The old proverb ‘united we stand, divided we fall’ isn’t just a timeless bit of wisdom.
Here in Europe it seems to be an active operating principle of self-harm, one that is cleverly exploited by China’s leadership.
Recent trade-related dramas suggest that Europe (always a collection of self-interested nation states with short-term horizons) have inverted the proverb and changed it to ‘divided we stand, united we fall’
Bearing witness to that is the European Commission’s attempts to impose punitive tariffs of up to 68 percent on China’s solar panel manufacturers. The latter have flooded the EU market with state-subsidised products. They have under-priced and under-cut Europe’s own producers by ‘dumping’ low-cost solar products on the EU market.
The result of this cheap product dumping has been catastrophic for European solar manufacturers. They have either gone out of business or now teeter on the verge of bankruptcy.
And yet, marshalled against the EU and especially Karl de Gucht its trade commissioner, are a bevy of bickering, self-referential, European sovereign states – at least 14 of the EU’s 27 governments by one count – now complaining they don’t want the EU to impose penalties against China.
This resistance is led by Germany’s new ‘Iron Chancellor’, that indomitable Freya, Angela Merkel. She has made no secret of her opposition to Mr.de Gucht and the EU’s solar anti-dumping proposals (her truculence was foreshadowed last year at the 15th China-EU Summit). That she is the de facto leader of the EU is no longer in doubt
“I will get involved to make sure that soon there are intensive negotiations with the Chinese side about all upcoming questions,” says the portentous Mrs. Merkel. And then later she adds: “Germany will use its influence”. In saying these things, Merkel is putting German interests first, and worringly, she is undermining the EU trade commissioner’s attempts to get his Chinese counterparts to come to the negotiating table.
Cui bono, Mrs. Merkel?
The German chancellor has just received China’s new premier, Li Keqiang, in Berlin.
Between them they’ve signed 17 bilateral agreements on culture, trade and investment. Business contracts were concluded between Chinese and German companies, including Siemens, BASF and BMW. For the first two corporations, China is their third biggest market. For BMW, it is its largest single market.
Germany is China’s most important trading partner in Europe. Germany has a net trade surplus with China, something in the order of €11 billion. Not an insignificant positive trade balance and the envy of most other European countries. It is one that Germany certainly wants to retain or grow. Even if it comes (it seems) at the expense of EU unity by subverting the EU’s collective interest in supporting China against the EU trade commissioner’s attempt to implement ‘fair trade’ principles.
Germany’s position toward Mr. Li and specifically China smacks of short-term self-interest. Yet Germany is not alone in abandoning EU solidarity.
The other 14 or so EU countries (by some reports, now 18) that have opposed the EU’s imposition of solar tariffs (among them are the UK and the Netherlands) are as equally culpable in undermining European unity in the face of a concerted Chinese effort to promote unfair trade practices.
A Herculean job
And what of Mr. de Gucht’s role in all this? In my view, he is doing a Herculean job under huge countervailing political pressures. He has to deal with a European Hydra without slaying it. A tough one, that.
As the European Commission’s (the executive arm of the EU) trade commissioner he has raised a serious existential European-wide trade issue posed by China, and put it firmly on the EU table. European companies are “facing life-threatening dumping and unfair competition,” he says.
As an unintended side-effect, de Gucht has raised a question about EU unity on trade questions. The question deserves an answer.
Mr. de Gucht has taken a European-wide, regional view of the Chinese subsidy problem. It is counter to the narrow-minded nation state view. In a nutshell, uttered through a spokesman, de Gucht’s view is this:
“It is the role of the European Commission to remain independent, to resist any external pressure and to see the ‘big picture’ for the benefit of Europe, its companies and workers based upon the evidence alone.”
The de Gucht view is as it must and should be for Europe. It is a Eurocentric unitary view, long-term, and goes deeper than just China’s impact on the European economy.
