EU-US scuffle in Sweden — Melonidrama

EU-US scuffle in Sweden — Melonidrama — Spat with Japan

Decoding transatlantic relations with Beijing.

By STUART LAU

with PHELIM KINE

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WELCOME TO POLITICO CHINA WATCHER! This is Stuart Lau, covering Europe-China affairs for you this Tuesday (plus a deep dive into the latest Sino-Japanese spat.) My U.S.-based partner-in-crime Phelim Kine will be with you on Thursday.

US-EU TALKS

TUG OF WAR IN SWEDEN: Top U.S. and EU officials are meeting on the edge of the Arctic Circle in the small coastal city of Luleå in Sweden today and tomorrow. That’s where the next round of the long-running transatlantic tussle over how far to go on confronting China is taking place. Even though G7 leaders agreed on a broad game plan to tackle China less than two weeks ago, the EU’s executive branch, the European Commission, is still unable to sign up to the tough language the U.S. is proposing on China. Officials say there just isn’t yet a consensus among the EU’s 27 member countries.

Ctrl+F: Some European officials told reporters that even if the keyword “China” doesn’t appear in the final communiqué as much as the U.S. would like, Beijing will still be at the core of the summit. A U.S. official demurred, suggesting that the EU’s failure to present a united front on China could give hardline Republicans further ammunition to cast doubt on American support for Europe on Ukraine.

The cast: Representing the U.S. at the transatlantic Trade and Tech Council will be Secretary of State Antony Blinken, Commerce Secretary Gina Raimondo and Trade Representative Katherine Tai. On the EU side, Valdis Dombrovskis and Margrethe Vestager, the European Commission’s executive vice-presidents in charge of trade and digital policies, will be present. Prime Minister Ulf Kristersson of Sweden, which holds the current presidency of the Council of the EU, will also attend.

GETTING TOUGH ON BEIJING … OR NOT: Washington is eager for its EU allies to take a more aggressive stance toward Beijing, urging Brussels to sign up to commitments that call out China for its alleged anti-competitive and "harmful non-market policies and practices," according to a draft communiqué obtained by POLITICO’s Mark Scott and Barbara Moens.

Stage 1 bickering: An early European draft, obtained by POLITICO, limited specific references to Beijing to just three. Two were related to foreign interference, the other was linked to the global medical devices industry. The document merely referred to strengthening transatlantic cooperation by tackling economic coercion from "non-market economies" — a reference to China, but a veiled one.

Stage 2: Yet in later additions from U.S. policymakers, also obtained by POLITICO, the diplomatic language had been punched up to repeatedly refer to Beijing's anti-competitive practices. The new wording outlined formalized EU-U.S. cooperation specifically to thwart China's economic powers that could be extended to other allies.

Stage 3: Such language, however, was removed by EU diplomats in final-round negotiations last week, according to a Commission official, who spoke on the condition of anonymity because he was not authorized to discuss the matter publicly.

EU OFFICIALS ARE WALKING A FINE LINE: "We have a complex relationship with China," Vestager, the EU’s tech czar told reporters ahead of Tuesday's summit, Suzanne Lynch reports. "We don't have a European approach to this. There's no sort of European prism through which we can see the question of economic security." Three other officials and diplomats, also speaking on the condition of anonymity, said a lack of consensus between governments on Sino-European relations had made it difficult, if not impossible, to sign up to Washington's effort to create a formal anti-China pact.

WILL U.S. FIND AN ALLY ON COERCION? U.S. Commerce Secretary Raimondo said that the Biden administration "won't tolerate" Beijing’s decision to ban the U.S. firm Micron Technology from supplying semiconductors for key Chinese infrastructure projects. “We see it as, plain and simple, economic coercion," Raimondo said on the margins of a ministerial meeting of the Indo-Pacific Economic Framework in Detroit on Saturday. The meeting produced an agreement implicitly designed to insulate the U.S. and its allies and partners, including Australia, Japan and Indonesia, from intentional or unintentional supply chain obstructions in China.

Further reading: Here’s our story, by Mark, Barbara, Sarah Anne Aarup and Doug Palmer.

ALL AROUND EUROPE

ITALY’S MELONIDRAMA CONTINUES: Italy's Prime Minister Giorgia Meloni continues to keep the world guessing as to her next move on whether she’ll quit China’s Belt and Road Initiative.

What next, Rome? On Sunday she dropped her strongest hint to date that Italy might quit the massive Chinese scheme to exert geo-economic and diplomatic influence around the world, saying that other countries have shown that membership of the Belt and Road is not a prerequisite to maintaining good trade ties with the Asian superpower. Reminder: G7 leaders (including Meloni) have signed up to a policy of “de-risking” from Beijing.

In her words: In an interview with the Italian daily Il Messaggero she said: "Italy is the only G7 member that signed up to the accession memorandum to the Silk Road, but it is not the European or Western country with the strongest economic relations and trade flows with China.” She added: "This means that it is possible to have good relations with Beijing, also in important domains, without them necessarily being part of an overall strategic plan.”

Auto-renew: Italy's participation in BRI is set to be renewed automatically for five more years in March 2024 if neither side withdraws with three months’ notice. Gregorio Sorgi has the story.

DUISBURG ‘GAVE CHINA THE RED CARD’: The German port city of Duisburg is reportedly rebranding itself after formerly being known as “China city” with massive Chinese investment turning it into a “smart city.”

