Yves here. It is hard to underestimate the preening, self-destructive arrogance of Collective West leaders. Yanis Varoufakis gives a Europe case study below.
By Yanis Varoufakis. Originally published at Project Syndicate; cross posted from his website
Against the backdrop of the new cold war between the United States and China, the European Union’s top brass seems to be adding to the pressure on China by issuing credible threats in response to four grievances. Alas, the Chinese authorities are probably more amused than alarmed.
On the December 7, the presidents of the European Council and the European Commission, Charles Michel and Ursula von der Leyen, respectively, attended the 24th European Union-China Summit to convey a stern message to Chinese President Xi Jinping. In the eyes of European and American public opinion, and against the backdrop of the new cold war between the United States and China, the EU’s top brass seemed to be adding to the pressure on China by issuing credible threats in response to four grievances. Alas, the Chinese authorities were probably more amused than alarmed by what they heard.
The EU’s first grievance concerns “unbalanced trade.” Von der Leyen put it colorfully claiming that “for every three containers that go from China to Europe, two containers return empty.”
There is, of course, no doubt that sustained trade imbalances may well reflect a mercantilist strategy for permanent surpluses. But the EU accusing China of mercantilism is a bit rich. Over the past decade, China’s current-account surplus averaged 1.65%, while that of the eurozone averaged 2.24%. In the same period, the main engine of Europe’s economy, Germany, recorded an eye-watering 7.44% surplus
The EU’s second grievance is that China’s state aid amounts to dumping Chinese exports into Europe’s markets. Undoubtedly, such a grievance made considerable sense in the late 1990s and early 2000s, when, far from complaining about Chinese dumping, the EU – along with the US – were waxing lyrical about China’s induction into the West’s circuits of trade and capital. But why raise this grievance now that the charge of mercantilism has lost its basis in reality?
After all, Chinese batteries or electric vehicles (EVs) are competitive in Europe not because of subsidies but because of massive Chinese investment in their development. Today, Chinese
solar panels have achieved a quality that Europe simply cannot match – with or without state aid.
Volkswagen, one of China’s >largest domestic automakers, used to import German parts as well as industrial robots. Today, Volkswagen sources all the parts and capital goods it needs to produce cars in China from China, adding to Europe’s trade woes.
And it is not just the trade surplus that has been reversed. After relying for decades on German engineers to design its cars, Volkswagen is in the process of hiring up to 3,000 Chinese engineers for the next generation of all-electric cars that it plans to sell in China and in Europe. More broadly, since 2008, while the EU was imposing severe austerity across Europe, crushing investment in its industries in the process, China was boosting its investments to a world record ratio of almost 50% of its national income.
Blaming Chinese mercantilism only raises eyebrows, especially among German industrialists who spent the past 50 years arguing that Germany’ persistent trade surplus with the rest of the world reflected global demand for high-quality German products. Whatever von der Leyen says to China’s leaders, these same industrialists know that their Chinese counterparts making solar panels, batteries, and EVs have earned the right to make a similar claim.
Michel and von der Leyen’s third grievance is that European firms find it hard to secure Chinese government contracts. Together with the previous two grievances, these are the grounds on which EU officials have built their case for punitive measures against China’s exporters – in particular, high tariffs on EVs (and green tech more generally). But, while officials cite the formal investigation of Chinese EVs that is already underway in Brussels, it all seems unconvincing.
European industrial leaders to whom I have spoken privately admit that they view these threats as evidence of EU leaders’ panic at the realization that Europe has lost competitiveness in crucial fields. One rhetorically asked: “Does von der Leyen truly believe that the threat of tariffs on BYD’s EVs will boost [European] exports to China?”
To be sure, European firms complain about a skewed playing field in China, especially when it comes to government procurement. But they cannot see how this will change if, as a result of enormous US pressure, EU governments increasingly bar Chinese companies from their own procurement. “Not to mention,” one of them confided to me, “the fact that, ever since the pandemic, EU governments have themselves embraced state aid as if there is no tomorrow.”
The fourth grievance that Michel and von der Leyen laid at Xi’s door is that China was
threat of tariffs of the EU’s sanctions on Russia as part of a common front to end the Russian army’s brutality in Ukraine. Setting aside the question of the efficacy of sanctions, this charge merely exposes hypocrisy: Lambasting Putin’s bombardment of hospitals and targeting of Ukraine’s water, electricity, and food supply (as we all should) while staying silent as Israel does the same, and arguably much worse, in Gaza.