It is also much broader than the parochial self-interest of Germany or other self-serving sovereign states. The de Gucht-Eurocentric position views Europe as one trading ‘bloc’ – a collective that has the power and strength to negotiate with China, the world’s second largest economy which is soon to be the first.
Chinese state support – cheap land, tax breaks, interest-free loans, export credits – for domestic firms do undermine the ability of European companies to compete fairly. And not just in the global market, but on Europe’s home turf.
If you doubt the fact that Chinese firms benefit from state subsidies, whether private or state-owned, read here. It offers an objective, academic, assessment of where China leverages its post-WTO advantage.
To their great discredit and shame, but as a part of their usual mischief to preserve good relations with China, Mrs. Merkel and other collaborationist European states have painted Mr. de Gucht – for want of a better description – as an inflexible EU bureaucratic ‘attack dog’.
In the course of doing so, Merkel and Co., have distanced themselves and their countries from support for the collective interests of the EU as a regional trading bloc. In pursuing purely bilateral trade interests with China at a cost to regional trade security and competition they have, in fact, betrayed the idea of European unity.
Over the last few years China has orchestrated a clever end-game in the anti-dumping debate in Europe, culminating in Mr. Li Keqian’s German visit.
Clearly, China has employed a smart PR and lobbying strategy. Against the canvassed backdrop of a self-painted ‘victim’ (China always seems to take on the angst of victimhood when it suits its interests) of foreign protectionist lobbies, it reaches out to be ‘understood’.
Immediately prior to Li Keqiang’s visit to Germany, China’s own ‘victims’ of potential European punishment – the Chinese solar manufacturers – were belatedly confronting the EU trade commission.
A consortium of 40 or so Chinese solar panel firms had miraculously emerged as an association and approached the EU trade commission seeking negotiations. They subsequently claimed the EU was stalling on talks thereby creating an impression that the trade commission was being uncooperative (which the trade commission denied).
Then, a day before Li Keqiang’s arrival in Berlin, Germany’s economics minister Philipp Rösler popped up like a primed puppet to criticise the EC’s position. Anti-dumping duties would be a “grave mistake”, he said, offering no further explanation or reason why they would hurt or benefit Europe.
Now, after Mrs. Merkel’s intervention to undermine Mr. de Gucht saying that Germany is opposed to the solar panel levy, Mr. Li crows: “This position, that is what binds China with Germany and earns my appreciation.” Berlin, he said, wanted to ‘hear’ China’s position, implying that the EC trade commissioner didn’t.
China, it seems, places more importance on a bilateral trade alliance and close cooperation with Germany, rather than with the EU. Germany willingly reciprocates. How ‘European’ is that, Mrs. Merkel?
A tragedy for trade unity
The drama being played out this week is a tragedy for European unity in trade matters. China is to Germany what Iago was to Othello: Whispering and innuendo, bent on undermining if not destroying a union of common European interests.
Poor Mr. de Gucht takes the role of Desdemona, caught in the middle, though unlike her, de Gucht knows full well what’s going on. He made it very clear to China’s vice minister of trade that “he was aware of the pressure being exerted by China on a number of EU member states which explains why they are positioning themselves as they are.” No innocent by any stretch of the imagination, de Gucht is simply caught in an awkward vice between two nationalistic state actors, China and Germany, both intent on taking him out of the equation.
Divide and rule
‘Divided we stand, united we fall’. That is where the European Union sits now, most uncomfortably, on trade issues with China. It is conducting a trade war within itself. Each EU member is independently pursuing the China market to satisfy their own domestic trading interests whilst avoiding any offence to Beijing.
To carry on like this will be the undoing of Europe as a powerful regional trading bloc, eroding its ability to negotiate trade pacts from a position of strength – afforded by solidarity – with other big players such as the USA, BRIC’s, Japan and ASEAN.
And all the while, Europe’s internal bickering plays perfectly into China’s preferred game of ‘divide and rule’.
- Phil Mead
Rude am I in my speech, And little blessed with the soft phrase of peace.” – Othello.