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  1. Home
  2. / Investing
  3. / Global Equity

European Union Urged to Vote Down China Trade Deal

Hong Kong activists want Europe's parliament to vote down a trade deal rushed through before Biden took office.
By ALEX FREW MCMILLAN
Mar 12, 2021 | 07:52 AM EST

The first virtual summit of the Quad nations that champion democracy in Asia is taking place today. The e-summit is also the first participation of President Joe Biden in the Quad, which brings together the leaders of the United States, Japan, India and Australia.

Biden will have plenty to discuss in terms of virus response and economic cooperation with Japanese Prime Minister Yoshihide Suga, Indian Prime Minister Narendra Modi, and Aussie PM Scott Morrison. And then there's China. Yes, they'll have to chat about that.

It's an important meeting, symbolically, and the start of what we can only hope is a prosperous diplomatic partnership. Biden has pledged to tackle China's aggressive expansionism through diplomatic circles, but this is a tricky task when there's so much Chinese yuan to be made.

The Quad summit comes immediately before the first international trip for new U.S. Secretary of State Antony Blinken. He will travel to Tokyo and the South Korean capital, Seoul, next week. Then he will stop off in Anchorage to meet with his Chinese counterpart, Wang Yi, the first face-to-face talks between two superpowers who are still exploring the nature of their interaction under Biden's leadership. The White House issued a statement that it wanted this first meeting with China to occur on U.S. soil, and after the United States conferred with Japan and South Korea, important allies that have occasionally testy relations with China.

There's an excellent demonstration of how hard it is to deal with China diplomatically while engaging with it commercially in the form of the European Union's current interaction with China.

Hong Kong democracy activists on Thursday urged the European Union not to ratify its trade deal with China. The trade pact was rushed through by both China and the Europeans immediately prior to the inauguration of President Biden, so the Biden administration couldn't object, and while Biden's predecessor was obsessing over overthrowing valid election results.

Now 24 activists, 13 of them living in exile, have written to the members of the European parliament and the president of the European Commission, Ursula von der Leyen. The activists are requesting them to block the European Union from signing the treaty until China repeals its detested National Security Law in Hong Kong, releases all political prisoners, and removes its newly written "improvements" over how political candidates for office are picked in Hong Kong.

The 2,896 members of Beijing's parliament, the National People's Congress, on Thursday voted unanimously, bar one abstention, to approve a resolution on new rules for elections in Hong Kong. A Beijing official in its office of Hong Kong affairs on Friday called the changes "minimally invasive surgery," but they kill whatever semblance of democracy was left in Hong Kong.

The changes pretend to increase representation. The number of members of an election committee will rise from 1,200 to 1,500. But the changes concentrate power absolutely in the hands of pro-Beijing appointees. This hand-picked election committee will vet and nominate all candidates for the city's leader, the Chief Executive, and its Congress, the Legislative Council, which will increase from 70 seats to 90. Committee members have been told to select only "patriots," a vague term that has not been defined but loosely means "people who the Chinese Communist Party likes."

Those rules were written in Beijing, like the National Security Law, without the input of any Hong Kongers at all, and forced on the city. The rules also violate the Sino-British Joint Declaration, agreed when the British handed over Hong Kong to China. The declaration promised that Hong Kong would enjoy a "large degree of autonomy," and would progress toward democracy. It even stated Hong Kongers would electing the city's leader, the Chief Executive, by popular vote by 2007.

That didn't happen. It's very clear that China abides by international treaties only when the outcome suits it. The Hong Kong dissidents are entirely accurate in insisting that you can't believe a single deal that China agrees.

"It is simply absurd for the E.U. to expect China to uphold its obligations under a new bilateral investment treaty, when it is openly floating its current obligations to the international community to guarantee the autonomy and freedoms of the people of Hong Kong," the 24 activists tell von der Leyen and the European parliament.

The Members of European Parliament - the E.U. Congress - must ratify the trade deal. It was hastily given the digital handshake between Brussels and Beijing on December 30. Greater access to Chinese markets overrode concerns about China's human-rights record. The Biden administration indicated its unhappiness over the agreement, and there's a sizeable bloc of MEPs who don't like it, either. It may not get approved.

