Europe and China’s Year-End Breakthrough
With the completion of a major investment treaty between the European Union and China, the new year will begin on a promising footing. Now is the time for the world's leading powers to stop casting stones from glass houses, and start coming together to end the pandemic and set the stage for a green, digital global recovery.
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Europe’s China Gambit
The new EU-China agreement underscores a fundamental question of the post-pandemic world order: How should strategic and economic relations between major powers with very different institutional and political arrangements be managed? Can democracies remain true to their values while engaging in trade and investment with China?
CAMBRIDGE – Just as 2020 was ending, the European Union and China announced the completion of a Comprehensive Agreement on Investment (CAI) between the two economic giants. This “will be the most ambitious agreement that China has ever concluded with a third country,” boasted the official announcement from the European Commission.
The CAI gives European firms enhanced access to the Chinese market, removes (or relaxes) Chinese government requirements on joint ventures and technology transfer in some sectors, and promises equal treatment with state enterprises and greater regulatory transparency. Moreover, the Chinese government has undertaken some obligations on environmental sustainability and labor rights, notably by agreeing to make “continued and sustained efforts” to ratify the Forced Labor Convention.
On paper, this is a win not only for European industry, but also for human rights. But the reception the CAI has received has not been uniformly positive. The US reaction ranged from disappointment to outright hostility. For hardliners, including officials of the outgoing Trump administration, Europe’s decision looked like caving in to Chinese economic might and handing the country an important diplomatic win.
But many moderates, including President-elect Joe Biden’s designated national security adviser, were dismayed as well. The incoming Biden administration would have preferred presenting a unified front against China, by striking an economic deal with Europe first.
For others, it was the EU’s apparent naivete on China’s human rights promises that rankled. Guy Verhofstadt, a former Belgian prime minister and member of the European Parliament, tweeted that “any Chinese signature on human rights is not worth the paper it is written on.”
The Europe-China agreement underscores a fundamental question of the post-pandemic world order: How should strategic and economic relations between major powers with very different institutional and political arrangements be managed? In particular, can democracies remain true to their values while engaging in trade and investment with China?
To answer this question, we must recognize two facts. First, it is impossible to envisage a significant decoupling of the Chinese economy and the economies of the West that does not induce economic catastrophe. Second, there is little that Western countries can do, individually or collectively, to reshape China’s state-driven economic model or repressive human- and labor-rights regime.
Trade and investment agreements cannot transform China into a Western-style market economy or turn it into a democracy. Our best hope, then, is to seek a new global regime that recognizes the diversity of economic and political settings without severely undermining the gains from international trade and investment.
None of this implies that Western countries should put human rights or political considerations aside when they engage China in the economic sphere. It simply means that the US and Europe should pursue more limited, more attainable, and ultimately more defensible goals.
Two such goals are paramount. First, trade and investment rules should ensure that Western firms and consumers are not directly complicit in human-rights abuses in China. Second, such rules should safeguard democratic countries against Chinese practices that could undermine their domestic institutional arrangements on labor, environment, technology, and national security. The objective ought to be to uphold and protect the West’s own values, rather than export them.
So, the important question on the CAI is not whether the EU will be able to alter the Chinese economic system or improve China’s human rights and labor regime. Even if the treatment of the mostly Muslim Uighur minority improves, the repression of dissidents and free speech will continue. And even if China ratifies the Forced Labor Convention and enforces its provisions – a doubtful matter – Chinese leaders do not plan to recognize independent unions. The relevant question is whether the EU has given up its freedom to pursue policies that limit complicity in human rights and labor abuses or safeguard European national security and labor standards.
The European Commission has claimed that the CAI allows the EU to maintain its “policy space,” especially in “sensitive” sectors such as energy, infrastructure, agriculture, and public services. In the remaining areas, the EU is already fairly open to Chinese investment. That raises the question of what the Chinese government thinks it is getting with the agreement.
