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BERLIN – German business is getting upset with China.
For decades, German industry – an early movement in the Chinese market – saw the other way in the midst of Beijing’s human rights abuses, as leaders and engineers from e.g. Siemens and Volkswagen helped transform the country into Germany’s largest trading partner. But as Chinese leader Xi Jinping tightens the country’s surveillance state, threatens neighbors and takes on an increasingly belligerent tone with the West, Germany’s China strategy designed to serve the needs of its export industry looks increasingly unsustainable.
In fact, so much so that leading German industrialists are joining prominent politicians and calling for a reconsideration of the country’s approach to China and other autocratic states.
“Human rights are not the internal affairs of states,” said Siegfried Russwurm, head of the Federation of German Industries (BDI), adding that companies have a “duty to define red lines for their global engagement,” instead of waiting. on their own governments to do so.
If Russwurm sounds more like an activist for Amnesty International than the leader of the German business community’s main lobby arm, it’s because Germany Inc. is more concerned than ever about the optics and realities of the earth by doing business in China and other autocratic states. Like many foreign investors in China, German companies were long convinced that they would ultimately be on equal terms with their local counterparts. But Xi, who has put foreign firms on a tighter leash, has convinced them otherwise.
Now the German business community, which is more exposed to China than any of its European equals, is faced with an impossible choice between maintaining a crucial trade relationship and adhering to the liberal ideals that Germany cares about.
Asked how trade could be maintained amid reports of human rights abuses in China, a Siemens spokesman said in an email that the conglomerate “categorically rejects all forms of repression and participation in human rights abuses,” adding that they “trust to the United States, China and Europe to find policy solutions based on … reliable and transparent rules for cooperation and open dialogue. “
In an effort to help companies find that circle, BDI recently published one paper entitled “Responsible coexistence with autocracies.” While the paper emphasizes the importance of Western companies “leading by example” in matters of human rights and environmental protection, it also makes clear that breaking commercial ties with difficult regimes is not a viable option.
“It is a fact that companies need to generate profits to maintain long-term competitiveness,” the paper concludes. “We can not defend democratic values better if we weaken ourselves financially.”
Nevertheless, it is a difficult case to make in light of Beijing’s repression of the Uighurs, its repression of Hong Kong’s democracy movement and its belligerent attitude towards longtime partners such as Australia.
VW, the world’s largest carmaker, headquartered in Wolfsburg, came under scrutiny this year to run a factory in the Xinjiang region, where extensive inhuman treatment has been documented against China’s Muslim Uighur minority, which some countries have described as genocide. But Herbert Diess, CEO of VW, defended the commitment of his firm in the region and claims that it maintains its “values in Xinjiang, including employee representation, respect for minorities and social and labor standards.”
Once seen as the key to Germany’s long – term prosperity, China is now considered a long – term problem in Berlin.
Something is different
Not even China’s biggest defenders in Germany further pretend that economic prosperity will make Asia flourish a Western-style democracy, an idea known as “transformation through trade”, which has been pervaded by German leaders and politicians since the Cold War.
“The sober assessment is that ‘transformation through trade’ has reached its limits,” BDI concluded. “The expectation that global economic interdependence would automatically facilitate the spread and development of market economies and democratic structures has not been fulfilled.”
That reality check has put German business in a pinch, and not just regarding China. Every fourth German job depends on exports, and despite constant pressure from its partners, Germany has had one of the world’s largest trade surpluses for decades. Much of that trade is with autocratic states like China and Russia.
While Germany has always traded with tasteless regimes, it has never relied on one to the extent that it is now dependent on China. Although the US is still Germany’s largest export market overall, China has driven much of the growth in demand for German machinery and cars in recent decades and has been Germany’s largest trading partner (combined exports and imports) for five years in a row.
The question is how sustainable these trends are. Many German industrialists are beginning to realize that China, which has relied on their engineering skills to modernize its economy, may no longer need them. Over time, China has become quite good at designing and building the specialized machinery, tools and other equipment that it previously needed Germany for.
The China industry’s China debate comes as the country’s political winds change. Both the Greens and the Liberal Free Democrats, the two parties expected to join the Social Democrats in forming a new government, are taking a significantly harder line towards China than the outgoing Chancellor Angela Merkel did.
Merkel has been criticized for years for being too soft on China. In the middle of last year’s democracy protests in Hong Kong, Merkel flew to China with a large trade delegation and met with Xi. She was also the driving force behind the EU’s investment agreement with China. The agreement, signed last December, met strong opposition in Washington, where in recent years a bipartisan consensus has formed that the West needs to take a more powerful position vis-à-vis China.
“Those who expect Europe to be neutral in the struggle between China and the United States miss reality,” said Bijan Djir-Sarai, foreign policy spokesman for the Free Democrats in the German parliament. “Of course we are also fighting for European interests, but our place is in a close partnership with the United States and we should not be under any illusion.”
For example, among the BDI’s guidelines for new European foreign economic policy, there is a call for a stronger euro against other currencies, arguing that this “would give Europe more weight in the international payment system and global financial markets.”
Nils Schmid, the SPD’s foreign policy spokesman in the German parliament, argued that Germany needs to push harder in the EU for a common position on China – a position that is not necessarily in opposition to the US, but which puts European interests first .
Germany’s future government must “strengthen the foundations of the ability to act – at national as well as European level,” he said. “Then there will be no need to declare a new Cold War with China.”
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