EU-China summit: Advance on Market Economy Status, retreat on Economic Partnership

At the EU-China summit in Tianjin, José Manuel Barroso, Herman van Rompuy and Chinese Premier Wen Jiabao agreed

that a rich in substance EU-China investment agreement would promote and facilitate investment in both directions. Negotiations towards this agreement would include all issues of interest to either side, without prejudice to the final outcome. [Both sides] agreed to work towards the start of the negotiation as soon as possible.

One the one hand, this is an interesting development. In the past, bilateral investment agreements have allowed European enterprises additional security in their overseas investments, given that they could directly seek arbitration with an international tribunal.

One the other hand, opening new investment negotiations suggests that the 2007 Partnership and Cooperation Agreement (PCA) talks are all but dead. At the time, the EU wanted to update the 1985 agreement that governs Sino-European economic relations, and adapt the partnership to the changed trade patterns of the 21st century (increased trade in services, increased volume of foreign direct investment, questions of intellectual property, China's entry into the WTO in 2001 etc.). The 2010 EU-China summit still referred to the PCA, but this year it was not mentioned a single time. Are economic relations between the EU and China running smoothly if a comprehensive economic agreement is silently scrapped and replaced with the promise of a potential investment agreement? I don't think so. 

Another import point at the summit was Market Economy Status (MES) for China. Despite China's WTO membership since 2001 (analysis: here), the EU has long withheld MES for China and used it as a bargaining chip. Now, it appears that Van Rompuy and Barroso are ready to scrap their opposition if China steps up its help in the Eurozone crisis in return. Granting MES to China would inter alia strengthen Chinese enterprises in anti-dumping cases. The ALDE group is particularly unhappy to see the EU's bargaining chip vanish, but it would soon disappear anyway, given that under China's WTO accession agreement, the EU agreed to grant MES automatically in 2016 (even though this is contested).

Overall, I do not have the impression that this summit was a great advance in EU-China relations. But then, good relations across different cultures are not created overnight. Instead, many small initiatives such as dialogues in climate change, energy, urbanization etc. continue to bring the two partners closer together. In the long run, I would hope that the EU and China, two of the biggest trading blocks in the world, can use the summits to give their voice to global trade and global sustainable development. But in the short run, I believe that bilateral cooperation will continue to take place on the micro-level.

Youth urge leaders at Durban conference: GET IT DONE!

As the Durban climate conference is going into its last negotiations (follow them at the tag #COP17 on Twitter or via Google News), young people have been given the floor to speak on behalf of global youths, representing half of the world's population.

Global Youth's message to Durban is perfectly clear: Failing in climate negotiations is the "most stark betrayal" that a generation can commit against following generations. And its message is perfectly simple: GET IT DONE!

Durban summit: Is China becoming a climate leader?

Three more days of climate negotiations in Durban and the EU's hopes for a binding agreement are vanishing into the distance. Climate commissioner Connie Hedegaard already told the European Parliament in November that she did not insist on a binding agreement but was prepared to make concessions, if other countries agreed to a binding commitment from 2020 and a clear roadmap until then.

After no ratification of Kyoto and no progress in Copenhagen and Cancún, I am by now downright resentful of the United States that shot down the Green Climate Fund upon arrival in Durban and that now prefers to nag China before committing itself to any binding accord. I have laid out before my view that emission reduction cannot wait and that developed countries should lower their emissions irrespective of what developing countries do.

Now, the US has waited for so long that it seems China might not only outgrow its economy but also become a leader in emission reductions. On Monday, China stunned the world by announcing that it supported a binding agreement by 2020 (albeit in return for five conditions such as common but differentiated responsibilities and a continuation of developed country subsidies for developing countries).

The Chinese volte-face leaves the US and India in a cold shower, and it makes the US and Canada as developed economies look particularly isolated. As it currently stands, the US refuses a binding agreement, at this point as well as for the year 2020. It pledges to reduce emissions by 17% until 2020 given 2005 levels while China says it "achieved a 20 percent reduction in carbon emissions between 2005 and 2010 per unit of gross domestic product and planned to cut another 17 percent by 2015" (given that GDP is still growing at around 8%/year, absolute figures continue to be on the rise).

