BusinessEurope Headlines No. 2019-13
BusinessEurope on 10 April invited Member State officials, EU institutions and stakeholder partners such as business organisations, the European Trade Union Confederation (ETUC), the European Consumer Organisation (BEUC) and think tanks to have an open discussion on the future design of the Single Market rules and their implementation after the European election. Our Director General Markus J. Beyrer pointed out that Europe needs a strong and more integrated Single Market to be able to compete globally and to tackle current challenges like a changing environment for global trade, fast technological development and a fierce innovation competition, migration, climate change to name some. No EU Member State is capable of addressing it all alone. Freedoms of movement of capital, goods, services, people and data in the Single Market can give huge economic power which would enable faster economic and social convergence that is so needed in the EU. “Europe needs a fair level-playing field with the unquestioned freedoms of movement of people, capital, goods, services and data”, he said. Participants, including the European Commission Vice-President Jyrki Katainen, exchanged their thinking on the ambition for a barrier-free, fair and future-proof Single Market, and how to make rules so that market integration brings benefits to all. The event highlighted the necessity of “taking it seriously” to create an enforceable level playing field and ideas how to make implementation and enforcement more effective, transparent and uniform. This conference was a contribution to in depth discussion on the future agenda of the Single Market.
Contact: Martynas Barysas
A turning point in EU-China relations?
By Maurice Fermont, Adviser for International Relations
This week the 21st EU-China Summit took place in Brussels, an annual summit between political leaders of the European Union and China. The objective of this annual summit is to keep a finger on the pulse of the strategic partnership between the EU and China, and to agree on common objectives and sign off on achievements. In recent years, however, the summit has served more as a joint exercise of putting together a wish list than achieving real progress. Indeed, if no major outcomes are forthcoming soon, the summit and joint statement may well be reduced to an annual stock taking of how both sides view each other. And this too, is changing: China’s actions are significantly changing the way it is being viewed in Europe.
When China joined the World Trade Organisation (WTO) in 2001 it was widely believed that market opening would transform China into a fully-fledged market economy over time. Many foreign firms were first attracted to China through a host of preferential policies, producing and exporting mainly to foreign markets. Joint venture requirements initially featured as a blunt instrument to induce technology transfer to Chinese partners in exchange for market access. China’s investment-driven and export-led growth model turned it into the factory of the world. Although regulatory problems remained part of China’s economy, double digit economic growth and the belief that China would transform into a market economy meant that many companies expected these issues to eventually disappear. The rest is history.
Fast forward to the present, and it seems the future could not look more different. China is now the world’s second largest economy, and according to some of the pundits back in 2001, China should have become a market economy by 2016. Although the record shows mixed results, China broadly speaking held out on key reforms and resisted further market opening. Instead, China doubled down on its state-centric economic model since 2013 and has seemingly reintroduced political influence into all areas of its economy. Tellingly, it argued that WTO reform should respect members’ development models in a position paper it published in 2018 – implying that any degree of state intervention goes if it begets economic growth. In the same paper, China also argues against further disciplines for state-owned enterprises. Instead of reducing the role of the state in favour of the market, industrial policy features high on China’s agenda. Its declared objectives in its flagship programme ‘Made in China 2025’ includes comprehensive state-support to develop 10 key sectors that includes global market share targets that can climb up to 70% as well as provisions on “indigenous innovation” that aim to exclude foreign companies from supply chains.
No wonder then, that the way China is viewed in Europe is changing rapidly. The European business community has long supported China’s inclusion into the multilateral trading system and has made a substantial contribution to China’s economic success. Economic development is not a zero-sum exercise. But the way in which China has stacked the deck means that it has far greater access to Europe’s market than vice-versa, that its companies benefit from industrial subsidies where European companies do not, and that it can acquire companies and technology in Europe while European companies are barred from market entry or forced into joint ventures in China.
From 2016 European policy-makers argued for a greater need for reciprocity in the bilateral economic relationship. China had grown into a partner of formidable size, and equal treatment and access for business became paramount. What followed was a series of failures by China to live up to its promises. By 2018 it became clear that no real progress had been forthcoming, all while the problems of China’s market distortions increasingly began affecting global markets due to their sheer size and China’s increased global activity. By April 2019, following growing alarms among the business community over China’s direction, the European Commission published a Strategic Outlook in which it proposed specific steps to offset the negative spill-over effects of China’s state-centric economy on the European market.
The European business community still supports a positive, fair and reciprocal economic agenda with China. But a lack of delivery on key promises means that “promise fatigue” has set in and that measures are needed to restore a level playing field. A global economy can only function well when markets are well-regulated and do not feature distortions that undermine private activity and misallocate investments. Three important requirements to restore this level playing field are reciprocal market access, fair treatment and fair competition.
In this week’s summit the EU and China managed to agree on some important steps and timelines to achieve these goals: a commitment to discuss and address industrial subsidies in the context of WTO reform; an agreement to conclude bilateral negotiations on our comprehensive agreement on investment by 2020; and a conclusion of our agreement on geographical indications by 2019. Time will tell whether China intends to keep its promises and deliver on longstanding expectations. The EU has meanwhile demonstrated that it is willing to segment its relationship with China and will move forward with policies that address its concerns. Let’s now hope that China heeds these signals and treats its partners’ concerns seriously and delivers on its promises. This would be the surest way to revive trust and improve economic relations.
Contact: Maurice Fermont
Contact: Rebekah Smith
Photo copyright: European Commission
Contact: Christian Feustel
Contact: James Watson
Reform Barometer, that whilst our members believe that 90% of the CSRs are either important or very important, only 20% are currently being implemented satisfactorily by Member States. Proposals such as the one made by the Commission for the next long-term EU budgetary (MFF) to include a “Reform Delivery Tool”, whereby member states would receive a financial contribution upon the delivery of agreed reforms are essential to help increase implementation, and in-turn, long-term growth and employment.
Contact: James Watson
Photo copyright: Ministry of Foreign Affairs / Andreea Tănase
Contact: Rebekah Smith
Photo copyright: AGERPRES FOTO / Cristian Nistor
Global Trade Series 2019”, organised, among others, by Georgetown Law, took place in Washington D.C. Sofia Bournou, Senior Adviser for International Relations at BusinessEurope participated in a panel discussion which dealt with the implications of the current crisis in the World Trade Organisation (WTO) for business. “Safeguarding a strong and effective WTO is a competitiveness issue for businesses all over the world. It is the shared understanding that common rules bring not only stability and predictability in the global trading system, but they also bring a level-playing field, not allowing the most powerful to impose its interests on the rest”, Bournou said. The panel, comprised by representatives of companies and business associations, explored ways in which business can play a more prominent role in the current discussions on the reform of the WTO, for instance by presenting success stories and explaining how they use the rules and the jurisdiction of the WTO’s Dispute Settlement and the Appellate Bodies in their everyday business operations. The idea that a more permanent structure should be created within the WTO to ensure the more direct engagement of businesses was also flagged.
Contact: Sofia Bournou
Contact: Elena Bertolotto
- 16 April: International conference "2030 Agenda: Partnerships for Sustainable Development"
- 4 May: Open Day of the European institutions in Brussels
- 6-7 May: EBS 2019: Tomorrow's Europe