EU-China Briefing - 18 May 2020
YOUR WEEKLY SHOT OF EU-CHINA NEWS
BY FLAVIAN BERNEAGĂ AND GRZEGORZ STEC
1. The EU and China: Self-Reflection over Diplomatic Rows
► The diplomatic rows amid COVID-19 have caused both the EU and China to reflect on the performance of their diplomatic services.
► The EU is starting to acknowledge that its relation with China can no longer be “business as usual”;
► The EEAS found itself losing power after member states became increasingly active in pursuing their own foreign policy;
► In China, aggressive diplomacy faced a backlash from leading academics, who raised questions of its efficiency.
Coming to Terms
China’s handling of the crisis and its subsequent pursuit of wolf warrior diplomacy is reigniting the debate on a potential re-think of EU-China relations across Europe.
For the past decade, China was seen as an actor willing to uphold the international system, despite not being a liberal democracy. The COVID-19 pandemic is highlighting a new dynamic.
Divisions sowed through “mask diplomacy” in Italy, the domestic underreporting of cases, faulty medical supplies, disinformation spread by Chinese diplomats, dependency on Chinese medical production lines, and finally, the pressure exerted on the EEAS and the censorship of an op-ed by the EU Delegation to China are all prompting a shift of thinking about China.
These developments have triggered a debate in Europe over whether the EU would not be better off pursuing a much more assertive policy towards China.
While governments consider their own strategic interests (i.e., China is Germany’s main export partner outside the EU), poor results in the areas of investment, trade, and climate change are producing echoes of a similar debate.
No Ammo for the EEAS
But developing a common EU policy on China is not easy. The EEAS has its powers constrained by member states who are keeping foreign policy competencies within their national capitals.
Diplomats and officials within and outside the EEAS have argued that EU countries continue to pursue individual foreign policies, limiting the scope for EU action.
Pierre Vimont, who is the former Executive Secretary General of the EEAS, said: “We're witnessing more and more member states working on their own, taking their own initiative without much coordination with the institutions in Brussels.”
For example, Libya was meant to be a priority for Josep Borrell after he assumed office, but he saw his attempts curbed by France and Italy, who are supporting different sides in the Libyan civil war.
Even if the EEAS wanted to take a tougher line against China, such decisions require unanimous agreement between member states. This is a difficult feat, given some member states’ economic interests (e.g., German) or political agendas (e.g., Hungary) in China.
Domestic Scrutiny
Influential members of Chinese academia have openly criticised the aggressive stances of some Chinese diplomats, pointing to the gap between their actions and their goals.
Leading Chinese scholars and foreign advisors argued that diplomatic horn-locking is backfiring and is not an active attempt to find solutions.
Shi Yinhong, a professor at Renmin University and ex-adviser for the State Council, said these efforts were done “too hastily, too soon, and too loudly in tone.” He pointed to the “huge gap between what is intended and what is achieved.”
Xiang Lanxin, a professor at the Graduate Institute of International Studies in Geneva, argued the diplomatic efforts are not conducive to projecting China’s system and are contributing to the destabilisation of the world order.
Yan Xuetong, a professor at Tsinghua University, said comparisons between how China and Europe have dealt with the pandemic is exacerbating ideological conflict. He called for more rationality on the side of Chinese diplomats.
Zhu Feng, the dean of international relations at Nanjing University argued “wolf warriors” had led to a deterioration of relations with the US, calling on them to fix China’s foreign policy.
TAKEAWAYS
► DIFFERENT GOALS
EU diplomacy is aimed at shaping compromise and is actually in a very tricky position, having no power. As one EU diplomat said: “We don’t have the structure or culture to reciprocate assertiveness or use power plays like China. The aim of European diplomacy since the Second World War has been all about finding a compromise. China doesn’t necessarily look at things the same way at all.” Chinese diplomacy is the diplomacy of the Party, not only of the state. The CCP has, to a large extent, based its legitimacy over the past decades on economic growth but, as its economy slows down, it needs to defend its portrayals of a strong nation abroad, so its foreign policy is also aimed at its domestic audience. However, as the costs become too great internationally, the leadership may yet change its approach, out of caution so as to not endanger its diplomatic relations.
