Europe signals tougher line on Beijing with frozen EU-China trade deal
The European Parliament voted to end a massive investment deal with China – a move following tit-for-tat sanctions and a protracted dispute over Beijing’s treatment of its Uyghur and Muslim population in the Xinjiang province.
For the investment agreement to enter into force, it must be ratified by the European Parliament. But under a resolution passed on May 20, EU lawmakers demanded “China lift sanctions before parliament can deal with the Comprehensive Agreement on Investment (CAI).”
The motion to freeze the deal was passed by an overwhelming majority by a vote of 599 to 30 votes, with 58 abstentions.
Some lawmakers have indicated they will not support the deal even if China lifts its sanctions, which were imposed in March on five members of the European Parliament and various institutions.
This vote is a blow to hopes that the EU-China agreement – defended by German Chancellor Angela Merkel and put in place during seven years of negotiations – could be ratified in the months to come. Instead, the result is another sign of deteriorating relations between the EU and China.
The 27-nation bloc is now struggling to strike a balance between growing concerns about human rights in China and its desire to gain deeper access to China’s lucrative market. Brussels is also seeking its place amid an intensifying global rivalry between Beijing and Washington.
“Observers of EU-China relations knew it was doubtful that the European Parliament would approve the deal,” Vuk Vuksanovic, a researcher at the Center for Security Policy in Belgrade and a former Serbian diplomat, told RFE / RL. “The real lesson from this situation is that the EU still has not designed a policy to deal with the rise of China and the world of growing Sino-US rivalry.”
The decision to freeze the deal also comes as China is more closely linked to European domestic policy, with countries like the Czech Republic, Germany and Hungary all facing elections that could usher in new governments and a tougher line on Beijing.
“Problems related to China [have] become major political subjects in many [Central and Eastern European] countries, and could have an impact on the upcoming elections in the Czech Republic [in September], or in Hungary [in 2022]Says Tamas Matura, assistant professor at Corvinus University in Budapest.
Deal On Ice
The investment deal signed in December 2020 was controversial from the start. The pact aimed to provide European companies with access to Chinese markets by relaxing some of Beijing’s notoriously strict rules for foreign companies and making it easier for Chinese investment in Europe.
But as soon as final talks ended between Chinese President Xi Jinping, French President Emmanuel Macron, Merkel and European Commission President Ursula von der Leyen, the deal was immediately rejected by Chinese critics of the bloc, who urged Brussels to prioritize human rights in its relations with Beijing.
Then, on March 22, the EU imposed sanctions on Beijing for his treatment of Uyghurs and other Muslim minorities in Xinjiang – where China is accused of running a system of internment camps. These sanctions were the first imposed by Europe on China’s human rights record since the Tiananmen Square massacre in 1989.
Beijing denies running internment camps. He immediately announced counter-sanctions against members of the European Parliament, as well as members of national parliaments, EU committees and several European researchers who focus on China.
Since then, the deal has stuck on ice – with EU lawmakers delaying ratification as criticism of the deal has escalated.
“The CAI is not beneficial to European geopolitical interests,” Jakub Janda, director of European values for security policy in Prague, told RFE / RL.
The resolution to freeze the investment deal comes as many member states – and the EU as a whole – begin to adjust their policies towards China.
In an approach largely directed towards China, the European Commission offers May 5 rules to prevent companies receiving foreign subsidies from buying EU companies or participating in public tenders.
The bloc signed an agreement with India on May 8 to increase cooperation in infrastructure financing. He is also engaged in talks with the United States ahead of a G7 summit in June on how to form an alternative to Beijing’s massive infrastructure project, the Belt and Road Initiative.
Analysts say the decision to freeze the deal could also embolden criticism of China and lead to potential policy changes for several European countries, both inside and outside the EU.
Germany, Europe’s largest economy, will hold federal elections in September as Merkel steps down after being Chancellor for 16 years. Under Merkel, Germany mainly took a middle course in its policy towards Beijing. He spoke out on violations of human rights and democratic ideals, while pushing for better access to Chinese markets.
Forecasts suggest that a coalition between Annalena Baerbock’s Greens and Armin Laschet’s Christian Democratic Union is the most likely outcome. The latest polls show, however, that Baerbock, who criticized China during his campaign and criticized Merkel’s approach, is in the lead to become chancellor. This signals a potential change in foreign policy that could ripple through the bloc.
In Hungary, where Prime Minister Viktor Orban has close ties with Beijing, the construction of a controversial Chinese university has become a growing political issue in Budapest. At stake is the use of public funds by the government of Orban and land previously allocated to affordable student housing.
One of the most vocal critics of the project is the mayor of Budapest, Gergely Karacsony. He presents himself as an opposition candidate who is trying to overthrow Orban in the Hungarian legislative elections of 2022.
The Czech Republic has elections in October. A coalition with the main opposition blocs, which openly criticize China, is gaining ground against the government of Prime Minister Andrej Babis. “It could be one of China’s most belligerent in Europe,” Janda says.
The decision to delay the deal could also have ramifications in the Balkans, particularly in Serbia – China’s main partner in the region. Vuksanovic said the move will be noticed across the region and the move could make Belgrade’s balance between China and the EU more difficult.
“[Belgrade] will not be able to hide behind the EU-China deal to justify its own plans for collaboration with Beijing, “says Vuksanovic.” However, Serbia will not end its partnership with China. He will continue his [existing] of course as long as the risks are not too high. “