The answer seems to be that China is buying insurance against future restrictions in Europe. The agreement contains an arbitration scheme that enables the parties to bring violation complaints against each other. If consultations fail to resolve the matter, disputes are to be brought to arbitration panels with specific compliance procedures. While the European Commission views this as a mechanism to prevent Chinese backsliding from commitments, it could also serve as a means for the Chinese government to challenge specific entry barriers against Chinese firms.
A dispute resolution framework is essential to any workable global order. But what if, say, a European country wants to bar a Chinese firm that treats its workers badly or operates in Xinjiang? France already requires that large French companies abide by international human rights and environmental norms in their foreign operations.
What happens if European countries adopt tougher measures preventing Chinese firms with problematic labor or environmental practices from operating in the EU? Would the arbitration mechanism find these regulations compatible with the CAI? Similarly, how much deference will panels show to exceptions to market access based on “national security” considerations?
The answers to such questions are not clear. Much will depend on the final text of the CAI, and the degree to which arbitration panels choose to prioritize market access over countries’ self-described “public purpose.”
In any case, neither the US desire to forge a united front against China, nor the reality that the CAI will fall short of creating a freer, more market-oriented China is a valid argument against the CAI and other similar trade and investment agreements. We should not judge the CAI by whether it enables Europe to export its system and values. We should judge it by whether it allows Europe to remain true to its own.
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A China Strategy to Reunite America’s Allies
China’s autocratic ways and its strategic ambition are prompting the world’s democracies to band together against it. But, as the European Union’s recent decision to sign an investment accord with China makes clear, China’s geopolitical heft and the allure of Chinese trade and investment are tempting many to curry favor with it.
WASHINGTON, DC/LONDON – America’s relationships with its core democratic partners are set to rebound dramatically after President-elect Joe Biden takes office. Allies in Europe and Asia relish the prospect of an American president committed to adhere to democratic traditions at home, honor strategic commitments abroad, and be a team player.
Solidarity among the world’s democracies is especially important when it comes to standing up to China. But the European Union’s decision last week to sign an investment accord with that country underscores the potential for serious discord. Even though the Biden camp cautioned the EU against moving ahead with the agreement, it nonetheless sealed the deal (pending ratification).
To be sure, China’s headstrong ways motivate the world’s democracies to band together against it. Yet its growing geopolitical heft and the allure of Chinese trade and investment also tempt many countries, democracies included, to curry favor with its government. Accordingly, Biden should launch early in his presidency a concerted effort to forge a united democratic front on China, guided by the following three principles.
First, the United States should dial down the rhetoric and treat China as a formidable competitor, not an implacable foe. A US strategy of rigid containment or aggressive rollback would find few adherents in either Europe or Asia, implying that it would backfire strategically.
Democrats and Republicans may be seeking to outdo each other when it comes to calls for getting tough with China. But if foreign partners see Biden as spoiling for a fight, the US will do more to divide than unite the world’s major democracies. China already has significant geopolitical and economic clout in Asia and beyond – especially through the Belt and Road Initiative, its massive investment program in global infrastructure and commercial development. The genie cannot be put back in the bottle.
Pragmatic realism, not bombast, should guide US strategy toward China. Of course, the US should make clear its red lines, especially when it comes to Taiwan’s autonomy and freedom of navigation in the Asia-Pacific. But the US and China should aim for shared leadership in the region – a strategic objective that would enjoy ample support among US allies already fearful of the escalating Sino-American rivalry.
Second, the US and its key allies need to link arms to confront China on trade and investment. Economic decoupling is not in the offing; China is far too integrated into the global economy. Nonetheless, import competition from China and its unfair trade practices have cost the developed democracies millions of jobs over the past two decades. Pressing China to level the playing field can work to their economic advantage.
America and its allies need to team up to maximize effectiveness. Acting unilaterally, as President Donald Trump did – and as the EU is now doing – only plays to China’s strength by diluting the collective bargaining power of the world’s democracies. Trump’s tariffs have done little to liberalize China’s market or bring down the US trade deficit.