► SAME OLD PROBLEM
The EEAS’ internal crisis unveils a slightly hypocritical paradox. EU member states expect the EEAS to ‘act tough’ on China and show assertiveness, but the reality is that such powers were never bestowed to the Service. Historically, the EEAS came to exist because its first High Representatives, Javier Solana and Catherine Ashton, fought hard to obtain powers from other institutions. As always, member states refused to budge on foreign affairs matters, so the EEAS was crafted as an institution whose powers gravitate around diplomacy and negotiation, but without hard tools of persuasion in its arsenal (i.e. defence remained with member states, trade remained with the Commission). Now, member states are scapegoating the EU while Josep Borrell can only make calls for unity among member states, a diplomatic message in line with the EEAS’ powers.
READ MORE
The meaning of systemic rivalry: Europe and China beyond the pandemic - European Council on Foreign Relations (Andrew Small), May 13
EU diplomats face the enemy within - Politico (Jacopo Barigazzi), May 14
Xiang Lanxin, "On Wolf Warrior Diplomacy" - Reading the China Dream (David Ownby), Apr 30
Are China’s ‘Wolf Warriors’ baring their teeth too often? - Inkstone (Catherine Wong), May 15
2. Updates on EU-China Summit and CAI Negotiations with China Re-think in the Background
► As the EU’s China policy is changing, future relations with Beijing will be heavily influenced by:
► An official summit scheduled for early June;
► Concluding negotiations on the Comprehensive Agreement on Investment (CAI);
► Finding new dynamics for cooperation on development, the green transition, cyber, and other multilateral issues.
EU-China Summit on Investment
The EU and China are expected to host a delayed summit in early June on investment negotiations:
The summit would be China’s main diplomatic event since the start of the pandemic and is set to happen just a few weeks after The Two Sessions in Beijing.
At the official level, Trade Commissioner Phil Hogan talked over the phone on May 11 with Chinese Commerce Minister Zhong Shan and declared himself satisfied with the progress of the negotiations on an investment agreement.
However, investment talks have been a major point of contention, due to Beijing not meeting EU demands on market access reciprocity and a level playing field for EU companies in China.
The Fate of the CAI
According to Ulrich Weigl, the head of trade at the EU Delegation to China, the CAI is going to succeed if three conditions are met:
More ambition on China’s side to open up the market for European companies coming into China;
Ambitious commitments to ensure a level playing field by regulating Chinese state-owned enterprises (i.e., for SOEs to act commercially when engaging in commercial activity) and their distortive effects;
A strong commitment to sustainable development.
Weighl said negotiations are intense, but reaching the CAI deadline of the end of the year is feasible, “if China walks the talk.”
Borrell’s Take
On May 15, Josep Borrell published in multiple newspapers the necessary elements for a fruitful EU-China relation in the future.
He echoed the 2019 Strategic Outlook saying EU’s policy to China is multi-faceted, given that China is at the same time a strategic partner, a negotiating partner, an economic competitor, and a systemic rival.
Borrell argued that “[u]nity is a precondition for influence, since not even the biggest member state acting alone can influence a superpower.”
Borrell called for cooperation in helping the vulnerable in Africa, ensuring a “green recovery” strategy, and finalising a deal on investment and called for the EU and China to pursue the relationship on the basis of “a rules-based economic partnership”.
He also acknowledged that the EU and China have differing perspectives and approaches to multilateralism in areas such as: UN cooperation, WTO reform, and cyber policy,
UN cooperation - “Our approaches [...] differ, for instance on the universality and indivisibility of human rights or when it comes to UNCLOS and the tensions in the South China Sea.”
Cyber - “China’s state-centric stance contrasts with the EU’s multi-stakeholder approach based on respect for fundamental rights and freedoms.”
WTO - Borrell said China is, formally, extremely supportive of WTO, “but in practice it has shown little readiness to engage in the meaningful reform of the WTO that is clearly needed.”
Similarly, Borrell’s statement mirrored calls from other EU officials that Europe’s excessive dependence in strategic sectors must be avoided by stockpiling critical materials and diversifying supply chains.
