RECOMMENDATIONS FOR AN EU CHINESE POLICY: COOPERATE, COMPETE, CONFRONT

Source : European People’s Party (EPP) March 2021

EU policy regarding China should be based on the following principles: Cooperate where possible; Compete where needed; Confront where necessary. This approach allows the EU to react to the evolution of the bilateral relationship with flexibility.

Engagement, however, requires interest from both parties and adherence to existing rules. We therefore expect China to deliver on its own commitments. Selective application of the international rules-based order is unacceptable. We expect non-discrimination and openness from Beijing as well as its readiness to accept responsibility and accountability, which comes with its enhanced role on the global stage.

The EPP Group supports engagement with China that is principled, practical, and pragmatic. The EU should not compromise on its values and principles. The EPP Group calls on the European Institutions and EU Member States to use all means to persuade the Chinese leadership to turn their inspiring country into a responsible member of the international community.

EPP Recommendations

1. Strict reciprocity as the second-best solution: The EPP Group favours cooperation with China based on the open regulatory framework of the EU and in full compliance with WTO rules. Concomitantly, the EU must be able to robustly defend its core interests, based on WTO compatibility, reciprocity, and effective deployment of rebalancing measures. However, if such an open approach in economic EU-China relations is unachievable, the EU should make use of its trade defence and other relevant autonomous measures against Chinese companies should we detect trade-distorting effects or threats to the EU’s security and strategic interests. They should mirror the restrictions European companies face in China.
2. EU antitrust, merger and state aid rules for Chinese companies operating in Europe: To avoid unfair competition, the EU should develop a “competitive neutrality instrument” to ensure the competitive neutrality of Chinese state-owned enterprises in the European market. The same must apply to all state-subsidised companies, regardless of their ownership structure and the country they primarily operate in. Multilateral efforts to strengthen the WTO rules on industrial subsidies - based on the trilateral cooperation between the EU, the United States and Japan - must be further advanced.
3. Reciprocity in public procurement: European companies are often prohibited from participating in public tenders in China. The European Commission must assure that contracting authorities and Member States apply the EU 2014 directives effectively, and possibly review the framework. Co-legislators should finalise the new, balanced International Procurement Instrument (IPI) to strengthen the EU toolbox and promote globally reciprocal trading conditions. China should join the WTO Agreement on Government Procurement as soon as possible and open up to international tendering.
4.  Forced technology transfers: Forced technology transfers and IPR (Intellectual Property) theft continue to be exercised by Chinese vendors. The illicit practise is also a by-product of Beijing’s “Made in China 2025” project, whereby technological parity with the US and the EU is energetically pursued. These methods undermine future business perspectives and the creation of jobs and growth in Europe. While we positively acknowledge that rules directly prohibiting several types of forced technology transfer are now part of the CAI, nonetheless, we must ensure that adequately dealing with all forms of forced technology transfer and IPR theft remains a priority in bilateral relations. The European Commission should establish a taskforce to raise awareness amongst Member States and European businesses, and to insist on Chinese and vendors authorities to eliminate forced technology transfers and infringements of IPR protection.
5. Industrial strategy for the EU: The EU needs to improve framework conditions for companies to invest and innovate. Chinese strategy on key industries should be analysed, and lessons-learned reflected in research, development and innovation expenditure at EU and Member State level. Continuous investment in EU research, development and innovation can furthermore create new interdependencies to balance power between the EU and China. Special attention should be paid to the resilience of EU supply-chains with the goal of “open strategic autonomy,” including by the development of new opportunities in the Southern and Eastern neighbourhoods. The EPP Group also demands transparency on bilateral agreements between individual states and China. It is disconcerting when questionable state regulations are used to keep strategic contracts with Beijing secret. This was unfortunately the case with a recent loan granted by China to the Hungarian Government for a high-speed railway between Budapest and Belgrade. The EPP Group also demands that bilateral agreements between individual states and China are based on a sound assessment of risks to ensure that these investments do not undermine security or public order in the EU through the operation, management, or control of, inter alia, critical infrastructure, critical technologies and dual use items, the supply of critical inputs or sensitive information, including personal data. In this regard, the EPP Group calls for transparency of such agreements.
6. BRI: China’s geopolitical agenda, disguised in infrastructure and financing projects under the Belt and Road Initiative must be recognised for what it is, and any such projects must be closely monitored, also with regard to their negative political effects. The EU should advocate more strongly its own Connectivity Strategy to build infrastructure and provide financing in third countries, as it is strategically important and would bring business opportunities for our companies. However, we must demand that the BRI meets international standards and, recognising the lack of transparency in bidding processes, ensures fair competition in third markets by upholding multilateral economic governance practices.
