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Containment Is Futile: Europe and China Seal Investment Deal as U.S. Grumbles
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Source: Foreign Ministry of the People’s Republic of China

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The European Union and China have agreed “in principle” to a deal on investment after seven long years of negotiation, pointedly ignoring the concerns of the incoming Biden administration. The economic consequences of the so-called Comprehensive Agreement on Investment (CAI) remain unclear, but the political signals are telling: the EU is following an essentially German economic agenda centered on global trade while the United States of America’s attempts to economically contain China are manifestly ineffective.

European Commission President Ursula von der Leyen announced the agreement with Trumpesque hyperbole, to not say fake news, gushing that China had just sealed a deal with “the largest single market in the world.” In fact, with Brexit the EU economy is now unambiguously the second-largest in the world, with a respectable nominal GDP of \$18.3 trillion (as against the United States’ \$21.2 trillion and China’s fast-growing \$15.2 trillion).

I suppose von der Leyen’s transparently false statement was made based on contrived interpretations of the word “single,” as if the U.S. economy did not form a “single market.” If the EU’s head honcho is willing to be so misleading in the headline, beware of the fine print.

All that being said, there’s no denying the importance of trade between Europe and China. With U.S. President Donald Trump’s trade war against China, the EU has now become the East Asian giant’s biggest trading partner. Total EU-China trade amounts to some 560 billion euros (\$690.7 billion, as against U.S.-China trade of \$634.8 billion).

The deal essentially aims to enable European companies and investors to operate securely in China, while granting Chinese companies similar rights in the EU market. It should become easier for European investors to set up joint ventures in China, get shares in automobile and telecoms companies, operate in financial services, and offshore their production. The Chinese should in principle be able to more easily invest – critics would say take over – the European energy and tech sectors.

EU companies currently invest the most in the Chinese automotive sector, naturally of great interest to Germany. (Source: European Commission)
EU companies currently invest the most in the Chinese automotive sector, naturally of great interest to Germany. (Source: European Commission)

The deal represents a “rebalancing,” the EU says, of a trade relationship which has long been marked by China’s closedness, currency manipulation, and mercantilist trade practices. The deal in principle “prohibits technology transfers and other distortive practices” and demands transparency for certain subsidies. The deal also has a plethora of environmental and labor provisions, but critics (no bleeding hearts at that) lament that these are too general and basically unenforceable.

Money talks

Some have hailed the deal as a triumph of European Realpolitik and even a manifestation of the bloc’s ambitions for “strategic autonomy.” In fact, the EU has long been promiscuous in negotiating trade deals, often with precious little regard for so-called “EU values” (witness the bloc’s agreements and/or negotiations with Israel and the Gulf Arab states).

European trade deals and negotiations as of 2019. (Source: European Council)
European trade deals and negotiations as of 2019. (Source: European Council)

In the Balkans, the Ukraine, and the Caucasus, such economic deals are indeed part of a wider and generally effective strategic agenda of securing these states in the EU’s orbit and away from Russia.

Some have attacked the EU for making a deal at a time when Beijing, which leads the largest dictatorship in the world, is reasserting control over Hong Kong and is said to be committing “cultural genocide” against the Muslim Uyghur minority, complete with million-man-strong concentration camps. Raphaël Glucksmann,[1]Raphaël Glucksmann, like his warmongering Maoist-turned-neoconservative father André Glucksmann, has been criticized as a walking-talking anti-Semitic caricature. Glucksmann fils praised Mikheil Saakashvili’s government in Georgia in 2008 for being “made up of young people who have American, English, or Israeli dual citizenship, making Tbilisi like a Western [Tower of] Babel in the heart of the Caucasus.” a Jewish-Socialist-globalist-Zionist member of the European Parliament, denounced EU leaders in a dramatic speech, declaiming “J’accuse!

Certainly, the deal makes a mockery of “EU values.” But then, perpetual hypocrisies are merely the wages of Wilsonianism.

(Franco-)German leadership confirmed, U.S. on sidelines

The EU-China deal is indicative of certain tendencies in both global and intra-European politics.

