BOFIT Viikkokatsaus / BOFIT Weekly 2019/11

On Tuesday (Mar. 12), the European Commission released a joint communication entitled “EU-China – A strategic outlook.” The document reflects the strong pressures to strengthen the EU’s China policies. Proposals involving foreign trade and economic issues in many respects overlap with current US demands set out in the current trade negotiations with China.

The EU Commission, in addition to emphasising greater cooperation with China in many issues like climate policy, seeks more balanced and reciprocal economic relationship. This means the EU should closely monitor China’s compliance with its EU agreements and commitments. Needed actions include reforming the WTO (including reducing subsidies and forced technology transfers), as well as approval by 2020 of long-negotiated bilateral agreements on investment. Government procurements should stress reciprocity and make it easier for European firms to compete in China.

In addition to its demands on China, the European Commission also presented a number of actions EU could take to amend laws and their implementation in ways that reduce distortions in competition. These include the operation of third-country state-owned firms in the internal market as well as compliance with labour and environmental standards in government procurements. The joint communication directly mentioned the security risks associated with 5G telecom networks and foreign investment. Member countries were advised to implement the foreign investment screening mechanism agreed last month. The European Commission also stressed the importance of the EU’s own need to adapt to changing realities and reject protectionist urges in EU policy.

China will figure prominently in the EU agenda this spring. The upcoming meeting of European Council will take up the Commissions joint communication on March 21. The annual EU-China summit will be held on April 9. European business groups are also refining their China positions.