a ban on forced transfers of technology.
Beijing would agree to phase out the automotive joint venture requirements, continue the liberalization of the financial services sector, lift the ban on foreign investment in cloud services.
According to the European Commission, this agreement “improves the conditions of competition” of European companies in China by prohibiting any discrimination in purchases by public entities, which contribute 30% of China’s gross domestic product (GDP), and by imposing “obligations of transparency of subsidies “.
Behind the scenes, the EU Member States are much more divided and above all less eloquent than the official communiqués of the Brussels executive. An internal note, consulted by Le Monde, of the Permanent Representatives Committee (Coreper), the body that brings together the ambassadors of the EU member states, suggests several reservations: “Some member states (Netherlands, France, Italy, Austria, Hungary) recalled that priority should be given to the content of the agreement rather than the urgency of signature. The Netherlands has been particularly critical, fearing that this agreement will aggravate the asymmetry between China and the EU in terms of trade opening. ”
Concerns have also been expressed about the repercussions of this agreement on the EU’s economic relations with other powers, in particular with the United States. Jake Sullivan, the future US National Security Advisor, in a message posted to Twitter on December 22, 2020, urged Europeans to wait for the Biden administration to arrive to develop a common strategy towards Beijing. Finally, countries such as France, Sweden and Spain have asked for “a clear commitment from China for the ratification of the conventions of the International Labor Organization (ILO)”. RUSSIAN DOLLS
The commitment obtained on the ratification of the ILO conventions is ultimately unconvincing. Beijing promises only to “work for the ratification” of international conventions on forced labor. Shi Yinhong, professor of international relations at Renmin University, and skeptic: “The Chinese state will never accept, even implicitly, the suggestion that some of its citizens are forced laborers and that trade unions have no place in the country.”
In Brussels, we prefer to see the glass half full: “It is not with this text that the Chinese regime will change, but it is the first time that Beijing signs an agreement that talks about forced labor,” says a senior European Commission official. The EU appears to believe in the promises of its partners, which does not happen to everyone. “How could a centrally governed state open strategic economic sectors to foreign capital
?” Asks Shi Yinhong.
“In the past 20 years, China has not really respected the agreements signed,” adds Amrita Narlikar, President of the German Institute for Global and Area Studies in Hamburg. “For example, it continues to make massive use of state aid, ignore intellectual property and impose forced technology transfers, despite joining the World Trade Organization.”
If China achieved a first diplomatic victory with this deal, it could also reap economic benefits as tensions with the United States increase. “It needs to attract innovation and capital from abroad,” says Ludovic Subran, director of economic research at Allianz. “Its current account deficit is increasing and in 2019 it received half of FDI compared to 2017.”
However, the promises of liberalization of the second world power may hold unpleasant surprises. Chinese regulations look like Russian dolls – as they disappear, more may appear. “Even if Beijing eliminates joint venture requirements for private hospitals, foreign investors will still need a license,” said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis Bank. THE DECISIVE ROLE OF GERMANY
Faced with hesitation from both sides, Germany, which held the EU Council presidency in the second half of 2020, played a decisive role in reaching the agreement. “Chancellor Merkel sees her country as very vulnerable in a world of great power struggle, and she cannot alienate China at a time when her weight and influence is increasing,” says Noah Barkin, a researcher at the Berlin office of the German Marshall Fund.
In the third quarter of 2020, Germany was the top European investor in China (‘840 million), followed by the Netherlands (‘ 270 million) and France (‘140 million), according to the Rhodium Group. German giants like Volkswagen, BMW, Infineon and Adidas now generate at least 20% of their sales with the Asian giant.
It is not risky to bet so much on a dictatorial and aggressive regime abroad
“With this agreement, the EU is putting its interests above its values and its short-term economic gains over its long-term strategic independence,” warns Amrita Narlikar.
Dependence on the Asian giant could also weaken it, especially at a time when it wants to relocate some of its industries in the name of “strategic autonomy”. In France alone, according to a recent note from the Treasury Department, the share of foreign inputs in industrial production has risen from 29% to 39% in the last twenty years. Of the more than 5,000 products imported into the EU, 7% depend on a small number of supplier countries, mainly China.
“The new agreement between China and the EU raises a fundamental question in the post-pandemic world order: how to manage the strategic and economic relations between great powers with very different political and institutional systems
” writes Dani Rodrik, professor at Harvard University, in an editorial published on January 11 by the Project Syndicate. In the name of its economic development, the EU prefers to move closer to its rival, the only power to have experienced positive growth in 2020, and refuses to choose, unlike the United States, between its strategic and commercial interests.
(Extract from the press review of Eprcomunicazione)
