Merkel was the Crucial factor behind EU-China investment deal

By Duncan Bartlett for China Plus

I believe that Germany’s Chancellor, Angela Merkel, is the world’s most impressive diplomat.

She remains calm under pressure and tackles complex problems with patience and determination.

She has maintained Germany’s political stability for 15 years. During that lengthy leadership, she has avoided scandal and helped to heal the rift between the east and west of her country, which was torn apart by war.

She has also endeavoured to nurture a peaceful relationship between Germany and the rest of the world, including former enemies, not through force, but by trade. Under her leadership, Germany thrives as Europe’s strongest economy and its number one exporter.

Chancellor Merkel takes a pragmatic approach towards international relations. She has been consistently supportive of business and encouraged international trade, especially with China – a crucial destination for German goods.

Indeed, there is a close link between the growth of the Chinese economy and the success of German multinationals. Business leaders in Germany have encouraged their politicians to avoid ideological clashes with the Chinese, preferring to find common ground in the field of commerce.

Given this track record, I was not surprised that Ms Merkel was determined to finalise an investment agreement between China and the European Union while Germany held the presidency of the European Council.

Reaching the multi-billion dollar deal on December 30th, 2020 – after more than seven years of negotiations – showed a great deal of patience.

A few weeks ago, it seemed it would be almost impossible for the EU side to achieve a consensus. Belgium, the Netherlands and France had all voiced objections.

At the same time, Ms Merkel was dealing with a major domestic health crisis. German citizens are under a strict lockdown to prevent the spread of coronavirus, while its health service starts a mass vaccination programme.

There was also another international problem facing Ms Merkel: Brexit. The British prime minister, Boris Johnson, warned of a “no deal” break with Europe at the start of 2021, a situation which Ms Mekel feared would bring considerable economic pain to both sides.

She therefore smoothed things out between Mr Johnson and the European Commission, who managed to get a Brexit deal signed on December 24th, six days before the agreement with China was reached on December 30th.

Mrs Merkel had hoped the deal with China would be completed in September 2020, when she had invited President Xi Jinping to Leipzig for an EU-China summit.

That event was cancelled due to the coronavirus pandemic. Since then, Ms Merkel has held regular video conferences with Mr Xi and the European

Commission President, Ursula von der Leyen, who is a former German defence minister.

Announcing the deal with China, Ms Von der Leyen wrote on Twitter: “The EU has the largest single market in the world. We are open for business, but we are attached to reciprocity, level playing field and values.”

The trade term “level playing field” is used to describe rules that are designed to prevent unfair competition.

The big compromise on China’s part appears to be a relaxation of the rules on joint ventures, which oblige European firms to seek Chinese business partners. The investment agreement should make life easier for European business in China across a range of sectors, from financial services, manufacturing, real estate, construction, air and shipping services.

This marks a precious opportunity for global expansion at a time of turmoil. Life in China is more or less back to normal following the Covid-19 outbreak and its economy is predicted to grow strongly in 2021.

For the Chinese, the deal paves the way to investment in a range of European sectors, including permission to buy majority stakes in EU businesses. The Chinese are likely to find companies involved in technology and energy generation especially attractive. For example, China may well invest more in European nuclear power plants, using its technological expertise, which it claims to be the most advanced in the world in this area.

There are some significant unresolved issues. It has not yet been decided how disputes between the EU and China will be settled, should they arise. That is a matter which will have to be dealt with in a separate set of negotiations.

The deal reached in late December will also not be finalised until 2022, when France will hold the rotating presidency of the European Council.

That delay creates a diplomatic challenge for President Xi Jinping and the Chinese Vice Premier, Liu He. The French, including President Emmanuel Macron and his trade minister Franck Riester generally take a more hawkish approach towards China than the Germans.

The French were also reluctant to offer Britain a diplomatic way out of the Brexit debacle, which could have remained a major international problem for many years, without Ms Merkel’s help.

So as the new year begins, I am relieved that the German Chancellor has helped lead Europe through two difficult sets of negotiations, leading to outcomes that are largely satisfactory to all sides.

(Note: Duncan Bartlett is the Editor of Asian Affairs Magazine and a Research Associate at the SOAS China Institute, University of London. The views expressed are the author’s own.)

Related Posts