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Sino-Japanese controversy over the Senkaku/Diaoyu/Diaoyutai Islands: An imminent flashpoint in the Indo-Pacific?

30-07-2021

The 50-year-old controversy between Japan, the People's Republic of China (PRC) and Taiwan over the sovereignty of a group of tiny, uninhabited islets and rocks in the East China Sea, administered by Japan and referred to as the Senkaku Islands in Japan, as the Diaoyu Islands in the PRC and as the Diaoyutai Islands in Taiwan has become a proxy battlefield in the growing Sino-US great power competition in the Indo-Pacific, against the backdrop of a widening Sino-Japanese power gap. Since 1971, when ...

The 50-year-old controversy between Japan, the People's Republic of China (PRC) and Taiwan over the sovereignty of a group of tiny, uninhabited islets and rocks in the East China Sea, administered by Japan and referred to as the Senkaku Islands in Japan, as the Diaoyu Islands in the PRC and as the Diaoyutai Islands in Taiwan has become a proxy battlefield in the growing Sino-US great power competition in the Indo-Pacific, against the backdrop of a widening Sino-Japanese power gap. Since 1971, when the PRC and Taiwan laid claim to the contested islets and rocks for the first time, challenging Japan's position of having incorporated them into Japanese territory as terra nullius in 1895, possible avenues for settling the controversy have either been unsuccessful or remained unexplored. The PRC's meteoric economic rise and rapid military modernisation has gradually shifted the Sino-Japanese power balance, nourishing the PRC leadership's more assertive, albeit failed, push for Japan to recognise the existence of a dispute. Two incidents in the 2010s, perceived by the PRC as consolidating Japan's administrative control, led to the PRC starting to conduct grey-zone operations in the waters surrounding the islets and rocks with increasing frequency and duration, to reassert its claims and change the status quo in its favour without prompting a war. The EU has held a position of principled neutrality as regards the legal title to the disputed islands. However, the risk of unintended incidents, miscalculation and military conflict arising from the unresolved dispute poses a challenge to regional peace and stability and to the EU's economic and security interests. The EU's 2021 Indo-Pacific strategy takes a cooperative and inclusive approach, to promote a rules-based international order and respect for international law. This may include a greater Indo-Pacific naval presence under the strategy's maritime security dimension.

Review of EU Enforcement Regulation for trade disputes

19-03-2021

On 12 December 2019, the European Commission adopted a proposal to amend Regulation (EU) No 654/2014 concerning the exercise of the EU's rights for the application and enforcement of international trade rules ('the Enforcement Regulation') of 15 May 2014. The Enforcement Regulation enables the EU to suspend or withdraw concessions or other obligations under international trade agreements in order to respond to breaches by third countries of international trade rules that affect the EU's commercial ...

On 12 December 2019, the European Commission adopted a proposal to amend Regulation (EU) No 654/2014 concerning the exercise of the EU's rights for the application and enforcement of international trade rules ('the Enforcement Regulation') of 15 May 2014. The Enforcement Regulation enables the EU to suspend or withdraw concessions or other obligations under international trade agreements in order to respond to breaches by third countries of international trade rules that affect the EU's commercial interests. The proposed amendments were aimed at empowering the EU to impose counter-measures in situations where EU trade partners violate international trade rules and block the dispute settlement procedures included in multilateral, regional and bilateral trade agreements, thus preventing the EU from obtaining final binding rulings in its favour. - The Council adopted its negotiating position on 8 April 2020, and the Committee on International Trade (INTA) of the European Parliament adopted its position on 6 July 2020. Trilogue negotiations concluded on 28 October with a provisional agreement, which INTA endorsed on 10 November. Parliament adopted the agreed text on 19 January 2021. Following the Council's approval, the Regulation as amended entered into force on 13 February 2021. Third edition. The 'EU Legislation in Progress' briefings are updated at key stages throughout the legislative procedure.