Instead, global pressure will be required to push back against China’s harmful trade practices, including state subsidies and intellectual property theft. Though full-scale decoupling is not in the cards, the US should join with its democratic allies to pull back from China when it comes to sensitive technologies, such as semiconductors and artificial intelligence. The same holds for imposing new export controls, scrutinizing and regulating Chinese investment abroad, steering clear of Huawei when it comes to building 5G networks, and repatriating high-end production.
These steps would align well with the domestic measures that the Biden administration and the governments of many other democracies are poised to take to generate more jobs and better pay for blue-collar workers. The goal must be to ensure that economic growth and gains from trade are more inclusive. Spending on infrastructure, education and retraining, research and development, and renewable energy can help the major democracies maintain their competitive edge over China.
Finally, the US and its democratic partners should speak with a single voice when it comes to standing up for human rights. Resolute condemnation of China’s unwillingness to grant basic freedoms to its citizens will put China’s leadership on the defensive in the court of international opinion. And it will help repair the erosion of America’s moral authority under Trump.
Democratic leaders can further raise the costs to China’s rulers by imposing sanctions on those responsible for oppressing the Uighur minority in Xinjiang and cracking down on Hong Kong. When China resorts to economic coercion to punish countries for criticizing its human rights record, as it is doing with Australia, the world’s democracies should respond in kind.
Working to build a consensus around these three principles would not only signal the depth of the Biden administration’s commitment to work with its partners. It would also play to America’s strongest suit when it comes to handling China: its alliances.
China has only one ally – North Korea – while the US has loyal partners worldwide. China’s economy will be the world’s largest by the end of the decade, but its GDP will remain roughly one-third the collective size of the world’s major democracies. As long as they stand together and aggregate their geopolitical and economic heft, the main democracies will outclass China for the foreseeable future.
Biden will need to summon all of his persuasive skills to forge a coordinated approach toward China. But his task is made easier by the fact that even as they eye the benefits of more commerce with China, democracies in Europe and Asia are anxious about China’s intentions. They will welcome a US president who respects allies and appreciates the need for teamwork to deal with China.
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America Must Mend Many Fences on Trade
The past four years of US protectionism and unilateralism will serve as a lasting reminder of how not to conduct trade policy in the twenty-first century. The Trump administration has utterly failed to achieve any of its stated objectives, and the incoming Biden administration will have to act quickly to repair the damage.
WASHINGTON, DC – Until 2016, global leadership was a hallmark of American greatness. The United States was at the forefront of establishing and supporting the United Nations, the International Monetary Fund, the World Trade Organization, and much else. America was exceptional in that, despite its stature at the end of World War II, it chose to build a world order through multilateralism and global institutions, rather than pursuing reparations and unilateralism.
It is almost impossible to comprehend how much damage Donald Trump’s presidency has done to America’s global standing these past four years. From the start, his administration sought to reverse longstanding policies that had been embraced by Republicans and Democrats alike.
Preferring unilateralism, Trump abandoned the Trans-Pacific Partnership (TPP) and demanded a renegotiation of the North American Free Trade Agreement, the US-Korea Free Trade Agreement, and other accords. He slapped tariffs on imported steel and aluminum under the pretext of “national security,” in violation of the spirit, if not the letter, of international trade law under the WTO. These decisions – and Trump’s behavior more generally – quickly eroded the confidence that other countries had previously placed in US leadership and “soft power.” The US, suddenly, could no longer be trusted to honor its commitments.
While multilateralism cannot guarantee the US complete fulfillment of its objectives, it certainly can achieve more than bilateral deal making of the kind Trump has pursued. With 4.25% of the world’s population and accounting for 15.2% of its GDP, the US is nowhere near large enough to impose its will on the rest of the world. Rather, US influence is most enhanced when it is deployed in concert with others. Nowhere is this truer than on the issue of trade.