7. 5G technological platform: The development of a 5G network all over Europe is a cornerstone of Europe’s future competitiveness. Resources mobilised in the Recovery Plan for Europe should be used to provide all Member States with the necessary funds for secure infrastructure, and to support European industry, capabilities and innovation. Chinese participation in this field should be examined closely, whilst those companies deemed as a security threat must be excluded from any 5G-related ventures in EU-27.
8. Agrifood, fisheries and aquaculture sectors as strategic assets in relations with China: Given the persisting dependence of China and the Chinese leadership in the field of food security, the EU should mobilise resources to develop a smart framework to protect the interests of European farmers, fishermen and aquaculture producers and consumers and to avoid unfair competition in the agricultural, fisheries and aquaculture producing sectors. We acknowledge the Agreement between the European Union and the Government of the People’s Republic of China on the protection of Geographical Indications (GIs). We will closely scrutinise the implementation of this agreement, monitoring China’s efforts to ensure the protection of European IPR.
9. Deliver on the modernisation of the WTO: Since China joined the WTO in 2001, the country has fallen short of delivering on its commitments. The EU, together with other WTO members, should actively pursue its ongoing efforts to update the WTO rulebook. China must fulfil its responsibilities and commitments as a member in this regard and acknowledge its real economic status, including the recognition that it no longer qualifies as a “developing country”.
10. Full use of trade defence instruments: As long as unfair trading practices persist, we call for a continued and strict application - and consider the strengthening - of EU trade defence instruments and the new anti-dumping methodology. This will better tackle distortions in prices and costs that are not a result of free market forces.
11. More “own initiative investigations” by the European Commission: The EPP Group supports increasing the European Commission’s capabilities to investigate “ex officio” anti-dumping/anti-subsidy cases, without formal complaints from affected European companies. The Commission should make full use of these increased competences.
12. Explore new flexible forms of alliance cooperation: We encourage Member States to create a new forum for multilateral cooperation, drawing on the legacy of the Coordinating Committee for Multilateral Strategic Export Control. The main goal of this new forum would be to monitor and control the export of technologies, trade flows and sensitive investments in countries of concern, as well as ethical standards in research, production, and the culling of data.
13. Effective foreign direct investment screening: We urge Member States to swiftly implement and effectively apply the new regulation to establish mechanisms for screening foreign investments in critical sectors and to close existing loopholes. A possible revision should be considered also to address market distortions caused by foreign subsidies in the Internal Market. We are wary of efforts to establish detrimental economic dependencies through strategic investments and are committed to strengthen European open strategic autonomy in this regard.
14. A comprehensive EU-China Investment Agreement: We positively acknowledge the political agreement in principle on a comprehensive EU-China Investment Agreement that has been reached, aiming at a more secure legal framework for a long-term market access and investment opportunities. Reflecting our priorities, the CAI can make a contribution towards providing more reciprocity in market access, contributing to a level playing field, and promoting non-discriminatory treatment of businesses and investors. We acknowledge that this will not close all the gaps in these areas. The EPP Group will carefully scrutinise the agreement, which includes ambitious trade and sustainable development provisions, such as labour rights, which China has agreed to for the first time. We will also take into consideration the human rights situation in China when asked to endorse the investment agreement. The monitoring of the implementation is key since the value of the deal depends on how China implements these commitments.
15. Addressing overcapacities: The EU should continue dialogue with other international stakeholders within the framework of the OECD, WTO and the G20, and press China to rejoin the negotiations.
16. Investment Agreement with Taiwan: We support the launch of negotiations for a bilateral Investment Agreement with Taiwan. Furthermore, we call on the Commission to finish the preparatory work, specifically a scoping exercise and an impact assessment to formally start the talks under the framework of the EU One-China policy. We also believe Taiwan should be welcomed to participate in WHO meetings, mechanisms and activities, particularly during the pandemic. Taipei’s well-balanced management of the crisis has demonstrated the value its participation could bring to the organisation.
17. Striving for effective implementation: The EPP Group will ensure that the European Parliament actively monitors the effective implementation of any future agreement with China, encouraging a role for parliamentary diplomacy and dialogue in this effort.