He argued that “the watchwords for EU-China should be trust, transparency and reciprocity. We should move forward together, based on a realistic assessment of China’s strategic intent and the EU’s common interests.”
TAKEAWAYS
► THE CAI IS A BIG DEAL (LITERALLY)
Concluding the CAI would show a constructive relationship between the EU and China, much needed amid the controversies. It would also be important in regard to the EU's position within the US-EU-China triangle. And given how tense the US-China relations are right now, China could use the boost the agreement would give it. However, treatment of foreign businesses and Beijing’s reliance on state-owned enterprises (SOE’s) are long-standing issues. SOE’s are employed in massive infrastructure development projects and have been recipients of huge (and most often unperforming) loans from China’s banks. On the one hand, Beijing is unlikely to want to double down on its SOEs in a way that would increase already high unemployment and limit the Party’s ability to directly manage China’s economy. On the other hand, the Party-State is under enormous pressure from the sense of a Cold War dynamic (which we discussed in a news bite last week). If it won’t budge now, it is unlikely to in the coming years.
► STRATEGIC OUTLOOK - ONE STEP FURTHER
While the message from Borrell was not new (it did build on the EU-China Strategic Outlook from 2019), it is important to appreciate that he was significantly outspoken in naming concrete differences and EU grievances towards China. He openly called out different approaches to multilateralism, despite joint calls to support it amid Trump’s unilateral turn. He highlighted tensions between China's state-centered approach to cyber, compared to the EU’s multi-stakeholder approach. He criticised China’s passivity on WTO reform and highlighted the EU’s stance on the South China Sea. This is a clear call for a China-rethink, similar to calling out the “global battle of narratives”.
READ MORE
China-EU summit on investment deal, Covid-19 likely to start next month, sources say - SCMP (Wendy Wu), May 13
EU investment deal with China likely to hinge on three key elements, says European trade official - SCMP (Stuart Lau), May 14
Trust and reciprocity: the necessary ingredients for EU-China cooperation - EEAS, May 15
3. Huawei Question is Still to be Answered
► The potential participation of Huawei in the rollout of 5G technology in Europe has been stalled by the outbreak, but the debate is far from finished.
► A new study from the Swedish Institute of International Affairs (UI) sheds light on the issues following the EU’s announcement on a ‘toolbox’ for regulating 5G technology;
► There are new instances of Chinese entities putting pressure on EU member states to grant Huawei access to the European market.
Report on the Implications of Huawei for Europe
The UI published a paper by Tim Rühlig on the challenges of using Huawei’s 5G technology, accompanied by a number of policy recommendations.
The paper argues that concerns over Huawei’s 5G technologies are divided into two categories: network security risks and geopolitical challenges of technology dependency.
Network security risks refer to the potential that a malign actor with control over the 5G network could spy on users of the infrastructure and shut down the network at will.
However, threats of network security should not be overstated. Almost all economic or political spying is now carried out through applications and phishing, rather than through infrastructure.
The real risk relates to geopolitical reasonings, meaning that a state depending on another state for such essential technologies will likely make political concessions and behave favorably to maintain 5G as part of its critical infrastructure.
While Huawei does appear to be privately-owned, ownership does not equate to control. In the past, the company has profited from support from the party-state. Besides, Huawei operates in a certain political, legal, and economic environment that makes its complete autonomy unlikely.
The paper advocates for an EU policy that takes into account this geopolitical dimension. While not encouraging a complete ban on Huawei, the author argues the EU should seek to limit Huawei’s involvement in the market.
Instead of outright banning Huawei, the EU could shift to diversifying its supply, in terms of production and the underlying patents.
Network redundancies coupled with vendor diversity and better end-to-end encryption are much more effective means of mitigating these risks.
At the same time, a common EU approach is needed to ensure a single interpretation and implementation of the toolbox.
The Status Quo
The EU, through its 5G ‘toolbox’ published on January 29, appears to be taking a more critical stance towards Huawei technologies.
The ‘toolbox’ is a legally non-binding roadmap for member states on 5G adoption.
It indicates that both technological and strategic variables should be taken into consideration when rolling out 5G.
The toolbox provides measures to strengthen network security and advocates for stricter access controls, monitoring, and limitations on the outsourcing of maintenance work.
