Europe will regret signing the Investment Agreement with Beijing

As the madness of the Trump years unfolded, it was inevitable that Europe would seek to reduce its reliance on Washington, particularly by seeking closer ties with China. But the incoming Investment Agreement with Beijing is nevertheless a mistake.

           This agreement is currently being rushed into ratification by Angela Merkel and Xi Jinping, apparently in a bid to have it on the books before Joe Biden takes office in the US, when it is expected Washington will be trying to intervene more forcefully to slow things down. And for its defenders in Europe, the deal is a triumph on the terms of trade between Europe and China, and on market access and forced technology transfers particularly for European players. This deal does not go all the way towards levelling the playing field between European and Chinese firms, but it is a genuine improvement on where things stand at the moment.

           But there are many other considerations at play here, and the deal cannot and should not be viewed solely through the lens of the short-term interests of a handful of European transnational corporations with operations in China. Its political significance cannot be overstated, and should not be brushed under the carpet.

           The fundamental issue is that closer economic integration with China will make Europe more dependent on the political whims of Beijing. And we should already have a good understanding of just how bad a place to be that is. The current government in Beijing, under President for life, Xi Jinping, is a revanchist Han nationalist regime with a fetish for strong-arming everyone else into submission. We have seen this in the annexation of Hong Kong this year. And in the increasingly obnoxious territorial claims in the South China Sea. And in the increasingly alarming rhetoric directed towards Taiwan. And the ongoing efforts to punish Australia for the latter’s continued alignment with the US. And, above all, in the ongoing brutality of the genocide against the Uyghur minority in the Western province in Xinjiang whom Beijing accuses of “secesionism”.

           The advocates of this Agreement in Europe point to the concessions they have gained from China on commitments to labour rights and increased transparency on human rights issues. Critics correctly point out that those commitments are not practically enforceable by any aspect of the Agreement, and that while Beijing is promising that there will be no labour rights violations, it continues to vehemently deny the ongoing issues with slave labour we have been able to see with our own eyes. So any reasonable observer can expect that Beijing will continue to do exactly as it pleases with its citizens, and simply deny any violation of any of their promises in any treaty with foreign powers. The only question is what will the other power do in response. And so far, the only thing Europe can be trusted to do is to try and sign even more agreements.

           In short, Europe will meet the terms it has signed for under this Agreement, as per our tradition of rule of law, and Beijing will conversely try to cheat their way out of any and all provisions it can, as per the recent tradition of Xi Jinping for naked power politics. But Xi nevertheless walks away from this deal with the diplomatic and prestige win. And, rewarded despite his absolutely scandalous behaviour in Xinjiang, Hong Kong and the South China Sea, further emboldened towards aggressive and forceful actions against internal dissent and non-aligned neighbours. Xi has learnt from history that fortune favours the bold. And our European leaders have failed to learn from history that appeasing certain kinds of leaders only encourages their worst instincts and inevitably leads to even worse outcomes in the longer term.