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EU-China: Sanctions, threats and boycotts see relations enter downward spiral

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EU-China: Sanctions, threats and boycotts see relations enter downward spiral
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Diplomatic relations between Brussels and Beijing have taken a sudden turn for the worse, opening a new chapter of overt hostility, distrust and uncertainty.

The dramatic shift took place in a matter of hours: last Monday, following days of speculation and media reports, the 27 foreign affairs ministers of the European Union announced the first raft of sanctions against China in more than 30 years.

The punitive measures were aimed at five targets: four Chinese officials and one state-sponsored company believed to be involved in the human rights violations of the Uyghur Muslim minority in the Xinjiang region.

The international community has for months raised the alarm about an alleged program of systematic repression taking place in the autonomous region, which is said to include restrictions on religious freedoms, the use of forced labour, mass detention in internment camps and forced sterilisations.

The move from Brussels was synchronised with Western allies. That same day, the UK, US, and Canada announced sanctions against the very same targets, sending Beijing a clear message of unity and coordination.

China reacted swiftly and furiously: in an almost instantaneous counter-strike, the Chinese Foreign Ministry slapped sanctions on ten European individuals, including five Members of the European Parliament and three national lawmakers, as well as four entities.

"The Chinese side urges the EU side to reflect on itself, face squarely the severity of its mistake and redress it. It must stop lecturing others on human rights and interfering in their internal affairs," the Chinese Foreign Ministry said. "Otherwise, China will resolutely make further reactions."

The inclusion of the Political and Security Committee (PSC) on the list was particularly shocking: the PSC is a body of the Council of the EU, composed of the member states' ambassadors, based in Brussels. It is still unclear if this is a symbolic penalty or Beijing is taking the radical step of punishing 27 plenipotentiary representatives.

Beijing also blacklisted democratically elected officials from the UK, the US and Canada. In total, more than 30 individuals and entities were sanctioned.

As soon as the diplomatic crisis erupted, another highly-sensitive and controversial topic inevitably reemerged: the Comprehensive Agreement on Investment (CAI) that the EU had concluded with China just three months earlier.

Parliamentary showdown

An agreement on the investment deal was reached in principle at the end of December 2020 after seven long years of negotiations. The draft text intends to create balanced EU-China trade relations by making Beijing commit to a greater level of market access for EU investors and to fair treatment for EU companies - what the European Commission calls the "level playing field".

The breakthrough was made possible thanks to a deliberate and forceful push from German officials during the country's six-month presidency of the Council of the EU. The effort materialised in an eleventh-hour call between Chinese President Xi Jinping and European Commission President von der Leyen, European Council President Charles Michel, German Chancellor Angela Merkel and French President Emmanuel Macron.

According to the Commission, "for the first time, China also agreed to ambitious provisions on sustainable development, including commitments on forced labour and the ratification of the relevant ILO (International Labour Organization) fundamental Conventions".

The accelerated conclusion of the investment deal, in particular the assurances about labour rights, was met with criticism, scepticism and even disbelief among most Members of the European Parliament who, as co-legislators, will have the final say on the agreement.

If the chances for ratification inside the hemicycle were uncertain in early January, now in late March, after Beijing's full-blown attack against European legislators, they are, at best, precarious.

Three of the main political parties in the European Parliament (S&D, Renew Europe and Greens), which together hold 45% of the seats, have already said that, as long as the sanctions remain in place, the parliament will refuse to even open the debate for ratification. If opened, the debate is poised to be among the most heated and tense discussions that Brussels has ever witnessed.

"The investment agreement was designed to give a more level playing field in China for European companies and, for that, we saw it always as an opportunity. But under these circumstances - sanctioning the members of the European Parliament, ambassadors, etc. - it will be highly difficult to pass this agreement in the near future," Ilhan Kyuchyuk, Bulgarian MEP from the liberal Renew Europe group, told Euronews.

Kyuchyuk was one of the parliamentarians targeted by China, something that he says makes him feel neither proud nor guilty. He still wishes to see Beijing engage with Europe in an "open" and "constructive" dialogue focused on human rights.

