Hamburg Summit and the G20

shutterstock_1130256779I have been able to take the last couple of days off to join the Hamburg Summit – China meets Europe. This biyearly summit featured as high-level keynote speakers, Europe’s Competition Commissioner Margrethe Vestager, Germany’s Transport Minister Andreas Scheuer and China’s Vice-Premier Liu He, who is the chief trade negotiator with regards to the US-China trade conflict.

The Summit was particularly interesting in the context of the upcoming G20 Summit in Buenos Aires, where President Trump is expected to meet President Xi Jinping in order to discuss the US-China trade war.

Some initial bullet point thoughts of mine from the Hamburg Summit and the upcoming G20:

  • China wants to convey strength. It tries to show that Trump’s tariffs have no effect. All Chinese speakers sang from the same hymn sheets. They tried to overwhelm you with statistics about growing trade, increasing economic growth and increasing investments. At times it was as if one was listening to a 5-year plan. One speaker even listed how many kilometres of railroad had been built last year. China’s Vice Premier Liu He in his keynote speech extolled China’s economic strength for around 3 and a half minutes. If someone puts that much effort into highlighting ones economic strength, however, he leaves the impression of wanting to hide weakness. It’s also a paradox to, on the one hand, praise ones economic strength and then at the same time call yourself a developing country, as one Chinese speaker did.
  • China’s economic strength narrative is intended to attract Europe into a deeper partnership. It is supposed to show Europe’s companies that they have much to gain if they increase their ties to China. The Chinese speakers occasionally also highlighted Europe as weak, pointing out that China could be the leading force helping Europe in its “economic recovery”.
  • China is – rightly so – very proud of its immense technological progress. It has become a technology leader in countless areas ranging from artificial intelligence and digitalisation to quantum computing and battery technology. Now, they want to digitalise and upgrade their industries. For that, they want Germany as a strategic partner. Several speakers told me that the “Made in China 2025” Strategy should combine with Germany’s “Industrie 4.0” Strategy. I was told, China has the best technology, and Germany has the best industrial products. Therefore this should come together. However, I am sceptical, when it comes to turning Germany into China’s mere product supplier and leave China the more profitable parts of the value chain.
  • There was speculation that Liu He came to Germany in advance of the G20 Summit in order to have a charm-offensive and get Germany on its side in the US-China trade war. Additionally, it could also be a sign that Liu He didn’t want to arrive too early for the G20 Summit in Buenos Aires. Coming slightly delayed to all of the preparatory meetings would again signal that China is strong and has nothing to worry about, in the sense that they can take their time and don’t need to be the first rushing to the G20 in order to sort out the trade mess.
  • The European Commission pursued a clear line: we want free and fair and reciprocal trade. The access that we give China to our markets, we also want to enjoy in the Chinese market. No more hacking or cybertheft, more intellectual property rights protection, more open markets and foreign investment into China, etc.
  • Liu He, however, did not speak of free and fair trade of reciprocity. He focused on “mutual understanding and accommodation”. That ain’t just semantics. That’s a completely different concept and approach to trade relations. Who should accommodate whom? Accommodation is not in line with reciprocity. Liu He clearly emphasised that China is different. He stressed that China has a different social and development model and that this needs to be accepted. This, however, shouldn’t mean that China can simply have its own set of rules, while enjoying the benefits of others.

I fail to see how on the basis of these fundamental different approaches, there will be any kind of progress in the American-Chinese trade war. Europe, in any case, needs to ensure that it doesn’t get into a situation where it has to choose between the American and the Chinese side.
It’s probably gonna get worse, before it gets better.

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