Of course, it is not hypocrisy that is causing Europe to hemorrhage capital and lose its current-account surplus. The EU’s inane handling of the inevitable euro crisis a decade ago saw to that. Record-breaking levels of
austerity, coupled with massive money printing and a chronic failure to establish a banking and capital-markets union, ensured that for the next 13 years, Europe would have an unprecedented amount of money in its financial circuits and unprecedentedly low investment in the technologies of the future. This is why Europe is falling behind both the US and China. Responding with subordination to America and empty threats aimed at China is both sad and futile.
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Yes and it should be noted that Europe has not learned its lesson. Austerity is making a comeback. There is a big austerity push by the coalition partner FDP in Germany.
“Everything for Ukraine, U.S. arms makers, Israel, migrants, ‘woke’ minorities, and foreign billionaires. Zip for all you average Germans, you racist sexist xenophobic antisemitic deplorables, you.”
That may not be the intention, but that’s often how the traffic-light coalition’s policies come across.
At the moment, the German far right doesn’t need to do anything but lean back and watch. The “mainstream” keeps insulting voters, thereby herding them in the rightists’ direction all on its own.
I wonder with so much grooming of German politicians into NATO through it’s NGOs how much of these policies are even truly domestic? There is just such profound betrayal of their mandates, Amoung all the current left leaning coalition.
It hardly feels like a coincidence to be given the level of narrative control in the media across Europe, including and most especially social media, that we now see the far right rising.
It’s like as the MIC has been busy with it’s military lobby at EU level for the last ten years, that a coinciding media offensive has been taking place deliberately sowing polarization.
But with what? Shifting chimera, that change from one show of loyalty to the next, not about fact or policy or even survival, but ‘ who you are’. Now right is anti war and greens are pro nuclear weapons. The social democrats systematically undermine and punish industry and only the insane religious ethno nationalists the AfD make any kind of rational sense economically.
There seems to be no left left.
There are some “fringe” parties on the left still around Europe, but you rarely seem them covered in the press unless they can be slandered as crypto-rightist because they are opposed to unfettered “migration” and EU encroachments.
They’ll simply ban on any pretext the AfD or any other party that dares question American hegemony in general or Ukraine in particular.
Problem fixed! Democracy is Muh Saved!
Just going by memory here but when the Presidents of the European Council and the European Commission – Charles Michel and Ursula von der Leyen – gave their messages to Chinese President Xi Jinping, I think that there was also a demand that China condemn Russia and start to sanction them. Could be wrong here though.
I was just thinking that if the EU wants China to buy more and more goods, that it will be harder over time for two reasons. The first is that as countries like Germany de-industrialize, that that will reduced the range of finished goods that the Chinese may want to buy. Realistically there will be more and more finished products that will no longer be made in the EU.
The second reason is sanctions as the EU – prodded by Washington – is adding more and more goods that cannot be exported to China because they are either military goods or else it will be claimed that they are dual-use good which cannot be exported to them. What will be left for China to buy that they might be interested in buying then?
Potatoes and beets? Sounds more like borscht, but Russia probably won’t need them.
When in a hole, Europe seems hellbent on digging deeper.
Keep in mind though that some of this is sanctions, but as Yanis notes, a lot of this is simply a desire to maximize profits. Another possibility is that the Chinese are wanting a certain percentage of work being done in China. Also, note how Yanis indicates Europe under-invested in its manufacturing base.
In the long run, whether due to Europeans hiring more Chinese voluntarily, rising European energy prices, Western sanctions, or whatever other reason, what’s going to happen is that China will play a bigger role in capital goods, like ASML’s EUV semiconductor manufacturing machines will have their Chinese counterparts. IN fact, as you’ve accurately alluded to, there may not be a European equal if Europe is forced to de-industrialize.
I suspect that once the European public realizes that it’s been had, it will revolt. That could trigger major political change and maybe even cause Europe to leave the US orbit.
The important thing to keep in mind that is that it is not just energy costs that are causing this, nor just capitalistic greed. It is also the fact that China is transitioning to an innovative economy, with a higher skilled workforce.
The Free Market will rectify the imbalance right? Just gotta bring the wages in line. Ever been to a small town in China? It’s a whole lot different than shiny downtown Beijing and Shanghai.
