March 21, 2019 / 12:08 AM / 4 months ago

EU leaders to discuss stronger shield against Chinese influence

BRUSSELS (Reuters) - The European Union will weigh a more defensive strategy on China on Thursday, signaling a possible end to the unfettered access Chinese business has enjoyed in Europe but which Beijing has failed to reciprocate.

French President Emmanuel Macron and German Chancellor Angela Merkel meet on the sidelines of an EU summit in Brussels, Belgium March 21, 2019. Geert Vanden Wijngaert/Pool via Reuters

Caught between a new U.S.-Chinese rivalry for economic and military power, EU leaders will try to find an elusive middle path during a summit dinner in Brussels, the first time they have discussed at the highest level how to deal with Beijing.

But despite the stance Brussels wants to foster, Italy — where euroskeptics share power — prepared to receive Chinese President Xi Jinping for a visit during which he was expected to sign major bilateral trade deals with Rome.

French President Emmanuel Macron spoke of a “European awakening” that China is seeking to produce sophisticated products that will compete with those made in Europe. The EU’s trade chief Cecilia Malmstrom, a Swedish liberal, meanwhile argued that the international economic order had changed.

“Since the beginning of my mandate I’ve been calling for a real awareness and for the defense of European sovereignty,” Macron told reporters as he arrived for the summit. “I’d say that finally we have it for an issue as important as China.”

With China’s Xi starting a tour of France and Italy, EU leaders — who have often been divided over China — want to present a united front ahead of an EU-China summit on April 9.

According to a draft April summit statement seen by Reuters, the EU is seeking deadlines for China to make good on trade and investment pledges that have been repeatedly pushed back.

That was the message delivered to State Councillor Wang Yi by EU foreign ministers on Monday. It marked a shift toward what EU diplomats say is a more “assertive and competitive mindset”.

“In the past, it has been extremely difficult for the EU to formulate a clear strategy on China, and past policy documents have not been strategically coherent,” said Duncan Freeman at the EU-China Research Centre at the College of Europe. “There is now a clear effort to do that.”

U.S. President Donald Trump’s campaign to warn against Huawei telecommunications equipment in next-generation wireless networks has also accelerated EU discussions about its position, although the bloc is keen to avoid protectionist measures.

Malmstrom said Europe often agreed with the United States on what problems were, but not always on the cure — including U.S. tariffs on EU imports and Washington’s trade war with Beijing.

“It is tempting to try to lock out China, to decouple rather than to discipline. That might work in the short term. But the long term requires a deeper fix, systemic reforms built to last,” she said, urging transatlantic cooperation on the issue.

The deepest tensions lie around China’s slowness to open up its economy, Chinese takeovers in critical sectors in the EU and an impression that Beijing has not stood up for free trade.

GERMANY IS KEY

With over a billion euros a day in bilateral trade, the EU is China’s top trading partner, while China is second only to the United States as a market for European goods and services.

Chinese trade restrictions are more severe than EU barriers in almost every economic sector, according to research firm Rhodium Group and the Mercator Institute for China Studies.

Unlike the United States, which has a naval fleet based in Japan to wield influence over the region, the EU lacks military power to confront China, so its approach is technical.

Germany’s views will be important as Berlin has at times pressed for a tougher answer to unfair competition from Chinese rivals but also championed a closer relationship with Beijing.

Chancellor Angela Merkel told reporters in Brussels that there was a need to discuss the EU’s industrial strategy.

But any new EU policies could be complicated to implement, as individual EU capitals continue to court Chinese investment.

Italy plans to join China’s multi-billion-dollar Belt and Road project, while free-traders Ireland, Sweden and the Netherlands are wary of restrictions on commerce.

France is pushing for a coordinated EU approach to the Belt and Road infrastructure initiative, an Elysee official said earlier on Thursday, implicitly criticizing Italy for indicating it would join the Chinese project.

“As far as we’re concerned, we are advocating a different approach and we hope to get the backing of the European Union,” the official said, adding that France expected the Italian prime minister to explain his country’s position later at the summit.

One senior EU diplomat pleaded for a debate with “more subtlety,” because any ban on Chinese goods could be costly.

“We need to buy the best and cheapest for taxpayers,” the diplomat said.

Reporting by Robin Emmott and Philip Blenkinsop; Additional reporting by Michel Rose in Paris; Editing by Mark Heinrich and Catherine Evans

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