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International relations

EU split on Taiwan question as it fears fraying China ties

27-nation bloc must determine whether China is more of a partner or rival

Whether the European Union will begin making preparations for a bilateral investment agreement with Taiwan appears to depend on how the EU Commission assesses the bloc's relationship with China. (Nikkei montage/AP/Reuters)

TAIPEI -- A China backlash appears to be taking shape in the European Union, where this month the foreign affairs committee of parliament issued a report calling on the 27-nation bloc to begin preparing a bilateral investment agreement (BIA) with Taiwan.

The move came after the recent European Parliament session passed an amendment that calls for changing a trade office's name on the island to the European Union Office in Taiwan, a step that indicates the EU feels the need to "move away from [its] solely economic" relationship with Taiwan, according to the BIA report's rapporteur.

Justyna Szczudlik, head of the Asia-Pacific Program at the Polish Institute of International Affairs in Warsaw, said it is unlikely that initial preparations toward a BIA with Taiwan will get underway anytime soon. "It all depends," she said, "on the [EU] Commission's assessment of EU-China relations, namely whether more emphasis will be put on China as a partner or rival."

In the report, the foreign affairs committee advocates closer relations between the bloc and Taiwan, "guided by the EU's One China Policy." The document says key areas of cooperation include 5G, public health and semiconductor supplies. The European Parliament is to vote on the proposals next month.

Charlie Weimers, a Swedish politician and member of the European Parliament and the report's rapporteur, said that by the end of this year preparations have to be made for an impact assessment, public consultations and a scoping exercise so the EU and Taiwan can start negotiations and "deepen our economic ties."

Taiwan is publicly airing its desire that the EU get a move on in this regard. "We call on the European Union to initiate [these preparations] as soon as possible," its Foreign Ministry said last week.

Analysts say soured relations with China and Taiwan's growing economic and technological importance have created an opportunity for the EU and Taiwan to forge closer ties.

Szczudlik of the Polish Institute of International Affairs said China's wolf-warrior diplomacy and other "coercive activities are [only now] becoming apparent in Europe but are rather well-known in Taiwan." She cited disinformation campaigns and cyberattacks as forms of "coercive activities."

"Meanwhile," she added, "Taiwan's economic performance is critically important for the global economy. There is a growing awareness of Taiwan's role in fabricating cutting-edge semiconductors."

In 2020, the EU was Taiwan's largest foreign investor, accounting for 38.8% of the island's total. Yet it accounted for only 2% of Taiwan's foreign direct investment. The EU is Taiwan's 5th largest trading partner.

The EU first broached the idea of a BIA with Taiwan back in 2015 but later dropped the plan.

Standing in the way of such a pact is the partner-rival conundrum posed by China. The EU-China Comprehensive Agreement on Investment (CAI) was concluded in December, but the European Parliament in May put the deal on ice, saying ratification is possible only after China lifts sanctions.

Beijing in March sanctioned 10 EU politicians as well as think tanks and other concerns. The move was a response to Western sanctions against Chinese officials accused of the mass detentions of Muslim Uyghurs.

Ethnic Uighurs study Chinese at a school in China's Xinjiang region. (Photo by Shosuke Kato)

"The EU Commission will not engage in any negotiations on Taiwan until the situation with the CAI with China is more clear," said Alicia Garcia-Herrero, Asia-Pacific chief economist at Natixis. "I think the EU parliament, or at least parts of it, might be keen, but the commission needs to be fully engaged in such negotiations."

Garcia-Herrero added that the commission has a full agenda, including talks on a trade deal with Australia and possibly a broader approach to ASEAN now that the U.K. "is playing the CPTPP card."

The CPTPP, or Comprehensive and Progressive Agreement for Trans-Pacific Partnership, is a trade pact among 11 nations whose combined economies represent 13.4% of global gross domestic product. More recently, China has begun talking up the possibility of joining the bloc.

Some observers expect the EU and Taiwan to hammer out a bilateral investment agreement, though they note there are plenty of obstacles blocking the road ahead.

"Taiwan is a 'separate customs territory' as [defined] by its WTO membership," said Weinian Hu, a research fellow for Regulatory Policy at CEPS, a Brussels-based think tank. "CAI and BIA will have their respective applicable geographical areas, so they are separate issues."

The draft report will be submitted to the European Parliament plenary for a vote next month. Even with the plenary's endorsement, adoption hinges on whether the commission adopts the report.

"Even now that the CAI agreement is concluded and in the freezer, the commission continues to be very cautious when it comes to formally strengthening our ties with Taiwan," said Dita Charanzova, a Czech politician and vice president of the European Parliament. "While the scoping exercise and impact assessment are for the commission to launch, this may also depend on the overall view among member states.

"The position of the European Parliament is very clear, though, and was endorsed on many occasions through resolutions: We want an agreement with Taiwan," Charanzova added.

Szczudlik pointed out that "if the [European Parliament] adopts the report, it would be a very strong political signal, regardless of the fact that a formal EP report is a set of nonbinding recommendations, and the commission is obliged to react in three months -- accept or reject."

She added that the EU's policy on Taiwan is based on a one-China policy and that many member states, mostly Western ones like Germany, are economically dependent on China.

European Commission President Ursula von der Leyen, European Council President Charles Michel, German Chancellor Angela Merkel, French President Emmanuel Macron and Chinese President Xi Jinping are seen on a screen during a video conference, in Brussels on Dec. 30, 2020.    © Reuters

On another front, the recent European Parliament session passed an amendment that calls for changing the name of the European Economic and Trade Office in Taiwan to the European Union Office in Taiwan.

"The proposed name change reflects the consensus among parliament members in the foreign affairs committee that it's time to embrace Taiwan on its own merits," said Tsai Ming-yen, Taiwan's ambassador to the EU. "The EU's one-China policy is very different from the one-China principle that [China] insists on. The EU and member states do not have diplomatic ties with Taiwan under the policy, but the EU is flexible and practical in [its] cooperation with Taiwan, which allows us to be an indispensable partner of the EU in many areas."

Weimers said in a TV interview in Taiwan that the current name of the office is "solely economic and we need to move away from that."

Despite the Taiwan-friendly sentiment building in some parts of the EU, analysts don't expect any drastic political moves to follow that of Lithuania, which early this month withdrew its ambassador in Beijing and tilted diplomatically toward Taiwan by opening a representative office in Taipei.

"I do not expect any specific domino effect," Szczudlik said, adding that no "spectacular decision [is in the offing] such as a discussion about scrapping the one-China policy."

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