Actually it’s funny how the trade imbalances have to find their way into USD holdings, and China can use those to prop up it’s allies from sanctions.
> Ever been to a small town in China? It’s a whole lot different than shiny downtown Beijing and Shanghai
I wonder if 25 years later, there are still remote villages where life is as shown in the Zhang Yimou film Not One Less ?
https://www.rottentomatoes.com/m/not_one_less
https://www.imdb.com/title/tt0209189/
https://archive.nytimes.com/www.nytimes.com/library/film/021800less-film-review.html
February 18, 2000
`Not One Less’: A Substitute Teacher Is Put to the Test
By A.O SCOTT
Zhang Yimou’s “Not One Less” enlarges the possibilities of filmmaking even as it grounds itself in one of cinema’s oldest, most basic principles: the camera’s ability to document reality.
Zhang is best known for heart-wrenching, visually stunning period dramas like “Raise the Red Lantern” and “Shanghai Triad,” and for his association with Gong Li, one of the outstanding film actresses of our time.
In “Not One Less,” he has chosen to work with a cast of ordinary villagers and city dwellers — schoolchildren, shopkeepers and minor functionaries — most of whom play themselves. And he has restrained his painterly temperament — the sense of color and composition he used to magnificent effect in movies like “Ju Dou” and “Red Sorghum” — preferring simply to observe the ragged textures and jerky rhythms of daily life in a poor, dusty corner of modern China.
“Not One Less” is, among other things, about scarcity. In one early scene, an elderly teacher painstakingly counts out 26 pieces of chalk, one for each day of the month he will be absent. When the chalk is broken and trampled because of the carelessness of his temporary replacement, you feel an almost sickening sense of waste. And later you feel something like awe at the sight of 27 children sharing their reward for a hot day’s Sisyphean labor in a brickyard: two lukewarm cans of Coca-Cola, which is all they can afford.
Despite its deliberate austerity, “Not One Less” is extraordinarily rich. And despite the look and pace of raw documentary film, the movie is a splendid, assured piece of storytelling. Its narrative emerges slowly and organically from a mass of observed detail so that it feels like a series of events the camera has discovered out in the world, rather than like the realization of a scheme the filmmaker has devised beforehand in his mind.
At the center of “Not One Less” is Wei (Wei Minzhi), 13, a primary school graduate who has been pressed into service as a substitute teacher in the Shuiquan Primary School. She stands a few inches taller than her charges, and it is hard not to hear more than a trace of irony in their voices when they address her, according to the dictates of courtesy and custom, as “Teacher Wei.” …
“I wonder if 25 years later, there are still remote villages where life is as shown in the Zhang Yimou film Not One Less ?”
The difference for countryside millions is vast:
https://english.news.cn/20231225/a3928b089e024f1283b9c90df0b0cbe3/c.html
December 25, 2023
Relocation helps girl once living in mountainous area embrace new life
ANSHUN — Five years ago, six-year-old Ji Xue and her family of Miao ethnic group started a new life. Thanks to the poverty alleviation efforts, they were relocated to a new home from inhospitable mountainous and remote area.
Supporting facilities in the relocation community where Ji lives now have become better and better over the past five years.
It used to take Ji more than two hours to walk to school by mountainous road, while it only takes less than ten minutes to walk from her new home to school now.
“The Free Market will rectify the imbalance right? Just gotta bring the wages in line. Ever been to a small town in China? It’s a whole lot different than shiny downtown Beijing and Shanghai.”
As part of the successful poverty elimination program through China, there was emphasis on infrastructure building through the countryside and providing the economic tools for sustainable countryside well-being, Income through rural China are growing quickly and with that growth and in-place infrastructure consumption is increasing, from appliances and EVs to foods from over China as well as imported.
Like the Rust Belt, right?
Anywhere outside the major US cities is also vastly different. Hell even US cities have no go zones and areas that make 3rd world villages look like paradise. Same goes for most of Europe.
I’d rather be in rural Gansu then rural Mississippi or Virginia or even San Francisco.
It is amazing how little interesting info can be found with non-curated internet search these days. I put a search on the European Chamber of Commerce in China that has recently done a tour in Europe to find a sour feeling in the continent about investing in China.
Advocating in Europe for European businesses in China. The short conclussion of this paper is that
It seems to me that Europe asking for a “level playing field and reciprocity” means European inferiority complex developing at speed. China is not the same as Africa or South America, quite probably the kind of “level playing grounds” Europeans would like to play and are used to. Level meaning here “below us in most senses”.
