It’s been more than a year since the European Union’s much touted Lisbon Treaty came into effect, bestowing on the 27-member grouping a new High Representative of foreign affairs, Baroness Catherine Ashton and as of the last couple of months, a brand new diplomatic apparatus, called the European external action service. While vaguely evocative of a swat team in nomenclature, the new EEAS and its leader have in practice been found wanting in efficiency and policies, unable to carve out the common European foreign affairs stance they have been set up to devise.
Nowhere is this failure more apparent and perhaps more significant, than in the case of the world’s fastest rising power: China. Over the last year, as the EU found itself destabilized by the sovereign debt crises that engulfed or threatened several of its member states, China’s clout in the region has been on the rise.
A slew of Chinese leaders have visited the fiscally troubled capitals of Europe promising support, even as the eurozone’s own economic heavyweights like Germany dragged their feet in response. Buying up the bonds of governments that markets have forsaken, investing in infrastructure ranging from Greek ports to Spanish telecommunications, snapping up the cheap assets of flailing European enterprises, and beating European competitors to secure government contracts in new EU member states like Poland, the Chinese have transformed Europe’s crisis into a political and economic opportunity for themselves.
Beijing’s European shopping jamboree may have caused a few furrowed brows in Brussels, the headquarters of the EU, but the benefiting member states have received this Chinese munificence with gratefully extended arms. When Chinese Vice Premier Li Keqiang visited Spain in January this year, he was hailed by local media as a modern-day Mr Marshall, a reference to the American secretary of state after whom the post-war reconstruction programme in Europe was named.
During Li’s Spanish tour, Chinese companies announced plans to buy shares in European petrochemical ventures and tens of thousands of cars with a few million euros’ worth of Spanish wine and ham to top it off. But it was the Vice Premier’s promise to keep buying Spanish government bonds even as investors worried that the sovereign-debt problems of Greece and Ireland may spread to Spain, that grabbed the headlines.
While precise figures for the value and number of government bonds that Beijing has in fact purchased are unavailable, what is clear is that there has been a marked shift in both the perception and reality of the Europe-China power dynamic. Gone are the days when Brussels’ dispatched officials to sniffily lecture Beijing on the rules of international trade and investment, offering “technical support” on overhauling China’s banking system or the like.
Post the 2008-financial crisis, it is China with its vast foreign currency reserves and continued strong economic growth that seems better placed to give the lectures and it has the resources to put its money where its mouth is.
The cumulative effects of these developments means that in Brussels, the newly minted EEAS has its work cut out as it seeks to ensure that that the EU retains its ability to shape events on the global geo-strategic stage. The problem for Europe’s foreign policy mandarins is the bluntness of the instruments at their disposal.
The EU is not a hard power. Brussels lacks the traditional coercive means by which to muscle its way into geopolitical relevance. But even the usual arsenal of economic instruments, seemingly suited to the region’s trade bloc image, are proving ineffective against the Chinese.
The EU has steadfastly refused to grant China market economy status, a technicality which makes it easier for Brussels to initiate and win antidumping cases against Chinese firms at the WTO (world trade organisation). Yet, in December last year, China enjoyed its first win against the EU in an antidumping case when the WTO ruled that Brussels’ antidumping duties on Chinese steel fasteners like screws and bolts were against international trade regulations.
There are too many conflicts of interest between the priorities and strategies of individual European member states and Brussels on the one hand, and those of individual European companies and Brussels on the other, argued the official.
EU trade chief Karel De Gucht’s move to block Chinese companies from participating in Europe’s public procurement market until Beijing lifts restrictions against European companies’ access to Chinese public procurement, have come to naught. COVEC, a Chinese state-owned firm recently won a bid to construct highways in Poland, the first time a Chinese company beat out European competitors in a public procurement contract.
Poland was upfront about the reasons. The Chinese bid was the least expensive. “It will be very difficult for the EU to tell Poland it cannot accept a bid that it sees in its own interests,” explained the EU official.