Consider Trump’s “trade war” with China, which has utterly failed to meet its stated objectives. The bilateral trade deficit with China has grown, and US exports to China are falling well below the target level implied in the “phase one” agreement the two countries signed in January. Issues such as intellectual-property rights and e-commerce remain unaddressed. Perhaps even worse, demanding that China set quantitative targets for purchases of US exports has only increased the extent to which the Chinese state must intervene in its economy.
These failures do not come as a surprise. Tariffs cannot be expected to reduce a bilateral trade deficit, and bilateral measures are usually offset by third-party actions anyway. For example, in 2019, US imports from Vietnam rose sharply as its imports from China declined. And there have been numerous complaints about Chinese exports to the US being routed through other countries to hide their origin.
The Trump administration’s one-on-one deal making has failed for a simple and obvious reason: we live in a multi-country world. Tariffs and other discriminatory measures levied against one country will simply create an opening for other countries to fill.
Ignoring this reality leads to serious difficulties. For example, one of Trump’s first official acts was to ditch the TPP, which would have established a free-trade area among 12 Pacific Rim countries, notably excluding China. Following the US withdrawal, the remaining 11 countries proceeded without it, leaving US exporters at a distinct disadvantage in those markets. And now, Japan, South Korea, Australia, New Zealand, and ten other Southeast Asian countries have entered into a new free-trade bloc – the Regional Comprehensive Economic Partnership – that includes China and excludes the US.
The Trump administration has also effectively paralyzed the WTO’s important dispute-settlement mechanism, by refusing to approve any nominees to replace departing judges on its Appellate Body. The DSM is where countries previously could bring complaints about suspected violations of WTO rules. But, rendered inquorate by Trump’s intransigence, the DSM cannot adjudicate such questions, making it more likely that routine disputes will erupt into larger trade wars.
With Trump on his way out, the priority now should be on withdrawing the US tariffs on steel and aluminum imports. It is estimated that 0.7% of US manufacturing jobs were lost in steel-using industries, while only 0.3% of manufacturing jobs were gained in steel production. Worse yet, employment gained in steel production cost consumers about $817,000 per job. Although the tariffs were defended on national-security grounds, the truth is that the US imports only around 27% of its steel, and its defense industries account for less than 3% of steel consumption.
Reversing these policy mistakes will be necessary to restore US leadership in the global economy. Pursuing realistic aspirations through multilateral negotiations will be far more effective than bilateral talks when it comes to persuading the Chinese to alter some of their practices. Curtailing China’s economic growth in any significant way simply is not feasible. The US instead should take steps to ensure that it is in China’s own interest to abide by internationally agreed rules. Restoring the DSM’s operational capacity can and should be done quickly.
Beyond that, many observers believe that WTO rules should be amended both to address some US complaints and to reach an understanding on new issues, such as e-commerce and cybersecurity. Here, a possible US strategy might be to rescind tariffs (on steel, aluminum, and any number of imports from China) while simultaneously convening talks to address other outstanding issues.
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America Should Rewrite the China Trade Contract
America and other countries have no right to obstruct China’s economic rise or dictate its development model. But US President-elect Joe Biden’s incoming administration can and should revise decades-old trade arrangements with China to take account of changed realities.
NEW DELHI – Once US President-elect Joe Biden’s administration has made the relatively easy decisions to rejoin the Paris climate agreement, remain in the World Health Organization, and attempt to reboot the World Trade Organization, it will confront three key foreign-policy issues. In order of importance, they are China, China, and China.
Biden’s dilemma is that China has become too deviant to cooperate with fully, too big to contain or ignore, and too connected to decouple from. So, what principles should govern America’s economic engagement with it?
Two decades ago, the United States and the rest of the world bet that China, as it became richer, would open up economically and politically, while remaining benign in its international conduct. Under the resulting implicit contract, embodied in China’s 2001 WTO accession agreement, the world promised to guarantee market access for Chinese exports; in return, China would make its economy more open and transparent, and play by international rules.
