Tag: Trade

What cold war? U.S. trade with China hits new high

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While some of the increase in last year’s trade figures may be a result of historic levels of inflation, the figures remain eye opening, particularly considering the years-long U.S. tariff campaign on Chinese imports and new efforts to stop the flow of U.S. tech to Beijing. And they demonstrate just how intertwined the U.S. and China remain, commercially at least, despite efforts to effectively “decouple” their economies.
“The decisions of consumers and businesses so far have been more powerful than governments,” said Ed Gresser, former Assistant U.S. Trade Representative for Trade Policy and Economics. “Tariffs are basically a form of taxation. They have an influence on trade flows, but they don’t have the overwhelmingly powerful influence, or at least they haven’t so far.”
After years of steadily rising imports from China, former President Donald Trump launched a tit-for-tat trade war in 2018 that led to tariffs on more than $300 billion worth of Chinese goods. That was driven initially by concerns over Chinese trade practices that forced American companies to turn over valuable intellectual property, but the original purpose was soon lost.
Beijing retaliated by hitting around $100 billion of U.S. products, and most of the duties imposed by both sides still remain in place two years into the Biden administration.
Trump justified a number of his trade actions in the name of national security, a trend that has continued during the Biden administration, especially in the form of export controls aimed at keeping the most sensitive U.S. technology away from China’s military.
That reflects concern over Chinese President Xi Jinping’s goal of reuniting China and Taiwan, a self-governing island that Beijing has long viewed as part of its territory and whose strategic position would help the Chinese military dominate the region.
Still, despite talk of “decoupling” from China, U.S. imports of Chinese goods increased to $538.8 billion in 2022, only slightly less than the record set in 2018. The U.S. also exported a record $153.8 billion worth of goods to China last year.
The gap between exports and imports in trade with China was $382.9 billion in 2022, which was also the second bilateral trade deficit highest on record.

A large share of the U.S. exports to China are agricultural goods, putting farmers on the frontline of any efforts to sever or scale back trade relations.
“I think decoupling from China would be a terrible mistake,” John Bode, president & CEO of the Corn Refiners Association and a member of the Farmers for Free Trade Coalition, told reporters recently. “What needs to happen is a strategic approach to managing the relationship so that strategically sensitive information is protected.”
That seems the more likely course at the moment, despite the current diplomatic uproar over a Chinese spy balloon discovered flying over U.S. territory and similar episodes — former House Speaker Nancy Pelosi’s trip to Taiwan in August — that have strained the relationship.
A recent report by the Boston Consulting Group forecasts trade between the U.S. and China to decrease by $63 billion, or just about 10 percent, through 2031, as companies look to avoid supply chain disruptions by shifting production to less geopolitically risky places such as Mexico, India and countries in Southeast Asia.
Instead of abandoning China completely, many companies and countries are developing “a China-plus-one strategy” to diversify their options, Nikolaus Lang, a managing director and senior partner at Boston Consulting Group, said in an interview.
Vietnam, in particular, has benefited as American companies seek to hedge their reliance on the Chinese supply chains in a trend that predates Trump.
Two-way trade between the United States and Vietnam has more than tripled over the past 10 years, reaching a record $127.5 billion in 2022. Most of the growth has been in U.S. imports from Vietnam as companies have shifted production out of China. That has resulted in a U.S. trade deficit with Vietnam that also set a record last year at $116.1 billion.
U.S. trade with the rest of the world also hit a record high in 2022, despite a new wave of protectionism at home and across the globe. It’s a reminder that even as Covid-19 severed supply chains and geopolitical tensions prompted talk of “near-shoring,” the end of globalization may not be as definitive as some have suggested.
“You can see some shifting of sourcing — a little bit less from China and somewhat more from some other sources,” Gresser said. “But you haven’t seen that show up as the U.S. trading less than it used to be. In dollar terms, we’re trading more than we did in the past.”
The 2022 numbers include record imports of $553.3 billion from the European Union, which has complained loudly about new U.S. clean energy and technology subsidies that they fear will hurt their sales to the United States and siphon investment out of Europe.
That could be the case in the future, but it’s still too early to see the impact of the new U.S. policies on the trade data, Lang said.
In fact, imports have also risen as a percentage of the overall U.S. economy in recent years, while exports have dipped in those terms. That may be because companies have had less incentive to export because of strong domestic demand, or it could be that Trump’s tariffs boosted the cost of inputs and made U.S. products more expensive, Gresser said.
The strong U.S. dollar, which increases the costs of American goods for foreign buyers, also is a drag on exports, he added.
Despite that, the United States still had record exports to a number of trading partners, including the EU, China and more than 70 others.
One obvious exception was Russia, which the United States and its allies hit with a number of sanctions after Moscow’s further invasion of Ukraine in late February 2022. Two-way U.S.-Russia trade was less than half of the 2021 level, with both imports and exports down sharply from pre-war volumes.
CORRECTION: This story has been updated to correct Ed Gresser’s former title at the office of the U.S. Trade Representative.
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( With inputs from : www.politico.com )

February 7, 2023
Britain’s semiconductor plan goes AWOL as US and EU splash billions

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LONDON — As nations around the world scramble to secure crucial semiconductor supply chains over fears about relations with China, the U.K. is falling behind.
The COVID-19 pandemic exposed the world’s heavy reliance on Taiwan and China for the most advanced chips, which power everything from iPhones to advanced weapons. For the past two years, and amid mounting fears China could kick off a new global security crisis by invading Taiwan, Britain’s government has been readying a plan to diversify supply chains for key components and boost domestic production.
Yet according to people close to the strategy, the U.K.’s still-unseen plan — which missed its publication deadline last fall — has suffered from internal disconnect and government disarray, setting the country behind its global allies in a crucial race to become more self-reliant.

