All relationships need worked on - trade relations between the EU and China are no exception, argues Iuliu Winkler

European Parliament watching with concern as China increasingly becomes a rival and strategic competitor, says INTA Committee vice chair
Source: Alamy

By Iuliu Winkler

Iuliu Winkler (RO, EPP) is a vice-Chair of the European Parliament’s International Trade (INTA) Committee

30 Nov 2021

From the European Parliament, we are watching with concern as the areas of partnership and cooperation with China rapidly diminish and the country increasingly becomes a rival and strategic competitor. Our values differ, and our political and economic systems of governance are fundamentally opposite.

This atmosphere is being further fuelled by the political impasse in the bilateral relationship, in the aftermath of the Chinese sanctions on Members of the European Parliament, the Subcommittee on Human Rights and other European institutions and officials.

“We clearly do not agree on the topics of Xinjiang, Hong Kong, Macau or Taiwan. We find ourselves at odds on the normative battle over standardisation”

We clearly do not agree on the topics of Xinjiang, Hong Kong, Macau or Taiwan. We find ourselves at odds on the normative battle over standardisation. We witness malign Chinese behaviour in Europe, with hybrid tools and disinformation deployed to subvert the effective functioning of our democratic processes. We observe market-distorting practices by Chinese companies, and we are developing autonomous trade measures to assure reciprocity and a level playing field on our markets.

For these reasons, I welcome the new 2021-2022 position paper from the EU Chamber of Commerce in China, which vividly reveals the trend of China’s push for self-sufficiency. The 14th Five-Year Plan clearly indicates the central planners’ command to reduce overreliance in several sensitive sectors while boosting supply chain resilience.

In a recent discussion with representatives of the Chamber’s President J. Wuttke delivered the perfect one-liner on the latest paper: “China is all about self-reliance, turning its back on the global economy.” While this is worrying enough, it is also a blunt statement indicative of a new reality.

It seems that all major international players, be it the EU, US or China, are pushing for various degrees of ‘strategic autonomy’. Whether it relies on a pullback from more demanding international action, through unilateral trade and economic measures or uses a near-/on shoring of industrial capacity, all these actors are looking to protect themselves from shocks linked to increasing geostrategic competition.

While global interdependence is showing its ugly side, many of the world’s big hitters seek self-sufficiency. These trends could lead to the global economy underperforming, with possible negative effects for all European companies.

Stringent localisation demands, coupled with augmented securitisation and a broadening of the national security definitions in local regulation, are making it more difficult for European companies to maintain operations on the Chinese market.

In the dichotomy between control and performance, Beijing is leaning towards the former, choosing party control over market forces. This brings increased costs for compliance and for maintaining licenses to operate.

Moreover, the dominance of state-owned enterprise and the lack of properly reformed institutions result in a distorted playing field, lack of legal certainty and predictability as well as an overall decrease in business confidence. While bigger companies may be able to power through, possibly creating standalone supply chains specifically for the Chinese market, small- and medium-sized enterprises, and indeed, even bigger companies that are recovering from COVID-induced disruptions, could be forced out.

The effects will also be felt in regional efforts to achieve decarbonisation objectives and meet China’s 2030 carbon peak and 2060 carbon neutrality. Pertinently, as companies from Europe and other developed economies are moving out, one could also witness an even greater decrease in familiarity with the local markets and local mentalities, reducing mutual understanding with Europe.

“Economic nationalism, purely transactional commerce and isolationism in setting standards are detrimental to all participants of the international arena”

With this in mind, I believe China should choose a path of structural and institutional reforms while recommitting to a business-friendly climate that allows European companies to compete on a level playing field.

History teaches us all that isolationism is a dead end. Engagement and communication are the only tools we have at our disposal to ensure that we continue to cooperate on mitigating common threats such as climate change or global public health risks.

Daily trade with China exceeds €1bn; let’s not forget that many jobs in the EU are created and maintained by international trade. We need to be more assertive; we must reinforce our trade, investment and sustainable development toolbox with new and forceful instruments.

In the meantime, however, we should encourage engagement and the re-opening of various channels of communication. Let’s make it clear; the right best way to engage with the EU is engaging directly with the EU institutions, the Commission and the Parliament.

Fair competition is healthy for the economy, for innovation and growth, and indeed for job creation. We must continue the pursuit of establishing and enforcing market-driven competition with all available means. In contrast, economic nationalism, purely transactional commerce and isolationism in setting standards are detrimental to all participants of the international arena.

While standing up for our values, we will continue to robustly defend European strategic interests. In a quest to apply the principles of ‘Open Strategic Autonomy’, the EU must engage with China to resume dialogue and begin rebuilding trust. Together, we must shape the new reality of the EU-China relations.

Read the most recent articles written by Iuliu Winkler - Parliament’s trade legislation: A look back and moving forward

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