The China Thread

[grumbler]

If you asked me 10 years ago I'd have thought that free trade and exposure to the west would ultimately move the emergent Chinese middle class to demand democratic concessions, but so far it doesn't seem to be happening. 

I don't know why you think that way.  There are indeed plenty of Chinese middle class families who want democracy.  But the solution to that problem is to move to the West, not to start a revolution.

Perhaps that will change if rapid economic growth continues and the proportion of well-off families increases? Right now gdp per capita is still only about $10,000 ... so many must be delighted to be out of poverty and focussed on car ownership or whatever; if it gets to $30,000 their priorities might change. Taiwan and Singapore are democracies after all, with a greater value placed on good order than other Western countries perhaps.

Taiwan and Singapore had more luck in their fight against organized crime.  China was taken over by it.

There's nothing Western about democracy, per se.   It's just that democracy cannot exist where the thugs call the shots. 

[Threviel]

Democracy is not necessary the most important stuff either. Rule and predictability of law is. Like Singapore and previously Hong Kong. Having, like Grumbsy says, the organized crime in charge makes that impossible for China. And now Hong Kong. And if China gets what it want also Taiwan.

[Sheilbh]

In a bout of deal-making rumours the EU-China Investment Treaty may be almost agreed and possibly in place before President Biden takes office. Which I'm not sure is a great idea. It feels a bit like sacrificing Europe's political values for certain companies' economic interests (because I don't think this will help European manufacturing particularly in CEE which, to an extent, compete on cost).

[The Minsky Moment]

I don't see trade sanctions as a viable path to secure political reform in China.  The leadership clique isn't going to surrender just because the West makes it harder to trade.  Since 2005 the trade/GDP ratio for PRC has declined from 65% to 35% - a clear and unmistakable trend that shows how the internal market has advanced in relative terms.  Also, trade has expanded with non-American/Euro countries that can't be relied on to cooperate with a sanctions regime.  On the flip side, completely shutting down all trade with China would cause real pain to western economies with consequences for the politicians that pursue such a policy.

EDIT: For comparison, the EU countries average about 90% trade/GDP with Germany is 88% and France/UK in the mids 60s.  Much of that is intra-Euro trade of course, but it shows that a large country with a real domestic market is more insulated from disruption in trade flows.  The US is in the mid-20s and China seems to be gradually converging to that level.

[Sheilbh]

I don't see trade sanctions as a viable path to secure political reform in China.  The leadership clique isn't going to surrender just because the West makes it harder to trade.  Since 2005 the trade/GDP ratio for PRC has declined from 65% to 35% - a clear and unmistakable trend that shows how the internal market has advanced in relative terms.  Also, trade has expanded with non-American/Euro countries that can't be relied on to cooperate with a sanctions regime.  On the flip side, completely shutting down all trade with China would cause real pain to western economies with consequences for the politicians that pursue such a policy.

I totally agree - but I query the benefit of doing a deal especially when we know that China uses economics to leverage their political goals. This feels like using economics to ignore political goals by the EU.

From a group of EU-China experts:

EU should not rush investment deal with China
By A group of EU-China experts
Brussels, Today, 13:59

Before the end of the year, European countries have to decide on an investment agreement with China.

A tentative document was rushed through a meeting of ambassadors in Brussels on Friday (18 December). A top-level leaders' discussion is scheduled for the coming days.

Despite seven years of hard negotiations, the text is only a modest step in promoting reciprocity, competitive neutrality and a level playing field.

Concluding it now, is a symbolical victory for China and makes it harder for Europe to engage it on critical matters in the future.

China's concessions are a small improvement in terms of market access. But the draft agreement fails to comprehensively advance equal economic openness and clear, binding, rules.

That Angela Merkel and Emmanuel Macron are backing this deal, is also the consequence of some last-minute Chinese concessions.

France got some gestures for its retirement home industry. Germany is especially keen on securing its interests in the Chinese electric vehicles and battery sector.

