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EU shelves Taiwan trade upgrade amid high-wire balancing act on China

South China Morning Post logo South China Morning Post 17/11/2021 Finbarr Bermingham
Taiwanese President Tsai Ing-wen (centre) meets EU parliamentarians in Taipei this month. Photo: AP Taiwanese President Tsai Ing-wen (centre) meets EU parliamentarians in Taipei this month. Photo: AP

The European Union has postponed a confidential plan to upgrade its trade ties with Taiwan, in a sign of internal uncertainty over how best to balance ties with Taipei and Beijing.

On Friday, Brussels was preparing to announce a new strategic format for liaising with Taiwan on trade and economic issues, involving more regular meetings, collaboration on specific sectors such as semiconductors, and more visits by senior officials, according to multiple sources briefed on the plans but not authorised to discuss them publicly.

It would have marked an expansion of the annual consultations between Brussels and Taipei, the 32nd of which took place last December at deputy ministerial level.

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But the announcement, being handled by the trade commission, was postponed at the eleventh hour. It is likely to be revisited at a later date, perhaps in conjunction with the European Parliament, which has been pushing for stronger ties with Taiwan, according to a source in the parliament.

It comes as the EU tries to perform a high-wire balancing act, attempting to re-engage with Beijing following a sharp deterioration in ties over the first six months of the year, while at the same time enhancing its relationship with self-ruled Taiwan - which Beijing views as a breakaway province.

It is widely thought that some senior EU figures are concerned that pursuing the latter objective could jeopardise the former.

On Tuesday, China's ambassador to the EU, Zhang Ming, warned that "any attempt to develop official relations with Taiwan authorities is not acceptable because it's a violation of the basic norms of the international relationship".

"The Taiwan question is China's internal affairs," Zhang told a webinar organised by the European Policy Centre. "It is a highly sensitive issue, but some people in Europe seem to underestimate the Chinese people's aspiration for the complete reunification of our country. Let me stress that China's position on the Taiwan question is firm and clear. Such a position remains unchanged and will never be changed."

EU officials have repeatedly said that boosting economic relations with Taipei is well within the parameters of the one-China policy, meaning it stops short of recognising statehood.

"The European Union has an interest in enhancing relations and cooperation with Taiwan, within the framework of its one-China policy," EU Competition Commissioner Margrethe Vestager said last month.

The European Commission, however, is not interested in a bilateral investment agreement with Taipei - a key demand of the parliament, and lobbied for by Taiwanese officials.

"We are looking into possible options to boost our engagement with Taiwan, which remains an important and like-minded trade partner. This is a work in progress," said a spokeswoman from the EU's trade commission when asked about the plans.

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Parliamentary trade sources familiar with the situation said that anything short of preparing for a bilateral investment pact would be symbolic than substantive. But officials do not see an economic rationale for a deal, given that investment flows relatively freely between the EU and Taiwan. An agreement would, nonetheless, represent a significant political win for Taipei.

The rhetoric on Taiwan has gone into overdrive in recent months, overtaking Hong Kong and Xinjiang as Europe's China-related issue du jour.

EU lawmakers and some governments and officials in the Central and Eastern European countries of Czech Republic, Lithuania and Slovakia have been determined to place the Taiwan issue firmly on the EU's agenda.

"Taiwan has been a taboo subject in some capitals," said Noah Barkin, a Europe-China watcher for Rhodium Group in Berlin. "That is changing, because of Lithuania, because of China's behaviour, its displays of force in and around Taiwan. And so I think there's going to have to be a broader discussion within Europe about its policy towards Taiwan."

In a diplomatic flurry last month, Taiwanese Foreign Minister Joseph Wu visited European capitals including Brussels and a delegation from the European Parliament made a maiden trip to Taiwan.

The European Parliament also voted to adopt by a landslide majority its first report on Taiwan, which called for closer relations with the island.

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Simultaneously, Brussels is trying to "re-engage" with Beijing after being shocked at the pace of the decline of ties over the first few months of 2021. Bilateral sanctions were doled out in March, which led EU lawmakers in May to freeze progress on a long-negotiated investment pact that was agreed in principle at the end of 2020.

Top-level communications fell off in the months that followed, even if working-level discussions continued.

As part of the re-engagement - a buzzword in China-focused policy circles in Brussels for the past two months - the EU and China are trying to arrange a summit before the end of the year.

The "intention" is to hold the talks in a "27+1" format involving all EU states and top Chinese officials, according to an EU official familiar with the planning. This would be welcomed in the EU's eastern quarters, where some governments have voiced frustration at the Franco-German dominance of the China portfolio. However, it may be difficult to fit the summit into a busy end to 2021 in this format.

"Now we are preparing. We hope by the end of the year, inshallah," Zhang said when asked about an EU-China summit.

EU leaders have also spoken bullishly about the frozen Comprehensive Agreement on Investment (CAI), even if the immediate prospects of unlocking it seem remote.

"Is this agreement perfect? No," European Council President Charles Michel said last week. "Did we get everything we wanted? Certainly not. But neither did China. Would this agreement lead to a democratic system in China and full respect for human and labour rights? No. But it creates a platform to discuss these issues with the Chinese authorities, who don't like them, because they do not share our same system and our values.

"The question is, are our interests better defended and our ability to protect the Uygurs' rights and to promote the rule of law in Hong Kong better ensured with, or without, such an agreement? This is not an exact science. There is no easy answer."

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In an interview with trade publication Borderlex in October, EU trade chief Sabine Weyand said the sanctions led to a "division of labour" at the EU, with member states stepping up their interactions with Beijing, even as China was giving Brussels the cold shoulder.

"The EU as such has been paralysed by the issue of the sanctions, whereas member states were then continuing their economic engagement with Beijing at national level," she said.

"Now there is a realisation that that is not a sustainable approach. Therefore, I think we will have to find a way to re-engage China."

But potential banana skins include the prickly issue of EU sanctions on Chinese officials for human rights abuses in Xinjiang. Officials need to sign off on the sanctions in December if they are to be renewed in March, one year after they entered force.

The sanctions have already cleared the Working Party on Human Rights and are now with the Working Party of Foreign Relations Counsellors, where the legality of renewing the sanctions on four Chinese officials will be scrutinised.

After that, they need to clear the powerful Coreper II committee manned by each member state's ambassador-level permanent representatives, and finally the Foreign Affairs Council, comprising the EU's 27 foreign ministers.

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A senior EU diplomat said that although there would be some debate, it was unlikely that sanctions renewal would face major opposition given that the situation on the ground in Xinjiang "does not appear to have improved".

Zhang refused to be drawn on whether China's retaliatory sanctions would be removed, saying the "ball was in Brussels' court" on both that and the CAI. Nor would he be pushed on whether China would retaliate further should the sanctions be rolled over.

The EU's upcoming trade agenda could also cause consternation, particularly the draft anti-coercion legislation and supply chain due diligence rules aimed at combating forced labour, both of which are set to be unveiled in December.

Meanwhile, the World Trade Organization (WTO) Ministerial Conference in Geneva later this month could provide another opportunity to spar.

EU trade officials said that China had been "a rather constructive and engaged player" in WTO talks over e-commerce and trade in services and that a fiery trade policy review last month - in which the EU joined the US, Japan, Britain, Australia and Canada in accusing China of a laundry list of trade felonies - had not soured the mood.

But they added that China should be willing to play more of a leadership role in crunch talks on fisheries, urging Beijing to stop accepting subsidies and to stop blocking a clause that would outlaw forced labour on fishing boats.

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