It also restricts suppliers deemed to be ‘high risk’, including on critical and sensitive parts of 5G networks.
Nonetheless, even though it was crafted through agreement by all member states, the ‘toolbox’ is not a binding document. This allows countries like Portugal or Hungary to not limit Huawei during their 5G rollouts.
Getting Defensive
Chinese entities have issued some threats to countries that contemplated restricting Huawei’s market access.
In a letter on May 14, the head of Huawei Denmark warned the country’s Prime Minister of economic consequences if stricter regulations are imposed on 5G technologies.
This comes one week after the Chinese ambassador to Denmark threatened the trade minister of the Danish-controlled Faroe Islands that China will withdraw a free trade agreement if Huawei did not get a 5G contract.
Another key case took place in December 2019, when Wu Ken, the Chinese ambassador to Germany, warned that “if Germany were to make a decision that led to Huawei’s exclusion from the German market, there will be consequences.” This was an allusion to the automotive industry, where German-Chinese cooperation is already very developed.
In February 2020, the Chinese embassy in France posted a statement saying Nokia and Ericsson had been given preferential access to the Chinese market and threatened: “We do not wish to see the development of European companies in the Chinese market affected by the discrimination and protectionism of France and other European countries with regard to Huawei.”
Such instances strongly suggest a linkage between Huawei and the Chinese government. Not surprising given the particular public-private dynamics in China.
TAKEAWAYS
► TOUGH CALL
The EU’s 5G toolbox is not the end of the Huawei tale. The fact that the EU developed non-binding recommendations for the member states is definitely a success, but it doesn’t close the matter. According to the action plan announced in the toolbox, the member states are to report their progress on implementation of the mitigating measures by 30 June 2020. (The pandemic may make this challenging.) On top of that, the problem now is the divergence between member states (e.g., Hungary), which will make it hard to follow through with a joint implementation of the strategy. As we argued in the last news brief in talking about the Strategic Outlook, a plan is only good if it is feasible.
► CAI CONTEXT
Huawei’s 5G and the investment agreement may be linked. This was suggested in a speech on the investment deal at the Europe Policy Centre think tank in December last year, when Chinese Foreign Minister Wang Yi expressed hopes that the EU will make “well-informed and independent judgments on 5G issues” while mentioning CAI negotiations. Similarly, the Chinese ambassador to the EU, Zhang Ming, criticized EU efforts to restrict foreign corporate ownership and 5G mobile communications, saying these actions “had some kind of impact on Chinese investment in the EU.” This shows that China, in the context of CAI negotiations, is likely viewing the EU’s and its member states' decisions based on the level of access that Huawei is granted in 5G. After the EU categorized China as an economic competitor and systemic rival, and after the Commission adopted new foreign investment screening mechanisms, the Chinese leadership has deemed it necessary to call out what it regards as “EU’s protectionism”, thus hoping to mirror EU calls of obtaining greater market access in China. (This proposal of reciprocity is not fully equitable, as Chinese firms currently enjoy far greater access in the EU than EU companies do in China.) The requests for greater access for Huawei also have an additional geopolitical significance, given US-China tensions on the matter.
READ MORE
Who Controls Huawei? Implications for Europe - Swedish Institute of International Affairs (Tim Rühlig), May 2020
Huawei threatened to pull investment from Denmark in response to new screening law - Telecoms (Scott Bicheno), May 14
China Just Issued Stark New Threats Over Huawei: This Time Nokia And Ericsson Are In Its Sights - Forbes (Zak Doffman), Feb 9 2020
4. EU States in CEE Drift Apart on China Issues
► EU states within the 17+1 appear to increasingly diverge in their foreign policy stances on China:
► At the moment, the big topics of contention are Taiwan’s membership in the WHO and 5G;
► Hungary’s particular policy on China once again became apparent, as it openly refused any debate on Taiwan’s status.
Variable #1: Taiwan
Multiple CEE countries issued statements in favour of Taiwan joining the World Health Organization:
On May 14, the Foreign relations committee in the Czech Chamber of Representatives called on the Czech government to support Taiwan’s participation in the WHO.