If such "wins" will materialise at all, they will happen in the context of a China that is reinforcing its self-reliance industrial policies and at home and mercantilist expansion abroad.

China still does not pledge to open public markets, for instance. Despite Chinese government procurement totalling hundreds of billions each year, European companies will not be treated equally in public tenders.

China refuses to sign the International Procurement Agreement. Europe also failed to make Beijing accept an investment court system for handling investor disputes and level playing field clauses are unlikely to capture issues such as pervasive indirect subsidies.

One of the main problems is that the commitments to improve labour rights remain vague. They don't include critical commitments with regard to forced labour, the right to association and are still open to further negotiations.

As soon as the deal is approved, it will be harder to press China on this matter, especially now that forced labour seems to have become part of its re-education policy in Xinjiang.

From the moment that the deal is signed, Europe will thus lose leverage not only on issues critical for its future competitiveness but also on fundamental value issues – ranging from human rights to the future of coal power plants.

This has been a year in which China has rescinded its international treaty over Hong Kong. It has been a year during which China clashed on the border with India, engaged in military coercion of Taiwan, and economic coercion against Australia.

From Beijing's perspective, having the EU sign an investment treaty after this sequence of events and in the phrase of power transition in the US, amounts to a strong endorsement of its political trajectory, if not an encouragement to behave more assertively.

Vague promises

Given that China has not fulfilled many of its promises to Europe in the past, why should a vague text commit it more securely?

On the contrary, as has often happened, having achieved a public diplomacy success over Europe, China will turn further its attention to its one tough customer – the US, with the added benefit to have divided allies during an all-important transition in Washington.

If we make our separate deal, much as Donald Trump concluded his Phase One trade agreement a year ago, it will further undermine the transatlantic partnership.

Why the fast-track, the hurry, and the sidestepping of a public debate, why play into China's hand? What message is Europe, so proud of its deepening integration, so talkative about its open strategic autonomy, so insistent on its respect for values, sending to the rest of the world? Member states should think twice.

This deal is about more than pragmatic concessions in the realm of investment. It affects other important European interests and core values. It is about credibility and not committing the same mistake of partial and uncoordinated deal making that Europeans rightly blamed president Donald Trump for.

This treaty is a milestone. It must be negotiated properly so that it becomes a milestone towards a more balanced economic order.

Author bio
François Godement, Institut Montaigne, France.
Sławomir Dębski, Director, The Polish Institute of International Affairs, Poland.
Ingrid D'Hooghe, Clingendael Institute, The Netherlands.
Mikko Huotari, Mercator Institute for China Studies, Germany.
Janka Oertel, ECFR European Council on Foreign Relations.
Plamen Tonchev, Institute of International Economic Relations, Greece.
Jonathan Holslag, Free University Brussels, Belgium.
Ivana Karaskova, Association for International Affairs, Czech Republic.
Mathieu Duchatel, Institut Montaigne, France.
Nicola Casarini, Institute of International Affairs, Italy.
Maaike Okano-Heijmans, Clingendael Institute, Netherlands.
Matej Šimalčík, Central European Institute of Asian Studies, Slovakia.
Max J. Zenglein, Mercator Institute for China Studies, Germany.
Lucrezia Poggetti, Mercator Institute for China Studies, Germany

To that I'd add that one way, I think of addressing China would be for the EU to engage with Biden, Canada, Japan and probably the UK to look at the WTO and international trade in general on a multilateral basis. As it is the Commission has apparently informed member states "this is as good as it gets" with China.

[Threviel]

So, how would you curb China Joan?

[The Minsky Moment]

Curbing China is a different goal from regime change, just as Cold War containment differed from rollback.

Between the Obama and Trump admins, one started to see the elements of such a containment strategy: the "pivot", enhancing naval capability in the Pacific and freedom of passage exercises, key alliances in so-called "Indo-Pacific region" (the trumpers were right to link the regions together), toughened approaches in the CFIUS process to tech transfer and then using diplomacy to get Europeans on board. 

