EU puts up guard to Chinese firms, cools on trade deal

Philip Blenkinsop and Sabine Siebold
·3 min read
FILE PHOTO: An attendant walks past EU and China flags ahead of the EU-China High-level Economic Dialogue in Beijing

By Philip Blenkinsop and Sabine Siebold

BRUSSELS (Reuters) -The European Union took steps on Wednesday to guard against economic competition from China that it deems unfair, a sign of growing distrust after Western sanctions over rights abuses and Chinese retaliation.

The bloc's executive arm, the European Commission, unveiled plans to cut dependency on Chinese and other foreign suppliers in six strategic areas, and to limit the ability of companies supported by foreign subsidies to buy EU businesses or take part in public tenders.

EU competition chief Margrethe Vestager told a news conference there have been rules controlling state aid from European governments for 60 years, but none to stop foreign subsidies being used to buy up firms inside the 27-nation bloc.

"Europe is open for business, but come and do it in a fair and transparent manner," she said was the message.

The Commission is also pausing efforts to promote the China comprehensive agreement on investment (CAI), recognising that it will struggle to secure backing from EU lawmakers while Beijing maintains sanctions on five of their colleagues.

The EU executive still believes the deal, struck at the very end of 2020, will help redress unbalanced economic ties. But its prospects have dimmed.

"The ratification process cannot be separated from evolving dynamics of the wider EU-China relationship and in this context Chinese retaliatory sanctions," EU trade chief Valdis Dombrovskis told a news conference

'BADLY MISCALCULATED'

For now, the Commission is giving the agreement a legal review and translating it into EU languages, but the European Parliament is only likely to evaluate it in 2022.

China's rights record in Xianjiang had already cast doubt on the deal even before China's tit-for-tat sanctions, with Social Democrats and Greens in the EU assembly sceptical.

"The Chinese side has badly miscalculated," German Greens lawmaker Reinhard Buetikofer, one of five blacklisted members of parliament, told a news conference, adding he did not expect ratification for at least two years.

Bernd Lange, chair of parliament's trade committee, said the deal was "in the freezer" and would stay there for a long time.

French President Emmanuel Macron and German Chancellor Angela Merkel support the deal, but the CAI will only be ratified after Germany's election in September, when Merkel will have stepped down.

This could make a difference, particularly if the Greens are part of the next government in Berlin.

China still has strong EU allies, however.

Hungary blocked for a second time an EU statement criticising China's new security law in Hong Kong, diplomats said, in a move likely to undermine efforts to confront curbing of freedoms in the former British colony.

The EU, which aims to support Britain and the United States in upholding human rights in Hong Kong, had been due to issue the formal statement on Monday at a meeting of EU foreign ministers.

(Reporting by Philip Blenkinsop, additional reporting by Sabine Siebold and Robin Emmott; Editing by John Chalmers and Andrew Cawthorne)