Cause and Effect in European Politics and Law

China Is Playing with the Illiberal Pieces on the EU Chessboard

Adelina Marini, December 14, 2017

The traditional summit of China with South-East European countries is usually a time when leaders in this European region get excited and start pumping overwhelming hopes for easy money, many new jobs, improved infrastructure without any strings attached. Especially in countries where the media environment is captured, the summit is a leading topic on media agendas for days, aiming to show how globally significant their countries are even without being part of the EU or that they can do without the EU. The format's summits, also known as 16+1, are also a time to search for an answer to the question common the Union's foreign policy is and to what extent this format works against EU interests as a whole. It is time for the Brussels decision-makers to ask themselves another question too - whether this is the road of silk illiberalism?

What is 16+1?

This is a platform for cooperation between the countries of Central and Eastern Europe with China. It was set up in 2011 in Budapest as a response to the significantly shrinking Western investment due to the global financial and economic crisis, which then translated into a troublesome and protracted problem for the euro area. On the Chinese side, this is an initiative that aims to create a modern version of the one-time silk road that runs along the outlines of South-East Europe. The format includes 11 EU member states - Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia - and five Western Balkan countries - Albania, Bosnia and Herzegovina, Macedonia, Serbia. The ambition of the participating countries is to expand their cooperation with China in areas such as trade, investment, infrastructure connectivity, agriculture, science, health, education, culture.

This year, the sixth summit of 16+1 was held in the Hungarian capital again. The family photo of the meeting immediately leaves an impression because the majority of leaders are illiberals, starting with the pioneer of this format, Li Keqiang, the prime minister of totalitarian China, and on the European side with the "father" of the new European illiberalism, Viktor Orban, the most vivid illiberals such as the Polish Prime Minister Beata Szydło (now former prime minister), Serbian Prime Minister Ana Brnabić (who is not a leader in itself, but a pawn in President Alexander Vučić's hands), Bulgarian Prime Minister Boyko Borissov. The rest of the group are to a lesser extent illiberals or rather ordinary conservatives, and others are an exception.

Everything in the agreed guidelines for development is more of a wishful thinking but, regardless, this format is being looked at with concern by the old EU members because of suspicion that these countries are being used by China to enter the European market through the backyard, bypassing  the high European standards and, above all, the political conditions that the Union (as an entity) places on Beijing. 16+1 is alarming also because its purpose is hard to see, given that the EU has a built-in format for cooperation with China and holds summit meetings every year.

And the differences in tone between the EU-China summits and the 16+1 differ significantly, which further fuels concerns of the Union's institutions and some of its members. For example, this year's EU-China summit in Brussels, on 1 and 2 June, did not reach agreement on the final communique. The final press conference was delayed for several hours as efforts were made to find agreement on the text, as the differences between the EU and China on several key issues, including free trade and steel production, remained insurmountable. Another obstacle was that the EU refuses to recognise China as a market economy.

The two parties managed to find a point of contact with the implementation of the Paris Climate Agreement just one day after the US decision to withdraw from it, but the other issues that are important to the Union remained. The EU is also worried about freedom of expression in China, which institutional leaders Jean-Claude Juncker (Luxembourg, EPP) and Donald Tusk (Poland, EPP) do not fail to mention at any press conference.

Where is the conflict and why is 16+1 a problem?

Relations between the EU and China are driven by the Union's strategy for China. The elements of the new strategy were proposed by the European Commission in June last year (2016) and were approved a month later by the Council of Ministers. The adoption of a new strategy had become necessary since over the last decade China had changed significantly, growing on the global stage with an unprecedented scale, seeking a greater global role and more serious influence. The strategy covers everything that 16+1 does separately. The EU and China are two of the three largest economies in the world. According to the World Bank data of 2014, the EU as an entity of 28 members is the first economic power, accounting for  22.6% of the global gross domestic product, the US's share is 22.3%, and China's 13.3%. In terms of purchasing power parity, the EU again ranks first with 17.1% of global GDP, the US with 15.9% and China with 16.6%.

