Lobbying the Chinese government is difficult, even potentially risky. So let’s lobby the EU instead!

A few days ago I came across an article in the Wall Street Journal ("European Business Leaders Want a Stronger Hand With China, Not Decoupling") and another in the Financial Times (“Wallenberg warns against using Covid as excuse for protectionism?") about the publication by the European Round Table for Industry (ERT) of a new report titled ??Making Open Strategic Autonomy work – European Trade in a Geopolitical World?? that tackles, among other topics, EU-China relations. ERT, according to their website, is “a forum that brings together around 60 Chief Executives and Chairs of major multinational companies of European parentage” (list here).

The section about EU-China relations does not contain any new information. It’s mainly recommendations intended for the European Union institutions, and for the European Commission in particular. The very fact that there is no recommendation for the Chinese authorities is interesting. It could mean that the group does not want to be seen criticizing China and/or think there is no point trying to lobby the Party (could it be that they also feel some “promise fatigue”?). There is not much in terms of assessment/analysis of the situation we are in presently. We are left in the dark on the reasons why EU-China relations are not that great these days. Xinjiang is mentioned only once and in the section dedicated to relations with the US (!) (page 33) and Hong Kong does not appear anywhere. Chinese sanctions against five Members of the EU Parliament and a think tank dedicated to study China (among others) are not mentioned, just translated by “strong response” (“The EU, US, UK, and Canada have coordinated the sanctioning of Chinese officials over alleged human rights abuses in Xinjiang. This has led to a strong Chinese response that could jeopardize collaboration with China in other areas, including on the ratification of the Comprehensive Agreement on Investment”).

Still in the section about the relations with the US, we read that “A decoupling and the creation of separate supply chains for the US and Chinese markets should be avoided, as this would increase costs for companies and citizens worldwide and slow innovation”. Of course. But the latest “Business Confidence Survey” of the European Chamber in China shows that decoupling is not exactly what companies are doing now, at least not the European ones ("20% of companies have not reviewed their supply chain strategies, and 38% have reviewed them but are not planning any significant changes"). Furthermore, before talking about potential decoupling, let’s remember that China is not really coupled to the rest of the world in the first place. A recent report titled “Decoupling – Severed ties and patchwork globalisation” published by the European Chamber in China (EUCCC) in partnership with MERICS, rightly states that at the origin of decoupling, we have un-coupling, which is a policy of basically keeping the Chinese market out of the reach of foreign players.

It often sounds like all the efforts are to be made by the EU. There are almost no recommendations/remarks intended solely for the Chinese authorities. The situation regarding IPR protection is not satisfactory? Well, “The EU should support innovation by European companies through better protection of IP rights in China” (p. 44). Is it not the job of the Chinese authorities to protect IPRs in China?

Sometimes, it seems that it’s mostly a communication issue. For example regarding the indirect market access restrictions “the EU should seek to [address them] through a constructive dialogue with Chinese counterparts. Support for a closer relationship with China among Member States and in the European Parliament can only be built and strengthened if there is an understanding that China too is working to level the playing field and to provide European companies with the same fair treatment in China as Chinese companies enjoy in Europe”. Problem: China is NOT interested in a level playing field (see the EUCCC position papers of the past 15 years, the “promise fatigue” (and until last October, no interest in the CAI) etc.).

Some remarks sound a bit like wishful thinking: “The more detailed and time-specific the Chinese authorities are on the implementation of these aspects of the agreement, including the ILO Fundamental Conventions, the more it will help to create trust and to build support in the European Parliament for ratification once the time is right to pursue this”. Perhaps there is a reason why the wording is so vague in the first place? And do the people at ERT seriously think the European Parliament will ratify an agreement with a country sanctioning some of its members? The President of the European Chamber Mr. Joerg Wuttke summarized the core issue well in his recent paper on the CAI: “The agreement to make ‘continued and sustained efforts’ to ratify the four outstanding International Labour Organization (ILO) fundamental conventions is a weak commitment. That being said, is it not better to have at least this small commitment than none at all?”

The report also uses one of the talking points of the European Commission regarding the CAI which “binds in, or in some sectors extends, China’s openness to European firms, while also providing a basis for further strengthening the trade and investment relationship”. But can the Chinese authorities can be trusted to keep their word? Yes, thinks the EC (otherwise why bother with this agreement?). Problem: Not implementing what was promised numerous times is what led to the “promise fatigue” syndrome… A recent article of the French Economic Mission in Beijing details a good example of how respectful China can be of its signature. “China has de facto suspended bilateral aerial agreements, including the Sino-French agreement of 1966”. In addition, “European companies cannot have direct flights to Beijing, while Air China has direct flights to/from Athens, Copenhagen, Stockholm and Vienna, thus distorting competition and market access for EU-China flight services” (Bulletin d’analyse economique, juillet 2021).

Foreign companies with activities in China are in a difficult position these days, being dragged in political debates, most of them initiated directly or indirectly by the Chinese authorities. The size of the (potential) Chinese market makes clear decisions difficult for their boards. In many instances, they face the classic prisoner's dilemma. In others, they find themselves in a lose-lose proposition: they dare not voice their issues to the Chinese authorities and/or in public, for fear of retaliation; and when a representative organization (or a State) voices them on their behalf, the Chinese authorities dismiss them, pointing out that the said issues are not real, as nobody can produce example of them… Perhaps this is the reason why it seems that industry associations are instead focusing their efforts on the EU and the Member States… Therefore, the tone of this ERT report should not really be a surprise, especially considering that it was apparently piloted by Mr. Jacob Wallenberg, Chair of Investor AB and also Chair of the ERT Committee on Trade & Market Access: he made the headlines in Europe a few months ago for his aggressive lobbying of the Swedish government on behalf of Huawei...