18. Screening of foreign media investments: China has invested almost €3 billion in European media firms over the last 10 years. Only some EU Member States have screening mechanisms for foreign media investments in place. We therefore encourage the Commission to develop an EU-wide regulatory system to prevent media companies either funded or controlled by governments to acquire European media companies. This should apply predominantly to non-democratic countries in which European media organisations are not allowed to operate freely, or are pressured to tilt their coverage in favour of local governments. These efforts should be based on a common database to facilitate a harmonised prevention and/or persecution across the European Union. Otherwise, China's example will be followed by other states with similar authoritarian political ideologies, and the European Union risks other countries getting involved in its domestic affairs.
19. Support for independent China research and journalism: Increased support for independent and critical expertise on China would make think tanks and universities less dependent on Chinese companies and institutions that currently sponsor their activities. Establishing an EU funded programme for research on China - available for European universities - and the creation of a European China Knowledge Endowment is highly recommended. The EU and the Member States must also continue to defend the freedom of speech at universities, to ensure that free speech at European universities is not subverted by coercion from Chinese authorities, be it against European or Chinese students and academics.
20. Promotion, support and funding of independent journalism and liberal media: The EU and its Member States should support journalists investigating China’s censorship, propaganda, press harassment and human rights abuses. The Journalism Trust Initiative, the International Consortium of Investigative Journalists and the Forum on Information and Democracy are strong examples. The EU can contribute to these efforts by establishing a European Democratic Media Fund.
21. Counter Chinese disinformation campaigns and imposed narratives: A European car brand was forced to publicly apologise for having placed an advertisement citing the Dalai Lama on a social media platform. Mentioning persecution of religious and ethnic minorities, such as Tibetans and Uighurs, and awarding a European literature prize to a writer detained in China can lead to threats by Chinese diplomats against academic institutions, and even governments. Chinese attempts to impose its own narratives and censor opinions in the EU cannot be tolerated. All EU Institutions must be strict in identifying and naming Chinese disinformation campaigns and narratives, such as the one related to the COVID-19 crisis. We propose an EU-wide documentation of disinformation and human rights violations to raise awareness and thus support its victims, be it individuals, corporations or governments. This effort could lay the foundation for educational efforts such as toolkits or specific websites in order to equip European citizens with the necessary skills and/or knowledge to prevent them from being misinformed. This data may be compiled and published on a regular basis by the EEAS. Defending human and fundamental rights: Human rights abuses in mainland China and Hong Kong cannot be ignored and require a strong response from the EU and its Member States. The EPP Group welcomes the adopted EU Global Human Rights Sanctions Regime (EU Magnitsky Act), which will ensure that those guilty of violating human rights abuse are held responsible. The EPP Group should take the lead in political diplomacy to include corruption in the EU Global Human Rights Sanctions Regime. 
22. Release of human rights activists: We call for the release of arbitrarily detained and imprisoned human rights defenders, dissidents, and others, including the Swedish citizen Gui Minhai. We note with great concern reports of systematic human rights violations — including internment, sterilisations, and forced abortions — taking place in Xinjiang against Uyghurs and other mostly-Muslim minorities, and we demand an independent and urgent investigation into these allegations. We stress the need for a free access to Tibet, including for diplomats, journalists, tourists and Tibetans themselves. 
23. Continuing to stand up for Hong Kong: The EPP Group must continue to support Hong Kong’s autonomy, freedom and the rule of law. It should continue to strongly encourage the Member States to implement the package of measures agreed upon by the Foreign Affairs Council on 28 July 2020, as well as the Parliament’s Joint Resolution of 15 June 2020.
24. European import ban on products using forced labour: The Chinese authorities have been reportedly detaining a million of Uyghurs in camps and using them for forced labour in the Xinjiang province. The United States House of Representatives has almost unanimously passed a law that prohibits imports of products manufactured with the use of forced labour. The EU should also ban imports of products from companies taking advantage of forced labour, in compliance with WTO law. Products produced in re-education camps should be banned from EU markets as well.
25. Support of freedom of religion in China: China continues to deny religious freedom to its citizens. Religious associations and communities, especially Christians, Muslims, Buddhists and others who are not part of regime-controlled organisations, are targeted through harassment, detention, demolition of sacred symbols and places of worship, crackdowns and other forms of unrelenting persecution. Not only should the EU provide the Special Envoy for the promotion of freedom of religion or belief outside the EU with adequate means, but it should also continually raise the issue of religious freedom in its relations with the People’s Republic China. 
26. China has become one of the largest contributors to the UN budget and is increasingly participating with troops in UN peacekeeping operations. As a permanent member of the Council UN Security Council and a member of the Human Rights Council, China has a special responsibility to support the three pillars of the UN: human rights, peace and security, as well as development.