The aim of the strategy is for the EU to strengthen its relations with China, to engage it in the process of internal reforms that are of interest to the EU, those being in the area of economy, trade, investment and environment; to assert reciprocity in relations and the development of connecting infrastructure between Europe and China, but on the basis of rules. The document explicitly states that the EU must speak with one voice and be perceived by China as one. The 16+1 format is also mentioned, stating that Member States' bilateral relations must be coordinated with the Commission, the European External Action Service and other member states to ensure that all aspects relevant to EU and complying with European legislation, rules and policies are taken into account.

By adopting the strategy, member states have committed to working bilaterally with China on human rights protection, rule of law, civil society, political accountability, freedom of expression, association and religion. It is explicitly underlined that EU contacts with China must be in line with EU legislation, rules and policies. The strategy describes China as a non-market economy dictated by the Party.

The EU's long-term goal and strategy is to conclude a comprehensive free trade agreement with China. In recent years, these EU agreements have become an instrument of global influence and cover much more than purely trade relations. Through them, the EU demands that there be at least a minimum overlap of values, especially with respect to the rule of law, human rights and reciprocity. Indicative of the evolution of these agreements as an instrument of foreign policy is the agreement with Canada. The EU is very keen on these three things because they are key to creating a level-playing field between European and Chinese investors and entrepreneurs. That is why the strategy also says that the EU has no problem with Chinese investment in Europe but only if it complies with EU law and regulations and if the EU gets the same access to the Chinese market.

A particular problem is public procurement in China, subsidies to certain industrial sectors and, above all, steel overcapacity, which has been poisoning China-European relations for years. Being the largest economy in the world and the largest market, the EU is increasingly trying to impose its own standards of global trade and finance and its rules, especially given the isolationism that the United States has been falling into since Donald Trump was elected president. The EU also calls for reciprocity in terms of cooperation in science and technology, requires protection of intellectual property and access to the digital market.

In the Chinese One Belt and One Road Initiative, the EU sees significant geostrategic consequences. Therefore, it insists that China should adhere to market rules and international norms, including with regard to the candidate countries for EU membership. Reciprocity is a key principle in the Commission's vision for the management of globalisation.

How common is the common foreign policy?

The EU-China summits in recent years show how difficult the implementation of the goals set in the strategy is. That is why it is extremely important that the EU is united, but the issue of the common foreign policy is like a sword of Damocles over the Union. US President Donald Trump's visit to Poland last summer, who also has strong illiberal views, and his messages to the southeastern periphery of the Union, have very seriously raised the question of how much the EU's approach to the new reality in the United States is coordinated. In this sense, the German Chancellor Angela Merkel's call, made at the end of the September election campaign, to reach a common EU position in terms of China and Russia was a crucial.

This is particularly important in terms of enlargement, as the EU demands candidate countries to align their foreign policy with that of the Union, especially with regard to Russia. If, however, it is not aligned at the European level, how can candidates be expected to comply? The EU is trying to channel relations with China in one place and in this sense one of the few but significant successes at this year's Brussels summit was that China agreed to participate in the European Fund for Strategic Investments. This is the tool the EU is using to try and help investments in key projects in the member states and thus "come back" to some of them.

The 16+1 format undermines EU's unity. Furthermore, the agreed guidelines in Budapest this autumn do not fully meet the objectives set out in the European strategy on China. There is no word about human rights and the rule of law, and reciprocity is briefly mentioned, maybe to save faces.  So far, the stated scale exceeds reality manifold. In 2015, trade between China and CEI amounted to $ 56.2 billion, which is less than in 2014 when it was $ 60.2 billion. China's trade with the Western Balkans is still insignificant as the countries in the region are in a trade deficit with it. The enthusiasm of the meetings of these countries with China also exceed reality manifold.

Relations in this format are moving along the edge of European policies and rules, which hinders more serious reactions, but there is no doubt that it can be and is used by illiberal European leaders to demonstrate that there is an alternative to the EU, that is, a leverage to influence European decisions that the illiberal leaders do not like. The next 16+1 summit will be in Sofia next year - the year Bulgaria will take over the rotating presidency of the EU Council of Ministers for the first time .