Welcome to the 45th issue of the #CEEasia Briefing.
In this issue, we dissect the following topics:
- EU-China high level trade talks
- North Korea-Russia summit
- Vietnamese EVs to reach Europe
- India-Middle East-Europe Corridor (IMEC)
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1. EU-China economic and trade dialogue
What’s going on? Executive Vice President of the European Commission Valdis Dombrovskis traveled to China to co-chair the EU-China High-Level Economic and Trade Dialogue. The dialogue, which took place in-person for the first time since 2018, was only one out of a series of similar bilateral engagements, including the EU-China Climate Dialogue in Beijing that took place in July. In addition, both the President of the European Commission (Ursula von der Leyen) and the European Council (Charles Michel) are reportedly planning to travel to China by the end of the year.
Going deeper… There are two reasons behind this recent flurry of engagements. On one hand, the EU is trying to convey its willingness to make progress in its increasingly deteriorating relationship with China. Indeed one portion of the agenda for the trip was devoted to explaining the EU’s approach to de-risking and enhancing economic security, both of which China perceives as protectionism and akin to the US policy of decoupling.
At the same time… Dombrovskis, who is generally seen as preferring a more gradual and pragmatic approach to the EU’s de-risking policy than President von der Leyen, also made sure to address some of the long-standing issues in the EU-China economic relationship. This includes the EU’s ongoing requests for a level playing field in market access and transparency in raw materials supply chains.The two sides also discussed the EU’s ongoing probe into the Chinese government’s subsidies for electric vehicle (EV) manufacturers.
Nevertheless… The visits concluded with some breakthroughs including new agreements, mechanisms and working groups to address issues of cross-border data flows, export controls and financial regulation. But the EU’s top priorities such as the issues of market access, supply chains and the bloc’s trade deficit with China (that has recently reached a record high of €396 billion) were left unresolved.
2. North Korea-Russia summit signaling cooperation
What’s going on? North Korean leader Kim Jong Un visited Russian President Vladimir Putin to discuss military cooperation, the Ukraine war, and the country’s satellite program. This trip marks only the eighth foreign visit Kim has made in 12 years.
Going deeper… The visit represents Kim’s second official trip to Russia in four years. Amid Russian aggression against Ukraine and escalating tensions between the US and North Korea, the summit seems to offer a mutually beneficial scenario. While the specifics remain unclear, the visit hinted at potential North Korean military support for Russia. Military collaboration between the two nations is not new, and there have been indications that Kim has been supplying Russia with military equipment since last month. In return, Russia could assist North Korea in building satellites or provide it with other technology, particularly as North Korea’s attempts to launch a spy satellite into orbit were unsuccessful earlier this year. The next launch of the Chollima-1 rocket is scheduled for October.
This means… UN Secretary-General Guterres emphasized that any collaboration with North Korea must adhere to the sanctions imposed by the Security Council. But Russia and China have taken a stand against implementing new sanctions on North Korea, thwarting a US-led initiative, and further dividing the UNSC. Furthermore, Western states have already warned of imposing further sanctions on intermediaries involved in arms trade between North Korea and Russia. Nevertheless, these ties will likely strengthen as the Russian Foreign Minister Lavrov and President Putin have accepted an invitation to visit North Korea.
Meanwhile… North Korea fired two short-range ballistic missiles into its waters, marking the first missile launch while its leader was outside the country.
3. Vietnam’s VinFast to deliver its first batch of EV’s to Europe
What’s going on? Vietnam’s electric vehicle (EV) manufacturer VinFast aims to deliver its first load of cars to France, Germany, and the Netherlands by the end of this year. Emergence of alternative suppliers is significant in the context of EU’s recent anti-subsidy probe against Chinese EVs producers and considerations of imposing import tariffs. The investigation is thus opening a space for growth in trade with other countries and marks an example of EU’s ongoing de-coupling steps with regards to China.