A lack of experience and joined-up policy-making in Whitehall, a period of intense political upheaval in Downing Street, and new U.S. controls on the export of advanced chips to China, have collectively stymied the U.K.’s efforts to develop its own coherent plan.
The way the strategy has been developed so far “is a mistake,” said a former senior Downing Street official.
Falling behind
During the pandemic, demand for semiconductors outstripped supply as consumers flocked to sort their home working setups. That led to major chip shortages — soon compounded by China’s tough “zero-COVID” policy.
Since a semiconductor fabrication plant is so technologically complex — a single laser in a chip lithography system of German firm Trumpf has 457,000 component parts — concentrating manufacturing in a few companies helped the industry innovate in the past.
But everything changed when COVID-19 struck.
“Governments suddenly woke up to the fact that — ‘hang on a second, these semiconductor things are quite important, and they all seem to be concentrated in a small number of places,’” said a senior British semiconductor industry executive.
Beijing’s launch of a hypersonic missile in 2021 also sent shivers through the Pentagon over China’s increasing ability to develop advanced AI-powered weapons. And Russia’s invasion of Ukraine added to geopolitical uncertainty, upping the pressure on governments to onshore manufacturers and reduce reliance on potential conflict hotspots like Taiwan.
Against this backdrop, many of the U.K.’s allies are investing billions in domestic manufacturing.
The Biden administration’s CHIPS Act, passed last summer, offers $52 billion in subsidies for semiconductor manufacturing in the U.S. The EU has its own €43 billion plan to subsidize production — although its own stance is not without critics. Emerging producers like India, Vietnam, Singapore and Japan are also making headway in their own multi-billion-dollar efforts to foster domestic manufacturing.
US President Joe Biden | Samuel Corum/Getty Images
Now the U.K. government is under mounting pressure to show its own hand. In a letter to Prime Minister Rishi Sunak first reported by the Times and also obtained by POLITICO, Britain’s semiconductor sector said its “confidence in the government’s ability to address the vital importance of the industry is steadily declining with each month of inaction.”
That followed the leak of an early copy of the U.K.’s semiconductor strategy, reported on by Bloomberg, warning that Britain’s over-dependence on Taiwan for its semiconductor foundries makes it vulnerable to any invasion of the island nation by China.
Taiwan, which Beijing considers part of its territory, makes more than 90 percent of the world’s advanced chips, with its Taiwan Semiconductor Manufacturing Company (TSMC) vital to the manufacture of British-designed semiconductors.
U.S. and EU action has already tempted TSMC to begin building new plants and foundries in Arizona and Germany.
“We critically depend on companies like TSMC,” said the industry executive quoted above. “It would be catastrophic for Western economies if they couldn’t get access to the leading-edge semiconductors any more.”
Whitehall at war
Yet there are concerns both inside and outside the British government that key Whitehall departments whose input on the strategy could be crucial are being left out in the cold.
The Department for Digital, Culture, Media and Sport (DCMS) is preparing the U.K.’s plan and, according to observers, has fiercely maintained ownership of the project. DCMS is one of the smallest departments in Whitehall, and is nicknamed the ‘Ministry of Fun’ due to its oversight of sports and leisure, as well as issues related to tech.
“In other countries, semiconductor policies are the product of multiple players,” said Paul Triolo, a senior vice president at U.S.-based strategy firm ASG. This includes “legislative support for funding major subsidies packages, commercial and trade departments, R&D agencies, and high-level strategic policy bodies tasked with things like improving supply chain resilience,” he said.
“You need all elements of the U.K.’s capabilities. You need the diplomatic services, the security services. You need everyone working together on this,” said the former Downing Street official quoted above. “There are huge national security aspects to this.”
Referring to lower-level civil servants, the same person said that relying on “a few ‘Grade 6’ officials in DCMS — officials that don’t see the wider picture, or who don’t have either capability or knowledge,” is a mistake.
For its part, DCMS rejected the suggestion it is too closely guarding the plan, with a spokesperson saying the ministry is “working closely with industry experts and other government departments … so we can protect and grow our domestic sector and ensure greater supply chain resilience.”
The spokesperson said the strategy “will be published as soon as possible.”
But businesses keen for sight of the plan remain unconvinced the U.K. has the right team in place for the job.
Key Whitehall personnel who had been involved in project have now changed, the executive cited earlier said, and few of those writing the strategy “have much of a background in the industry, or much first-hand experience.”
Progress was also sidetracked last year by lengthy deliberations over whether the U.K. should block the sale of Newport Wafer Fab, Britain’s biggest semiconductor plant, to Chinese-owned Nexperia on national security grounds, according to two people directly involved in the strategy. The government eventually announced it would block the sale in November.
And while a draft of the plan existed last year, it never progressed to the all-important ministerial “write-around” process — which gives departments across Whitehall the chance to scrutinize and comment upon proposals.
Waiting for budget day
Two people familiar with current discussions about the strategy said ministers are now aiming to make their plan public in the run-up to, or around, Chancellor Jeremy Hunt’s March 15 budget statement, although they stressed that timing could still change.
Leaked details of the strategy indicate the government will set aside £1 billion to support chip makers. Further leaks indicate this will be used as seed money for startups, and for boosting existing firms and delivering new incentives for investors.
U.K. Chancellor Jeremy Hunt | Leon Neal/Getty Images
There is wrangling with the Treasury and other departments over the size of these subsidies. Experts also say it is unlikely to be ‘new’ money but diverted from other departments’ budgets.
“We’ll just have to wait for something more substantial,” said a spokesperson from one semiconductor firm commenting on the pre-strategy leaks.
But as the U.K. procrastinates, key British-linked firms are already being hit by the United States’ own fast-evolving semiconductor strategy. U.S. rules brought in last October — and beefed up in recent days by an agreement with the Netherlands — are preventing some firms from selling the most advanced chip designs and manufacturing equipment to China.
British-headquartered, Japanese-owned firm ARM — the crown jewel of Britain’s semiconductor industry, which sells some designs to smartphone manufacturers in China — is already seeing limits on what it can export. Other British firms like Graphcore, which develops chips for AI and machine learning, are feeling the pinch too.
“The U.K. needs to — at pace — understand what it wants its role to be in the industries that will define the future economy,” said Andy Burwell, director for international trade at business lobbying group the CBI.
Where do we go from here?
There are serious doubts both inside and outside government about whether Britain’s long-awaited plan can really get to the heart of what is a complex global challenge — and opinion is divided on whether aping the U.S. and EU’s subsidy packages is either possible or even desirable for the U.K.
A former senior government figure who worked on semiconductor policy said that while the U.K. definitely needs a “more coherent worked-out plan,” publishing a formal strategy may actually just reveal how “complicated, messy and beyond our control” the issue really is.
“It’s not that it is problematic that we don’t have a strategy,” they said. “It’s problematic that whatever strategy we have is not going to be revolutionary.” They described the idea of a “boosterish” multi-billion-pound investment in Britain’s own fabricator industry as “pie in the sky.”
The former Downing Street official said Britain should instead be seeking to work “in collaboration” with EU and U.S. partners, and must be “careful to avoid” a subsidy war with allies.
The opposition Labour Party, hot favorites to form the next government after an expected 2024 election, takes a similar view. “It’s not the case that the U.K. can do this on its own,” Shadow Foreign Secretary David Lammy said recently, urging ministers to team up with the EU to secure its supply of semiconductors.
One area where some experts believe the U.K. may be able to carve out a competitive advantage, however, is in the design of advanced semiconductors.
“The U.K. would probably be best placed to pursue support for start-up semiconductor design firms such as Graphcore,” said ASG’s Triolo, “and provide support for expansion of capacity at the existing small number of companies manufacturing at more mature nodes” such as Nexperia’s Newport Wafer Fab.
Ministers launched a research project in December aimed at tapping into the U.K. semiconductor sector’s existing strength in design. The government has so far poured £800 million into compound semiconductor research through universities, according to a recent report by the House of Commons business committee.
But the same group of MPs wants more action to support advanced chip design. Burwell at the CBI business group said the U.K. government must start “working alongside industry, rather than the government basically developing a strategy and then coming to industry afterwards.”
Right now the government is “out there a bit struggling to see what levers they have to pull,” said the senior semiconductor executive quoted earlier.
Under World Trade Organization rules, governments are allowed to subsidize their semiconductor manufacturing capabilities, the executive pointed out. “The U.S. is doing it. Europe’s doing it. Taiwan does it. We should do it too.”
Cristina Gallardo contributed reporting.

