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Germany’s deal with China: A blast from the past?

Authors: Ong Guan Da. Sasthaa GB

Region Head: Sasthaa Gingee Babu

Editor: Sakshi Sanganeria




Abstract

In this paper, the authors will be focusing on the relations between China and Germany- how it was before and how it is now. We will also show how the EU has responded to the relationship (past and present). The Germany-China Relationship

We need to talk about Germany. Let us start with an inconvenient truth: The German government, both past and present, has consistently prioritised trade with China over other enlightened German national interests, for example, democracy and human rights. Such commercially-driven engagement with China, however, is neither a value-free proposition nor quite as substantial as corporate propaganda suggests.

Germany’s Trade with China and how it affects the EU

Last year alone, Germany exported nearly €100 billion worth of goods to China- accounting for more than half of the value of all EU exports to the country. Germany bought even more from China than it exported there, making the country its biggest overall trading partner.

While the U.S. remains Germany’s biggest export market overall, China drives the country’s export growth. Even in the midst of the pandemic, China has remained a crucial pillar, with German exports returning to pre-crisis levels, while the U.S. has declined. It is self-evident that the EU will struggle to develop a more assertive policy on China without the backing of Germany- especially since Merkel is the main force in pushing for agreement between the EU and China.

Resistance by the EU

With the U.K., France. Italy and much of Eastern Europe and Scandinavia preparing to push Huawei out, Merkel — who has talked repeatedly about the need for a common EU position on 5G — will find it difficult to take Germany in another direction. New U.S. export controls that restrict Huawei’s access to advanced chips have raised additional questions about the company’s reliability as a 5G supplier and given further ammunition to Huawei’s opponents in the German parliament. This resistance isn’t anything new. It was also present during the budding stages of the Sino-German relations.


The relation in 1990s

As early as November 1991, when this was still very much controversial among its European partners, the German government organized a visit to China by its Minister for Trade and Industry, Jörgen Möllemann, accompanied by 30 business people. In 1992, it ruled out arms sales to Taiwan. In October 1993, Berlin published a paper outlining its new policy toward the Asia-Pacific. This policy focused on expanding economic relations with the region and substantially emphasized relations with China. The German government would aim for a stable, problem-free relationship with Beijing- which meant restarting high-level visits and reducing pressure on human rights.

A comparison can be drawn to France because France adopted a more stricter approach towards China, citing human right violation issues, and isolated China along with other European countries. The difference in economic pay-off between the two approaches was clear. German exports to China almost doubled between 1992 and 1994, whereas those of France grew by only 22 percent in the same period. Other EU states began to emulate Germany’s China-policy of avoiding offense to Beijing and focusing on economic cooperation instead. Reasons for Europe wanting a good relationship in 1990: Shared interests, global security and competitiveness

China should be engaged in dialogue and cooperation towards sustainable development and for the protection of the environment and global resources, scientific and technological development, the information society, demographic growth, poverty alleviation, the preservation of forests, addressing the problem of illegal immigration, and the control and eradication of disease, AIDS, drugs and crime China’s size and influence on world trade gives its economic policy global significance. It is in the world’s interest, as well as China’s, that the Chinese economy continues to grow and to open up, and that China takes its place as a major player in the world system of economic rules and policies. It is also essential to help China to participate fully in the rules-based system of the World Trade Organisation. In order for European industry to be globally competitive, we must be present on the world’s most dynamic markets. China was the Union’s fourth largest market and fourth largest supplier. China’s market would become the largest in the world in many high tech sectors, from telecommunications to aircraft and from computers to energy. An active role for EU business in China, where US and Japanese competition is already fierce, is essential. Current Situation

Angela Merkel, the current Chancellor of Germany always had “good” relations with China, even visiting the country an unprecedented 12 times during her Chancellorship. She was into developing business relationships in China to the point where during the 2-hour virtual summit, Merkel talked about Hong Kong, minorities, and human rights for a mere 10 seconds. The stoic chancellor was however, far more animated when talking about the improved chances to sell German wine and beer following the EU-China agreement on geographical indications, which then took up more time in her statement. Similarities can be drawn between the reasons for the relationship in the past and need for relations now. For example, they have a shared interest in eliminating COVID-19 as a global issue. China is the fastest growing economy and is the first ‘large country’ to recover from COVID-19 and have a positive growth rate. Therefore competitiveness of Germany and the European region as a whole depends on having good relations with the country. China’s response over the years

That expectation (about developing competitiveness through good relations) declined in 2017 when President Xi Jinping cemented his hold on power. Instead of reducing the government’s role in the corporate sphere, Xi strengthened their hand. Many companies have been forced to give the Communist Party an explicit role in corporate decision-making. A recent cybersecurity law that forces companies to grant Chinese authorities access to their networks fueled fears among foreign firms that they would be powerless to protect their trade secrets.

China’s aggressive change in dealing with foreign countries has resulted in many businesses being subjected to unfair Chinese competition- sending a signal to the EU that they are not as open to business as they were in the past. Based on a report by the Federation of Germany Industry (BDI), even though blue-chip industrial giants in Germany may have an easier time protecting themselves in China, they are still worried that China’s strategy will result in lasting damage

Impact on Sino-German relations due to recent developments

Now that the new president of the United States is Joe Biden and not Donald Trump, the direction of China-EU trade can go either way. The China-EU investment treaty is largely impacted by the phase 2 China-US trade deal as they cover similar issues like subsidies to state-owned enterprises. President Biden and his Democrats will have more common ground with Western mainstream values and political ideologies, resulting in the pressure on China to increase as they would be more united than in the past.

However, on the other hand, there could be positive changes in the fields of trade and economy. For example, with the Trump administration out of the picture, the EU countries would be more willing to cooperate with Chinese companies such as Huawei on the 5G network, and the China-EU cooperation in high-tech and infrastructure areas will be easier and smoother. Not only that, conservative forces in the EU who support Trump in taking China down will start to lose their power and the EU will be more united.

While Germany may be the largest voice in the EU when it comes to the investment treaty, it ultimately comes down to how the new Biden administration will deal with China and China’s policy towards foreign businesses.

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