Going deeper… As cheap Chinese EVs keep flooding the European market, year-on-year tripling their imports into the EU, the European Commission chief Ursula von der Leyen announced an anti-subsidy investigation against Beijing. China has in the past decade invested heavily in battery production (but also EVs and renewables), being responsible for 60% of their production globally. But as the investigation moves forward, European carmakers find possible retaliatory measures from Beijing worrisome, as many of them depend on supplies of licensed batteries from Chinese-owned companies. Moreover, European car manufacturers, which enjoy high volumes of sales in China, are also uncomfortable about the exposure they could face there.
This means… Diversification and balancing of trade partners is good news. But the investigation, therefore, seems to be a double-edged sword taking into account the EU’s larger exposure to China. On one hand, it could decrease pressure on competitiveness of non-Chinese EV manufacturers and suppliers within the European market. But bringing the process to an end could take years and is not immune to manipulation of figures for political purposes. In addition, imposing import barriers and possible countermeasures from Beijing could further deepen the imbalance of EU-China bilateral trade, constantly recording a notable surplus for China.
4. India-Middle East-Europe Corridor (IMEC)
What’s going on? India, the UAE, Saudi Arabia, the US, the EU, France, Germany, and Italy have agreed to launch the India-Middle East-Europe Corridor (IMEC). Concluded on the sidelines of the 2023 G20 summit hosted by New Delhi, the initiative holds large potential and rationale for all participating countries – spanning geopolitical, economic as well as security considerations. The project is considered a counterweight to China’s Belt and Road Initiative despite its notable differences.
Going deeper… Proposed as a rail and shipping corridor, the IMEC connects India with the Arab Peninsula, and European ports in the Mediterranean through Jordan and Israel. It involves high-speed data cables, undersea electricity connections, and energy pipelines. According to the European Commission chief, IMEC could cut transportation time in India-Europe trade almost by half. Several ports, including Haifa in Israel, Piraeus in Greece, Mundra and Kandla in Gujarat, and Jawaharlal Nehru Port in Mumbai, have been proposed. Estimated cost of the project is tens of billions of dollars. That said, further details around funding, timescale, and exact routing will be proposed in November when the countries will meet again to discuss the IMEC Action Plan.
In addition… The EU’s interest in strengthening ties with India is also a priority. This holds true not only for Germany and France (both boosting their economic and defense ties with Delhi) but also Italy that recently signed a MoU on defense cooperation with India.
However… There are still several challenges that will require a strong political will. This includes settling on regulations, taxation, and customs, decreasing reliance on import of high-tech products from China as well as expected economic slowdown. What is more, a questions arise regarding utilization of Piraeus port (the majority owned by the Chinese government) and other ports in India and Israel (owned by Indian tycoon Gautam Adani with close links to prime minister Modi).
Quick takes on CEEasia developments
CHINA | Cai Ge, China’s new ambassador to Slovakia, has pledged to advance bilateral ties between the two countries at a reception celebrating the 74th anniversary of the PRC’s founding. The reception was attended by several prominent Slovak politicians, including Speaker of the National Council Boris Kollar who has previously traveled to China to lobby for further investments by the Chinese side.
CHINA | Hungary’s Minister for Foreign Affairs and Trade, Péter Szijjártó, stressed the importance of strengthening economic ties with China and expressed concern about the EU’s worsened economic and defense capabilities at the annual meeting of China’s Belt and Road Initiative in Hong Kong. He attributed the decline partly to the EU’s active supply to Ukraine.
TAIWAN | Taiwan’s Foreign Minister Joseph Wu delivered an online speech at the Inter-Parliamentary Alliance on China (IPAC) annual summit in Prague discussing the threats that autocratic regimes, namely China and Russia, pose for the international community and rules-based order.
SOUTH KOREA | South Korea’s Prime Minister visited eastern Poland in September, discussing further collaboration with his counterpart, particularly in the military, nuclear energy, and economic sectors.
JAPAN | In a further sign of growing relations between Hungary and Japan, Hungarian Finance Minister Mihály Varga met the management of the Japanese Sumitomo Mitsui Banking Corporation that made its first agreement with Hungary in 2021.