It is still a bit piecemeal and incoherent.  The US still has not adopted the LoS convention, which is madness especially at this point.  Obama had problems with the Philippines; Trump created wholly counterproductive issues with Korea - but did pretty well with Japan and India. Trump's tariff oriented policy was pointless and ended up counterproductive by not putting the proper emphasis on the theft and exploitation of stolen IP.  Most importantly, the abandonment of the TPP was a huge strategic mistake that is hard to recover from

[The Minsky Moment]

America's hard power edge over China erodes every year and you can pick your date for when China could force matters in Taiwan using conventional arms if it were willing the pay the costs - if it's not there already it will be in the foreseeable future.  China has already been able to create fait accomplis in the South China Sea

America still retains a strong edge in soft power despite Trump's efforts to undermine it.  The belt has come off the B&R/Silk Road indicatives as China confronts the realities of international finance and diplomacy in overseas weak states; they are now starting to grasp why the World Bank works the way it does.  In the short run you can buy some diplomatic support with cheap credit, but it rarely sticks.

[Sheilbh]

I feel like a ban on the use of forced labour really should be the bear minimum requirement in deals with a third country - especially one that uses forced labour in its economy

EU nears China trade deal despite slave labor fears
Companies want greater market access, but EU politicians point to Beijing's attacks on Hong Kongers and Uighurs.

China and the EU are racing to strike a trade accord in the final days of the year, but political scrutiny over China's record on forced labor has only just begun.

Negotiators from Brussels and Beijing have made a breakthrough on access to each other's markets and the EU's trade chief Valdis Dombrovskis will on Monday try to seal the deal with his Chinese counterpart Liu He, EU diplomats and officials said.

The EU-China Comprehensive Agreement on Investment offers safeguards to EU companies offshoring production to China and will make it easier for EU investors to buy Chinese companies, and vice-versa.

Sabine Weyand, the bloc's top trade bureaucrat, on Friday briefed EU ambassadors on progress in talks and described a surprisingly good offer from the Chinese side, according to five diplomats and one official. However, she warned that China had not agreed to the binding commitments on labor rights, especially a ban on forced labor, that Brussels would have wanted.

Politicians and activists across Europe say they have fundamental questions about whether Europe should be deepening its economic ties with an increasingly aggressive one-party state just as China is cracking down on democracy in Hong Kong, using mass surveillance technologies to control its population and is reportedly locking up hundreds of thousands of members of the Uighur Muslim minority in work camps.

Despite such concerns, EU countries backed Brussels to move into the "endgame" to lock down the deal, even though several nations asked the Commission to secure more commitments on labor. Two diplomats said that because of these remaining concerns, they would expect Weyand to give them another briefing before concluding the pact. "But with Weyand you never know, she is very autonomous," said one.

Many European politicians have been pressing Brussels to avoid economic and political alignment with China, but instead stop Beijing from undercutting the EU on lower labor and environmental standards.

"The political signal is disastrous. This deal mocks the concentration camps and enslavement of a people," said French MEP Raphaël Glucksmann. "I will be active in organizing opposition to this deal. If [EU leaders] think that ratifying this deal will be like posting a letter, they are gravely mistaken."

Critics also warn that agreeing a deal now risks complicating Brussels' effort to team up with U.S. President-elect Joe Biden to confront China on everything from human rights to technological standards.

Green MEP Reinhard Bütikofer complained: "A few market access concessions weigh more than both the need to stand tall against the appalling forced labour practises in China, and the opportunity of aligning with the incoming Biden team."

Cars and banks

In a crucial win for EU companies that have complained about an uneven playing field when doing business with China, the agreement commits Beijing to ease the requirements imposed on joint ventures when EU companies set up shop in China. It will lift foreign ownership bans on certain sectors, which will benefit European car and telecoms firms in particular.