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( With inputs from : www.politico.eu )

January 31, 2023
Sensex, Nifty close higher in volatile trade as IT, oil shares recover

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Mumbai: Benchmark BSE Sensex and Nifty closed higher in a highly volatile trade on Monday, riding on the back of a recovery in IT, oil and financial stocks after a two-day fall even as investors remained cautious ahead of the Union budget and policy announcement by the US Federal Reserve.
The 30-share Sensex recovered 169.51 points or 0.29 percent to settle at 59,500.41 as 17 of its constituents ended in the green. During the day, it rose by 313.34 points or 0.52 percent to 59,644.24.
The broader NSE Nifty gained 44.60 points or 0.25 percent to end at 17,648.95 as 29 of its stocks advanced. The index moved in a range of 17,709.15 to 17,405.55 during the day.
Shares of Adani group firms closed on a mixed note with flagship Adani Enterprises climbing 4.21 percent.
However, Adani Transmission dropped 14.91 percent, Adani Green by 20 percent, Adani Total Gas by 20 percent, Adani Power by 5 percent, and Adani Wilmar by 5 percent, a day after the group released a 413-page response to allegations of wrongdoing brought by a US-based short seller Hindenburg Research.
“The response by Adani had a mixed effect on the stock group and market. The saga is likely to continue as a hanging risk in the minds of the investors in the medium-term. Now the focus of the market will be on Budget and Fed policy,” said Vinod Nair, Head of Research at Geojit Financial Services.
“Volatility continued to be the order of the day, as benchmark Sensex gyrated nearly 1000 points intra-day before staging a smart comeback in late trades on selective buying. Two big events, the interest rate decision by the US Federal Reserve and the Union Budget are keeping investors nervous,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd.
Among Sensex stocks, Bajaj Finance rose the most by 4.61 percent on positive quarterly results. Ultratech Cement rose by 2.51 percent, Bajaj Finserv by 2.22 percent and NTPC by 1.53 percent.

IT stocks also recovered with HCL Tech rising by 1.85 percent, Infosys by 1.37 percent and TCS by 0.72 percent. Reliance Industries, Maruti, Wipro, M&M, Kotak Bank, Sun Pharma, ICICI Bank also gained.
Among losers, Power Grid fell the most by 3.38 percent, IndusInd Bank by 2.56 percent, L&T by 2.11 percent, Tata Steel by 1.62 percent, HUL by 1.55 percent and Tata Motors by 0.45 percent.
State Bank of India and HDFC were also among the laggards.
In the broader market, the BSE midcap gauge dipped 0.22 percent and smallcap index fell 0.10 percent.
Among sectoral indices, utilities slumped 5.74 percent, power declined 5.30 percent, oil & gas (4.06 percent), energy (3.12 percent), capital goods (1.30 percent) and metal (1.19 percent).
IT, teck, consumer durables, telecommunication, consumer discretionary and commodities were the winners.
Elsewhere in Asia, equity markets in Seoul and Hong Kong ended lower, while Tokyo and Shanghai settled in the green.
European markets were trading lower during mid-session deals. Markets in the US had ended higher on Friday.
International oil benchmark Brent crude dipped 0.25 percent to USD 86.44 per barrel.
Foreign Institutional Investors (FIIs) offloaded shares worth Rs 5,977.86 crore on Friday, according to exchange data.
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( With inputs from www.siasat.com )

January 30, 2023
The Great British Walkout: Rishi Sunak braces for biggest UK strike in 12 years

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LONDON — Public sector workers on strike, the cost-of-living climbing, and a government on the ropes.
“It’s hard to miss the parallels” between the infamous ‘Winter of Discontent’ of 1978-79 and Britain in 2023, says Robert Saunders, historian of modern Britain at Queen Mary, University of London.
Admittedly, the comparison only goes so far. In the 1970s it was a Labour government facing down staunchly socialist trade unions in a wave of strikes affecting everything from food deliveries to grave-digging, while Margaret Thatcher’s Conservatives sat in opposition and awaited their chance.
But a mass walkout fixed for Wednesday could yet mark a staging post in the downward trajectory of Rishi Sunak’s Conservatives, just as it did for Callaghan’s Labour.
Britain is braced for widespread strike action tomorrow, as an estimated 100,000 civil servants from government departments, ports, airports and driving test centers walk out alongside hundreds of thousands of teachers across England and Wales, train drivers from 14 national operators and staff at 150 U.K. universities.
It follows rolling action by train and postal workers, ambulance drivers, paramedics, and nurses in recent months. In a further headache for Sunak, firefighters on Monday night voted to walk out for the first time in two decades.
While each sector has its own reasons for taking action, many of those on strike are united by the common cause of stagnant pay, with inflation still stubbornly high. And that makes it harder for Sunak to pin the blame on the usual suspects within the trade union movement.
Mr Reasonable
Industrial action has in the past been wielded as a political weapon by the Conservative Party, which could count on a significant number of ordinary voters being infuriated by the withdrawal of public services.