According to Washington Post, Chinese shipping giant Cosco quietly sold its 30 percent share in the Duisburg Gateway Terminal in October last year, with Markus Bangen, the CEO of the port, hinting that the controversial company was asked to leave. "There are rules in our contracts, and you have to follow these rules. If you don't do so, it's like in soccer, there's a yellow card. Sometimes the second yellow card … follows the red card: You're kicked out,” he said.

SWEDEN PM SPEECH ON CHINA: Swedish Prime Minister Kristersson is due to deliver a speech today at the Stockholm China Forum organized by the German Marshall Fund of the United States, a think tank.

SPAT WITH JAPAN

TOKYO POSTCARD: From the arrests of Japanese businesspeople on the ground of espionage to its strategic cooperation with Russia, China is perceived with increasing skepticism in Tokyo, where your correspondent is reporting from this week. Japanese officials are increasingly convinced that Tokyo would become involved in the event of a U.S.-China conflict over Taiwan. Few of those your correspondent spoke to, in private discussions, thought Japan would stay out of a war, if it happens.

That said, Tokyo insists on keeping the communication channel open with Beijing, with the Chinese and Japanese trade officials meeting for the first time in years last week. There are also plans for the Chinese, Japanese and South Korean leaders to meet later this year.

Where is Europe? One senior Japanese official told China Watcher that Tokyo is scrutinizing Europe’s moves very closely. “Europe is not there yet,” he said, referring to the lack of strategic awareness of the potential challenges brought about by Beijing’s increasing assertiveness. “We were especially disappointed with French President Emmanuel Macron,” he added. Macron’s interview with POLITICO, in which he said Europe should not “take our cue from the U.S. agenda” on Taiwan, clearly didn’t impress. “Japan is pleased with Europe’s plan for an economic security strategy. But to prepare for future challenges, it needs to do more.”

BEIJING TURNS UP THE HEAT: China has ratcheting up the pressure on Japan since the G7 summit in Hiroshima. Most recently it criticized Japanese Prime Minister Fumio Kishida‘s expected attendance at the NATO summit in Vilnius in July — even though it wouldn’t be the first time he joined the group, since he also took part in last year’s gathering in Madrid. Japan is part of the Asia Pacific 4 (also comprising South Korea, Australia and New Zealand) with which NATO is stepping up cooperation.

At a press conference in Beijing, Foreign Ministry spokeswoman Mao Ning said that NATO’s eastward foray “undermines regional peace and stability” and countries in the area “should be on high alert.” She urged Japan to “draw lessons from history and be committed to peaceful development.”

NEW MOVES AT SEA: Chinese vessels spotted close to the disputed Senkaku/Diaoyu Islands in the East China Sea have begun “reissuing data on their locations and routes” while within Japanese waters, a source close to the Japan Coast Guard told Kyodo Saturday, adding that the change in Chinese vessels’ behavior appears to be intended to emphasize their administrative right to the islands.

TRANSLATING WASHINGTON

CHINA COMMERCE CHIEF IN U.S.: China’s Commerce Minister Wang Wentao was in the U.S. to attend the APEC Ministers Responsible for Trade Meeting last week. When they met, USTR Katherine Tai raised issues including "critical imbalances caused by China's state-led, non-market approach to the economy and trade policy … [and] PRC actions taken against U.S. companies operating there," USTR said in a statement. Wang raised Beijing's concerns including "Taiwan-related issues … and Section 301 tariffs," Chinese state media reported on Saturday.

He also met Commerce Secretary Raimondo, who focused on the Chinese government's slew of probes of China-based U.S. firms including Mintz, Capvision and Bain & Company. Raimondo "raised concerns about the recent spate of PRC actions taken against U.S. companies operating in the PRC," the Commerce Department said in a statement published on Thursday. Wang brought up Chinese concerns including the U.S. "economic and trade policy toward China, its policy on semiconductors and export controls, and its outbound investment review policy," the Chinese embassy spokesperson in Washington, Liu Pengyu, said in a tweet on Thursday.

LAWMAKER WARNS CHINA IS MENACING GUAM: The U.S. government is facing calls to bolster missile defenses that protect the island territory of Guam from potential Chinese aggression. "I'm disturbed to learn Chinese hackers used malware to attack the infrastructure on American military bases in Guam. This is a clear sign that that China wants to gain an edge over the U.S. starting with Guam," Rep. James Moylan (R-Guam) tweeted on Friday. Moylan's comments followed Microsoft's warning on Friday that Chinese hackers had deployed "stealthy" malware against Guam's U.S. military infrastructure.

ALSO ON OUR READING LIST

CHINA-MALDIVES: Maldives stresses pro-India stance while maintaining China ties, its foreign minister Abdulla Shahid told Nikkei Asia.

CHINA-TALIBAN: Afghanistan reopens direct flight to China with Kabul-Urumqi service. SCMP has more.

TAIWAN-NEW ZEALAND: Two New Zealand parliamentarians are visiting Taiwan, Focus Taiwan reports.

MANY THANKS: To editor Tim Ross reporters Mark Scott, Barbara Moens, Sarah Anne Aarup, Doug Palmer, Suzanne Lynch, Gregorio Sorgi, Aoife White and producer Giulia Poloni.

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