Even though Chinese emissions are still rising in the short term, signs are multiplying that citizens are becoming increasingly unwilling to put up with air and water pollution. Millions of Chinese citizens protested online yesterday after several days of severe pollution in Beijing that caused the cancellation of hundreds of flights across China. The government heavily subsidizes the installation of solar panels on rooftops in parts of the country and China recently became the world's biggest investor in renewable energy.

These developments indicate that something is changing in China. With capacity-building and technology from the EU, China is moving onto the path of sustainable environmental development. It might be on the way to becoming a climate leader within in the next decade. The US, meanwhile, continues to pretend that life will always go on as it has before. It thereby not only endangers its own citizens but also citizens of the rest of the world.

One year, little change. Happy Birthday Europe

Happy Birthday Europe. It's a sour birthday. There isn't really much to celebrate on Europe Day. The EU hasn't moved an inch closer to becoming a force to be reckoned with in the world, despite the establishment of the EEAS and the continuous decline of the US as a superpower.

The democratic uprisings in the MENA region left Europe, including Turkey, divided, driven, uninspired, even uninterested. While France pushed for a swift European response in Libya, Germany successfully embarrassed itself in front of the UN Security Council. They later subduedly committed more Awacs to Afghanistan to make up for it. In the end, the US took the baton from the squabbling Europeans and did the lion share of the job themselves. Even as the MENA uprisings touch home in form of North African migrants, the EU finds itself unable to pursue a common migration strategy. It prefers compromising the Schengen system and letting member states have it their own way.

Talking about the US, did anybody say the US would drop in European esteem after the release of thousands of diplomatic cables last year? It appears the EU doesn't even know how many European bank account details the US accesses on a daily basis, a right the European institutions willingly granted them. And European politicians were fastest to congratulate Barack Obama for the killing of Osama bin Laden, but when people started criticizing their attitude, they quickly highlighted that they lacked reliable information about how Osama really died.

No, the EU has definitely not become a stronger voice in the world. Even in the area where we have been most progressive so far, green energy, the EU allows itself to be surpassed. Despite all studies calling for a 30% emission reduction target by 2020, the EU prefers business-as-usual. China and Indonesia are showing the way to clean energy in an impressive manner. Yet, on a more positive note it seems that Spain and Germany have understood the importance of renewable energy and are committing more investment to the sector. 

While many things in external policy are far from perfect, there are also successes. The bright light in the obscure forest is Humanitarian Aid Commissioner Kristalina Georgieva, who has established the EU as a powerful donor of humanitarian aid in Haiti, Ivory Coast and Libya.

With regard to internal EU affairs, the picture looks a little brighter as well. The Belgian and Hungarian presidencies have been running ambitious agendas with a focus on sustainable development, Trans-European Networks and a stable European economy. It is to be hoped that the Polish presidency will follow in this line.

Yet, as we are heading into the new year, Euroscepticism is on the rise in Finland and France among others, European democracy hasn't improved much (where is the ECI?) and we are no step closer to a single-seat parliament than a year ago. Europe is entering into a year with a lot of things on the agenda. I hope it will be less disappointing than the last year has been.

Happy Birthday Europe, and a good start into the new year. You will need it

Ambitious Five-Year Plan stops growth obsession

China’s 12th Five-Year Plan has received a lot of positive feedback from commentators in China and in the West. One of its main objectives is to reduce growth rates and to create more income equality. This is definitely needed, as growth remains limited to export-oriented business, inflation eats away most of people’s savings and high personal income tax does the rest.

Now the government vowed to wage a war on inflation, which is officially at 4.9% but probably much higher. One of the core instruments to reduce the income gap is a government investment program set to build 10 million affordable homes this year and 36 million units over the period between 2011 and 2015. This and other measures, the government hopes, will allow citizens to keep more of their salary in their pocket. In my view, it is a good idea because next to bringing social peace, it empowers the citizens and allows for more entrepreneurial ideas in the economy (China being a country in which the entrepreneurial spirit is quite well-developed despite its education system). Higher income also provides citizens with more political power in terms of what you may call “voting with your wallet”. In addition, it may well increase the legitimacy of the government, in which people are said to have little trust.