Tories have consequently often used strikes as a stick with which to beat their Labour opponents, branding the left-wing party as beholden to its trade union donors.
But public sympathies have shifted this time round, and it’s no longer so simple to blame the union bogeymen.
Sunak has so far attempted to cast himself as Mr Reasonable, stressing that his “door is always open” to workers but warning that the right to strike must be “balanced” with the provision of services. To this end, he is pressing ahead with long-promised legislation to enforce minimum service standards in sectors hit by industrial action.
Sunak has made tackling inflation the raison d’etre of his government, and his backbenchers are reasonably content to rally behind that banner | POOL photo by Oli Scarff/Getty Images
Unions are enraged by the anti-strike legislation, yet Sunak’s soft-ish rhetoric is still in sharp relief to the famously bellicose Thatcher, who pledged during the 1979 strikes that “if someone is confronting our essential liberties … then, by God, I will confront them.”
Sunak’s careful approach is chosen at least in part because the political ground has shifted beneath him since the coronavirus pandemic struck in 2020.
Public sympathy for frontline medical staff, consistently high in the U.K., has been further embedded by the extreme demands placed upon nurses and other hospital staff during the pandemic. And inflation is hitting workers across the economy — not just in the public sector — helping to create a broader reservoir of sympathy for strikers than has often been found in the past.
James Frayne, a former government adviser who co-founded polling consultancy Public First, observes: “Because of the cost-of-living crisis, what you [as prime minister] can’t do, as you might be able to do in the past, is just portray this as being an ideologically-driven strike.”
Starmer’s sleight of hand
At the same time, strikes are not the political headache for the opposition Labour Party they once were.
Thatcher was able to portray Callaghan as weak when he resisted the use of emergency powers against the unions. David Cameron was never happier than when inviting then-Labour leader Ed Miliband to disown his “union paymasters,” particularly during the last mass public sector strike in 2011.
Crucially, trade union votes had played a key role in Miliband’s election as party leader — something the Tories would never let him forget. But when Sunak attempts to reprise Cameron’s refrains against Miliband, few seem convinced.
QMUL’s Saunders argues that the Conservatives are trying to rerun “a 1980s-style campaign” depicting Labour MPs as being in the pocket of the unions. But “I just don’t think this resonates with the public,” he added.
Labour’s current leader, Keir Starmer, has actively sought to weaken the left’s influence in the party, attracting criticism from senior trade unionists. Most eye-catchingly, Starmer sacked one of his own shadow ministers, Sam Tarry, after he defied an order last summer that the Labour front bench should not appear on picket lines.
Starmer has been “given cover,” as one shadow minister put it, by Sunak’s decision to push ahead with the minimum-service legislation. It means Labour MPs can please trade unionists by fighting the new restrictions in parliament — without having to actually stand on the picket line.
So far it seems to be working. Paul Nowak, general secretary of the Trades Union Congress, an umbrella group representing millions of U.K. trade unionists, told POLITICO: “Frankly, I’m less concerned about Labour frontbenchers standing up on picket lines for selfies than I am about the stuff that really matters to our union” — namely the government’s intention to “further restrict the right to strike.”
The TUC is planning a day of action against the new legislation on Wednesday, coinciding with the latest wave of strikes.
Sticking to their guns
For now, Sunak’s approach appears to be hitting the right notes with his famously restless pack of Conservative MPs.
Sunak has made tackling inflation the raison d’etre of his government, and his backbenchers are reasonably content to rally behind that banner.
As one Tory MP for an economically-deprived marginal seat put it: “We have to hold our nerve. There’s a strong sense of the corner (just about) being turned on inflation rising, so we need to be as tough as possible … We can’t now enable wage increases that feed inflation.”
Another agreed: “Rishi should hold his ground. My guess is that eventually people will get fed up with the strikers — especially rail workers.”
Furthermore, Public First’s Frayne says his polling has picked up the first signs of an erosion of support for strikes since they kicked off last summer, particularly among working-class voters.
“We’re at the point now where people are feeling like ‘well, I haven’t had a pay rise, and I’m not going to get a pay rise, and can we all just accept that it’s tough for everybody and we’ve got to get on with it,’” he said.
More than half (59 percent) of people back strike action by nurses, according to new research by Public First, while for teachers the figure is 43 percent, postal workers 41 percent and rail workers 36 percent.
‘Everything is broken’
But the broader concern for Sunak’s Conservatives is that, regardless of whatever individual pay deals are eventually hammered out, the wave of strikes could tap into a deeper sense of malaise in the U.K.
Inflation remains high, and the government’s independent forecaster predicted in December that the U.K. will fall into a recession lasting more than a year.
More than half (59 percent) of people back strike action by nurses, according to new research by Public First, while for teachers the figure is 43 percent, postal workers 41 percent and rail workers 36 percent | Joseph Prezioso/AFP via Getty Images
Strikes by ambulance workers only drew more attention to an ongoing crisis in the National Health Service, with patients suffering heart attacks and strokes already facing waits of more than 90 minutes at the end of 2022.
Moving around the country has been made difficult not only by strikes, but by multiple failures by rail providers on key routes.
One long-serving Conservative MP said they feared a sense of fatalism was setting in among the public — “the idea that everything is broken and there’s no point asking this government to fix it.”
A former Cabinet minister said the most pressing issue in their constituency is the state of public services, and strike action signaled political danger for the government. They cautioned that the public are not blaming striking workers, but ministers, for the disruption.
Those at the top of government are aware of the risk of such a narrative taking hold, with the chancellor, Jeremy Hunt, taking aim at “declinism about Britain” in a keynote speech Friday.
Whether the government can do much to change the story, however, is less clear.
Saunders harks back to Callaghan’s example, noting that public sector workers were initially willing to give the Labour government the benefit of the doubt, but that by 1979 the mood had fatally hardened.
This is because strikes are not only about falling living standards, he argues. “It’s also driven by a loss of faith in government that things are going to get better.”
With an election looming next year, Rishi Sunak is running out of time to turn the public mood around.
Annabelle Dickson and Graham Lanktree contributed reporting.

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( With inputs from : www.politico.eu )

January 30, 2023
Dutch PM Rutte wants EU to play it frugal in face of mega US subsidies

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Don’t inject fresh money into the European Union — just reform national policies, says Dutch Prime Minister Mark Rutte.
That’s the best way to prevent EU industry from getting wiped out by U.S. companies under Washington’s major new green subsidies scheme, Rutte told a group of journalists at the office of the Dutch embassy to the EU in Brussels on Tuesday.
“There’s so much money at this moment in the system,” Rutte said shortly after meeting with European Commission President Ursula von der Leyen and Belgian Prime Minister Alexander De Croo. He also argued for deeper reforms, stressing how some European countries spend so much on their pension systems — “all money you cannot spend on innovation and green tech.”
Rutte is often viewed as the key leader of the so-called “frugal” group of European countries, comprised of like-minded fiscally conservative nations. The group, which also includes Denmark and Sweden, has been reluctant to increase national contributions to EU coffers — at least until the coronavirus pandemic forced them to partly adjust that line.
The discussion among EU decision-makers on how to preserve the bloc’s industrial base is taking place ahead of a meeting of EU leaders next month as the U.S. moves to roll out a $369 billion industrial subsidy scheme to support green industries under the so-called Inflation Reduction Act.
The U.S. legislation has stoked fears about consequences for European industry and sparked calls to revisit rules on state aid. Another concern is that such subsidies put the EU’s single market at risk by conferring an outsized advantage to countries with larger fiscal capacity, such as Germany, which have more space to financially maneuver.
Rutte, who was recently in Washington to visit U.S. President Joe Biden, said: “There are a number of consequences to this Inflation Reduction Act (IRA) — but unintended.” The IRA “forces us to think about how we organize ourselves” to remain competitive, he added.
On the one hand, he sees U.S. attempts to meet climate targets as a positive development. On the other hand, he pointed to risks to having a level playing field, like with electric mobility. “Companies might shift investments from the EU to the U.S.,” he said, parroting a much-repeated fear.