But China has changed since then, and not only by becoming much richer and a much larger trader. Under President Xi Jinping, an authoritarian in the mold of Mao Zedong, China has repudiated Deng Xiaoping’s three guiding tenets: collective leadership in domestic politics, steady economic opening and reliance on market forces, and quiet cooperation with the world. Instead, Xi’s repressive regime is fashioning a new brand of inward-oriented, state-dominated capitalism. And it poses a threat to many of its neighbors, including Taiwan, Australia, India, the Philippines, Vietnam, and Japan.
In other words, the world has lost its China wager. Even where China has adhered to the letter of the contract – concerning currency and intellectual-property, for example – it has violated the spirit. The Biden administration and the rest of the world are thus entitled to renegotiate the deal.
America and others have no right to obstruct China’s economic rise, because its 1.4 billion citizens are entitled to pursue prosperity and security. Likewise, China is entitled to choose its development model, with its own balance between the state and the market.
Subject to these caveats, however, America can – and should – revise the decades-old contract to account for changed realities. The more China plays by the rules, the more such a revision would benefit developing countries that can trade with it.
For starters, China is no longer a poor country, but its status as a developing country entitles it to favorable treatment under global trade rules. This status must be revoked.
Second, China departed from the spirit of the original contract through beggar-thy-neighbor exchange-rate policies (especially from 2004 to 2010) that artificially preserved its economic competitiveness. That problem went away for a while, but is beginning to resurface.
The world must respond by codifying and enforcing rules on exchange-rate manipulation. And where the line between state and commercial entities is blurred – as it is in China – the definition of “excessive” intervention should be widened to include foreign-exchange purchases by state-owned banks as well as those by the central bank.
Third, the 2001 WTO accession agreement imposed obligations on China concerning its state-owned enterprises (SOEs). But, with the Chinese state playing a much larger direct and indirect economic role under Xi, these rules have to be adapted, tightened, and made more justiciable. Regarding Chinese investment abroad, for example, the world should treat skeptically China’s claim that the government is distinct from SOEs because the latter are run on commercial principles. The burden of proof should be on China to prove this.
As for inward foreign investment, the basic aim should be to ensure a far more level playing field. The new rules should therefore cover not only explicit state policies but also the actions of SOEs, as well as more of China’s government procurement policies and practices.
But Biden must first persuade China to agree to renegotiate the contract. Immediately removing all of President Donald Trump’s unilateral tariffs on Chinese imports could help. The Biden administration could also lend quick support to the WTO, by approving the choice of the body’s new director-general and restoring its Appellate Body. And the US could signal its willingness to join China-led international financial institutions such as the Asian Infrastructure Investment Bank, and to end the West’s monopoly of the leadership of the World Bank and International Monetary Fund.
Beyond improving the atmospherics, Biden must consider his tactical options: unilateral, multilateral, and regional. In theory, he could go even further down the unilateral road than Trump by threatening China with a return to the pre-WTO arrangement under which its market access would be reviewed annually by a fickle, more protectionist Congress.
But, as Chad Bown of the Peterson Institute for International Economics has demonstrated, even the more limited Trump strategy has failed, because the world has become too dependent on China to embrace restrictive trade actions against it. Moreover, success would be enormously costly: the global trading system’s integrity would be decimated, wrecking a half-century of international efforts.
Biden also has the multilateral option of renegotiating with China as part of an effort to revive the WTO, which has been languishing largely because of Trump’s hostility to it. The problem is that China – as a WTO member with significant clout – would have to agree to any changes.
The Biden administration must therefore consider the regional route that Trump abandoned when he withdrew the US from the Trans-Pacific Partnership (TPP) in 2017. Rejoining its successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), would enable the US to integrate more deeply with the rest of Asia and possibly also with Europe, thereby reducing its dependence on China while inflicting de facto exclusion costs on it.
