17 April 2020, 09:10
In 2013 the EU committed to a comprehensive strategic partnership with China. Back then the EU and China believed that their strategic development plans presented a potential for synergies and win-win cooperation. There was growing confidence that China would undertake comprehensive reform of its economic and social model with the aim of transforming China's growth model into a more sustainable one, based on greater domestic consumption, an expanded service sector and openness to foreign investment, products and service.
However, there has been a growing perception that China’s reforms have slowed down, if not reversed. As pointed out in the 2016 EU Strategy on China, China has made significant strides in areas such as tax reform, broadening social security coverage, and reform of financial markets. However, in other areas, such as State-owned companies and openness of the service sector, progress has been slower. Recent legislative initiatives introduced new restrictions on foreign operators in China, which go against market opening and the principles of equal treatment.
The rise of China has happened in the last decade with unprecedented scale and speed. With the Made in China 2025 strategy, China aims to move away from traditional low-cost manufacturing to embrace higher-value products and services. China’s increased weight in the world economy and a renewed emphasis on "going global" reflects its ambitions to become a leading global power.
As a result, the EU’s assessment of the role of China in the world, as outlined in the 2019 EU-China strategic outlook, now includes multiple facets. From cooperation partner to negotiating partner, from economic competitor in pursuit of technological leadership to systemic rival promoting alternative models of governance. This assessment of China led the EU to consider a new approach with China based on the defence of European interests and values.
The EU business community welcomed the new shift of the EU towards a more realistic and assertive approach. Some association produced a number of studies and recommendations into specific areas, such as trade & investments, procurement, intellectual property and standardization.
Here is an overview of the main recommendations provided by BusinessEurope, VDMA and the Industry4Europe coalition.
BusinessEurope’s paper “The EU and China: Addressing the Systemic Challenge” sets out a strategy on how the EU and China can build a stronger and fairer economic relationship. The paper first demonstrates that there is a shift in the balance of opportunities and challenges in the economic relationship with China. This means that the EU should reconsider how it engages with China. As a result, four key objectives should be pursued in order to seize the opportunities within the economic relationship and to address the systemic challenges that China’s state-led economic system poses to the EU. The four key objectives are as follows:
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Secure a level playing field between China and the EU
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Mitigate the impact of China’s government-induced market distortions
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Reinforce the EU’s own competitiveness
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Ensure fair competition and cooperation on third markets
The German mechanical industry association VDMA published the position paper “Competitor China – realigning trade policy instruments” calling for a trade policy reorientation with China. Indeed, the perception of China in Germany has changed in the mechanical engineering sector.
In its document, VDMA calls on national and European institutions to review their trade policy instruments and - where necessary - adapt them to the new circumstances. Previously tolerated subsidy distortions and unequal market access are no longer acceptable. Subsidies and public procurement are a focus of the paper.
Among growing protectionism worldwide, the Industry4Europe coalition urged the EU to champion international trade and a level playing field in order to maintain the competitive advantage of the EU industry. In the joint paper ‘A long-term strategy for Europe’s industrial future: from words to action’, the following recommendations are provided:
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An open rule-based multilateral trading system with a modernised WTO
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Achieving a level playing field to improve market access
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An ambitious bilateral trade agenda and better implementation and monitoring of FTAs and Association Agreements
To conclude, despite the conflicting approaches the EU and China want to enhance cooperation and to this purpose have been negotiating a comprehensive investment agreement since 2013. It was desirable to see the agreement finalized by the end of 2020 under the German Presidency of the EU. However, the impact of COVID-19 will most likely disrupt the negotiation schedule in addition to the global economy to an extent we cannot predict for the time being.
Source: CECE - Committee for European Construction Equipment