But EU subsidies should remain unaltered, Rutte argued. Regarding calls to adapt to the IRA by changing EU aid rules, he conceded: “I can accept some changes as long as they are limited.”
Rutte was clear on his belief that no fresh EU money should be put on the table. “I mean, not grants, but even not loans,” he said. “There’s so much still around” — for example loans in the Recovery and Resilience Facility, the centerpiece of the EU’s pandemic recovery plan.
A draft of the text that leaders would seek to agree on at their upcoming European Council meeting hints at opening up new sources of EU funding. The draft, seen by POLITICO, makes calls “to take work forward building notably on the success of the SURE programme,” referring to the EU’s loans-based program to support employment floated by Rome and others.
Rutte stressed that he would not like to see this proposal in the text, which will be discussed by EU ambassadors on Wednesday.
On the question of whether he’d be in favor of a new SURE program, “My answer would be that we have serious doubts,” he said.
Barbara Moens contributed reporting.

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( With inputs from : www.politico.eu )

January 24, 2023
Don’t use TikTok, Dutch officials are told

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Public authorities in the Netherlands are being told to steer clear of TikTok amid growing concerns across the EU and U.S. that the Chinese-owned video-sharing platform poses privacy risks.
Dutch ministries and agencies are mostly following a recommendation to shun TikTok accounts and stop government communication and advertising on the platform, two government officials told POLITICO. This is despite the app’s skyrocketing popularity in the Netherlands, where it has around 3.5 million users.
The Dutch pivot away from TikTok follows advice issued by the general affairs ministry to “suspend the use of TikTok for the government until TikTok has adjusted its data protection policy” announced in November. While the recommendation resembles a recent U.S. government decision from December to ban the use of TikTok on government devices, the Dutch guidance is far more limited in scope and enforcement.
It’s the latest example of how TikTok, owned by the Beijing-headquartered ByteDance, is facing headwinds in Europe, adding to its troubles in the U.S. The firm is already under investigation for sending data on European Union users to China. One of the video app’s fiercest European critics is French President Emmanuel Macron, who has called TikTok “deceptively innocent” and a cause of “real addiction” among users, as well as a source of Russian disinformation.
Dutch officials have sought to strengthen ties with Washington in recent months as the U.S. pushes for more export controls on selling sensitive technology to China, including machines made by Dutch chips printing giant ASML. Dutch Prime Minister Mark Rutte this month met with U.S. President Joe Biden, where they discussed how to “quite frankly, meet the challenges of China,” the U.S. leader told reporters ahead of the meeting.
The Dutch policy on TikTok, which is effectively a pause rather than a ban, is mainly targeted at stopping the use of TikTok for “media” purposes, a spokesperson for the general affairs ministry said, and doesn’t explicitly instruct government officials to delete the app from phones.
The spokesperson said it’s hard to evaluate how strictly government services have abided by the advice since the ministry isn’t monitoring separate services’ use of the app. But the two officials said the advice had triggered a clear shift away from the Chinese-owned app, in line with growing security concerns across the West.
A junior Dutch government coalition party called in November for a full ban on the app “in its current form.” Asked by reporters what he thought of this proposal, Rutte said this was “the opinion of five seats in the Dutch lower chamber.”

TikTok admitted in early November that some of its China-based employees could access European TikTok user data. It also came under intense scrutiny in the U.S. over a report in Forbes magazine in December that employees had accessed data to track the location of journalists covering TikTok.
This month, TikTok Chief Executive Shou Zi Chew visited Brussels to assuage concerns in meetings with EU commissioners including Executive Vice President Margrethe Vestager, Vice President for Values Věra Jourová and Justice Commissioner Didier Reynders.
“I count on TikTok to fully execute its commitments to go the extra mile in respecting EU law and regaining [the] trust of European regulator,” Jourová said in a warning shot at the company. There could not be “any doubt that data of users in Europe are safe and not exposed to illegal access from third-country authorities,” she said.
TikTok said in a comment that it’s open to engaging with the Dutch government “to debunk misconceptions and explain how we keep both our community and their data safe and secure.”
UPDATED: This article was updated to add TikTok’s comment.

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( With inputs from : www.politico.eu )

January 24, 2023
Russian diamonds lose their sparkle in Europe

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In the European bubble in Brussels, diamonds aren’t anyone’s best friend anymore.
The Belgian government’s reluctance to ban imports of Russian diamonds, which would hurt the city of Antwerp, a global hub for the precious stones, has outraged Ukraine and its supporters within the EU.
Ukraine has been pushing to stop the import of Russian rough diamonds because the trade enriches Alrosa, a partially state-owned Russian enterprise.

