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Observatory on The European Union: How will the Covid-19 pandemic affect the EU-China relations? Challenges and Perspectives

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The COVID-19 outbreak and its dramatic impact is affecting the relations between China and the European Union. Could this mark a turning point in their relationship? Alicia García Herrero, Senior Research Fellow at European think-tank Bruegel, and Mario Esteban, Senior Analyst in Elcano Royal Institute, analyzed this complicated relationship in a webinar hosted this week by the Transatlantic Relations Initiative of IE School of Global and Public Affairs and the Observatory of the European Union.

The discussion, followed by a dynamic virtual Q&A with the public, focused on the current state and the future of the relations from the point of view of trade, investment, economics, but also from the perspective of digital, transparency, geopolitics. It was moderated by Salvador Llaudes, expert on EU Affairs, co-Chair of the Observatory on the European Union, and Adjunct Professor on EU integration at IE University.

Salvador Llaudes TRI from IE Communications on Vimeo.

Alicia García, who is also the Chief Economist for Asia Pacific at Natixis and currently Adjunct Professor at the Hong Kong University of Science and Technology, as well as member of the advisory board of Elcano Royal Institute, highlighted that the economic situation is so dramatic, that although Asia won´t be so hard hit by the crisis as Europe or the US, “we are expecting a recession in Asia that we hadn´t seen since 1997”.

In light of this, García added that “China is doing a lot of things that we don´t know about” and “surely not in the interest of the rest of the world”. In other parts of Asia, data is poor but shows that the recovery should be faster if there is no 2nd or 3rd wave, if Europe and the US start recovering in the 3rd quarter and if there is no wave of defaults in the world. “Only under these circumstances”, she remarked.

One of the main topics discussed during the webinar was the role of multilateralism and globalization in Europe and China, especially because 2020 was supposed to be the year where bilateral relations between the two actors were to be strengthened, with the signing by the end of the year of the Comprehensive Agreement on Investment (CAI).

According to García, there is no reason to sign this agreement in 2020, since none of the European conditions are fulfilled. “Why were we not able to finalize the Brexit negotiations this year and we can rush to sign the CAI with China?”, she asked. “I don´t see anything on China´s table. We could accept the BIT but in exchange for what?”

Alicia Garcia TRI from IE Communications on Vimeo.

Also Mario Esteban, Senior Analyst on the Asia-Pacific region at the Elcano Royal Institute and Assistant Professor at Centre for East Asian Studies of the Autonomous University of Madrid, thinks there shouldn´t be a rush to sign because the agreement must reflect the European interests.

Garcia, who lives in Hong Kong, emphasized that China is the largest beneficiary of multilateralism but pointed out that in this country there is an “asymmetrical multilateralism” from the beginning. “China uses it for its own benefit and doesn’t give anything in return. Should we blame China? No, because we offered those tools to China. China just used them very cleverly.”

“China has not opened up to the world the way the world has opened up to China”, she continued. “There was not a reciprocity deal. We accepted, we created this and didn´t mind it because China´s market was too big, because it was cheaper to produce there, etc. But now, we mind it. That’s the big change.”

According to Esteban, the best framework for Europe to defend its interests is multilateralism, something that China has understood as “an instrument to handle its international relations and create a multipolar system”. Europe should avoid falling into this polarized world and invigorate multilateralism, he recommended.

He also called for Europe to become a relevant partner in the middle of the growing friction between the US and China because this fight has “a spill-over effect on Europe” and the continent cannot afford not to be a relevant actor. “A good question for us is whether we want to be a battlefield in this fight or whether we want to be part of the conversation”.

Regarding the perception and image of China, Mario Esteban considered that it is still early to draw conclusions because we are witnessing some contradictory trends. As he explained, opinion polls conducted in Spain, for example, reflect on the one hand, the increased perception of China as a threat. At the same time, the country is seen as one of the most important partners in order to overcome the pandemic because of its solidarity and its position as the main supplier of medical equipment and aid.

Esteban ended by showing his concern about the rise of extreme views and hyper-nationalism in China and Europe, something that, in his opinion, is hijacking the relation. “The simplistic and aggressive use of the conversation can affect EU-China relations”, he warned.

Transatlantic Relations Initiative – Mario Esteban about EU-China relations from IE Communications on Vimeo.