With regard to the environment, the Chinese objectives are remarkably ambitious. Renewable energies will be raised to 11.4% of China's energy consumption by 2015 and 15% by 2020, energy intensity is to be cut by 16% and carbon intensity by 17%. Officially, EU Climate Commissioner Hedegaard is highly delighted about the good news from China. In reality, the EU has to be very careful that China doesn’t overtake it in environmental policy. While the EU is talking about a smart energy grid, China is already implementing it.

However, problems are still apparent. Five-Year Plans passed by the national parliament (NPC) have generally been quite far-sighted; problems appear when it comes to implementing these policies in the provinces, and they concern environmental measures in particular. Many provinces do everything they can to enhance economic growth at the detriment of the environment. For the coming 2011-15 period, the government has lowered overall growth to 7% but 25 provincial regions out of 31 in the Chinese mainland set double digit growth rates. What the focus on economic growth can mean in practice has been highlighted by the film "The Warrior of Qiugang", that tells the story of a villager's fight against a polluting company next door (watch it here). Fearful of losing an investor, the authorities long refused to act in favor of the population. We can only hope that implementation will become better as the standard of living rises and corruption in public administration declines.

But overall it looks as though China wanted to move away from growth and GDP as indicators of progress and turn towards social, environmental and technological aspects. It apparently elaborates a new set of benchmarks including a kind of happiness index. Much remains to be done, as sources indicate that up to 94% feel unhappy given the unequal distribution of income. But if the objectives of the Five-Year Plan can be implemented on a regional and local level all over China, the country is on the best way to become a fully developed country.


To get a better picture of the Chinese economy, you may want to read this excellent report by HSBC.
Update 20/04/2011: Steward Fleming has a more pessimistic take on the Five-Year Plan, saying that "bureaucrats, operating in China's quasi-market system, are proving unequal to the task of slowing growth, curbing inflation, and managing the exchange rate of the yuan".

MountEUlympus back in action

I've come home from China and will start blogging again. It's pretty exciting to come back just now, with the EU busy about the Hungarian Media Law, the Hungarian presidency, democracy in Italy and saving the Euro. Taken as a whole, 2010 has certainly been one of the EU's most challenging years since 1957.

The new year is always the time for new plans and new beginnings, so I will try to do some new things as well. First of all I'm honored to join the bloggingportal.eu editors. Hope that I can do some good things as an editor. To that effect, you can also add me on Twitter now. Secondly, I will give a new focus to my blogging. Sure, I'm still writing about institutional affairs and current EU events. But I want to pursue a few topical issues as well.

The most important one is China. We don't know anything about this new world power. And the way it is, we are headed into a clash of cultures between "the West" and China. In my blogging, I will take up issues that China talks about and take up EU-China questions, trying to avoid the conventional bias of our media. The question is, how can "the West" and China be reconciled? How can the faultlines be mended? Where does assimilation take place, in China or in "the West"? Obviously, talking about "the West" will not be limited to the EU but essentially incorporate the US as well...

The second aspect is the global economy. This will be a learning-by-doing experience, as my knowledge about international trade flow and finance only stems from a bachelor's degree. Together with the global economy, I also want to explore questions of sustainable development in the world.

The final aspect is event journalism. I will move into the Brussels bubble in a bit and try to cover some European Councils, press conferences and what else seems of interest to me and to you. Depending on the opportunities I get, I'm also going to play with my video camera and try to interview some of the people that keep the wheels spinning in Brussels.

At any rate, this is an exciting time to recommence blogging. After the #EUCO tweet wall event, I expect that we'll have to negotiate how blogging and bloggers can be incorporated into EU policy-shaping in the future.

Glad to start this new year together with you. I'm looking forward to a lot of fruitful interaction and debates.


P.S. if you're too busy to check this website for updates, how about copying its RSS feed into your feed reader?