The deal will "increase market access" for EU companies, in particular "financial services," such as banks, said Jörg Wuttke, president of the EU Chamber of Commerce in China.

China, meanwhile, hopes to invest more broadly in the EU's sensitive energy and high-tech sectors, EU diplomats said. Brussels and Beijing have in the past also presented the deal as a stepping stone towards a broader free-trade agreement.

Other sectors covered by the deal include air travel, hospitals, water transportation, electric and hydrogen cars, and research and development.

A spokesperson from the Chinese mission to the EU said that talks had "accelerated" over the past two weeks, and that the two sides had achieved "concrete results."

Diplomats said France and Germany had been the strongest proponents of the agreement, because their firms stood to benefit the most. Firms could sell their products or services without having to share the profits with a local Chinese partner.

Backing down on labor rights

The deal will face intense political scrutiny, as the European Parliament will need to vote on the agreement. Crucially, EU diplomats said the Commission had not secured binding commitments on forced labor, as it had originally hoped.

If Brussels indeed backs down on labor rights to strike a deal, it could fail to secure a majority in the European Parliament, where the Socialists and Democrats and Greens groups have said they would not ratify an agreement without binding labor rights commitments.

China's worsening track record on human rights, including its treatment of the Uighur minority and its crackdown on pro-democracy protestors in Hong Kong, could also torpedo the deal.

Only on Thursday, MEPs adopted a resolution condemning the arbitrary detention, torture and surveillance of Uighur, Kazakh and other minority groups in China.

As part of the deal, the EU wanted China to commit to ratifying the International Labor Organization's "fundamental conventions" which abolish forced labor, and allow workers to organize to form independent unions. But China has refused to make binding commitments on this, fearing that independent labor unions could evolve into a political opposition to the communist party, as the Solidarity trade union did in Poland in the 1980s.

Three diplomats said Brussels could instead consider a compromise on labor rights along the lines of the EU's trade deal with Vietnam. However, in that deal, Vietnam only committed to making "sustained efforts towards ratifying" the ILO's core conventions. EU trade law experts have warned that such language is not legally binding.

"Parliamentarians might push back on labor rights and sustainability commitments, but also with regard to the broader strategic question of signing this agreement with China now instead of working more closely with like-minded partners," said Mikko Huotari, executive director of the Mercator Institute for Chinese Studies in Berlin.

France, too, has expressed concern about Beijing's human rights record, though its President Emmanuel Macron and German Chancellor Angela Merkel have both supported the deal.

Bye bye strategic autonomy

There are also worries that, by signing a deal now, the EU will jeopardize its goal of becoming less economically dependent on China and diversifying its supply chains.

"This is a completely wrong response to what has happened for the past year," said MEP Glucksmann, from the Socialists and Democrats. "There has really been a questioning in public opinion across Europe of our dependence on China, of our inability to produce masks, of our inability to produce medicines," he added, arguing the deal undermined the EU's goal of securing more "strategic autonomy."

The deal could also undermine the EU's goal of teaming up with the new administration in the U.S. on an array of China-related issues. While Biden has promised a return to diplomacy in contrast to Trump's combative "America First" policy, his administration is poised to take a tough line on China, according to analysts.

Reaching the EU-China deal wasn't easy. "China needs to convince us that it is worth having an investment agreement," Commission President Ursula von der Leyen warned in September, while trade chief Dombrovskis said that the agreement should be "ambitious" enough to address "imbalances" in the economic relationship.

However, given the economic difficulties Europe is facing amid the coronavirus crisis, its exporters are increasingly reliant on the Chinese market for growth. In the first three quarters of 2020 EU-China trade hit more than €420 billion, meaning China surpassed the U.S. to become the bloc's top trade partner.

Jacopo Barigazzi contributed reporting.

If member states endorse this it'll be a disgrace - just utterly craven.

