Saturday, November 29, 2008

China-EU trade war brewing

Between the Thanksgiving Day holiday and the wall-to-wall coverage of the terrorist attacks in Mumbai, one story you may have missed is the growing spat between China and the European Union (France in particular).

It all goes back to French President Nicolas Sarkozy's decision to meet with the Dalai Lama, Tibet's exiled leader. China is notoriously touchy about all things Tibet, so they abruptly cancelled a planned economic summit with the EU, and business leaders in France are worried that the cancelled meeting is only the tip of the iceberg. They're especially worried about a series of pending orders between state-run Chinese airlines and Airbus aircraft to be built in France.

China wants to isolate the Dalai Lama, and they certainly don't want him meeting with world leaders since they feel that gives him the air of being a political leader himself, which they feel will only fuel the movement in Tibet for autonomy from Beijing. Now that the Olympics are finished, China isn't afraid to play hardball where trade is concerned.

Hopefully Sarkozy will stick to his guns for two reasons. First, with its cheap exports and booming economy that needs to import things like steel, oil and (of interest to the French) airplanes, China does have a lot of weight to throw around economically. But the global slowdown is affecting China as well, and they need to keep selling their exports around the world to keep their own domestic economy going. Some experts believe that if China's economy just slows down, forget actually going into a recession, it could make for big troubles at home. So while China may be strong economically, it's also vulnerable, a fact that politicians in the EU and US too often overlook.

And second if you stand up to a bully, they usually back down. China has been pursuing an aggressive strategy to replace the culture of Tibet with a Han Chinese one (Han is the dominant ethnic group in China). The Dalai Lama has long been a public embarrassment to China because of the great respect and following he has around the world, and when people think of the Dalai Lama, they think of Tibet, so China would like nothing better than to marginalize him so that they can get on with the business of squashing the remnants of Tibetan culture.

Let's hope Sarkozy doesn't make it so easy for China.
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