It took Brussels and Beijing seven years to agree an investment deal. A deal that, until its conclusion a few days ago, had been largely eclipsed by the Brexit process. Once the negotiations had concluded, however, the European side suddenly came under intense criticism — China, detractors said, was not the sort of country the EU should be cosying up to.
That the deal was finalised on the penultimate day of the year was a sure sign that Angela Merkel was pushing for closure. She had stated before the pandemic that advancing EU-China relations would be one of the goals of Germany’s EU Council presidency (now passed on to Portugal). A goal for Germany perhaps, but there was substantial opposition to the deal among European heads of states.
The Netherlands feared that China would never obey the mandatory workers’ rights regulation and prohibitions on forced labour. Eastern Europeans — particularly reliant on US military spending to secure their borders — argued that it would not be wise to close a deal before Joe Biden’s inauguration, thus reducing his room for manoeuvre in any US talks with China. Other sceptics, including French President Emmanuel Macron, eventually agreed to the deal, but doubts remain. How Merkel convinced the French President, in particular, remains a mystery. One possibility is that the deal will not be ratified until the first half of 2022 when France chairs the EU Council. That way Macron would have time to put pressure on China by threatening to let the deal collapse if Beijing does not follow the workers’ rights regulations. Even if that scenario comes to fruition, it is still astonishing how both Merkel and Germany got their way yet again.
And they really have got their way. European companies will face fewer hurdles to invest and do business in China, particularly in sectors that were previously shielded from foreign investments. A car manufacturing giant like Volkswagen that has become highly depended on the Chinese market will be happy about what the deal promises. No one in Brussels or elsewhere believed that an investment agreement would reduce the market share of China’s state-backed companies or fundamentally change the country’s domestic market system.
What’s more, Merkel might have undermined Biden’s start on the international scene with the agreement. Just a few weeks ago, the German chancellor signalled to the incoming president that she would be happy to co-ordinate more closely with Washington in matters of geopolitical relevance, including relations between the West and China. The trade deal with Beijing undermines Biden’s position in upcoming talks, because, as emphatically as he could stress that he represents the global West, Beijing knows how much Europeans value their access to the Chinese market. This undermining of Biden may perhaps even have been the point. He was, of course, vice president when US intelligence services tapped Merkel’s phone. This is an early warning that — though global friends — the EU is not subservient to America, it can make its own way if needed.
The fact that, despite the drawbacks, Merkel still followed through shows that she pursues her own agenda rather than America’s. She is convinced that the power balance will shift towards Asia in the 21st century. As China and its neighbours move up, she wants Europe to cling on to the economic giant in an attempt to maintain its status in the world. While many in the German media have criticised her for her soft-hand approach to China, economic experts have adamantly argued that German manufacturers need the Chinese market. Volkswagen sells almost 50 per cent of its cars to China, and competitors are equally reliant on it. The new trade deal ensures Volkswagen, Daimler and others that they will soon be able to sell electric cars in China. In pursuit of worldwide dominance, German car giants have irrevocably tied their fate to China and possibly left Berlin with no other option than to find an agreement with Beijing.
The EU declared China a ‘systemic rival’ in 2019, and for a while, it seemed as if European politicians and businessmen would look beyond profit. After all, the way China treats its citizens, arbitrarily removing basic rights, reflects how Beijing treats foreign companies that get in its way. But direct conflict is not the Brussels way. Eurocrats are keen to avoid falling into the growing rift between the US and China. Far better, as a primarily economic bloc, to hedge bets and smile both ways.
And yet the Chinese state is now a much more hostile internal player and more aggressive in foreign policy — the China that signed this deal is not the same beast that started the negotiations seven years ago. For all its hardnosed realpolitik, the EU is playing a risky game.