On May 14, Lithuanian Minister of Foreign Affairs Linas Linkevičius urged WHO Director-General Tedros Adhanom Ghebreyesus to invite Taiwan as an observer nation, given its successful handling of the pandemic.
This comes after more than half of Lithuanian MP’s signed a letter on April 24, urging Ghebreyesus to involve Taiwan in the WHO World Health Assembly happening between May 20-28 in Geneva.
On the other hand, after a telephone conversation with Chinese Foreign Minister Wang Yi on May 15, Hungarian Foreign Minister Peter Szijjarto said Hungary will “always uphold the one China principle,” thus parting ways on the matter with other 17+1 countries.
Wang Yi had phone calls with counterparts in Estonia and in Bosnia and Herzegovina too, but discussions on Taiwan were not featured.
On May 18th, Taiwan decided to delay its bid for participation in the proceedings of the World Health Assembly until later this year.
Slovakia also made a political statement (albeit on a different matter sensitive to China); on May 17th, 22 Slovak Parliamentarians issued a joint statement calling for the release of Panchen Lama.
Variable #2: 5G
On May 6, Czech Prime Minister Andrej Babiš and US Secretary of State Mike Pompeo signed a joint declaration pledging cooperation on 5G security.
The Czech Republic thus joins three other 17+1 EU states that have done the same: Estonia, Poland, and Romania.
The declaration pledges to create a mechanism for finding reliable and trustworthy software and hardware vendors, protect communication networks, and protect individual rights.
As part of the agreement, the network hardware and software suppliers must:
not be under undue foreign influence
have transparent ownership and corporate governance structures
be committed to innovation and respect for intellectual property rights
be subject to a legal regime that enforces transparent corporate practices
The Outlier: Hungary
Hungary appears to be the one EU state within the 17+1 that consistently positions its foreign policy in line with Beijing’s:
After Szijjarto’s call with Wang, Xi Jinping talked over the phone with Viktor Orban on boosting trade, cooperating on matters of the digital economy, and elevating the 17+1. In turn, Orban thanked China for the medical aid and vouched Hungarian support for the one-China principle.
This comes in the context of China’s BRI project to build a railway from Budapest to Belgrade. On May 14, the Hungarian parliament voted in favor of classifying details of the contracts for this project for up to 10 years.
If Hungary wants to declassify the documents at any point in the next ten years, it will need China’s approval to do so.
TAKEAWAYS
► BROAD-BRUSH PAINTING WON'T CUT IT
The 17+1 has been regarded by Brussels as a potential ‘Trojan horse’ within the EU. But the platform has been evolving and the dynamics between EU members differ. It is therefore important not to paint the picture with a broad brush and dismiss the agency of the CEE countries in developing their own China policies. It may even turn out that—Hungary aside—resistance to a potential EU rethink on China may come primarily from the bigger member states committed to upholding a “business as usual” approach, with Germany at the helm. (We discuss this in the upcoming podcast with Ivana Karásková.)
► EUROPEANISATION OF 17+1
The 17+1 platform has also been getting more Europeanised. For example, on May 8, the national coordinators of the 17+1 hosted a videoconference. Talks were focused on cooperation with China on fighting COVID-19, as well as potential cooperation in connectivity, tech, and trade. However, the videoconference wasn’t so much a homogenous Central Eastern European affair. EU representatives also joined in on the call and Austrian and Belarusian officials were present, which points to a more Europeanized and transparent format for the 17+1. The rumour now is that Malta (mentioned in the next news bite in an unfavourable light) may be the next, after Greece, to join the format, further transforming the 17+1 from its CEE-based origins.
READ MORE
Budapest stands with Beijing in opposing Taiwan’s membership of World Health Organisation - SCMP (Keegan Elmer), May 15
Tweet on the Foreign relations committee of the #Czech Chamber of Representatives - May 15
Lithuania's support for Taiwan draws ire from Beijing - LRT (Vaidotas Beniušis), May 14
Tweet on Belgrade-Budapest railway details classified up to 10 years - May15
Joint Statement on United States – Czech Republic Joint Declaration on 5G Security - US Department of State, May 6
MOFA thanks Estonia, Latvia, Lithuania parliamentarians for supporting Taiwan’s WHO participation - Taiwan Today, May 2
5. Brussels’ Spy Stories or China Paranoia?
► Over the last few months multiple scandals emerged in Brussels in regard to alleged espionage activity by China:
► Malta’s Permanent Representation in Brussels, which was furnished by China, was suspected of having technologies that would allow Beijing to spy on EU institutions.;
► The Belgian homeland security service has warned of bio-espionage and of spies harboured within Confucius Institute.