What a fine post. I am grateful, but surprised and discouraged at the China-hostility reflected in the referenced paper.
Interestingly, when Greece was most troubled economically and being disciplined rather than assisted by EU governors, the Chinese offered a large investment in the limited port of Piraeus. The Chinese investment has proven an immediate and continued important benefit to Greece but the EU government evidently never accepted this. Now when the Chinese want to make logistics investment in Italy, an Italy that essentially stopped growing in 2000, the new Italian president has decided to simply pull Italy out of the Belt and Road Initiative.
I have no sense of how to make sense of the sneering at China from many newer EU officials, even when it is clear how Greece and Hungary and Serbia and Croatia have gained. German companies like VW are investing heavily and beneficially in China, but German ministers are disgruntled.
China has played it near perfectly, but could not succeed without EU/Western avarice, hubris and austerity. Austerity, in this case, is both explicit in terms of economic policy, and also a bit of euphemism which represents the willingness of the EU/Western leadership to do real harm to their citizens in the pursuit of greed. Contrast that “harm” with something like Xi’s “shared prosperity” philosophy and you being to realize that the two geo-political/economic poles are indeed moving in opposite directions.
It’s laughable in one sense, because these are the same people who believe that they are the garden and China is part of the jungle. Tariff talk qualifies as pure comedy – China has almost 1.5 billion of people – double that when you include the wider pan-Asian area (India, South Asia etc). The entire EU is 3/4 billion people. Who’s going to get punished more by restricting access to their market? I think China would be more concerned about tariff restrictions from India, and we all see how cleverly India has played the EU/West in this regard. From politicians to television news hosts, India has made it clear that it is not going to get lectured from the likes of Von der Leyen. India may be more inclined to listen to the US, but the US is not going to come to the EU’s rescue here methinks. Better to let the EU’s trade relationship with China sour so that US goods can but positioned as substitutes! (Look how well it’s work out for natural gas!)
https://www.imf.org/en/Publications/WEO/weo-database/2023/October/weo-report?c=924,532,534,546,111,&s=PPPGDP,&sy=2000&ey=2022&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1
October 15, 2023
Gross Domestic Product based on purchasing-power-parity (PPP) valuation for China, European Union, India and United States, 2000-2022
2022
China ( 30,762)
European Union ( 24,357)
India ( 11,901)
United States ( 25,463)
China in 2022 had a GDP that was more than 26% higher than that of the European Union.
https://fred.stlouisfed.org/graph/?g=17id3
August 4, 2014
Real per capita Gross Domestic Product for China, European Union, India, Japan and United States, 1977-2022
(Indexed to 1977)
#TYVM
Someone should email those to Ursula … ;-)
Very good summary of facts on the ground. What is missing is that EU put itself into corner by quiting imports of Russian energy, metals, fertilizers and foodstuff. Now EU buys many of these things from the US at double or tripple price while Chinese buy it from RUS for reasonable prices. That is not a recipe how to remain competitive. Add to this inflexible expensive EU labor, high levels of debt (in some countries public debt in another countries private debt), high euro interest rates (not speaking about satellites like Poland, Czech, Hungary where interbank rates are above 6%p.a.) and population which lost any illusions about future. How can EU catch up with China? EU is not even a paper tiger it is a fat armchair cat losing its fur.
A very solid and worthwhile piece, except for a bit of gaslighting in the penultimate paragraph, specifically:
The fourth grievance that Michel and von der Leyen laid at Xi’s door is that China was . . .
threat of tariffs of the EU’s sanctions on Russia as part of a common front to end the Russian army’s brutality in Ukraine. Setting aside the question of the efficacy of sanctions, this charge merely exposes hypocrisy: Lambasting Putin’s bombardment of hospitals and targeting of Ukraine’s water, electricity, and food supply (as we all should) while staying silent as Israel does the same, and arguably much worse, in Gaza.
This looks like a straw man argument. It is not “arguably much worse” brutalization of a civilian population in Gaza, the IDF & Biden’s bombs killed as many Palestinian civilians in 2 months as had died during 22 months of war between Russia and Ukraine. And further, as I presume most NC or MoonofAlabama readers know, Russia is defending itself against the existential threat of NATO expanding to its borders and planting nuclear bombs there (as Zelensky threatened 2 days before Putin “invaded” in Feb. 2022.) Also, is Varoufakis entirely ignorant of the 14,000 Donbass area residents killed by unceasing shelling from “their” (sic) government of Ukraine between 2014-now? (It was actually only about 12,000 when the Russians belatedly invaded.) What a sad double standard from an “alternative” writer like Y.V.