While such a crackdown wouldn’t inflict the same damage on Vladimir Putin’s economy as a prohibition on all fossil fuels, for example, the continuing flow of Russian diamonds has become a symbol of Western countries putting their national interests above those of Ukraine.
New plans for a fresh round of sanctions against Putin have now reignited the debate over the morality of Europe’s trade in diamonds from Russia.
Belgium is fed up with being scapegoated. According to Prime Minister Alexander De Croo, Putin’s ability to sell diamonds to all western markets now needs to be shut off.
“Russian diamonds are blood diamonds,” De Croo said in a statement to POLITICO. “The revenue for Russia from diamonds can only stop if the access of Russian diamonds to Western markets is no longer possible. On forging that solid front, Belgium is working with its partners.”
The West’s economic war against Russia has already had an impact. Partly because of U.S. sanctions, the Russian diamond trade in Antwerp has already been severely hit. But those rough Russian diamonds are diverted to other diamond markets, and often find their way back to the West, cut and polished.
That’s why Belgium is working with partners to introduce a “watertight” traceability system for diamonds, a Belgian official said. If it works, this could hurt Moscow more than if Washington or Brussels are flying solo.
“Europe and North America together represent 70 percent of the world market for natural diamonds,” the official said. “Based on this market power, we can ensure the necessary transparency in the global diamond sector and structurally ban blood diamonds from the global market. The war in Ukraine provides for a strong momentum.”
Sanctions at last?
Belgium’s offensive comes just when its position on sanctioning Russian diamonds is under renewed attack — not just from other EU countries and Belgian opposition parties, but also within De Croo’s own government.
According to Belgian Prime Minister Alexander De Croo, Putin’s ability to sell diamonds to all western markets now needs to be shut off | Laurie Dieffembacq/Belga Mag/AFP via Getty Images
The EU is preparing a new round of sanctions against Russia ahead of the first anniversary of Putin’s invasion of Ukraine on February 24. Countries such as Poland and Lithuania are again urging the EU to include diamonds. However, one EU diplomat said the discussion is now more an “intra-Belgian fight than a European one.”
De Croo leads a coalition of seven ideologically diverse parties. The greens and socialists within his government are pushing him to actively lobby for hitting diamonds in the next EU sanctions round.
In particular, Vooruit, the Dutch-speaking socialist party, is making a renewed push. Belgian MP Vicky Reynaert will be introducing a new resolution in the Belgian Parliament proposing an import ban.
“It’s becoming impossible to explain that Belgium is not open to blocking Russian diamonds,” Reynaert said. “We want Belgium to actively engage with the European Commission to take action.” Belgian socialist MEP Kathleen Van Brempt is pushing the same idea at the European level.
But the initiative from the socialists isn’t likely to deliver an import ban, or even import quotas, four officials from other Belgian political parties said. De Croo is now set on an international solution instead. No one expects the socialists to destabilize De Croo’s fragile Belgian coalition government over the issue of diamonds.
Even if all seven parties in the Belgian government did agree to hit Russian diamonds, there would be another key obstacle.
In the complicated Belgian political system, the regional governments would have a say as well. The government of the northern region of Flanders is against an import ban. That government is led by the Flemish nationalists, whose party president, Bart De Wever, is also the mayor of Antwerp. “Nothing will change their minds on this,” one of the Belgian officials said of the nationalists’ position.
Blood diamonds
Belgium hopes that by building an international coalition to trace Russia’s “blood diamonds” it will finally stop being seen as a roadblock to action.
The industry agrees. “Sanctions are not the solution,” said Tom Neys of the Antwerp World Diamond Centre. “An international framework of complete transparency, with the same standards of compliance as Antwerp, can be that solution,” he said.
Such a transatlantic plan would have a huge impact, according to Hans Merket, a researcher with the International Peace Information Service, a human rights nonprofit organization. “That would have much more effect than the current U.S. sanctions, which are being circumvented,” said Merket.
But the devil will be in the details. Will Belgium succeed in building a transatlantic coalition? Are consumers willing to pay more for their diamonds, or does it still risk diverting the goods to other markets where traders are less diligent?
One of the Belgian officials was doubtful of Belgium’s chances of success. If the international alliance falters, Belgium and the EU should consider moving ahead on their own to convince the rest of the world to act. “But let’s give De Croo a shot at this,” the official said.

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( With inputs from : www.politico.eu )

January 24, 2023
Europe is running out of medicines

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When you’re feeling under the weather, the last thing you want to do is trek from pharmacy to pharmacy searching for basic medicines like cough syrup and antibiotics. Yet many people across Europe — faced with a particularly harsh winter bug season — are having to do just that.
Since late 2022, EU countries have been reporting serious problems trying to source certain important drugs, with a majority now experiencing shortages. So just how bad is the situation and, crucially, what’s being done about it? POLITICO walks you through the main points.
How bad are the shortages?
In a survey of groups representing pharmacies in 29 European countries, including EU members as well as Turkey, Kosovo, Norway and North Macedonia, almost a quarter of countries reported more than 600 drugs in short supply, and 20 percent reported 200-300 drug shortages. Three-quarters of the countries said shortages were worse this winter than a year ago. Groups in four countries said that shortages had been linked to deaths.

It’s a portrait backed by data from regulators. Belgian authorities report nearly 300 medicines in short supply. In Germany that number is 408, while in Austria more than 600 medicines can’t be bought in pharmacies at the moment. Italy’s list is even longer — with over 3,000 drugs included, though many are different formulations of the same medicine.
Which medicines are affected?
Antibiotics — particularly amoxicillin, which is used to treat respiratory infections — are in short supply. Other classes of drugs, including cough syrup, children’s paracetamol, and blood pressure medicine, are also scarce.
Why is this happening?
It’s a mix of increased demand and reduced supply.
Seasonal infections — influenza and respiratory syncytial virus (RSV) first and foremost — started early and are stronger than usual. There’s also an unusual outbreak of throat disease Strep A in children. Experts think the unusually high level of disease activity is linked to weaker immune systems that are no longer familiar with the soup of germs surrounding us in daily life, due to lockdowns. This difficult winter, after a couple of quiet years (with the exception of COVID-19), caught drugmakers unprepared.
Inflation and the energy crisis have also been weighing on pharmaceutical companies, affecting supply.
Last year, Centrient Pharmaceuticals, a Dutch producer of active pharmaceutical ingredients, said its plant was producing a quarter less output than in 2021 due to high energy costs. In December, InnoGenerics, another manufacturer from the Netherlands, was bailed out by the government after declaring bankruptcy to keep its factory open.
Commissioner Stella Kyriakides wrote to Greece’s health minister asking him to take into consideration the effects of bans on third countries | Stephanie Lecocq/EPA-EFE
The result, according to Sandoz, one of the largest producers on the European generics market, is an especially “tight supply situation.” A spokesperson told POLITICO that other culprits include scarcity of raw materials and manufacturing capacity constraints. They added that Sandoz is able to meet demand at the moment, but is “facing challenges.”
How are governments reacting?
Some countries are slamming the brakes on exports to protect domestic supplies. In November, Greece’s drugs regulator expanded the list of medicine whose resale to other countries — known as parallel trade — is banned. Romania has temporarily stopped exports of certain antibiotics and kids’ painkillers. Earlier in January, Belgium published a decree that allows the authorities to halt exports in case of a crisis.
These freezes can have knock-on effects. A letter from European Health Commissioner Stella Kyriakides addressed to Greece’s Health Minister Thanos Plevris asked him to take into consideration the effects of bans on third countries. “Member States must refrain from taking national measures that could affect the EU internal market and prevent access to medicines for those in need in other Member States,” wrote Kyriakides.
Germany’s government is considering changing the law to ease procurement requirements, which currently force health insurers to buy medicines where they are cheapest, concentrating the supply into the hands of a few of the most price-competitive producers. The new law would have buyers purchase medicines from multiple suppliers, including more expensive ones, to make supply more reliable. The Netherlands recently introduced a law requiring vendors to keep six weeks of stockpiles to bridge shortages, and in Sweden the government is proposing similar rules.
At a more granular level, a committee led by the EU’s drugs regulator, the European Medicines Agency (EMA), has recommended that rules be loosened to allow pharmacies to dispense pills or medicine doses individually, among other measures. In Germany, the president of the German Medical Association went so far as to call for the creation of informal “flea markets” for medicines, where people could give their unused drugs to patients who needed them. And in France and Germany, pharmacists have started producing their own medicines — though this is unlikely to make a big difference, given the extent of the shortfall.
Can the EU fix it?
In theory, the EU should be more ready than ever to tackle a bloc-wide crisis. It has recently upgraded its legislation to deal with health threats, including a lack of pharmaceuticals. The EMA has been given expanded powers to monitor drug shortages. And a whole new body, the Health Emergency Preparedness and Response Authority (HERA) has been set up, with the power to go on the market and purchase drugs for the entire bloc.
But not everyone agrees that it’s that bad yet.
Last Thursday, the EMA decided not to ask the Commission to declare the amoxycillin shortage a “major event” — an official label that would have triggered some (limited) EU-wide action— saying that current measures are improving the situation.
A European Medicines Agency’s working group on shortages could decide on Thursday whether to recommend that the Commission declares the drug shortages a “major event” — an official label that would trigger some (limited) EU-wide action. An EMA steering group for shortages would have the power to request data on drug stocks of the drugs and production capacity from suppliers, and issue recommendations on how to mitigate shortages.
At an appearance before the European Parliament’s health committee, the Commission’s top health official, Sandra Gallina, said she wanted to “dismiss a bit the idea that there is a huge shortage,” and said that alternative medications are available to use.
And others believe the situation will get better with time. “I think it will sort itself out, but that depends on the peak of infections,” said Adrian van den Hoven, director general of generics medicines lobby Medicines for Europe. “If we have reached the peak, supply will catch up quickly. If not, probably not a good scenario.”
Helen Collis and Sarah-Taïssir Bencharif contributed reporting.

