The EU’s China deal is bad for democracy

It would have been wiser to wait. That was the unmistakable message from Washington to Brussels last month as the EU neared agreement on its new investment agreement with China. Jake Sullivan, Joe Biden’s national security adviser, dryly said that “early consultations” would be welcome. Matt Pottinger, an able Mandarin-speaking official in the present administration, was blunter, saying that the US was “perplexed and stunned” by the deal, signed in principle on December 30.

But in Brussels people are fed up with years of hasty, unilateral American decision-making. Their deal, they note, is similar to the “phase one” market access agreement struck by the Trump administration with China last January. Why should European companies suffer while US ones are protected? Moreover, the year-end deadline was long advertised. If the Biden administration wants to rebuild multilateralism, start with a bit of humility.

The deal itself is quite narrow. It replaces and amplifies multiple existing agreements, with the aim of protecting investors against arbitrary treatment. Their bugbears include mandatory joint ventures, which China uses to steal technology and other secrets, and subsidies for local competitors. China has also made a mealy-mouthed commitment to make “continued and sustained efforts” to ratify International Labour Organization conventions that underpin free trade unions and prohibit slave labour.

The Chinese Communist Party (CCP) may have given away a bit on this front but has gained far more on others. Hopes of a global stance against Chinese bullying are dashed. Australia, the subject of ferocious pressure, is left marooned. Countries mulling how far to stand up to China will draw their own conclusions: Europe talks about values but self-interest trumps solidarity.

The deal exemplifies the gap between the EU’s foreign policy aims and reality. The European Commission claims to be “geopolitical”. In 2019 it deemed China a “strategic rival”. Yet the mercantilist influence of big business, particularly in Germany, steamrollers ethical and security concerns.

So does French vanity. For reasons nobody could quite explain, President Macron took a prominent role in the video-conference with Beijing that closed the deal. Grandstanding about European “strategic autonomy” overrides any thought about the aims and means of such a policy. Charles Parton, a China-watcher at the Royal United Services Institute who worked both for the British government and at the EU mission in Beijing, notes how few European decision-makers appreciate the threat posed by the CCP, and the need for international co-operation in dealing with it. For at least the next year, as the European Commission works on finalising the deal, the EU will shy away from any political rows with China.

But others will exploit the coming months. Critics in the European parliament promise to give the agreement a rough ride. Several governments, notably the Netherlands’, worry that it is too soft on China’s use of forced labour. Detailed scrutiny of the monitoring and enforcement of the promised human rights protection and bans on unfair subsidies offer plenty of scope for further haggling. More broadly, many Europeans will find it perverse to snub an American administration that looks set to be more Europe-friendly than any since Bill Clinton’s. Countries that rely on US-led efforts for their military security, notably the Baltic states, Sweden and Poland, are keenly aware of this. They will be pushing the EU to make up for its wetness on other fronts.

Opportunities abound. The real action in constraining China is elsewhere, notably in reform and reinvigoration of the World Trade Organization. This free-trade arbiter was a Trump administration bugbear. Reviving it would suit the EU and the Bidenites. Another important front is screening investment for national security reasons, which the deal does not cover. Nato is also waking up to the threat from China. Many countries worry privately about China’s habit of gobbling up foreign citizens’ personal data: a level of unchecked surveillance that make the practices of western intelligence agencies seem tame.

But for now transatlantic disarray reigns. This is a lesson, a danger and an opportunity for post-Brexit Britain. Inside the EU, our sceptical, atlanticist voice counterbalanced other forces. The scramble to sign off the China deal exemplifies how EU decision-making now works in our absence. Post-Brexit, we risk being stranded between a hawkish US policy and a dovish European one, at a time when our battered economy gives us little room for manoeuvre.

Yet a nimble and clear-sighted policy could work well. Unlike most other European states we do global diplomacy, not least with our reach in Asian countries such as India. A coalition of western and China-wary countries is still possible. We have broadly similar goals: to constrain the Beijing regime’s mischief-making through global standard-setting, to build resilience by diversifying key supply chains, while also preserving where possible, and even expanding, commercial relationships. As a big contributor to the continent’s security, Britain can make its case, and also reinforce American thinking, effectively and consistently in European capitals.

China, says Lord Ricketts, a former national security adviser and top diplomat, will be a “test case” of whether we can influence European decision-making from the outside. Centuries of history suggest we can.

Edward Lucas is a writer and consultant specialising in European and transatlantic security.

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