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Paul Taylor, a contributing editor at POLITICO, writes the Europe At Large column.
PARIS — The European Union has drawn a firestorm of criticism for clinching a long-sought comprehensive investment agreement with China in the last days of 2020. That criticism is largely unwarranted.
The deal concluded by the European Commission — spurred on by Germany and France and with the consent of all member countries — will improve conditions for European companies doing business in the world’s second-largest economy, create jobs in Europe and China, and give Beijing an incentive to cooperate with Europe.
The deal will not miraculously convert China to Western norms of social, economic or political governance, but it does represent a modest step forward for the kind of regulated globalization that the EU has long sought to embody and promote.
Critics who have (rightly) complained about pressing issues — such as Chinese intellectual property theft, compulsory joint ventures, lack of reciprocal market access, use of forced labor and abuse of state subsidies — are now up in arms about an agreement that seeks to address all of those problems.
Three major arguments have been raised against closing the deal now. The first is that it is a strategic victory for Chinese President Xi Jinping, splitting the West and rewarding Beijing’s aggressive international behavior. The second is that it disregards the human rights of persecuted Muslim Uighurs in Xinjiang province, beleaguered democrats in Hong Kong and Chinese dissidents. And the third is that it preempts efforts by the incoming Joe Biden administration to build a coordinated transatlantic strategy to counter China’s growing assertiveness.
Some also contend that the accord is inconsistent with the EU’s designation of China as a systemic rival and its recent adoption of new instruments to screen strategic investments by state-owned or subsidized enterprises. The deal could also hamper the bloc’s ability to apply economic sanctions against egregious human rights violators, the thinking goes.
Each argument has some merit, but each is also selective and ultimately unconvincing.
Having long naively believed that integrating the People’s Republic into the global trading system would facilitate its transition over time toward liberal democracy, we now run the risk of lurching to the other extreme and demonizing Beijing in ways that could eventually lead to armed conflict. One-dimensional “yellow-peril” thinking does not do justice to China’s stunning rise from the ashes of Maoism.
A strategic approach toward the world’s fastest rising power must combine several strands: the search for cooperation in areas of mutual interest, including commerce; the fight against climate change and promotion of global health and sustainable development; and due caution to avoid economic and technological dependency and preserve our own security.
Nothing in this limited investment agreement prevents European countries or EU institutions from exercising vigilance through investment screening and protection of their critical infrastructure. Nor does it prevent Europeans from criticizing Chinese human rights abuses and drawing attention to the repressive, authoritarian nature of the Communist regime — as the European Parliament did in 2019 when it awarded the Sakharov Prize for freedom of thought to Ilhem Tohti, an imprisoned Uighur economist who has campaigned for the rights of Uighur people in China.
However, it is unrealistic to think that the EU can significantly change China’s domestic behavior — however repulsive by Western standards — by signing or not signing an investment deal. Fifteen Asia-Pacific countries, including democracies such as Australia, New Zealand, South Korea and Japan, signed a Regional Comprehensive Economic Partnership with Beijing in November without securing any commitment on labor standards. That did not trigger similar righteous indignation.
MEPs who strike the highest moral tone on human rights should ask themselves whether rejecting the investment deal with China, which they have the power to do, would improve the lot of a single Uighur prisoner, dissident blogger or pro-democracy protester in Hong Kong. Or would it just make us feel better about ourselves?
Without impugning their genuine attachment to individual freedom, some critics of the deal seem more concerned about keeping their consciences pure and sending a political signal to their voters than about helping either European or Chinese workers.
The investment agreement does give Europe some limited leverage on labor standards for the first time, since it commits Beijing to make good faith efforts to ratify key International Labor Organization conventions. It also opens some new industrial sectors to European investment, notably in financial services and electric cars, and puts some constraints on Chinese behavior on intellectual property, joint ventures and unfair subsidized competition, with mechanisms to review disputes.
If China does not live up to these commitments — and its recent record of respecting treaties gives grounds for doubt — the EU would have a basis for toughening its own stance.
All in all, the accord represents a step toward a more level playing field, both between Brussels and Beijing, and between European and U.S. corporations operating in China.
So what of the argument that we should have waited for U.S. President-elect Joe Biden?
Washington did not consult with Europe before President Donald Trump launched his unilateral trade war against China, nor when he cut his Phase 1 partial trade deal with Xi. On the contrary, Trump used bullying tactics and the threat of extra-territorial sanctions or withholding intelligence to try to shut Chinese telecoms provider Huawei out of the European market.
To be sure, Biden has promised to involve allies and work toward a joint approach to China. That is a welcome relief after the last four years of diplomatic vandalism. But pursuing a transatlantic consensus does not mean Europe should give America a veto over its trade and investment arrangements with Beijing.
Those who accuse the Europeans of “pursuing narrow, material self-interest under the U.S. security umbrella” are essentially implying that the EU should accept limited economic sovereignty as the price for NATO protection. We don’t need a Western version of the Brezhnev doctrine, thank you.
It will take months for a new administration to work out its own strategy on China and decide which Trump policies to maintain, which to discard and which to adapt. Why should the EU sit on its hands when it has an opportunity now to shape the triangular relationship between Beijing, Brussels and Washington?
When the Biden team is ready, Europe should indeed work for a transatlantic consensus on red lines for China’s international behavior and be willing to back them up with action if necessary, for example in case of an attack on Taiwan.
However, preemptively decoupling our economy from China’s and actively seeking to harm the Chinese economy, as the Trump administration sought to do, is ultimately a path to war that is in neither U.S. nor European interests.
Economic interdependence is complicated and requires careful management. But it also creates common interests in stability and a rules-based international system. China is indeed both a systemic rival and a vital economic partner. Don’t blame the EU for trying to manage both.
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