Europe to crank up regulatory pressure on China

Good morning and welcome to Europe Express, your daily guide to what matters in the EU and beyond. Today, we will stop in France, where lockdown restrictions are starting to ease one step at a time even as the number of daily infections remains high.

But first, we will take a bigger-picture look at legislative proposals the European Commission is scheduled to put forward on Wednesday in a renewed attempt to get tough on China. Not quite as tough as the US, though — mainly because of Germany’s lack of appetite for confronting Beijing.

And, as on every Monday, we will bring you the week’s agenda highlights, with a few notable elections and a weekend of summitry in Porto.

EU is no match for Joe

US president Joe Biden vowed last week to fight back against China’s unfair trade practices as part of a competition to “win the 21st century”, writes FT Brussels bureau chief Sam Fleming. 

America will stand up to unfair trade practices . . . like subsidies to state-owned enterprises

This week, the EU will in a far more low-key and technocratic way take a step in a similar direction, as it unveils legislation to crack down on market-distorting subsidies from China and other third countries. 

The proposed regulation, first reported by the FT last week, would allow the commission to block takeovers of big EU companies if the purchase was juiced by public handouts from outside the bloc. It would also prevent some procurement bids when competition was warped by taxpayer money. 

The rules, championed by Margrethe Vestager, Brussels’ competition enforcer, were drafted with China firmly in mind and will be accompanied by a paper examining the bloc’s ability to stand industrially on its own two feet.

The effort also comes alongside a series of other initiatives, including tighter scrutiny over exports of dual-use goods and investment screening rules. Tougher provisions are also being debated to make companies legally responsible for violations of labour and environmental standards in their supply chains. In March, the EU joined western partners in imposing sanctions against Chinese officials over abuses in the country’s western Xinjiang region.

All this reflects a marked shift in EU thinking over how to handle relations with a more aggressive China. The push for “open strategic autonomy”, as the Brussels buzz phrase goes, is leading to a more assertive posture. 

But this cannot disguise the continued gap between the more openly confrontational US stance, underscored in Biden’s address to Congress last week, and the EU’s more cautious, incremental approach.

The US and EU do not inhabit separate planets when it comes to China policy, argued Noah Barkin of the Rhodium Group, “but there are big differences”.

Even as the commission tools itself up, EU nations have disagreed sharply over how far to push the clash with Beijing. Germany, for example, remains far less eager for confrontation with its huge trade partner, especially when EU economies are struggling to recover from the Covid-19 pandemic. 

Accordingly, in government consultations between Berlin and Beijing last week, Chancellor Angela Merkel lauded the stalled China-EU investment treaty struck late last year as a potential foundation for better economic relations between the two sides. 

The US president will probably push his European allies on the topic during summits this summer. As the FT discussed, one test is whether tangible joint action can be taken to counter China’s Belt and Road Initiative, which backs infrastructure projects across the world. 

Christophe Hansen, rapporteur for the European parliament’s trade committee, said it was critical to get transatlantic dialogue over China back on track. But the centre-right MEP warned that, given the divisions among member states, the EU was failing to speak to Beijing with a clear voice.

Chart du jour: Cherchez l’Allemagne

Germany stands to lose most from a sterner stance towards Beijing, as its companies have exported considerably more to China than have other European groups. (Learn more here)

Déconfinement, step one

With France’s devastating third wave of the Covid-19 pandemic just past its peak, President Emmanuel Macron will cautiously start to ease the country’s lockdown today, writes our Paris bureau chief Victor Mallet. Step one: Secondary schools will partially reopen and domestic travel restrictions will be lifted.

Macron, who is seeking a second term in next year’s election, continues to tread a fine line in managing a twin health and economic crisis that has already killed more than 105,000 people in France and plunged the country into recession. 

He has been criticised on the one hand by doctors and epidemiologists for lifting restrictions too quickly, and on the other by small businesses and frustrated citizens for not moving faster to reopen the economy.

So it was no surprise that amid the traditional May 1 trade union demonstrations across France, there was another sort of march through the centre of Paris on Saturday.

Shouting “Let’s liberate France!”, a few hundred anti-lockdown protesters mobilised by Florian Philippot’s far-right Patriots party voiced their anger with Macron and the rules that have kept restaurants, bars, cafés, gyms, cinemas and museums closed for months.

The easing of the lockdown will certainly be a risk, given the slow decline of infections and hospitalisations over the past week. Covid-19 deaths are running at about 300 a day, and at the weekend more than 28,000 people were hospitalised with the virus, 5,500 of them in intensive care — more than the total number of intensive care beds across France before the pandemic. 

But the reality is that many people are breaking the rules anyway, travelling at weekends, holding parties and ignoring the 7pm-6am curfew. Macron is relying on an accelerating vaccination campaign — France administered more than half a million doses on some days last week at vaccination centres, pharmacies and doctors’ surgeries — to keep the spread of the disease under control.

Our battle now is to vaccinate as quickly as possible to increase our collective immunity

In an interview with regional newspapers, Macron defended the move to ease the lockdown even though there were still five times as many infections a day as the 5,000 marker he set in October.

“The big difference from October is that today we have a vaccine,” Macron said. “We’ve seen the effectiveness of combining the curfew with the vaccine’s arrival in January. That’s a real change for the management of the epidemic.” 

The next steps in Macron’s plan to ease the lockdown are as follows:

• On May 19, the nightly curfew will be moved back from 7pm to 9pm, while shops, museums, cinemas and theatres will be allowed to reopen under strict social distancing rules. Restaurants and cafés will be allowed to serve tables of up to six people outside. 

• On June 9, the start of the curfew will be further pushed back to 11pm and restaurants and cafés will be able to serve inside. Cultural and sporting venues will be allowed to accommodate up to 5,000 people with health passports and foreign tourists will be allowed in, again with health passports. 

• On June 30, most remaining restrictions will be lifted. However, each step of the déconfinement could be delayed anywhere the rate of infections runs at more than 400 per 100,000 inhabitants.

Three things to watch today

1. G7 foreign and development ministers gather in London for their first in-person meeting in two years

2. European commissioners Valdis Dombrovskis and Paolo Gentiloni appear in front of the European parliament’s economics committee

3. It’s World Press Freedom Day and Europe’s record is far from pristine

. . . and later this week

1. Tomorrow: Madrid election, Polish parliament votes on the EU recovery fund

2. Thursday: Elections in Scotland and Wales, EU foreign ministers meet virtually to discuss defence matters

3. Summit weekend in Porto: EU social summit on Friday, informal EU leaders’ summit and EU-India summit on Saturday

Notable, Quotable

It’s a little bit like an explosion, from every social class, from every corner of society, in favour of freedom, in response to such a difficult time

• Spain’s rising star: The conservative Popular party is in for a comeback in elections in Madrid tomorrow, with Isabel Díaz Ayuso set to double the tally of PP seats in the regional assembly. (Find out why)

• Vaccine inequality in the EU: Discrimination, fear of authorities and lack of paperwork mean that millions of Roma, migrants and homeless people risk being excluded from countries’ inoculation campaigns. (FT)

• German cleaners: A German shipping company has loaded 59 containers of hazardous materials from last year’s explosion in Beirut. (Euronews)

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