MC12 Closing Ceremony. 17/06/2022. Source: WTO

Triumph of Multilateralism

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We identified the following items as having a significant impact on the development of China-EU relations this week.

The first is multilateralism, where China and the EU speak the same language. The 12th Ministerial Conference (MC12), the first offline meeting in recent years, brought together trade officials from China, the EU, and other WTO members in Geneva this week.

Their negotiations were so tense that the meeting dragged on till early Friday morning, but it ended on a positive note: the deliverables were fruitful and exceeded expectations.

At the meeting, ministers reaffirmed their support for the WTO, sending a new and much-needed signal at a time when fragmentation and protectionism continue to threaten globalisation.

There were breakthroughs in many areas. Concerning Covid-19 vaccine patents, ministers agreed to waive certain procedural obligations under the TRIPS Agreement, allowing for the rapid manufacture and export of COVID-19 vaccines without the patent owner's consent.

Their agreement on harmful fisheries subsidies was particularly successful, albeit difficult for negotiators. Finally, ministers agreed to prohibit subsidies that contribute to illegal, unregulated, and unreported fishing, as well as subsidies for fishing on the unregulated high seas.

Concerning global food security, which has been greatly harmed by the war in Ukraine, WTO members agreed to avoid unjustified food export restrictions and to completely exempt humanitarian purchases for the World Food Programme from export restrictions.

In terms of WTO reforms, ministers agreed to restore a "fully functional dispute settlement system no later than 2024." They also agreed to extend the customs duty moratorium on electronic transmissions.

Both China and the EU are staunch supporters of multilateralism. The success of this week's MC12 demonstrated that the multilateral trading system, which China and the EU jointly support, has once again demonstrated strength and victory in the face of urgent and severe challenges in a time of global turmoil.

The second was about the EU's unilateral trade tool known as an "anti-coercion instrument." The European Parliament's Committee on International Trade (INTA) met this week to discuss revisions to the commission's proposal.

“Triggers for this instrument need to be broadly defined and country-neutral,” INTA said, adding that economic coercion can indeed take many different forms, name-checking U.S., Russia and China as Washington threated to retaliate on the digital tax of several EU Member States, Beijing “blocked” imports from Lithuania after Taiwan opened an office in Vilnius and Russia banned imports of agricultural goods from EU Member States.

`What is perplexing and upsetting about the opinion is that it regards the Chinese people's spontaneous boycott of Western brands and "rejection of MEPs' criticism of China" as economic coercion. The INTA opinion has yet to be enacted into law, but the trend of the EU’s expanding its unilateral economic and trade tools is quite concerning.

Lithuania, on the other hand, has announced plans to open an office in Taiwan this fall. According to reports, the country's exports to the Chinese mainland fell to "close to zero" in the first quarter of this year.

Third, for the first time, NATO will state its position on China. NATO held a pre-summit press conference this week ahead of its meeting in Madrid at the end of June, during which NATO is expected to unveil its latest "strategic concept" in a decade, likely featuring China as a "challenge."

Fourth, policymakers in the EU are concerned about the EU's strategic reliance on China, as well as China's role in the global supply chain.

Senior EU officials responded to MEPs' questions about China, including the EU's dependency on China and supply chain disruption caused by Covid-19.

Mr. Breton, EU commissioner for the internal market, wrote on Thursday that Brussels had identified 137 products in sensitive ecosystems on which the EU is highly dependent, with China accounting for roughly half of them.

He added that certain foreign investments may “put at risk security or public order” in the EU, to which Brussels responded by establishing an EU FDI screening mechanism. The commission's current priority is "full implementation" of the regulation, which includes the establishment of national screening mechanisms by all EU member states, and a report assessing the tool's effectiveness will be presented to the European Parliament by October 12, 2023, according to the commissioner.

The EU’s foreign affairs chief Borrell wrote on Tuesday that Brussels is monitoring the Covid-19 outbreak in China's financial hubs of Shanghai and Beijing. In May, the commission convened a fact-finding meeting with representatives of maritime and landside transportation service providers to discuss the most recent developments in supply chain operations.

Our assessment of the developments between China and the EU is as follows:

To begin with, the outcome of the MC12 meeting is a great relief, providing impetus and vitality to the development of China-EU cooperation and further strengthening coordination between China and the EU within the multilateral system.

Official figures on bilateral trade between China and the EU confirmed that China-EU economic relations remain strong. The mainstay of China-EU relations should always be cooperation.

Uncertainty, on the other hand, looms large. Lithuania's decision to open an office in Taiwan runs the risk of escalating China-Lithuania tensions and destabilising China-EU relations.

Enterprises should pay attention to some risk factors and plan their development strategy in Europe prudently.

German, French, Italian, Romanian leaders visit Ukraine

According to China Daily, French President Emmanuel Macron, German Chancellor Olaf Scholz and Italian Prime Minister Mario Draghi arrived in the Ukrainian capital by train from Poland. It is their first trip to Ukraine since Russia started its special military operation in Ukraine on Feb 24.

At their talks, the parties also touched upon the issues of economic support for Ukraine, the blockade of the export of Ukrainian grain, and fresh economic sanctions on Russia.

Before departing, Macron said on Wednesday that Ukrainian President Volodymyr Zelensky will have to negotiate with Russia, and the Europeans will also be present at the negotiating table, bringing security guarantees.

"Let's hope they will encourage President Zelensky to really look at the state of affairs," Russian diplomat and the press secretary Peskov said.

The three were also joined by Romanian President Klaus Iohannis.

Taxonomy: MEPs object to Commission’s plan to include gas and nuclear activities

MEPs in the two responsible committees objected on Tuesday to the inclusion of nuclear and gas in the list of environmentally sustainable economic activities.

In a joint meeting of the Economic and Monetary Affairs Committee and the Environment, Public Health and Food Safety Committee on Tuesday 14 June, MEPs adopted an objection to the Commission’s proposal to include specific nuclear and gas energy activities in the list of environmentally sustainable economic activities covered by the so-called EU Taxonomy, with 76 votes to 62 votes and 4 abstentions.

MEPs recognise the role of nuclear and fossil gas in guaranteeing stable energy supply during the transition to a sustainable economy. But, they consider that the technical screening standards proposed by the Commission, in its delegated regulation, to support their inclusion do not respect the criteria for environmentally sustainable economic activities as set out in Article 3 of the Taxonomy Regulation.
 

EU launches legal action against UK over Northern Ireland breach

According to Deutsche Welle, the European Commission launched new legal action against Britain on Wednesday, accusing London of threatening peace in Northern Ireland by trying to overhaul their post-Brexit trade deal.

Sefcovic added that "opening the door to unilaterally changing an international agreement is a breach of international law, as well. So let's call a spade a spade. This is illegal."
A new bill proposed by the UK government would remove customs checks on some goods entering Northern Ireland from the rest of the UK, overriding parts of the trade treaty the Prime Minister Boris Johnson signed with the EU less than two years ago.
 

What are experts talking about？

"Why can't Europe control its own destiny?" was published in June in the Cultural Review by Nanzhi Wei. This article analyzes the changes in Europe after World War II from a long historical perspective and argues that the biggest obstacle to Europe's re-emergence may be essentially themselves.

Bruegel published “Is the EU Chips Act the right approach?”  by Niclas Poitiers and Pauline Weil. This article points out Measures to safeguard semiconductor supplies proposed in the European Chips Act could prove to be wrongly focused and could tip over into harmful protectionism.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.