Can the EU work with Biden in the Balkans?

Can the EU work with Biden in the Balkans?

The Comprehensive Agreement on Investment (CAI) signed in December provides access to the Chinese market for European investors while protecting China’s existing rights in EU trade. However, US national security adviser, Jake Sullivan, voiced concern over the deal, stating Washington would welcome early consultations with Brussels when addressing Beijing’s economic relations. The lack of coordinated EU-US strategic thinking on China poses a risk to Euro-Atlantic integration in the Western Balkans. 

It is likely that the CAI will make it difficult for Brussels to forge a united front with the Biden administration to tackle issues concerning the EU accession process. In allowing China access to European manufacturing and renewable energy sectors, the Investment Deal sidelines the issue of Beijing’s economic presence in the Western Balkans. This puts the EU on the back foot in working with the US to advance their shared interests in the region.

Deteriorating transatlantic relations and the stalled EU enlargement process

The US-brokered agreement between Serbia and Kosovo in September commits the two states to restoring normalised economic relations. The then-US President Donald Trump hailed the accord as a major breakthrough after previous attempts to resolve the dispute between the two states following the collapse of Yugoslavia. However, the treaty may be seen more as a foreign policy stunt than a serious engagement with the Kosovo-Serbia dialogue. 

The economic focus of the deal means that it only covers bilateral issues already addressed by the EU under the Stabilisation and Association Process and the Berlin Process, which both aim to enhance regional cooperation in the Western Balkans. EU Spokesperson for Enlargement, Ana Pisonero, pointed out that Europe were already approving investments for the construction of a motorway linking Serbia with Kosovo’s capital city, Pristina, that the Washington agreement stipulated. 

This lack of coordination between the US and the EU has weakened the Euro-Atlantic integration process of the Western Balkans. Although the agreement in September may have satisfied the foreign policy interests of the Trump administration, it is problematic for the EU enlargement agenda. A part of the deal included binding Serbia to move its embassy in Israel from Tel Aviv to Jerusalem. However, this provision contradicts compliance with foreign policy alignment, which is a key criteria for EU membership. 

Its signing also needlessly exacerbated political tensions in the region and consequently damaged Kosovo’s progress towards EU accession. The Kurti government, which pursued an anti-corruption agenda, collapsed after its refusal to lift tariffs on Serbian imports frustrated Washington. Although talks were eventually allowed to go ahead, forming a temporary pause of the derecognition campaign as the basis of negotiation proved to be ill-suited for stabilisation efforts, considering previous warnings from Pristina that any arrangement made with Serbia must uphold Kosovo’s independence.

China and Brussels reach agreement at Biden’s expense

Although the CAI does deliver economic benefits to the EU, it will have ramifications for transatlantic relations just as Washington and Brussels are finding it difficult to collaborate on the deeply-entrenched political issues facing the Western Balkans.

The accord is likely to cause friction with the US since the Biden administration has been clear in its aim to rebuild an alliance with the EU to put pressure on Beijing’s economic practices.

The focus of the Investment Deal is on ensuring a level playing field so that European companies can compete fairly with China and foster the growth of EU industry. In replacing the existing 25 bilateral investment treaties that the EU has with China, the CAI resolves issues concerning the unfair competitive advantage for China’s state-owned enterprises and the requirement to disclose technological expertise to compete in the Chinese market. 

The agreement is also a welcome development for the European manufacturing sector, particularly so in Germany. Sino-EU goods trade grew eight-fold over a period spanning ten years (2009-2019). This has helped China to account for a significant number of sales made by manufacturing companies in Germany. 

Concluding the treaty with Beijing a month before Biden takes office, however, proves to be problematic for EU-US relations.

The CAI dismisses US interests regarding China as it entrenches an investment environment that strengthens Beijing’s position while simultaneously undermining the agenda of the new administration to revive efforts to respond to Chinese activities in the European economic space. Brussels has therefore signalled its intention to prioritise identifying areas of compromise with Beijing instead of ways in which it can work with the Biden presidency on common policy issues.

How does the accord with Beijing affect Euro-Atlantic interests in the Western Balkans?

With transatlantic relations already sour over Trump’s disengagement, Brussels’ decision to sign an agreement with China will make it even more difficult for the EU to coordinate a strategy with Washington to confront a political environment in the Western Balkans that currently does not favour Euro-Atlantic integration. 

The Biden administration hopes to reverse the inadequacy of its predecessor’s foreign policy in reaching a long-term settlement between Kosovo and Serbia and re-engage with Europe on the issues concerning Balkan EU accession. This is demonstrated in Biden defining the fight against corruption as a core national security interest months before the Council of the European Union denied Serbia opening a new accession chapter due to insufficient progress on rule of law reform. 

However, in opening up new opportunities for China in EU trade, the CAI creates difficult conditions for Brussels and Washington to pursue a common strategy on political reform implementation and economic modernisation in the region.

One of the key challenges facing the EU enlargement process is the lack of substantial progress on corruption and the rule of law. In forging partnerships with those who operate in sectors that form the national economies of the region as a result of investment, China is making it harder for Europe to incentivise reform that advances the EU accession process. The decision of the Serbian president, Aleksandar Vucic, to turn to Beijing for the delivery of Covid-19 vaccines given the difficulty that the EU is facing with vaccine procurement illustrates the scale of China’s political standing in the region. 

There is reason to suggest that the CAI risks embedding Beijing’s influence over policy decision-making. With Chinese access to European manufacturing and renewable energy sectors formalised in the accord, Serbia will find it difficult to overcome its dependency on China due to Sino investment in Serbian heavy industry. Given the lack of transparency in Chinese investments in the Western Balkans, the CAI puts Brussels on the back foot in working with the new US administration to tackle corruption and rule of law reform.

The EU-China investment accord is also likely to undermine the renewable energy transition, which is a key policy area that the Biden presidency has expressed interest in. China currently occupies a strong position in the Serbian energy market. As part of the Belt and Road Initiative, China Eximbank loaned Belgrade $608m for the construction of a 350MW lignite power plant in central Serbia. 

Since the existing rights of Chinese companies in EU markets are protected under the CAI, it will not be easy for Europe to compete with China’s economic presence in the region during the implementation of the European Green Deal. Although the EU wants to encourage European industries to use environmentally-friendly energy sources, Beijing has warned Brussels consultation is needed on a proposed carbon border adjustment mechanism that aims to discourage Sino carbon-intensive imports.

As Biden assumes the presidency, the investment accord with China carries risks for the EU as it seeks to deepen Euro-Atlantic integration in the Western Balkans with the support of the US.

Permitting Chinese access to European markets under the CAI undermines Biden’s call to re-engage with Brussels on issues concerning EU enlargement. The space the agreement affords China to operate economically in Europe means Beijing can continue wielding political leverage in the Western Balkans. The accord also places the EU at a competitive disadvantage in the energy sector that risks the renewal of a joint EU-US initiative to advance the renewable energy transition.  


Categories: Europe, Politics

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