EU-CHINA STRATEGIC OUTLOOK

The European Commission set out a 10-point plan for more balanced economic relations with China, urging EU leaders to back its ideas to curb Chinese state-owned enterprises and increase their guard against cybersecurity threats. The action plan marks a shift in the EU’s  stance toward its top trading partner.

The Commission said the European Union should cooperate more with China in areas such as climate change and peace, but should also push for a more reciprocal economic relationship and take steps to protect its industry.

The European Union shares many of the United States’ concerns over Chinese market distortions, overcapacity and technology transfer.

Europe has also been increasingly frustrated by what it sees as the slowness of China’s opening of its economy, a surge of Chinese takeovers in critical EU sectors and U.S. pressure to shun China, and notably telecoms equipment maker Huawei [HWT.UL], over espionage concerns.

Commission Vice President Jyrki Katainen said that Chinese state financing and state-owned enterprises distorted EU markets. For example, EU rules limited subsidies EU governments could give to European companies, but this does not apply to foreign companies.

The EU Commission believes Chinese bidders for EU public contracts should meet high labor and environmental standards and wants to adapt EU law to limit the state-owned enterprises and state subsidies in the EU market.

It also believes EU countries should find a common line on the security of planned high-speed 5G telecoms networks.

China is the EU’s biggest source of imports and its second-biggest export market after the United States, with trade between the two worth more than $1 billion per day. China’s trade surplus in goods with the European Union was 177.7 billion euros ($200.4 billion) in 2017.

10 Point Plan

Action 1: The EU will strengthen cooperation with China to meet common responsibilities across all three pillars of the United Nations - Human Rights, Peace and Security, and Development

Action 2: In order to fight climate change more effectively, the EU calls on China to peak its emissions before 2030, in line with the goals of the Paris Agreement.

Action 3: The EU will deepen engagement with China on peace and security, building on the positive cooperation on the Joint Comprehensive Plan of Action for Iran.

Action 4: To preserve its interest in stability, sustainable economic development and good governance in partner countries, the EU will apply more robustly the existing bilateral agreements and financial instruments, and work with China to follow the same principles through the implementation of the EU Strategy on Connecting Europe and Asia

Action 5: In order to achieve a more balanced and reciprocal economic relationship, the EU calls on China to deliver on existing joint EU-China commitments. This includes reforming the World Trade Organisation, in particular on subsidies and forced technology transfers, and concluding bilateral agreements on investment by 2020, on geographical indications swiftly and on aviation safety in the coming weeks

Action 6: To promote reciprocity and open up procurement opportunities in China, the European Parliament and the Council should adopt the International Procurement Instrument before the end of 2019

Action 7: To ensure that not only price but also high levels of labour and environmental standards are taken into account, the Commission will publish guidance by mid-2019 on the participation of foreign bidders and goods in the EU procurement market. The Commission, together with Member States, will conduct an overview of the implementation of the current framework to identify shortcomings before the end of 2019

Action 8: To fully address the distortive effects of foreign state ownership and state financing in the internal market, the Commission will identify before the end of 2019 how to fill existing gaps in EU law

Action 9: To safeguard against potential serious security implications for critical digital infrastructure, a common EU approach to the security of 5G networks is needed. To kickstart this, the European Commission will issue a Recommendation following the European Council

Action 10: To detect and raise awareness of security risks posed by foreign investment in critical assets, technologies and infrastructure, Member States should ensure the swift, full and effective implementation of the Regulation on screening of foreign direct investment.