• The EU-China Trade Relationship: Factors Hindering A Free Trade Agreement

    The EU-China Trade Relationship: Factors Hindering A Free Trade Agreement

    The EU-China trade relationship is of huge importance for global economic growth and prosperity. On average, trade between both parties is estimated to exceed one billion Euros per day. However, the increasing human rights violations in China, the disappointment around the “one belt one road” (OBOR) project, and the Trump administration’s unpredictable trade policies are significantly influencing the current EU-China trade relations.

    China’s apparent lack of respect for human rights has caused major European countries to shy away from building closer economic ties with the Asian country. Western capitalist countries expected that China’s economic opening to the international markets, which began in the late 1970s, and its subsequent economic growth would enhance its democratisation progress. Instead, China has remained a largely illiberal and authoritarian state which continues to violate human rights. While the EU does want to maintain trade relations with China, its hope is to ensure that China’s ability to achieve economic success while promoting illiberal domestic practices does not incentivize other nations to stray away from the World Trade Organization’s liberal trade standards. Therefore, during the EU-China Leaders Meeting, trade discussions were ”overshadowed” when Chancellor Angela Merkel and other European politicians criticised China for suppressing the protests in Hong Kong and violating the human rights of the Uyghur communities. 

    Contrary to the EU`s opposition,  the 17+1, an initiative of the Chinese government to create investment development programs in 17 Central and Eastern European Countries (CEEC), was established by CEEC nations and China in Budapest in 2012. The  17 European nations were expected to be compensated for providing access to their European market connections to China by grandiose investment projects in infrastructure, logistics, and trade under the Beijing-implemented “one belt one road” (OBOR) initiative. However, after the seven years since the project started, China has not lived up to its promises and only a small amount of investments were made. The Asian superpower did not achieve the “positive results in various fields“  mainly because of cultural issues, differences between the promises and the real situation, and intellectual property rights problems. China’s non-compliance with its investment promises made with Central and Eastern European Countries (CEEC)  revealed how one of China’s real reasons for the opening reforms was to gain access to the European markets and undermine the EU’s cohesion. As relations soured between CEEC and China and the pandemic became more severe,  the participating European nations cancelled Chinese projects; for instance, the Czech Republic, Romania, and Estonia decided to cancel the construction of power plants and the 5GB network construction by Huawei. 

    In addition, the  US’ trade war with China created a difficult situation for the EU-China trade relations in the midst of the COVID-19 outbreak. While Beijing’s largest export destination is Brussels, in 2018 the EU exported 2.5% of its GPD to North-America and only 1.3% to China, which shows how the EU tends to favour the American market. In another blow to China’s economic status, the Trump administration raised the issue of the Chinese technology transfer and theft of American intellectual property to the WTO as reasons for issuing tariffs on Chinese goods. When the US government imposed heavy duties on certain Chinese products, they disregarded one of the basic principles of the WTO, namely the prioritization of free trade.  Furthermore, this action placed China in a situation where they had to impose similar financial barriers on American goods. These actions of the US and China created an unusual plurilateral atmosphere in the WTO where otherwise multilateral agreements are preferred to ensure the economic liberalisation and the continuous growth of the members.

    Going forward, the EU has mapped out its relationship with China in its New China Strategy, a five-year plan that points out which steps have to be taken to achieve a Free Trade Agreement in the future. The EU recognises its interdependence with China while also understanding the need to ensure that the Asian country becomes more liberal and facilitates a welcoming environment for western companies. China can accomplish that by removing the discriminatory EU trade defence measures, by discontinuing the unfair subsidizing and favouring policy towards state-owned companies. Without fully addressing these concerns, the EU-China trade dialogue will remain only on the level of annual meetings and summits instead of evolving towards a higher level of trust and cooperation.

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