Spectre of Trump inspires EU fight on China’s economic strong-arming
- A proposed legislative instrument aimed at Donald Trump’s trade tariffs is being seen by the EU as an important tool against Beijing coercion
- Australia’s experience of Chinese bans on its exports has been seen as a cautionary tale by many European countries
The internet users had picked up on a row over a Dutch proposal to redesignate a trade and investment office in Taiwan as the “Netherlands Office Taipei” – to the fury of the Chinese embassy in Amsterdam. The Global Times, a nationalistic tabloid affiliated to Communist Party mouthpiece People’s Daily, reported the story with the headline: “Netizens call for Dutch products boycott, halt to medical exports over Taiwan”.
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European Union officials had already been formulating an “anti-coercion instrument” designed initially to counter the “weaponisation” of trade by former US president Donald Trump, whose penchant for tariffs hit European businesses, as well as Chinese.
But as the pandemic unfolded and China started to more obviously weaponise access to its giant consumer market, it became clear in Brussels that such an instrument was needed to counter Beijing too.
According to officials from multiple EU member states, calculations have been made in ministries across the continent as to the costs of being cut off from the Chinese market in key sectors, should someone say or do the wrong thing.
No European economy is as exposed to China as Australia’s, but many governments have noted its cautionary tale. China impeded Australian exports of coal, wine, barley, beef, and other products over Canberra’s demands for an independent investigation into the origins of Covid-19 – on top of a litany of other issues, including a call for Taiwan to be admitted to the World Health Organization.
Other countries have faced trade restrictions from China. Beijing banned Canadian canola seeds over concerns about invasive pests, but only after the arrest in Vancouver of Huawei Technologies executive Meng Wanzhou, pending extradition to the United States.
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“An increasing number of players [are] resorting to coercion in order to achieve their aims – and they are not hesitating to weaponise trade relations in this context,” said the EU’s director general for trade Sabine Weyand during a recent webinar.
“When we started thinking about this, this was really under the impression of the Trump administration’s use of 301 [tariff] measures, rather than developments in China which are more recent or have come to the forefront,” she said.
The political organs of the EU have closed for the summer break, but a draft of the anti-coercion instrument is one of a number of tools – designed to strengthen the bloc’s trade arsenal – which are expected to appear in a busy few months for China affairs.
Last year, the EU launched its human rights sanctioning regime, which was used on Chinese officials for the first time in March. A senior German diplomat expects more sanctions on China in the near future. “There is a shiny new tool that needs to be filled with names – you can bet more of them will be Chinese,” the diplomat said.
In addition, the bloc’s top diplomat Josep Borrell is plotting a review of its China policy by the summer’s end, while further detail on its nascent Indo-Pacific strategy will be unveiled in September.
On the economic coercion front, a task force put together by the European Council on Foreign Relations (ECFR) has been charged with putting meat on the bones of the proposed legislative tool. It is comprised of high level officials, MEPs and business representatives from Germany, France, Sweden, Spain, the Czech Republic and the Netherlands.
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“Even if the economic damage was limited, Beijing mainly seemed to want to send a message to Europeans to say: China is now ready to use economic coercion in direct response to European policy choices – to even moderate EU attempts to adopt stronger policies and close ranks with the US. President Xi Jinping told Chancellor Angela Merkel as much,” the paper read.
With China overtaking the US as Europe’s biggest trading partner, economic dependence is increasing, the report says.
Meanwhile, China has been strengthening its own arsenal with measures including a law that forbids companies from complying with foreign sanctions on Chinese soil.
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EU policymakers are looking for an instrument that can be deployed far more quickly and effectively than a World Trade Organization arbitration – which took years even before the appeal court was decapitated by the US.
While it will need to be approved by EU members, the anti-economic coercion tool would allow the bloc to react more swiftly to implement proportionate, but not necessarily identical, measures in response to intimidation.
Each measure would be approved by member states, but likely on a qualified majority basis, avoiding the sort of situation which has seen Hungary block successive sanctions on Hong Kong.
“Why is it that all the tools that we have to protect our economic interests do not work?” asked former French minister for European affairs Noelle Lenoir on a recent ECFR webinar, adding that the pandemic was a “wake-up call” on Europe’s dependence on China for key goods, highlighting “the emergency to have new instruments”.
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Bart Groothuis, an MEP who previously served as a cybersecurity expert at the Dutch defence ministry, is a member of the task force. He described China as an “all-encompassing threat” and sees the flurry of policy moves as a long overdue sign that the EU is waking up to the perceived menace. The primary issue, he thinks, is that the EU is “too dependent” on China.
“Norway is a good example on China, there are hardly any pressure points in Norway to push, but the same goes for Sweden. Why are they so successful in standing up against China? Because the pressure points that China has are reduced. And that is something that has to happen across Europe, especially in Germany, because Germany is deciding the foreign policy on China and that’s not a good thing,” he said.
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Another member is Marie-Pierre Vedrenne, a French MEP and vice-chair of the European Parliament’s Committee on International Trade. She said the example of Australia had been cited at length during meetings as an example of why such a measure was needed.
“It’s true that sometimes we have a feeling that Europe is naive about the behaviour of a higher power, especially in China,” she said.
“But I think that since two years ago, the EU has changed its position, and we have a lot of discussions now on the economic aspects since the conclusion of the CAI [the investment deal with China].”
The Chinese mission to the EU said it was “following relevant developments”.