This strategy has major advantages. It would create a trading area that would complement, rather than undermine, the international trading system. And such a move would not be subject to a Chinese veto; in fact, it would likely force China to the negotiating table, because it would not want to be kept out of such a large market. But joining the CPTPP would not be painless: it would require the US to countenance more trade opening, which the current domestic mood might not allow.
The recent signing of the Regional Comprehensive Economic Partnership, a pan-Asian free-trade agreement including China, might seem to signal a different approach than that proposed here. But Asian countries have fewer options relative to China: They are more dependent on and integrated with it, and Trump’s 2017 rejection of the TPP left them without an anchor for managing economic relations with China. After Trump, and considering China’s increasing assertiveness, Asian countries might go along with or even secretly hope the US and Europe reset relations with China.
In any event, Biden should have no illusions: China is too important to ignore, but the challenge it presents defies easy solutions. America and the world should brace themselves for the long haul.
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The Limits of the RCEP
The new Regional Comprehensive Economic Partnership, signed last month by 15 Asia-Pacific countries, represents a firm repudiation of the protectionism that has been gaining ground in recent years. But it cannot save the multilateral trading system – and might undermine it further.
SEOUL – Last month, 15 Asia-Pacific countries signed the Regional Comprehensive Economic Partnership. The occasion marked what might be the most significant economic achievement since the COVID-19 crisis began. And yet the RCEP – or, indeed, Asia – cannot save the ailing multilateral trading system alone.
To be sure, the RCEP is a firm repudiation of the protectionism that has been gaining ground in recent years. Economic integration is very difficult in the Asia-Pacific, owing to widely varying levels of development, diverse cultures and institutional structures, and ongoing territorial disputes. But, confronted with the COVID-19 downturn, the parties were eager to conclude the pact, after eight years of negotiations.
And this is no minor trade bloc. Signatories include China and Japan – the world’s second- and third-largest national economies, respectively – as well as South Korea, Australia, New Zealand, and ten Southeast Asian countries. The RCEP thus accounts for 30% of global GDP, making it the world’s largest free-trade area.
Moreover, the pact is a major step forward for regional economic integration. Signatories will eliminate various tariffs on imported goods, align trade norms, and adhere to unified rules-of-origin standards. The agreement also includes provisions on intellectual property, government procurement, financial services, and e-commerce.
But the RCEP has its limits. It lacks rules to protect the environment and workers, and the tariff reductions it demands are not as large as the ones required by the other big Asia-Pacific trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes seven RCEP members. As a result, it will not bring major economic benefits, even for participating countries.
The RCEP’s real significance lies in China’s participation. It is the first regional multilateral trade agreement the country has joined. And, as a major consumer, China is essential to strengthen regional value chains, thereby increasing RCEP members’ ability to reap the benefits of integration.
But a major regional economy, India, refused to join, owing to concerns about larger trade deficits with China and the inability to protect weak industries. India’s inclusion would significantly increase the deal’s economic benefits, not only because of the size of its market, but also given its position in services supply chains.
The RCEP remains “open for accession by India, as an original negotiating State, from the date of its entry into force.” But signatories should go further, creating incentives to induce India to join.
With or without India, however, the RCEP will not revive multilateralism. On the contrary, despite reflecting an appetite for trade liberalization, the proliferation of regional trade blocs could weaken the multilateral trading system, because they necessarily exclude non-signatories.
For Asian economies, which have secured their prosperity by participating in global markets governed by common trade rules, this should be a serious concern. And yet they can hardly revive the multilateral trading system alone. The rest of the world must contribute, with the United States leading the way.
Over the last four years, the US under President Donald Trump has waged war against multilateralism. It has rejected trade agreements and implemented protectionist policies, with China its primary target. It has also paralyzed the World Trade Organization’s Appellate Body, which adjudicates trade disputes, by blocking the appointment of new judges to succeed those whose terms expired.
