The EU’s two initiatives target forced labor and economic coercion, and will likely damage relations with Beijing.
BY BARBARA MOENS AND STUART LAU
August 26, 2022
EU-China relations are about to get bumpier.
Brussels will present its forced labor ban in early September — a move that will target products made by persecuted Uyghur Muslims in China. Meanwhile, the EU's institutions are negotiating just how tough its newest trade weapon, aimed at tackling economic threats from countries like China, will be.
The EU's China hawks are battling the pragmatists in discussions on both policies, with the pragmatists — especially export-driven Germany — afraid the EU can’t afford to upset Beijing while it's cutting trade and energy ties with Russia.
"EU-China relations are at a low point, but like it or not, we rely on each other, in particular in the fight against climate change," said Jörg Wuttke, president of the EU Chamber of Commerce in China.
The hawks argue the EU should draw lessons from dealing with Russia and move away from China toward more like-minded partners, and quick.
A European trade official stressed the need for more diversification and strengthening the EU’s trade defense instruments. “We are fully committed to ramping up our trade defense toolbox and won’t change that strategy all of the sudden over Ukraine or Taiwan,” the trade official said.
The sense of urgency has been heightened in recent weeks, as Beijing put military pressure on Taiwan following U.S. House Speaker Nancy Pelosi’s visit to the self-ruling democratic island, sparking fears of a Chinese invasion that could trigger the kind of Western response like that against Russia.
Tackling forced labor
MEPs want an embargo at the EU’s borders on imports and exports of products made under duress, but the Commission fears such measures might fall afoul of international trade law. The instrument also got pushback from the EU’s trade department, which critics accuse of being one of the more Sinophilic parts of the Commission.
But even the Sinophiles can't ignore China's human rights record. In August, a United Nations expert found “reasonable” evidence to show the existence of forced labor in Xinjiang. According to a new report by Tomoya Obokata, the U.N. special rapporteur on contemporary forms of slavery, the “involuntary nature” of work rendered by affected communities served as “indicators of forced labor … in many cases.”
That puts the Commission in an awkward situation in which it's trying to maintain a trading relationship with China while at the same standing up to it. Hélène de Rengervé, from the NGO Anti-Slavery International, said that “what we are missing is someone championing the issue … The feeling I have is that [the Commission is] trying to get that proposal off their desks." She said the Commission's moves feel more like an "administrative process with no impact for workers.”
After months of passing the buck on the forced labor initiative across different departments, the Commission is now expected to present a proposal on September 13. It wants to ensure the ban isn’t just directed against China, but to all forms of forced labor. But it won’t require much reading between the lines to understand whom the ban wants to target first.
Brussels is also ramping up its defense to fight what it considers economic blackmail from China and other rivals. After years of the EU complaining that it is vulnerable to trading partners punishing individual EU countries, the upcoming so-called anti-coercion tool would allow the Commission to impose commercial sanctions against a country outside the bloc.
It wants to prevent the kind of scenario that took place earlier this year, when Beijing stopped all trade with Lithuania in response to the country’s diplomatic support for Taiwan. The bill isn't meant for one specific country, "but it is written with China in the back of their minds,” said Nikolas Keßels from Germany's BDI industrial lobby, which supports the anti-coercion instrument.
The move is meant to deter countries from bullying the EU, but experts have warned it also risks creating a spiral of retaliation measures that could escalate tensions further.
As a result, Beijing has accused Brussels of kowtowing to Washington.
“Europe needs to sort out domestic affairs and figure out how much of its anxiety around China really comes from China, and how much comes from surrendering strategic autonomy to the U.S.,” according to an August editorial in the Global Times, a Chinese state media outlet. “With a highly complementary industrial chain and great economic interdependence, it stands to reason that the trade war should not have become a serious topic in Europe's China policy discussion.”
Some Europeans agree that Europe should avoid a trade war. “This has huge foreign policy implications,” said one EU diplomat about the anti-coercion instrument.
But both the European Parliament and EU countries are struggling to strike the balance between having an assertive trade defence arsenal, while not appearing too hostile.
“We need to make sure that this will be a dog that bites,” said Green trade MEP Reinhard Bütikofer.
That the new trade defense instruments come on top of previous legislation to help the EU tackle unfair trading practices only raises the political stakes. The EU already adopted measures to screen foreign subsidies, limit the access to the EU’s procurement market for non-European companies and to ramp up the EU’s anti-dumping measures.
The war with Ukraine and China's tensions with Taiwan has made Europe's balancing act all the more perilous, especially at a time when China's own foreign policy is at odds with Europe's.
While Europe has frozen out Moscow, Beijing continues to be friendly to it, citing its “no-limits” friendship while buying up Russian oil. It's also openly threatening to “take back” Taiwan by force, conducting threatening military exercises near the island, which Europe counts on for the bulk of its microchip imports.
Europe has approached Taiwan clumsily at times. The EU’s foreign policy chief Josep Borrell did not endear himself to China when he referred to Taiwan as a “small country,” leading to an immediate rebuke from Beijing’s diplomats, who believe the island is a part of the People's Republic. The Continent also risks further ire as parliamentary delegations are being planned across EU capitals to visit Taiwan, with the German Bundestag scheduling two trips in October alone.
China can still hurt Europe — and Germany in particular — if the relationship becomes more fraught.
According to a study from Germany’s Ifo Institute for Economic Research, decoupling from China would cost the bloc’s biggest economy six times as much as Brexit. (A German Socialist politician, though, snubbed the findings: “Just six times? Have you felt much pain from Brexit?”)
“We are not looking for decoupling, but we are clearly in favor of diversification,” one German official also said on the condition of anonymity.
Berlin is working on a new China Strategy that is likely move away from former Chancellor Angela Merkel’s business-over-all-else approach. While the ruling coalition's two junior parties — including the Greens, who control the Foreign Ministry that is principally in charge of drafting the strategy — favor a tough approach, “the Chancellory will be the one trying to tone it down,” a German diplomat said.
“But even that,” the diplomat added, “it would hardly be a nice read for Beijing.”
Sarah Anne Aarup contributed reporting.