The Problems of Reciprocity

Sticking to its demands for “level playing fields” and reciprocity in its relations with China, the EU has entered a slippery slope. It may end up acting more like Beijing rather than persuading it to act more like the EU.

Tensions between Europe and China have been growing uncharacteristically hostile this year; in fact, they arguably haven’t been this dire since 1990, buoyed by a European populace whose unfavorable views of China are at a decade-long high.

This makes it worth asking what exactly Europeans want Beijing to do differently.

Liberals demand that it ends its crimes against humanity in Xinjiang province and restores Hong Kong’s political autonomy. Military hawks say European states must become more involved in security operations in Asia, especially in the South China Sea or Taiwan, to forestall Beijing’s increasingly belligerent tactics. Others are now more willing to speak of China in ideological terms, signaling a more fundamental gulf.

Level Playing Fields

As for most governments in Europe and the European Commission, a successful outcome would be if Beijing were to level the playing fields for European companies in the Chinese market. In May, EU foreign policy chief Josep Borrell wrote that “the watchwords for EU-China should be trust, transparency, and reciprocity.” Margrethe Vestager, the European competition commissioner, put it in simpler terms at a news conference in June: “We want reciprocity and a level playing field.”

“Reciprocity” has moved from cliché to dogma for the EU in recent years. Yet as with all dogmas, it risks drifting away from its original objectives if left unquestioned. In basic terms, Europeans want Beijing to provide equal opportunities for European businesses in the Chinese market. The OECD ranks China as one of the most restrictive markets in the world, especially its service sector, whereas the EU has one of the most open. Foreign firms are often prohibited from investing in certain sectors of the Chinese economy—real estate is the only sector where openness is comparable, the Berlin-based China think-tank MERICS noted in a 2018 study—while China’s state-run firms are provided with privileged access to funding and procurement by the communist authorities. Lacking transparency and corruption are additional problems, as are requirements that mean foreign firms often have to partner unfairly with Chinese ones.

Beijing has made significant strides toward market liberalization since the 1990s, but reforms stalled between 2008 and 2013. Ever since Xi Jinping became president that year, they have flip-flopped. Earlier this year, Beijing reformed its financial services industry by lifting equity caps for foreign investment and agreed to Geographical Indications with the EU in September. Yet, the state-sponsored industrial strategy “Made in China 2025” clearly sets out Beijing’s long-term dependence on state-run firms, while legislation like the National Intelligence Law, passed in 2017, requires even greater cooperation between private firms and the Beijing government.

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