President-elect Joe Biden must take a radically different approach, not only rejecting protectionism, but also supporting much-needed reforms to a fragmented and outdated multilateral system. For example, current WTO rules do not adequately cover data flows, the digital economy, state-owned enterprises, and technology transfers.
Biden has expressed a clear commitment to multilateralism. But he has also indicated that he will be tough on China. This raises serious risks for the RCEP and multilateralism more broadly.
Make no mistake: the Sino-American trade conflict that has unfolded under the Trump administration has been highly damaging, not only for both sides, but also for the rest of the global economy. For its own sake, the US must stop trying to limit China’s inevitable economic and technological rise, and focus instead on persuading the country to open its markets further and adhere to global rules and norms. This will be possible only if the US strengthens its relationships with allies and deepens its commitment to institutions like the WTO.
This kind of US leadership would also strengthen the RCEP, which, contrary to what one might assume, would not be bad for the US. Yes, the trade bloc will facilitate China’s efforts to expand its regional influence. And it is no coincidence that China announced the agreement – as well as its possible willingness to join the CPTPP – during the tumultuous dying days of Trump’s presidency.
But the RCEP is not a China-led economic bloc. As the World Bank’s Managing Director of Development Policy and Partnerships Mari Pangestu and the Australian economist Peter Drysdale have pointed out, “RCEP is an ASEAN conception of the regional order, not a Chinese initiative.” And most RCEP members – including Australia, Japan, South Korea, and many ASEAN members – are closer to the US, politically and militarily, than they are to China.
That is why the Biden administration’s China strategy is pivotal to the RCEP’s success. If the US escalates its trade and technology war with China, confrontation will become more likely among RCEP members, as exemplified by the current tensions between China and Australia.
But stability and prosperity in Asia are in America’s economic and strategic interest, not least because of the size of the markets involved. In fact, Biden would do well to consider joining a regional trade bloc, either the RCEP or the CPTPP, which can serve as a stepping-stone to comprehensive multilateral trade liberalization.
Even if the COVID-19 pandemic ends soon, the world will be dealing with the economic fallout for a long time to come. US global leadership, in the form of a commitment to revitalize multilateral trade and economic cooperation, could go a long way toward easing the pain – and accelerating the recovery – for all.
NEW YORK – Kudos to the European Commission for finalizing a new investment agreement with China. Europe’s active diplomacy also played a role in China’s recent commitment to achieve carbon neutrality by 2060 – a decision that was quickly followed by Japan’s pledge to decarbonize by 2050. Now it has yielded yet another major success.
The new EU-China investment agreement will benefit Europe, China, the world, and even the United States, despite the latter’s warnings against it. In general terms, the agreement signifies the intention of the EU and China to continue to deepen economic relations, by granting each party more assured access for investments in the other’s economy. European industry will gain better access to China’s enormous domestic market just as China embarks on a decade of green and digital economic restructuring, and at a time when Europe is striving to stay at the technological forefront in these areas.
The agreement comes in the face of deeply misguided – indeed, dangerous – attempts by US President Donald Trump’s administration not only to cut economic ties with China in high-tech industries, but also to contain China’s growth by forging a US-led alliance that Trump hoped would be backed by the EU and Asia-Pacific countries, including Australia, India, Japan, and South Korea. It appears that the incoming Biden administration may well lean in the same direction, though certainly with more finesse and less bombast than Trump.
The ostensible aim of US policy is to constrain China’s belligerence and human-rights violations, or so the US says. But it is worth noting that the policy is favored by a bipartisan US foreign-policy establishment that maintains some 800 overseas military bases, and that has repeatedly launched illegal wars, imposed illegal unilateral sanctions, and otherwise refused to abide by the United Nations Charter, treaties, and Security Council decisions. It’s certainly hard to argue that China is the belligerent party here.