German Chancellor Angela Merkel was the key driver of the deal, keen to increase opportunity for German carmakers, many of which already have joint ventures in China. European banks would also benefit from greater access to China. The deal would ease requirements that foreign companies form j.v.s and share technology with their partners, who quite honestly in China have a great track record of stealing that information and setting up their own production on the side.

China for the first time replaced the United States as the largest trade partner for the European Union in 2020. Merkel was joined by von der Leyen, Chinese President Xi Jinping and French President Emmanuel Macron in announcing the deal.

Xi in December authorized Chinese negotiators to make enough concessions to get the deal pushed through before Biden took office. Besides the concerns of MEPs over civil rights in Hong Kong and the ethnic genocide being perpetrated in Xinjiang Province, some European politicians, particularly from France, are unhappy that the deal mainly seems designed to benefit German multinationals.

Merkel quite frankly couldn't stand Biden's predecessor, Donald Trump. Trump's insistence on going it alone internationally - and frequently criticizing countries like Germany for not paying enough into NATO - led politicians such as the German chancellor and, eventually, Macron to decide the European Union couldn't rely on U.S. leadership in international diplomacy.

Biden will be working hard to turn that around. He has pledged to review the heightened tariffs on Chinese goods shipped into the United States - China has made it clear it is desperate to see those lifted - but has also promised to organize an international coalition to corral China's aggressive excesses and expansionism, particularly in Asia.

While Chinese officials have "suggested" in recent days that the United States should make nice and lift its tariffs, they have not offered anything at all in return. Instead, they have repeated their insistence that Xinjiang, Hong Kong and even Taiwan are "internal" matters that only China can decide. It has drawn several of its famous imaginary "red lines" around those places. Hands off.

The Hong Kong activists say the European Union must "set clear red lines" when it comes to China's "flagrant violation of international treaties, appalling human rights record, and increased aggression toward its neighbors including Taiwan, "failing which" the Chinese Communist Party will know that it can continue abusing its power unchecked."

The red-line comment is a nice riposte. It mimics the tit-for-tat sanctions China has imposed on U.S. politicians after its own officials were sanctioned for human-rights violations, and the expulsion of foreign journalists from China after the United States limited the number of U.S.-based Chinese journalists writing propaganda for state-run publications.

The Hong Kong activists note that the E.U. deal would set a bad example that only encourages China to get more aggressive over Taiwan, an independent country in practical terms that China insists is a reengage province.

Ted Hui, a former Hong Kong congressman who was forced into exile and is now wanted by the Hong Kong police, says E.U. politicians must "search their conscience," and ask whether this trade deal encourages China to believe its oppression and civil-rights violations can go unpunished.

"Rather than encouraging China to make new commitments under an investment treaty that its leaders will never honor, Europe should focus on ensuring that Beijing recommits to upholding its international obligations to Hong Kong, starting with the repeal of the National Security Law, the release of all pro-democracy activists, and the restoration of our electoral system," Hui, now in exile in Australia, says in the letter.

Ray Wong, a Hong Kong activist who has been granted political asylum in Germany, says pacts with China aren't worth the digital paper they're printed on. He also notes that China is bullying Australia by waging a silent trade war - in November unofficially banning at least seven categories of Australian imports into China - after it requested an independent inquiry into the origins of the coronavirus, passed laws to prevent Chinese interference in local politics, and demanded improvements in China's human-rights record.

"In Hong Kong, we have experienced first-hand that the CCP is not willing to keep its word," Wong says. "While the Australians are being punished with tariffs for taking a stand for democracy, the EU is ploughing ahead with CAI. The deal will weaken the bloc's ability to take a principled stand in solidarity with Hong Kong's people, and Uyghurs facing oppression."

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At the time of publication, Alex Frew McMillan had no position in the securities mentioned.

TAGS: Investing | Markets | Politics | Trading | China | India | Australia | Europe | Japan | Global Equity

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