Thanks for this. I was also disappointed by YV’s almost deranged comparison, and his complete misapprehension of what the Ukraine “war” is all about. As a politician, and a very smart geezer, he should (and i believe does) know better. That paragraph was for the gallery, and beneath his dignity.
Reminds me of the Wall Street Journal’s imaginary front page dated January 1, 1000, which had “The Outlook” in column five contrast a thriving Song dynasty China with “the backward nations of Western Europe [that] stumble along in a sorry state”:
https://brodarrylsnotebook.files.wordpress.com/2012/01/01-01-1000-wall-street-journal.jpg
I recall von der Leyen not having much luck on her last China trip, where she expected to be met by highly placed government officials but had to clear her own luggage at the airport. The Chinese leadershiip were not interested in talking to some unelected bureaucrat faking it as the voice of Europe. Just an annoting buzzing insect to them. Orban has criticized vdL’s EC bureaucracy as having the temerity to speak on sovereign matters that affect Hungary, when it’s no part of their remit.
On the purely speculative side of things, it has been my impression that when it comes to product of all kinds, Chinese companies haven’t the first clue about after-sales service. You buy it, it’s yours is what I’ve seen. Not that Western companies are great, but they pay lip service to the customer. Do the Chinese? We shall see.
And this Varoufakis fellow says “Lambasting Putin’s bombardment of hospitals and targeting of Ukraine’s water, electricity, and food supply (as we all should)”. I must have missed Putin’s bombardment of Ukie hospitals and targeting of water and food supply. Disqualifies this man’s maunderings on China for me. Sorry. Only so much BS I’ll tolerate — my mind goes blank on the rest of his EU/China arguments after reading balderdash like that.
yeah, that part is rich. i think one hospital was hit and the RAF have hit the power grid a few times in retaliation for terrorist attacks on russian infrastructure, but there has not been any deliberate targeting of civilian infrastructure.
Shows, I think, how pervasive the torrent of habitual accusations in the ideological media can be, where Varoufakis ends up with discredited content by failing to reach into independent reporting. Part of this is the calculated practice of vilifying honest accounts as “pro-Putin.”
100% agreed/correct
Now when you buy things in the West it’s increasingly not yours – “You shall own nothing and be happy!”
China should just impose tariffs on EU wines and luxury goods such that the EU is no longer competitive in any field.
“Alas, the Chinese authorities were probably more amused than alarmed by what they heard.”
Beautiful!
Europe really has lost its technological edge.
Varoufakis mentions Volkswagen, though that was partially driven by diesel scandals and a late pivot to electric. EU countries have embraced electric cars, and Chinese models are a large part of that market, with BYD constructing a plant in Hungary.
Then there’s Nokia and Ericsson, which keep shrinking. Neither makes handsets anymore. They’ve lost their markets in China, and they’re losing market share elsewhere including the US. Nokia is now closing the old Bell Labs headquarters in New Jersey which was home of the first transistor, Claude Shannon, C, Unix, etc.
The other half of the equation is that China has a long term industrial policy. Instead of catching up with internal combustion cars or 3G wireless mobile, they looked ahead to the next generation technology and now dominate electric cars and 5G.
I find it sad that thinkers like Yanis can see clearly about China, but screw the pooch when it comes to Russia. Russophobia runs deep as does Kyiv propaganda about the causes and conduct of the war. Yanis says, “Putin’s bombardment of hospitals and targeting of Ukraine’s water, electricity, and food supply…” as if he were not repeating claims from a fascist government that lies about everything. The ‘hospital’ bombardment was long shown to be false as the Yukie forces had occupied it for a firing position–thus it was no longer a hospital but a fortress. Likewise, Russia destroys infrastructure, not out of meanness, but out of military necessity to stop Western weapons and Ukrainian conscripts from reaching the front lines. As far as food, I assume Yanis refers to the grain shipments out of Odesa. Again, this is a military move to deprive Ukraine of revenue and out of pique for Western duplicity that violated the ‘Grain Deal’. Yanis is smart and he should know better than repeat foolish propaganda.