France and Germany are again playing old power game in climate change

The refusal of France and Germany to back Climate Commissioner Connie Hedegaard's proposal of curbing emissions by 30% until 2020 stems from a backward logic and is detrimental to the EU's soft power. "The European Union is ready to adopt the 30 percent figure if other major economies make comparable undertakings," French industry minister Christian Estrosi is quoted by EUObserver after a joint press conference with German economy minister Rainer Brüderle.

Estrosi and Brüderle want to play the old power game that led to the failure of Copenhagen: "We don't budge if you don't budge." Yet, it was apparent already at Copenhagen and also after Copenhagen that China was really not impressed by the EU's power play, to put it politely. The EU lost its multilateral negotiation power in Copenhagen and playing power games now does not get it back. Those of you who are familiar with game theory will understand that after a look at the rudimentary game tree below:



It is clear from the game tree that China wins if it chooses not to regulate its emissions, regardless of what the rest of the world does. It is also clear that "(m)ost of China's policy initiatives that affect climate change have come about without any direct reference to international frameworks, but have been driven by domestic policy needs" (Freeman and Holslag). Meaning that power games are rather useless.

There is only one thing that China wants and doesn't have. Technology. European comparative advantage is in technology. And if Freeman and Holslag are right that "the EU considers the combat against climate change . . . as a source of soft power", policy-makers are well-advised to start leading by example. The North-Sea Grid and the Desertec Initiative (which btw also extends to China, the US and Australia), for example, have not been paralleled by comparable projects initiated in the States or China, and progress in these projects can lead to more soft power for the EU.

Leading by example means leading by successful implementation of ambitious programmes at home. An ambitious target of 30% emission reduction entails a lot of research into best practices, consumption habits, carbon capture and storage, market mechanisms in environmental protection and other fields. An ambitious target is therefore a significant factor contributing to development of technology and thereby soft power.

Let alone that refusing an additional 10 base point emission cut where it is technically possible is not a particular sign of respect toward the population. It is true that developing countries face a trade-off between economic development and environmental protection (i.e. one declines as the other grows), but developed countries with a high degree of technology are less subjected to this trade-off and can prioritize economic development AND environmental protection.

And it is not a sign of particularly intelligent government communication that Chancellor Merkel is currently wandering through the eco-city "Masdar City" learning all about intelligent sustainable development while her economy minister rejects a stronger engagement of the EU in favor of old power games.

All in all, this makes me feel like we are far away from using the resources we have, and far away from making sustainable development a source of soft power.

French and Italian Environmentalists oppose high-speed railway lines

As a part of the Trans-European Networks policy of the EU, the Commission is creating channels of transport and telecommunications along the main axes of the European continent (see map). 30 projects on the rail, on the road, in the water and in the air have been launched to give more mobility, better and more sustainable transport infrastructure and to create cross-border connections.

Source: European Commission

On Saturday, environmental activists and various political representatives marched through Suse in Piemonte, Italy and Hendaye, France in protest against the high-speed lines. In particular, they demonstrated against two lines currently under construction between Bordeaux and Madrid, and Lyon and Turin. Members of French Greens and members of the Italian Democratic Party (PD) and the Greens joined them in their protest.

In France, they signed a charter that is supposed to finds its way the the Commission and the European Parliament, calling for a stop of construction and a revision of the Trans-European Network policy. Next to endangering the environment, the demostrators criticize that the new railway lines will merely pass through the region without including small cities along the way. The French Greens in the region of Acquitaine (South-West) obviously use the situation to gain points for the upcoming regional election, while critical voices believe that they might soften their position in case a coalition with the Socialists should become possible.

In Italy, the millionaire and political blogger Beppe Grillo is one of the main figures in the "No TAV"-movement. To me, the movement appears a little polemic and the ten reasons for opposing the track ("Dieci grandi bugie" - Ten big errors) are more polarizing than explanatory. However, popular opposition to the track seems large and the Greens as well as some leftist parties support the No TAV -movement as well. Apparently there are some chances that the Italian movement will be heard by politics.