China, no doubt, should improve its human-rights record – particularly to address the issues raised by the UN High Commissioner for Human Rights regarding the situation in the Xinjiang Uyghur Autonomous Region. But let’s be clear: the US, Europe, India, and many Western nations should make similar improvements. Over the past 20 years, in particular, Muslim populations in the Middle East and South and Central Asia have repeatedly suffered from brutal wars waged by Western powers, domestic crackdowns, unilateral US sanctions, and other abuses.
The fact is that few countries properly abide by the Universal Declaration of Human Rights; and the US, to its great shame, still has not even ratified the UN Covenant on Economic, Social, and Cultural Rights, while China and the EU’s 27 member states did so long ago. The correct response to genuine human-rights concerns is to raise them in a serious and constructive manner, without hypocritical finger-pointing, exaggeration, or disruptions to dialogue, diplomacy, and economic relations. Let the country without sin cast the first stone.
But America’s real intention in opposing China has nothing to do with human rights. Particularly under Trump’s lawless administration, US policies have been motivated by a hunger for dominance, plain and simple. The US is trying to stop China’s technological and economic rise in order to preserve its own predominance. The world economic system, however, cannot and should not operate for the benefit of US hegemony, especially considering that the US accounts for a mere 4% of the global population.
Following the tragedies of 2020, the world needs renewed global cooperation, not a new US-stoked cold war. It is time to get the pandemic under control and to chart a new course toward recovery and sustainable development. China can and should be involved as a full partner in tackling these challenges.
After all, China, unlike the US and Europe, successfully suppressed its COVID-19 epidemic in 2020 (as did most of its neighbors in the Asia-Pacific region). Now, China and its neighbors should help the rest of the world to implement the non-pharmaceutical interventions (testing, contact tracing, and quarantining) that have succeeded where US and European policies have failed. And provided that the new Sinovac and Sinopharm vaccines are proven safe and effective with peer-reviewed data, China should start mass-producing and distributing these vaccines worldwide.
The EU, China, and US President-elect Joe Biden’s administration should also join forces to map out a green and digital global recovery. With leading emitters now pursuing carbon neutrality, and with Biden planning to return the US to the Paris climate agreement and to commit the US to decarbonization by 2050, we have the makings for a truly green broad-based recovery.
Moreover, development and deployment of new green technologies – renewable energy, electric vehicles (EV), and battery storage – will benefit immensely from global cooperation. For example, just this week, China’s Yahua Group, a major producer of lithium hydroxide, signed up to supply five years’ worth of inputs for battery production at Tesla, a US-based EV manufacturer.
Similar opportunities are available with digital technologies. In a world where digital access is crucial for economic participation, 5G-based technologies promise pathbreaking solutions to a host of challenges, from improving energy efficiency to scaling up e-commerce and e-health. Fortunately, the EU-China investment treaty will help drive digital cooperation, which could give a huge boost to sustainable development.
Still, it will be important for Europe to continue resisting US pressure against China. Trump’s main weapon against China has been to cut off the export of advanced technologies with the hope of bringing Huawei and other major Chinese tech firms to their knees. This move comes straight out of the US hegemony playbook, and was applied against the Soviet Union during the Cold War.
Trump’s administration justifies its approach vis-à-vis Huawei on the grounds that China might spy on others using Huawei’s 5G equipment. A more plausible reason is that Huawei equipment would make it more difficult for the US government to spy on others, including US citizens. An even more likely reason is that the US naively thinks it can maintain technological superiority indefinitely by cutting off advanced inputs to China. Yet China will probably be able to close the remaining technology gaps in advanced semiconductor production quickly.
Europe is right to engage actively, deeply, and constructively with China, while also attending to its abiding and admirable concerns about human rights around the world. Biden’s administration should resist the hegemonic impulse and instead restart constructive relations with China.
For now, the new EU-China investment agreement is a good way to end a dismal year. The EU is asserting its appropriate foreign-policy prerogatives independent of the US. But more challenges await us in 2021, when the world urgently needs to change course to end the pandemic and move onto a path toward sustainable development.