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( With inputs from : www.politico.eu )

January 24, 2023
Scholz upbeat about trade truce with US in ‘first quarter of this year’

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PARIS — German Chancellor Olaf Scholz raised optimism on Sunday that the EU and the U.S. can reach a trade truce in the coming months to prevent discrimination against European companies due to American subsidies.
Speaking at a press conference with French President Emmanuel Macron following a joint Franco-German Cabinet meeting in Paris, Scholz said he was “confident” that the EU and the U.S. could reach an agreement “within the first quarter of this year” to address measures under the U.S. Inflation Reduction Act that Europe fears would siphon investments in key technologies away the Continent.
“My impression is that there is a great understanding in the U.S. [of the concerns raised in the EU],” the chancellor said.
Macron told reporters that he and Scholz supported attempts by the European Commission to negotiate exemptions from the U.S. law to avoid discrimination against EU companies.
The fresh optimism came as both leaders adopted a joint statement in which they called for loosening EU state aid rules to boost home-grown green industries — in a response to the U.S. law. The text said the EU needed “ambitious” measures to increase the bloc’s economic competitiveness, such as “simplified and streamlined procedures for state aid” that would allow pumping more money into strategic industries.
The joint statement also stressed the need to create “sufficient funding.” But in a win for Berlin, which has been reluctant to talk about new EU debt, the text says that the bloc should first make “full use of the available funding and financial instruments.” The statement also includes an unspecific reference about the need to create “solidarity measures.”
EU leaders will meet early next month to discuss Europe’s response to the Inflation Reduction Act, including the Franco-German proposal to soften state aid rules.
The relationship between Scholz and Macron hit a low in recent months when the French president canceled a planned joint Cabinet meeting in October over disagreements on energy, finance and defense. But the two leaders have since found common ground over responding to the green subsidies in Washington’s Inflation Reduction Act. Macron said that Paris and Berlin had worked in recent weeks to “synchronize” their visions for Europe.

“We need the greatest convergence possible to help Europe to move forward,” he said.
But there was little convergence on how to respond to Ukraine’s repeated requests for Germany and France to deliver battle tanks amid fears there could be a renewed Russian offensive in the spring.
Asked whether France would send Leclerc tanks to Ukraine, Macron said the request was being considered and there was work to be done on this issue in the “days and weeks to come.”
Scholz evaded a question on whether Germany would send Leopard 2 tanks, stressing that Berlin had never ceased supporting Ukraine with weapons deliveries and took its decisions in cooperation with its allies.
“We have to fear that this war will go on for a very long time,” the chancellor said.
Reconciliation, for past and present
The German chancellor and his Cabinet were in Paris on Sunday to celebrate the 60th anniversary of the Elysée treaty, which marked a reconciliation between France and Germany after World War II. The celebrations, first at the Sorbonne University and later at the Elysée Palace, were also a moment for the two leaders to put their recent disagreements aside.
Paris and Berlin have been at odds in recent months not only over defense, energy and finance policy, but also Scholz’s controversial €200 billion package for energy price relief, which was announced last fall without previously involving the French government. These tensions culminated in Macron snubbing Scholz by canceling, in an unprecedented manner, a planned press conference with the German leader in October.
At the Sorbonne, Scholz admitted relations between the two countries were often turbulent.
“The Franco-German engine isn’t always an engine that purrs softly; it’s also a well-oiled machine that can be noisy when it is looking for compromises,” he said.
Macron said France and Germany needed to show “fresh ambition” at a time when “history is becoming unhinged again,” in a reference to Russia’s aggression against Ukraine.
“Because we have cleared a path towards reconciliation, France and Germany must become pioneers for the relaunch of Europe” in areas such as energy, innovation, technology, artificial intelligence and diplomacy, he said.
On defense, Paris and Berlin announced that Franco-German battalions would be deployed to Romania and Lithuania to reinforce NATO’s eastern front.
The leaders also welcomed “with satisfaction” recent progress on their joint fighter jet project, FCAS, and said they wanted to progress on their Franco-German tank project, according to the joint statement.
The joint declaration also said that both countries are open to the long-term project of EU treaty changes, and that in the shorter term they want to overcome “deadlocks” in the Council of the EU by switching to qualified majority voting on foreign policy and taxation.

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( With inputs from : www.politico.eu )

January 21, 2023
China turns on the charm

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Beijing wants to be friends again.
Chinese diplomats are fanning out with a new softer message for international partners and adversaries alike. Gone is the aggressive “wolf warrior” rhetoric. In its place, a warmer tone and a promise of economic cooperation.
Vice Premier Liu He took Beijing’s diplomatic olive branch to the exclusive annual huddle of the global political and business elite in Davos, Switzerland this week. With a heated transatlantic trade spat exploding in panel after panel and melting the Swiss Alpine snow, Liu offered a kinder, gentler Beijing.