[Sheilbh]

Good news! France () has announced they'll oppose any EU-China investment agreement because of the use of Uyghur forced labour

[Sheilbh]

Good news! France () has announced they'll oppose any EU-China investment agreement because of the use of Uyghur forced labour

Apparently China has made some sort of concession on this - it'll be interesting to see what and no member state has objected to proceeding and trying to get this done by the (self-imposed) deadline of end of this year.

Coincidentally this story also came out today - the latest Buzzfeed investigation on the large and growing complex of factories in detention camps:
https://www.buzzfeednews.com/article/alison_killing/xinjiang-camps-china-factories-forced-labor?bftwnews&utm_term=4ldqpgc#4ldqpgc

[Crazy_Ivan80]

Good news! France () has announced they'll oppose any EU-China investment agreement because of the use of Uyghur forced labour

Apparently China has made some sort of concession on this - it'll be interesting to see what and no member state has objected to proceeding and trying to get this done by the (self-imposed) deadline of end of this year.

Coincidentally this story also came out today - the latest Buzzfeed investigation on the large and growing complex of factories in detention camps:
https://www.buzzfeednews.com/article/alison_killing/xinjiang-camps-china-factories-forced-labor?bftwnews&utm_term=4ldqpgc#4ldqpgc

china doesn't make concessions, only lies

[Tamas]

Yeah, China will stop using its Uygur slave labour because France disapproves it. They'll even pinkie-swear on it, which will be good enough for France and the rest of the EU to sign the deal and further enrich that dystopian hellhole of a country.

[Sheilbh]

Yeah, China will stop using its Uygur slave labour because France disapproves it. They'll even pinkie-swear on it, which will be good enough for France and the rest of the EU to sign the deal and further enrich that dystopian hellhole of a country.

It'll be interesting to see but my guess is that they'll probably end up with either something like the trade deal with Vietnam were Vietnam commits to "work towards" ILO standards on not using forced labour, or it'll be a commitment to adhere to ILO standards but no audit rights for Europe to actual assess compliance.

It reminds me of that thread by David Henig (mainly about Brexit) that the EU until 2016 didn't really have any strong level playing field provisions because it mainly made trade deals with the developing world where it was seen as unfair. It was only when negotiating the deal with the US that EU started to develop them in particular because of the embarrassment caused by realising that American trade deals have more robust labour and environmental protections than European ones

I do find it astonishing that amid all the talk of strategic autonomy the decision is to try and get this done before Biden takes office (as Biden has clearly flagged that his preferred approach would be to work with Europe and to develop a common strategy towards China), so Europe can boldly have its China policy that is strategically autonomous from the US. But looked at overall it seems like the European model for strategic autonomy is to do very little to end their security dependence on the US and to take steps to increase commercial/economic dependence on China. It's baffling and it strikes me that at some point those two approaches may conflict.

This appears to be driven by the German Presidency and the Commission, the Coreper decision was to proceed on the basis that no member state had raised a "stop" sign, but a German Green MEP has said that from what he's heard Poland wanted more time to harmonise policy with the incoming US administration (and Poland's ambassador has said member states were bounced into a decision), Italy raised concerns that member states still haven't seen a draft of the Agreement and France and the Netherlands raised concerns around human rights and the Uyghur labour camps. But none of them actually said to stop with the process, so it's proceeding.

I think the core questions are the ones that Ulrich Speck raised on Twitter and these haven't been answered in my view:
- Will the investment deal deepen an already problematic EU dependency on China?
- Will it provide China with additional instruments in the competition with liberal democracies?
- Is it in the longer-term economic interest of the EU?
- What geopolitical message would such a deal send to Beijing, and to Washington?

[Crazy_Ivan80]

- Will the investment deal deepen an already problematic EU dependency on China?
- Will it provide China with additional instruments in the competition with liberal democracies?
- Is it in the longer-term economic interest of the EU?
- What geopolitical message would such a deal send to Beijing, and to Washington?

given the stupidity of EU politicians the answers will probably be as follow:
1) yes
2) yes
3) no
4) the wrong one