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The European Dimension of China’s “Going Global” Strategy

published 3 March 2016 updated 3 March 2016
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There are two major EU-China issues under consideration in 2016. One is whether the EU should grant China Market Economy Status (MES) and the other is the ongoing negotiations on an EU-China Investment Agreement. The two issues are separate, but closely linked. If MES is granted to China, it would have very concrete impact on anti-dumping rules in Europe, which would put up to 3.5 million jobs in Europe at risk. Moreover, it would also be an official sign that the EU accepts China as a market economy. If MES were to be granted, it would mean negotiations on an EU-China agreement based on a fiction.

The MES issue points to fundamental and profound differences between, on the one hand, enterprises at the service of a State and, on the other, States at the service of enterprises. Putting those dramatically different characteristics together based on the myth that both economies are the same is like declaring that a fox and a chicken are of the same species with the expectation that the fox will not, therefore, eat the chicken if placed in the same room.

The ETUC just released a study prepared for it by Syndex, a research firm associated with the trade union movement, entitled “ China investment policy: consequences for workers”. In his introduction to the study, ETUC General Secretary Luca Visentini, contrasted the fundamentally different approaches to investment by China and the EU as follows:

“As the study shows, China’s expansionary policies are part of a long-term strategy. For example, President Xi Jinping’s ‘ Chinese Dream’ initiative, covering a broad spectrum of policies including trade and investment, is set in a vision extending to 2049. China’s “ One Belt, One Road” and New Silk and Maritime Silk Road Initiatives demonstrate a global view that is wider than trade and encompasses political and security considerations. Chinese investment decisions are highly regulated, coordinated, and approved centrally. All this is in stark contrast to the short-term mercantilist approach of the EU and its Member States who compete rather than coordinate and leave it to individual companies to decide where and how to invest, while supporting them.”

It is clear in the study that Chinese investments in Europe are shifting in recent years from production to services. These investments include the financial sector, telecommunications, information and communications technology, as well as such areas as construction and transport. There are not yet any examples of Chinese investment with respect to privatisation of education or health care, but the study explains one disturbing privatisation experience in transport.

Greece was forced to privatise a number of state-owned enterprises by the EU and the IMF. Chinese investors have invested in a large number of such enterprises, including acquisition of the largest part of the Container Terminal of Piraeus Port Authority (Pier II) by the Chinese state-owned enterprise COSCO (which also owns more than 130 ships). COSCO was, subsequently, the only bidder to develop a new facility for Pier III. Piraeus is a key link in the Chinese “new silk road” or “maritime road”.

The company has effectively destroyed collective bargaining and occupational health and safety protections at Pier II; rights won by the Dockers’ union over many years. It has done so by creating a complicated web of subcontractors. The company only directly employs about 200 workers, mostly administrative personnel, while 600 to 700 others doing the company’s work are legally employed by sub-contractors with various “flexible” and casual employment schemes. The sudden drop in labour costs through such methods are also undercutting other port facilities and their workers, including at Piraeus Pier I where Dockers are still covered by collective agreements.

Of course, it is not only Chinese companies that generate precarious work in order to weaken or destroy trade unions. And, there are many similar problems with other trade and investment agreements or future agreements. But, the differences between the prospective partners are so great that certain basic issues about the nature of our societies are particularly relevant in this relationship.

Dissimilarities in strategies between China and the EU reflect the divergent manner that the respective economies are organised, but there are also many relevant political and social differences. There is an element of “self-policing” in agreements between partners having democratic systems.

Democracies normally have more transparency as well as the possibilities for citizens and workers to influence public policy. In the absence of democracy in one or both partners, “verification” of compliance with agreements is nearly impossible.

Democratic debate, rule of law and an independent judiciary, a free press, and free civil society, including trade unions are highly relevant to MES and to the contents as well as the enforceability of any bilateral investment agreement. Although democratic governance issues are relevant in all agreements, even those between democracies, democracy itself is the key to this one.

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Note: According to the report, “The “Going Global” strategy dates back to 1999 and was aimed at rebalancing the trade relationship between China and the world, fostering Chinese investments abroad at a time when China had plenty of foreign reserves, but also with a view to prepare China for international competition in its domestic market as a result of opening up to foreign companies at global champion level, against the background of WTO membership (in 2001). To do so, Beijing offered Chinese companies different forms of support to help them settle overseas, export activities and mitigate commercial risks.”

The opinions expressed in this blog are those of the author and do not necessarily reflect any official policies or positions of Education International.