EU-China: Proceed with caution
China is an opportunity for our market, but its growing influence in the EU is a source of concern, argues David Martin.
In recent decades, China has become one of the leading players in international trade. It is the second-biggest export market for the EU after the US, while the EU is China’s largest trading partner.
There should be no doubt that China’s growing domestic market and economic weight represents an opportunity for EU businesses and workers. The European Commission and the High Representative recently published a joint communication on EU relations with China.
The document acknowledges that the balance of challenges and opportunities China presents has shifted; China is a strategic economic partner but remains a (often unfair) competitor. In fact, as the joint communication points out, ensuring a level playing field in our trade relations is crucial.
When China joined the WTO in 2001, we expected its government to keep its commitment to implementing substantive economic reforms, converting China from a non-market economy with significant state interference into a market economy.
However, this did not happen; consequently, our producers do not compete with their Chinese counterparts on an equitable basis. The matter was discussed at length by this Parliament in 2017 when addressing the issue of granting the so-called ‘market economy status’ to China in the context of EU trade defence investigations.
There was consensus in Parliament that China is not a market economy and that our trade defence instruments are needed to take account of this in order to be effective. Available data demonstrates that most EU anti-dumping and anti-subsidy investigations involve China.
Another area of concern is the growing influence of China in EU Member States. China has been buying up infrastructure in Europe on a massive scale, under the ‘Belt and Road Initiative’ (BRI). Think of China’s entire or partial acquisition of ports in Belgium, the Netherlands, Italy, Spain and - most notably - Greece.
I do not think it is a coincidence that Athens prevented the EU from issuing a unified statement against the Chinese aggression in the South China Sea, or opposed the adoption of resolutions condemning China’s human rights record.
“Available data Demonstrates that most EU anti-dumping and anti-subsidy investigations involve China”
Personally, I consider it at least suspicious that Greece failed to act against a major Chinese fraud network dumping extremely cheap clothing and footwear imported into the EU through Piraeus.
Therefore, I welcome the forthcoming entry into force of the FDI screening framework - a piece of legislation strongly supported by Parliament - that sets out to establish a framework for screening foreign direct investment (FDI) inflows into the EU on grounds of security or public order.
It is interesting to note that Italy and the UK were the only two Member States that abstained in Council. While the position of the UK is understandable, given its expected departure from the EU, Italy’s is less so, unless it can be linked to its recent decision to sign a Memorandum of Understanding with China relating to the BRI.
I was sceptical about the UK-China ‘Golden era’ of trade relations started by David Cameron, therefore I am glad that Theresa May has - to some extent - put it into question. May has pushed for a review of China’s investment policy in the UK nuclear sector.
Due to security concerns, British Telecom has recently removed the Huawei 4G technology previously incorporated into its network. Despite this, I want to continue warning against the Brexiteers’ myth of fantastic and quick bilateral trade deals with the rest of the world, including China.
“There should be no doubt that China’s growing domestic market and economic weight represents an opportunity for EU businesses and workers”
First, post-Brexit, the UK will rank below Australia, Vietnam, South Korea and Malaysia in importance as a trading partner for China. EU-wise, Germany is China’s largest economic partner by far. Second, it is clear that China will sit at a negotiating table with us only if it can obtain major concessions, including opening the door to investments in our key infrastructure.
In addition, China will never want to include strong obligations on social and environmental protections in a potential deal; I am afraid the current UK government would be open to accept that scenario. With no provisions on social and environmental standards, Chinese companies will be able to unfairly undercut and outcompete its UK rivals.
To conclude, I consider China’s growth as an opportunity for our companies and workers. But at the same time, China is also a competitor, therefore we need to ensure it abides by the same rules and standards. In addition, the EU and post- Brexit UK should remain vigilant - China has a clear plan to increase its influence in Europe and the BRI is a key part of that.
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