Just days before the EU-China agreement, U.S. Secretary of State Michael Pompeo had warned that economic engagement with China had failed and that the Chinese Communist Party aims to “dominate the free world,” noting that parts of the world still did not recognize this. The latter was something of an understatement as indeed the EU-China deal came on the heels of China’s own trade agreement with other 14 Asia-Pacific nations, including Australia, Japan, New Zealand, and South Korea.

Even if these agreements are in fact not particularly deep, they show the United States’ inability to corral allies and the general futility of attempts to contain China economically. In a decade or two, China is likely to become too powerful economically to contain, period.

Within the EU, the deal is suggestive of real power dynamics. The deal was rushedly concluded “in principle” at the end of 2020 under pressure from Germany,[2]One is reminded of President Bill Clinton and Prime Minister Tony Blair’s false announcement of the completed mapping of the human genome on June 26, 2000. In fact, as one of the researchers later conceded, “The date of the announcement . . . was picked because it happened to be free in both Bill Clinton’s and Tony Blair’s diaries. It was not clear that the Human Genome Project had quite got to its magic 90 percent mark by then . . . so nobody was really ready to announce; but it became politically inescapable to do so. We just put together what we did have and wrapped it up in a nice way, and said it was done . . . Yes, we were just a bunch of phonies!” Quoted in George Church and Ed Regis, Regenesis (New York: Basic Books, 2012), p. 167. which then held the EU’s rotating presidency. German Chancellor Angela Merkel no doubt wished to tie a bow on her final months in office. Germany is the only major European economy which is a net exporter of goods to China.

The deal was sealed over the objections of several EU countries – namely Italy, Spain, Poland, and Belgium – particularly regarding labor rights (China is alleged to be using slave labor). The French trade minister had even threatened to scupper the deal but in fact backed down. The triumph of Germany’s position is no surprise: EU head von der Leyen long served as Merkel’s defense minister, continues to keep close contact with the Chancellor, and was no doubt sensitive to her needs.

What’s more, French President Emmanuel Macron was mysteriously allowed to participate in the conference call with Chinese supremo Xi Jinping, which normally should have only included the leaders of EU institutions. Presumably this was to enable the Frenchman to, yet again, play the statesman on the international stage. The Italians by contrast were snubbed, their request to participate being rejected. The desire to limit personalities on the European side is certainly understandable, insofar as foreign leaders like Barack Obama had long complained of being bored at having to meet with so many interchangeable European officials. All this is suggestive of the EU’s real leadership today: (symbolically Franco-)German.

Critics may allege that the EU’s deal with China is tone deaf and will only worsen the denationalization and decimation of industries in the Old Continent. Brussels insists that implementation of the agreement will require extensive “engagement and monitoring.” On the Chinese side, the limited documentation available in English is characteristically opaque. China had in fact recently passed a National Security Law enabling the country to halt foreign investments if these are deemed threatening.

Time will tell what all this adds up to economically. What is certain is that, despite Washington’s best efforts to demonize and isolate Beijing, China is now a much sought-after economic partner being avidly courted by powers across the world from western Eurasia to the Pacific rim.

Notes

[1] Raphaël Glucksmann, like his warmongering Maoist-turned-neoconservative father André Glucksmann, has been criticized as a walking-talking anti-Semitic caricature. Glucksmann fils praised Mikheil Saakashvili’s government in Georgia in 2008 for being “made up of young people who have American, English, or Israeli dual citizenship, making Tbilisi like a Western [Tower of] Babel in the heart of the Caucasus.”

[2] One is reminded of President Bill Clinton and Prime Minister Tony Blair’s false announcement of the completed mapping of the human genome on June 26, 2000. In fact, as one of the researchers later conceded, “The date of the announcement . . . was picked because it happened to be free in both Bill Clinton’s and Tony Blair’s diaries. It was not clear that the Human Genome Project had quite got to its magic 90 percent mark by then . . . so nobody was really ready to announce; but it became politically inescapable to do so. We just put together what we did have and wrapped it up in a nice way, and said it was done . . . Yes, we were just a bunch of phonies!” Quoted in George Church and Ed Regis, Regenesis (New York: Basic Books, 2012), p. 167.

 
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