EU-China Comprehensive Agreement on Investment: Equal Distance with China and the U.S.|Chang Meng-jen

Published (HKT): 2021.01.03 09:22

U.S. President-elect Biden’s National Security Adviser candidate Jake Sullivan posted a text on Dec. 22, 2020, to remind people of the fact that China and the EU are negotiating the EU-China Comprehensive Agreement on Investment (EU-China CAI), and Biden also said on Dec. 28 that he would urge like-minded partners to form a coalition to hold China responsible in the areas of economy and trade. However, it is still difficult to prevent the EU-China CAI fro coming into fruition.

The reason why EU-China CAI suddenly saw significant progress after 35 rounds of negotiations over 7 years includes several obvious factors. First, after Germany took over the EU’s rotating presidency in July, it requested the negotiation to be completed as soon as possible. Merkel has always been an important driving force of the EU-China CAI. Second, the two superpowers of China and the U.S. have fought from a trade war to a technology war. Not only is Europe a battlefield, but the EU is also a target both the U.S. and China have been trying to rope in, especially when Biden is eager to revive the relationship between EU and the U.S., broken in the past four years during Trump’s term. China (or Merkel) must have taken into account the factors of partnering with the U.S. and sped up the signing of EU-China CAI. Third, this is to make up for the difficulties of future economic development and budgeting after Brexit and COVID-19. Finally, the EU has started to gain its autonomy in keeping an equal distance with both the U.S. and China.

EU trying not to offend China or the U.S.

Due to the impact of the pandemic and the increased imports in October 2020, China replaced the U.S. for the first time as the EU’s most important trading partner. Despite the raging pandemic, bilateral trade volume increased by 2.6% to 328.7 billion euros. Among the 27 member states, Germany accounted for 28% of the EU-China trade. In the second quarter, China surpassed the U.S. for the first time and became Germany’s largest export market, importing nearly 23 billion euros worth of goods from Germany. The importance of China to the EU economy is self-evident.

In fact, to gain the trust of the EU, China raised the banner of defending multilateralism and tried to overtake the U.S. under Biden. At the same time, it conceded and agreed to open up more markets to EU companies. To show the EU devotion, China has reduced its restricted or prohibited industries in 2020 from 151 to 123 and promised to allow foreign companies to explore and produce oil and natural gas in China. China has granted even bigger concessions in terms of intellectual property rights. As it is implementing its 14th 5-year plan, China has approved a specific intellectual property rights plan for a timeframe until 2025 and amended the “Copyright Law.” In November 2020, the National People’s Congress announced the revised version. Other concessions include the revision of “forced technology transfer,” restraining the competitiveness of state-owned enterprises in the domestic market, and the disclosure of subsidies.

The only thing China does not want to really let go of and only gives verbal promises is that it is willing to make efforts to ratify the basic conventions on forced labor according to the International Labour Organization (ILO).

As far as China is concerned, the agreement can free it from the shackles of geopolitics and reduce the EU’s fear of Chinese-funded mergers and acquisitions in key industries in recent years. In addition, it may win the EU’s reciprocity to comply with China’s requests to allow Chinese companies to set foot in a small number of industries of renewable energy that are not “strategically critical.”

The “asymmetrical interdependence” of neorealism could explain why the EU will gradually move toward independence and autonomy amidst the competition between the U.S. and China. Although a high degree of interdependence in the economy could reduce the possibility of war, conflicts will increase, so will hostility and vulnerability. The two interdependent parties will find ways to reach a “moderate economic interdependence” and “moderate competition.” Considering the avoidance of asymmetrical interdependence, the EU would try not to “offend either party” amidst the competition between the U.S. and China, either when they formed a close relationship with the U.S. for “security” or when they made China their biggest trade partner for “economic development.” They would avoid excessive dependence on any party for security and the economy.

In other words, although safety comes first, after Trump threatened to increase military expenditures, withdrew troops, and increased tariffs during his term, topped with Biden’s warning against Nord Stream 2, the EU has sensed the problem and started to take its own steps without complete dependence on the U.S. Now that the international landscape has changed, with China having the ability to take the lead in shaping a new international order, the U.S. hegemony no longer dominating, and every country’s economy being hit hard by the pandemic, the EU has decided to buy another “China insurance.”

It is of course impossible to convert to a complete pro-China approach. Both sides are fighting to maximize their interests, and they serve as two pillars to restrain the U.S. Europe’s stance on China has become tougher and sees Beijing as a systemic rivalry. This long-term trend will not change with the signing of the agreement, and the EU has already posed new obstacles to Chinese mergers and acquisitions of companies and the promotion of technologies.

Emphasizing the autonomy of the EU

The self-autonomy of the EU could also be observed from the signing of a joint declaration on Dec. 29, 2020, to “consolidate the autonomous technologies of the semiconductor.” It declares that it will invest 145 billion euros in the semiconductor industry in the next two to three years to jointly promote European technology and capabilities of advanced manufacturing. On the occasion of the US-China war on science and technology, the European Commissioner for Internal Market said that Europe has the ability to diversify and reduce dependence while still remaining open.

Naturally, Taiwan needs to be cautious with the EU’s neglect of the reminder of the U.S. and the sudden friendship between the EU and China. It is necessary to recognize the self-autonomy of the EU. In terms of economy, it may threaten China while curbing the U.S., and it will guard against but not offend China in terms of technologies and military security, moving toward independence. It would also partner with the U.S. to demand that China contribute to issues demonstrating EU values such as environmental protection and human rights. In diplomacy, it would show a flexible reaction. For example, if they see an adversary from the U.S. in Nord Stream 2, they would stand close to China and Russia.

In short, if the EU is united, it can act as the third pole and position the U.S., China, and Europe as three strong pillars. Facing the balance of power among these three parties, Taiwan can choose its way to unite with the U.S. and the EU, in technology, environmental protection, democracy, and the value of human rights.

(Chang Meng-jen, associate professor and director of the Department of Italian Language and Culture and Convener of the Diplomacy and International Affairs Program, Fu Jen Catholic University)

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