Covid-19 & EU-China Relations
– a Strategic Conversation

By Vova Leschenko
For those that haven’t followed us live, watch 📺 the replay

On the backdrop of the COVID-19 outbreak 😷, the strategic relationship between the 🇪🇺 EU and 🇨🇳 China is witnessing moments of complex tension, yet with considerable potential for cooperation. In the age of unprecedented economic interdependence and asymmetric multipolar competition these two important actors of the international system will have to find their way forward. The challenges are many, including a harsh economic outlook, societal and public health recovery, as well as the security dilemma which ought to be addressed. What matters most is mutual trust and political will.

Will we emerge as partners, competitors or systemic rivals?

Moderated by Tudor Petru Fabian, Coordinator Working Group on Trade SME Europe of the EPP, the Virtual Meeting saw high-level speakers such as: Ulrich Weigl, Head of the Trade Section, who spoke for H.E. Nicolas Chapuis, Ambassador of the European Union to China, who couldn’t participate in the meeting; Joerg Wuttke, President EU Chamber of Commerce in China, Vice-President & Chief Representative of the Group in China. Anna-Michelle Asimakopoulou MEP, Vice-Chair INTA; Christoph Hansen MEP, EPP Group Coordinator INTA and Philip Torbøl, Partner with K&L Gates, Antitrust, Competition & Trade Regulation. The event was hosted by Iuliu Winker MEP, Vice-Chair INTA, Standing Rapporteur for EU-China Relations and 1st Vice President of SME Europe

In his comprehensive introduction Iuliu Winkler described the strategic triangle that the EU has to currently deal with. On the one hand, the EU had high hopes on the evolution of relations with China as its partner in different areas, in particular negotiations for Paris Agreement, Investment Agreement, and as its economic competitor. On the other hand, he stressed the importance of the US as an essential partner of the EU. In this context, he warned against using binary approach of prioritizing cooperation with either the US or China and called for building global relations with both partners on the two major pillars of the EU external action– fundamental values and interests of the EU. Iuliu Winkler concluded his remarks by outlining five points about the recovery after the COVID-19 pandemic:

  • Reducing the EU vulnerabilities and dependencies
  • Defining the strategic sectors of the EU economy and then building on diversification of its supply chains
  • Enforcing the level playing field towards all EU partners
  • Strengthening the EU trade defense instruments
  • Searching for new allies and strengthening the WTO

Ulrich Weigl continued the discussion by stating that China had the burden of being first afflicted by the virus, but also has a chance to come out of the crisis first. Because the EU – China relation is so significant, Europe has to analyze China’s choices and decisions carefully and follow them in detail to understand what they mean for engagement. For example, now the Chinese stimulus might aim for infrastructure, which resonates with the big spending programs seen under and after the financial crisis. This suggests that it is very important to follow what would happen to not miss out on any opportunities. China is also about to write its next five-year plan, which will be the moment for China to set its policies, which is when the EU has to look for pointers in which direction the next steps and developments will go.

Joerg Wuttke also highlighted the significance of the EU – China relation by saying that it is very important for European businesses, which translates into European jobs. Adding to that, he stated that the Chinese GDP has still a very long way to grow, comparing it to the US GDP and of other countries’. Trade with the EU is essential for China for its own economy, which means that if China comes out first, the EU will also come out first. He also brings up the high demand for products in China, which not only leads to development and innovation on the supplier’s side, but also causes Europeans to learn many technologies or many products to be developed in China first in order to then replicate them in Europe. China is a market that stimulates innovation in Europe by simply being a demanding customership, which is often percepted as China is a Europes’ “fitness club”. To use this big opportunity Mr. Wuttke also suggests that Europe needs the kind of lobbying that is in Brussels or in Berlin or Paris or other places in order to keep the pressure on because China is playing offensive, while Europe plays defensive. Since Europe is becoming more self confident and it is after all the largest customer base and the largest market for China, it has to become more ambitious and competitive. In result this can make a lot of money for the EU. Europe has to stay humble about the Chinese relations to the EU, but at the same time make it clear by the help of Parliament that it’s not in their favor to be aggressive and offensive.

Then, Anna-Michelle Asimakopoulou MEP introduced her slightly different perspective, saying that she would not prefer to be pushed into making the binary kind of choices especially because of the political situation in the US at the moment. But at the same time she agreed that the way forward is to reduce the EU’s dependencies and vulnerabilities. She suggests that the EU needs to focus on strategic sectors, on diversifying in supply chains, on enforcement and new methods of enforcement. She also supported Iuliu Winkler on the idea of making new alliances and strengthening the WTO.  Concluding her speech, she said that Europe can’t leave unanswered what China may have done in either not disclosing things that have to do with the pandemic or even worse situations that are being described and whether the EU will just accept its “faith” or fight for its own values and make them high.

Christophe Hansen MEP insisted that Europe cannot allow itself be forced to make a binary choice between the American or the Chinese model of trade. He believes that the EU should have its own model, but Europe has to be very careful to not get squeezed between the two giants that are out there and not be able to change anything. He states that the better option would be to use China as well as the issue that Europe has with China to build the bridges with the US that is desperately needed nowadays, to restore the transatlantic relation. The US often criticizes Europe for  lacking in attitude towards China, so he says that the EU has to stand up and  work against certain problems in China, for example host technology transfer, unfair trade and harmful subsidies by maybe calling out China publicly and sensibly. He disagrees with Wuttke by suggesting that Europe has to fight and stay active instead of sitting calmly. This could create a dynamic that might be very benefiting for the EU and could even gain it some new strategic allies in Asia, and that would lead to diversification of partnerships, which is very significant. He also remarked about the importance of recovery and coming out of the pandemic, that everything has to be thought through.

Philip Torbol compares these relations to having friends: not all friends share the same values, some are not friends everyday, but you like to see each other now and then, relationships where you have to pick your moments; but the most important thing here is to accept your friends as they are. We don’t have to change them, but we have to make sure that we don’t change and stay true to ourselves sitting by our values. Philip believes that this relates to the way that Europe has to deal with China and the US. He thinks that the EU has to:

  • Set values and agree on them going forward
  • Take into account that partners like the US and China function very differently from the way Europe does when negotiating
  • Improve flexibility when negotiating in trade

He concludes that even though it will cost a lot in short term to stand up for the EU’s values, we can’t afford to not do it for the long term.

Adding on, Joerg Wuttke suggested that Europe is gaining major appeal, when America and China are losing appeal drastically. Europe has to sort out its own internal reform fatigue in order to “shine and sparkle”. He believes that Europe doesn’t have to choose because it’s already leaning more towards America  for stoical reasons while China has an autocratic system that no one can support from the political side, even though the EU should not ignore China. Also the EU has to put a lot of pressure on China to ensure that its businesses can do everything in China that China can do in Europe.

💬 The conclusions have been the following:
✔️#EU needs to strike a strategic balance between its core interests with 🇺🇸&🇨🇳 ✔️🤝no binary choice, instead, robust engagement based on 🇪🇺values & interests
✔️Despite current complexities, the dialogue🗣 continues, with ambition to advance #investment negotiations & World Trade Organization coop
✔️🇨🇳 has 🔑role for 🌏 economic growth & 🇪🇺jobs/innovation📈: 🔁decoupling is thus not realistic!
✔️ EU institutions remain committed & ambitious on tough subjects #SOEs#subsidies, level playing field, #IPR#environment#humanrights
✔️🇪🇺🤝🇨🇳 remain concomitantly partners, competitors & rivals in a complex international system