“China’s national reality dictates that opening up to the world is a must, not an expediency. We must open up wider and make it work better,” Liu said on Tuesday.
The Chinese charm offensive drove a lot of private conversations in Davos amid the World Economic Forum gathering. Executives are eager to learn more — and as always to explore opportunities in a market as big as China’s. The shift, if real, would signal a return to something the Davos crowd considers more normal: a somewhat predictable, business-friendly Chinese communist leadership, more interested in making money than waging fights against internal critics or outside enemies. The improved economic relationship between China and Australia has fueled such optimism.
Western officials have heard the message as well, but are suspicious that the outreach is more diplomatic sparkle than an indication of substantive changes. They are leery that the growing economic and military threat posed by China remains despite the velvet gloves.
The shift has been gathering steam for weeks after China’s President Xi Jinping offered a warmer tone in his meeting with U.S. President Joe Biden in Bali in November. Xi urged a return to “healthy and stable growth” in bilateral relations.
That has set in motion a cascade of Chinese initiatives seemingly aimed at repairing the harm done by years of “wolf warrior”-style diplomacy; saber-rattling across the Taiwan Strait; a more bellicose military posture in the Indo-Pacific; economic coercion; and high-tech espionage.
China’s Foreign Ministry is rolling out a rhetorical red carpet for U.S. Secretary of State Antony Blinken’s visit in early February. Europe is bracing for a multi-country diplomacy spree by former Foreign Minister Wang Yi. On Wednesday in Zurich, U.S. Treasury Secretary Janet Yellen’s meeting with Liu reaped an invitation to visit China “in the near future.” And the Chinese Foreign Ministry signaled gentler public messaging by banishing pugnacious spokesperson Zhao Lijian to the bureaucratic backwater of the ministry’s Department of Boundary and Ocean Affairs last week.
Western officials still have their guard up, though — particularly since Chinese diplomats were until recently issuing outright threats to their host countries.
“We are seeing a warmer Beijing that’s keen to talk about a business-as-usual approach, and there are fewer wolf warrior narratives,” an EU official told POLITICO on condition of anonymity because he isn’t authorized to speak on the record. “However, a softer face doesn’t necessarily mean a softer heart.”
Russia’s friend
That skepticism springs from the fact that Beijing isn’t matching its rhetorical expressions of bilateral goodwill with any substantive policy shifts. China’s “no limits” alignment with Russia continues even after Moscow’s war on Ukraine and record numbers of Chinese military aircraft regularly menace Taiwan. Beijing denies its well-documented abuses against Uyghur Muslims in Xinjiang and continues what the U.S. calls “unfair trade practices” that sustain billions of dollars of U.S. tariffs on Chinese imports.
There are also suspicions that China is seeking to prevent the imposition of additional crippling U.S. export restrictions on high-technology items such as semi-conductors — and slow down or derail U.S. efforts to persuade its allies to do likewise.
Vladimir Putin and Xi Jinping in Beijing | Pool photo by Ed Jones/Getty Images
“Xi wants the American boot off his neck — he can’t stomach any more tech containment or more sanctions and recognizes that a lot of [Beijing’s] foreign diplomacy has backfired and he wants to lower the temperature,” said Craig Singleton, senior China fellow at the Foundation for Defense of Democracies. Beijing’s uptick in diplomatic outreach aims to “seek a reprieve from Washington’s regulatory assault on China’s tech sector, and then lay the groundwork to stimulate China’s economy after this current COVID wave subsides,” Singleton said.
China is in desperate need of an international image overhaul. The results of a Pew Research survey published in June indicated “negative views of China remain at or near historic highs” in 19 European and Asian countries due to concerns about human rights and perceptions of a growing Chinese military threat. Pew Research Center survey results released in September revealed that 82 percent of Americans in 2022 had “an unfavorable opinion of China,” an increase from 76 percent the previous year.
Beijing’s change in tone reflects its alarm at the Biden administration’s success in rallying international support for his China-countering Indo-Pacific Strategy. That has included arch-rival Japan’s embrace of closer defense ties with the U.S. underwritten by a multibillion-dollar investment in Tokyo’s military.
The ruling Chinese Communist Party’s sense of vulnerability is heightened by China’s raging COVID outbreak and an economy pummeled by three years of lockdown linked to the country’s now-defunct zero-COVID policy. “There’s recognition [in Beijing] that — wait a minute, the U.S. is not going anywhere, it is still a major geopolitical power — and so China has to reengage with the United States,” said Victor Shih, an expert in Chinese elite politics at the University of California, San Diego’s School of Global Policy and Strategy.
Uphill struggle
But old habits die hard. Vice Foreign Minister Xie Feng, the incoming Chinese ambassador to the U.S., accused the Biden administration of “besieging China through geopolitics such as the Indo-Pacific Strategy,” in a speech on Monday. And besides Zhao’s removal from the Foreign Ministry press briefing platform, Xi hasn’t fired or demoted any senior “wolf warrior” diplomats, points out Joshua Kurlantzick, a senior fellow at the Council on Foreign Relations.
EU officials in Brussels are preparing for a visit by Wang, the former Chinese foreign minister who has been promoted into the 24-person Politburo, the Communist Party’s ruling body, to oversee foreign affairs.
But Wang faces an uphill struggle in convincing Europe of a shift in China’s diplomatic settings. The EU is angered by Xi’s close relationship with Moscow despite Russia’s aggression against Ukraine. In response, European leaders have started exploring the diversification of sources of key imports, including those from China.
In conversations with their European counterparts, Beijing officials and diplomats have adopted the tactic of highlighting recent transatlantic disputes to try to persuade the Europeans that the U.S. — even after the Donald Trump era — remains an untrustworthy ally.
“They like to repeat the U.S. ‘gains’ in the Russian war against Ukraine, as well as the IRA,” another European official said, referring to the Biden administration’s Inflation Reduction Act, which is seen by many Europeans as a protectionist policy unfavorable to EU businesses. China claims that the U.S. military-industrial complex stands to gain from the war, while Europe suffers more from the energy crisis than the U.S.
Beijing is also reaching out to traditional allies in the U.S. business community to amplify its more benign messaging. Wang sat down in Beijing last month with John Thornton, former Goldman Sachs president and the current executive chair of Barrick Gold Corporation. That meeting signaled that “China is open to dialogue with the United States at all levels,” current Chinese Foreign Minister Qin Gang tweeted.
China’s former Foreign Minister Wang Yi addresses the 77th session of the United Nations General Assembly | Yuki Iwamura/AFP via Getty Images
Similar outreach to the European business community may fall flat.
“China heavily subsidizes its industry and restricts access to its market for EU companies,” European Commission President Ursula von der Leyen said during the World Economic Forum in Davos on Tuesday. “We need to focus on de-risking rather than decoupling. This means using all our tools to deal with unfair practices.”
But Beijing will hope that persisting with the warmer rhetoric will pay off even if the fundamentals don’t change.
“There are elements of Wall Street and certain constituencies in the U.S. government that are extremely receptive to talk about stability and predictability in the U.S.-China relationship after a very volatile two years,” said Singleton from the Foundation for Defense of Democracies. “But it’s an illusion.”
Matt Kaminski contributed reporting from Davos, Switzerland.

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( With inputs from : www.politico.eu )

January 21, 2023