"We want a dialogue and not unilateral criticism. And on our relationship with China, it's very important that we respect each other. It's a strategic relationship because we both are key actors in global and international issues," he added.

His colleague Maximilian Krah, a German MEP who is part of the far-right Identity and Democracy group, equally deplored the latest turn of events. His reasoning, however, is not centred on fundamental rights but on Europe's commercial interests, which he believes are intrinsically linked to China.

"Don't forget the first sanctions were brought out by the EU against China, and not the other way round. What we have is a spiral of political tensions. And on this spiral, we have our responsibility too. And now the question is: should our economy and our industry suffer from a misguided policy? I don't think so," Krah said.

"We have double standards. We attack China. We don't attack Saudi Arabia, for instance. And we use it now when we see the competition between the US and China, we (didn't) use it three or five years ago. So the problem of human rights is you always can use it and it always sounds very good and very value-based ... But at the very end, I think it is not really convincing."

Fire and fury

At the same time as the diplomatic showdown unravelled in public view, the Communist Youth League, a Chinese Communist Party group, took to the social media site Weibo to resurface old statements signed by H&M and Nike where the fashion brands expressed their concerns about reports of Uyghur Muslims being forced to pick cotton in Xinjiang.

Weibo users, state media and celebrities in China soon joined forces to launch a massive boycott against the two companies and other members of the Better Cotton Initiative (BCI), a global cotton sustainability programme. Western names such as Burberry, New Balance, Adidas and Puma quickly faced Chinese fury. Shares tumbled, business ties were cut and products were pulled off online platforms.

"I don’t think a company should politicize its economic behaviour," said a spokesperson from the Xinjiang government. "Can H&M continue to make money in the Chinese market? Not anymore."

For Andrew Small, associate senior policy fellow at the European Council for Foreign Relations, the boycott reflects the thin line that foreign companies have to walk if they want to succeed in the Chinese market. A market that Small describes as increasingly important for Europeans but also increasingly volatile to handle.

"China is very capricious," the expert says. "And I think this is the difficult thing, not so much just for the companies, but for European policy-makers thinking about this over time as China pushes further towards its sort of self-reliance drive (and the) instrumentalisation of the economy for national security and political purposes. How secure actually are these markets?"

Last year, China overtook the United States as the EU's main trading partner, as exchange of goods with America plunged due to the coronavirus pandemic. Combining imports and exports, the EU recorded a trading volume with China worth €585.7 billion as opposed to €555 billion with the US. China is one of the few partners with which the EU has a trade deficit (€181 billion in 2020), according to Eurostat.

It was this major economic dependence, together with a strong lobbying campaign from the private sector, that led EU leaders to hasten the conclusion of the investment deal at the end of December. Not even an obvious message of disapproval from a high-ranking official of the Joe Biden administration was sufficient to deter Europeans from their plans.

Proponents of the deal argue that the text could help the bloc strengthen its so-called "strategic autonomy" and become more assertive and independent on the global stage. But this high goal was awkwardly challenged when the EU decided to coordinate sanctions with its Western allies and was met with a fierce tit-for-tat from Beijing. The escalation in turn thrust the ratification of the investment deal into uncharted territory and triggered the boycott on Western fashion companies.

EU-China relationship headed into more difficult territory?

The European Union can't have it both ways, China appears to be saying. It's either sanctions to defend human rights or deals to boost the economy.

As US President Biden rallies allies in his quest to curb China's global influence and curtail what he calls "coercive and unfair economic practices", the EU's room for diplomatic manoeuvre could become even narrower, forcing the bloc to take a more straightforward stance, one side or the other.

"The EU-China relationship is headed into more difficult territory now. It was already heading in the wrong direction. The EU started to call China a systemic rival. the Comprehensive Investment Agreement was extremely controversial," Small said.

"I think there was some hope late last year that this would represent some advance in the co-operative elements of the relationship. But as we see with issues such as changing the piece values and the systemic questions are still really going to dog the relationship. And I think we're going to be in for a difficult few months, really a few years ahead now in the relationship."