In my view, however, it would be wrong to reopen the debate about Trans-European Networks now. The decision to connect the biggest cities of the continent along the major axes via railway tracks is a good one. In the long run, transnational trains have to become as affordable and as fast as a plane to make European travel more sustainable. Until now, high-speed train lines can only compete with domestic flights. As soon as a the plane leaves the country, trains are no longer a serious competitor. When I was stuck on Milan Airport last December, some travellers decided to take a train back to Düsseldorf. It took them twelve hours and they paid more than 150 EUR (as opposed to 90 EUR for a round trip on the plane). There has to be a greater investment in the train network to make it a true alternative to the airplane.

Revoking the Trans-European Network policy now would be a step in the wrong direction.


This radio show by EURadioNantes inspired me to write the post:


Entry crossposted on Th!nk about it

North Sea grid: A test case for European leadership

With the new power grid that nine European countries are planning to install in the North Sea, the EU can easily increase the share of renewable energy to 30% by 2020, Justin Wilkes, policy director of the European Wind Energy Association (EWEA), told Deutsche Welle. It can only be hoped that the EU will indeed raise its commitments and start to be a veritable leader in the development of stable renewable energy sources.

Unlike the Desertec projects in the MENA countries and in Southeast Asia, the project headed by the Commission can produce results within ten years. Its success or failure will be an important milestone for the other two projects. It will show whether the ambitious projects can work or not. The essential questions for success or failure in the North Sea are:

• will the participating countries fully cooperate, invest their resources and clear out legal obstacles? Or will fearful national politicians maintain a backdoor? (in which case everybody loses according to the prisoners' dilemma)
• will the participating enterprises and credit agencies make a long-term commitment that can endure setbacks?
• will citizens be prepared to give attention and donations to the project so that it can become a space for personal investment and personal identification?
• will the media continue to report about the issue, so that the climate change discussion can maintain the momentum it has at the moment?
  

If the European aspiration is to be the leader in renewable energy in the world, this project must not fail. Since Copenhagen, the international negotiations are even less of a common effort and even more of a national power game. The Chinese lion has woken and will claim a greater say in global politics. After the soft power approach has failed in Copenhagen, the EU can win back its influence through enormous, astonishing success in its own front yard. The North Sea grid will be a test case: Can European countries unite for the greater good, or will we have another lose-lose situation as in Copenhagen?


Cross-posted on Th!nk about it

German elections - what a disappointment for the young generation!

The election campaign in Germany is over. Three months of luke-warm campaigning between the two outgoing parties of the grand coalition have come to a close. Throughout the campaign, it became evident that a great share of citizens would support Christian-Democrat Chancellor Angela Merkel, whose campaign had little content and was based on her mere personallity. But she was perceived as an honest broker during the financial and economic crisis and people seemed to trust her and wanted her to go on. The CDU got a share of 34% and will be the strongest group in the new parliament, going into an alliance with the liberal FDP. Why so many citizens (almost 15%) voted for the FDP which advocates just those measures which led to the crisis will forever stay a miracle to me.

What really angers me with the election results is not the fact that the Social Democrats had to take their leave. It's also not the fact that the grand coalition is over. What really angers me is the fact that a number of dog-owners and Sunday strollers with two children and a BMW family limousine on their drive just impeded the future of many prospective university students from low-income family. The new government will improve conditions for those who already have money, and make life harder for those who don't.

And what angers me most is the fact that the SPD and the Greens would have given a sensible contribution to the Copenhagen climate change conference. The CDU and FDP parties said that they would definitely continue nuclear power and reverse the exit strategy conceived by the 2002 red-green coalition. The progressive law subsidizing renewable energy sources on public roofs and sustainable heating systems for private citizens were also a product of the red-green coalition and leading into the right direction.

When I scroll through my Facebook newsfeed, I get disappointed remarks from almost all young people that I know. The CDU/FDP government will drive those brainy students out of the country who were already doubting if they could afford the study fees. On the other hand, I'm pretty sure that, if I went into an average rural German city pub, you'd find a lot of very happy people today. They just got the confirmation that they won't have to change their consumption habits for another four years.

Of course, they won't pay the bill in 30 years time. It will be today's young people who will pay the bill. This election victory for the CDU/FDP came at the expense of the future generations of the country.