Maltese Permanent Representation Under Scrutiny
Le Monde reported on May 15 that Belgian security services suspected the Maltese embassy to the EU may have been a tool of espionage for China:
The Permanent Representation’s furniture and interior fittings were a donation from the Chinese government and were produced specifically for the Maltese embassy, which is within a 4 minute walk to the European Commission and the Council of the EU.
Richard Cachia Caruana, Malta’s former permanent representative to the EU, confirmed the furniture was donated, but it was assessed to the highest standards of the Maltese Security Services.
The Maltese government issued a statement on May 15, indicating that “80 percent of the mentioned furniture has over the past two years been disposed of and replaced by new furniture procured from Malta.”
The Maltese government also indicated the PR’s security system was overhauled and improved over the last two years.
Josep Borrell argued he only heard of the story from the news. He stated “if the Belgians have something to tell us, they will, but for the time being [that] hasn't happened”.
On the other hand, when Dutch MEP Bart Groothuis asked Vice-President of the European Commission, Valdis Dombrovskis about the issue, his response was “it’s on our agenda”.
Belgian Fears of Espionage
For the past year, Belgian authorities have upped the ante on potential spying from China:
On May 6, EUObserver reported Veiligheid van de Staat, the Belgian security service, believes Chinese spies targeted Belgian biological warfare and vaccine experts between 2010 and 2016.
They also feared the targeting of GlaxoSmithKlein, a British pharma giant and vaccine-maker, alongside Belgian high tech firms.
Earlier in January, Gerhard Sabathil, a diplomat with over 30 years’ of experience in EU work, was put under investigation for allegedly sharing private commercial information with the Chinese Ministry of State Security.
Last year, Song Xinning, the director of the Confucius Institute at the Vrije Universiteit Brussel, was banned from staying in Belgium, after secret services concluded he reported to the Chinese embassy on his recruitment of pro-Chinese agents of influence.
Broader Issues
These scandals point to wider existing problems:
EU efforts to counter espionage attempts are weakened by the lack of an effective solution for EU-counterintelligence.
The EU is thus under the jurisdiction of Belgian intelligence services, who are severely understaffed on responses to Russian and Chinese espionage. (According to reporting, only 30 counterintelligence agents work against an alleged 450 Russian and Chinese spies in Belgium.)
Another issue is the “revolving doors” phenomenon, a practice referring to EU officials who move to lobby or industry jobs, thus creating conflicts of interest. It is precisely the case of Sabathil, who moved to the lobbying firm EUTOP after three decades working in EU diplomacy.
For more info on revolving doors, we recommend the work of RevolvingDoorWatch, whose website is linked in the ‘Read More’ section.
TAKEAWAYS
► I WON'T TELL IF YOU DON'T
Paranoia or not, there certainly are solid grounds to beef up the EU’s counterintelligence capacity. The Belgian authorities seem understaffed for an immense task. Enhancing such abilities would also mean tackling the revolving door phenomenon. As we mentioned in a past briefing, Chinese interference in democracies also happens by relying on elite intermediaries (such as Sabathil). An official scrutiny of who goes through the revolving doors would be beneficial, and it could be modelled the same way as the Transparency Register of the Commission, a database that tracks the organizations that sent lobbyists to influence policy-making.
READ MORE
Did China use Malta's EU embassy for spying? - Time of Malta (Jacob Borg), May 15
Chinese spies in Malta’s embassy? News to me, says EU’s Borrell - Politico (Jacopo Barigazzi), May 15
La Belgique se rebiffe face aux espions chinois - Le Monde (Jacques Follorou), May 15
China suspected of bio-espionage in 'heart of EU' - EUObserver (Andrew Rettman), May 6
The man at the center of Brussels spy probe - Politico (Matthew Karnitschnig), Jan 22