Deals in the freezer

For seven years China has pushed a trade deal with the European Union. Last December eventually the negotiations resulted in a preliminary text for the EU-China Comprehensive Investment Deal. It was also favored by Germany’s Angela Merkel and France’s Emanuel Macron.

EU rules prescribe that an international contract has to be ratified in the 27 national parliaments and then in the Parliament of the Union before it enters into vigor.

Since it is a trade deal China insisted that human rights issues are excluded, but EU negotiators pushed through a measly paragraph on the topic well knowing that China would not honor it anyway. And more toads the Chinese had to swallow; mutual market access on a level playing field, rules-based competition without lopsided subventions in favor of Chinese enterprises, no cyber-based intellectual property theft and no malign spying.

Relations began to sour in March when EU parliamentarians imposed sanctions on Chinese officials who maltreated the Uighurs in Xinjiang. The Chinese retaliated by blacklisting ten EU lawmakers, scientists, and institutions.

On May 5, vice president of the EU Commission Valdis Dombrovskis of Latvia announced: It is clear, with the EU sanctions in place and the China counter-sanctions in place... that the environment is not conducive for ratification of the agreement.

Analysts predict that the deal is on ice but not dead. That Chancellor Merkel will do her best to push it through before she leaves next year. Germany is one of the 16 EU states with special ties to Xi Jinping’s Belt and Road Initiative. The two sides will hammer out the text, watering it down and then start the ratification process in the national parliaments.

The EU and India are currently talking about a world-wide infrastructure initiative called The Connectivity Agreement EU-India. It covers six fields; transport, energy, digitalization, climate change, people to people contacts, and global supply chains.

A draft was announced last May 8 at the EU summit in Porto, Portugal where a virtual session was held with Indian Prime Minister Narendra Modi.

US President Joseph Biden will announce a similar initiative for global infrastructure development in order to counter China’s growing influence. He has applied to include his infrastructure plan in the Agenda of G7+4 summit in June.

Australia-China tensions are worsening: China has suspended its economic accord with Australia, banning imports of coal, barley, seafood, wine, and timber. PM Scott Morrison wants Chinese stakeholders out of Australia’s seaports.

New Zealand’s Jacinta Ardern, after years of cozying up to Xi, has made a significant U-turn because of human rights violations in Xinjiang and Hong Kong. Although NZ trade with China is as big as with the four next nations combined, she says: Differences in our systems and values are becoming harder to reconcile. NZ will stick to the principles of the common front in the five-eyes coalition.

Taiwan is the world’s top chip maker. Since Trump has blocked US chip export to China, Xi is luring top Taiwanese semi-conductor specialists into the mainland. But last week a Taiwan law forbids recruitment platforms to react to any call for hiring Taiwanese tech talent.

Australian analyst Griffit Coonan says: Those minor players who have loose trade contracts negotiated bilaterally with China and try trading on their own are a big problem. They will get isolated. He refers to Cambodia, Laos, Vietnam, and the Philippines.

Erich Wannemacher

Lapu-Lapu City