Why is Chinese President Xi Jinping laughing? Because he was handed two gorgeous propaganda coups this week – one that his own government engineered, the other a lucky gift.
The first was the European Commission’s endorsement of the EU-China Comprehensive Agreement on Investment, known as the CAI. Seven years in the making, it was pulled together in the waning, chaotic days of the Trump administration. Its timing – two weeks before the inauguration of Joe Biden and nine months before the expected resignation of German Chancellor Angela Merkel – was no accident.
The second was the delightful sight (for him) Wednesday of Donald Trump supporters storming the Capitol building, bent on wrecking Congress’s certification of Mr. Biden’s electoral victory. The gloating among Chinese officials could barely be contained. Foreign Affairs Ministry spokeswoman Hua Chunying compared the attack on the Capitol to the 2019 pro-democracy campaign in Hong Kong, when protesters broke into the Legislative Council. “When similar things happened in Hong Kong, some Americans and U.S. media reacted differently,” she said.
Of the two, the CAI, which still has to be ratified by the European Parliament, is far sweeter for China, a significant geopolitical victory that was celebrated with triumphant articles in the People’s Daily, the official newspaper of the Chinese Communist Party. European media were much more subdued, deservedly so.
The EC’s endorsement of the CAI was driven by Germany, not the EU’s other big industrial powers – France and Italy. It came at a time when China’s human-rights record has strained its relationships with the West and other countries, notably Australia. It was done in open defiance of the incoming Biden administration, which was given no chance to co-ordinate a new China policy with the EU. Mr. Biden’s national security adviser, Jake Sullivan, asked Brussels to hold off on signing the deal but was rebuffed.
The CAI is not a trade deal; it covers investments and seems mostly tailored to Germany, which counts China as one of its biggest markets for cars, machinery, chemicals and other high-value manufactured products. In 2018, China was Germany’s largest trading partner, with two-way trade volume reaching €200-billion ($310-billion). Germany is the top European investor in China, and China is the third-biggest destination for German investment abroad, after the U.S. and Britain.
The CAI is designed to give European companies better access to China and to prevent China from appropriating – more accurately, misappropriating – European technology. The deal aims to level the playing field between European and Chinese companies. It removes caps on levels of investment in China and ends the automatic requirement to form partnerships or joint ventures with Chinese companies, which gave China direct access to Western technology.
It’s likely the EU squeezed more concessions from China than it had hoped before the U.S. election in November. China wanted to nail down a symbolic victory and avoid dragging out talks that might have opened the door to U.S. meddling by Mr. Biden’s new trade, investment and security teams. The last thing China wanted was a joint EU-U.S. response that would put enormous pressure on Beijing to commit to meeting international human-rights standards and end its dismantling of democracy in Hong Kong, where more than 50 prominent pro-democracy activists and politicians were arrested this week.
Crushing freedom in Hong Kong is just one of China’s moves considered grave sins by the West. The others include its sanctions against Australia – which dared to suggest that China allow an independent investigation into the origins of the coronavirus – threatening Taiwan and the oppression of the mainly Muslim Uyghur minority in China’s Xinjiang region, a million or more of whom are in detention camps. It has also imprisoned two Canadians on dubious espionage charges in what is widely seen as hostage diplomacy.
Germany clearly saw the CAI almost entirely as a business deal, knowing full well that China’s pledge to curtail state subsidies will almost certainly go nowhere. Ditto Beijing’s promise to “work towards” enforcing international labour standards, including those for forced labour (China is a founding member of the UN’s International Labour Organization but has not ratified many of its conventions).
Germany, backed by the EC, apparently took the view that this deal was better than no deal, since Germany has no intention of “decoupling” its economy from China’s, as Mr. Trump threatened to do, and that Europe certainly doesn’t need permission, or even input, from America to strike trade and investment deals.
But that misses the point. The point is that such deals always mix money with geopolitics. The CAI delivered very few geopolitical gains for Europe and will do nothing to stop the quashing of dissent in Hong Kong or end the political indoctrination campaigns in Xinjiang. Human-rights advocates are incensed. Lord Chris Patten, the last British governor of Hong Kong, said it “spits in the face of human rights and shows a delusional view of the Chinese Communist Party’s trustworthiness on the international stage.”
Europe is asserting itself, to be sure, but it’s not getting a lot in return from China, which has succeeded in driving a wedge between Europe and the United States while moving Europe further into its economic orbit. As we all know, political power follows economic power.
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