International Agreements in Progress - EU-China Comprehensive Agreement on Investment: Levelling the playing field with China

15-03-2021

Lack of reciprocity in access to the Chinese market and the absence of a level playing field for EU investors in China have posed major challenges for EU-China investment relations in recent years, with the negotiation of a comprehensive agreement on investment (CAI) being considered by the EU a key instrument to remedy this state of play. The CAI negotiations aimed at establishing a uniform legal framework for EU-China investment ties by replacing the 25 outdated bilateral investment treaties (BITs ...

Lack of reciprocity in access to the Chinese market and the absence of a level playing field for EU investors in China have posed major challenges for EU-China investment relations in recent years, with the negotiation of a comprehensive agreement on investment (CAI) being considered by the EU a key instrument to remedy this state of play. The CAI negotiations aimed at establishing a uniform legal framework for EU-China investment ties by replacing the 25 outdated bilateral investment treaties (BITs) China and EU Member States had concluded prior to the entry into force of the Lisbon Treaty in 2009 when the EU gained competence for most investment issues. The CAI was intended to go far beyond traditional investment protection, also covering market access, investment-related sustainable development, and level playing field issues, such as transparency of subsidies, and rules on state-owned enterprises (SOEs) and forced technology transfer. On 30 December 2020, negotiators reached an agreement in principle which is now undergoing legal scrubbing and will subsequently be translated into all official EU languages – which may take up to one year – before it will be formally submitted to the Council for approval and to the European Parliament for consent. Second edition. The 'International Agreements in Progress' briefings are updated at key stages throughout the process, from initial discussions through to ratification. The previous editon was from September 2020.

China tightens its grip over the South China Sea

24-02-2021

Of all the disputed areas claimed by China, the South China Sea (SCS) has been the most prominent in recent years, since it involves the largest number of actors with overlapping claims to maritime features and waters, as well as non-claimant countries, owing to its strategic importance as one of the world's busiest shipping lanes. In 2020, China stepped up its salami-slicing tactics to assert its sweeping 'historic' rights, while Malaysia, Indonesia, the Philippines, and Vietnam dismissed them in ...

Of all the disputed areas claimed by China, the South China Sea (SCS) has been the most prominent in recent years, since it involves the largest number of actors with overlapping claims to maritime features and waters, as well as non-claimant countries, owing to its strategic importance as one of the world's busiest shipping lanes. In 2020, China stepped up its salami-slicing tactics to assert its sweeping 'historic' rights, while Malaysia, Indonesia, the Philippines, and Vietnam dismissed them in an alignment of positions supported by a 2016 landmark arbitration award under the United Nations Convention on the Law of the Sea (UNCLOS). In 2020, the United States' previous neutral position on China's maritime claims shifted to dismissing them as unlawful. The EU remained attached to its position of not taking sides with either party's claims. Some EU Member States have become more vocal in dismissing China's 'historic' rights and have increased their presence in the SCS. This publication is an update of a briefing published in 2016, PE 586.671.

Taiwan in 2020 and beyond

24-02-2021

The Taiwanese went to the polls in early 2020 and overwhelmingly elected President Tsai Ing-wen of the Democratic Progressive Party (DPP) for a second term, while navigating pervasive disinformation and influence operations and closely watching events in Hong Kong. The Covid-19 pandemic was an opportunity for Taiwan to leverage its robust virus containment policy for global outreach. The self-ruled democratic island somewhat reduced its economic overreliance on mainland China through diversification ...

The Taiwanese went to the polls in early 2020 and overwhelmingly elected President Tsai Ing-wen of the Democratic Progressive Party (DPP) for a second term, while navigating pervasive disinformation and influence operations and closely watching events in Hong Kong. The Covid-19 pandemic was an opportunity for Taiwan to leverage its robust virus containment policy for global outreach. The self-ruled democratic island somewhat reduced its economic overreliance on mainland China through diversification and relocation strategies. Taiwan witnessed a spike in military incursions into its airspace and waters by mainland China's air and naval forces. Key issues to watch are the impact of the strategic rivalry between the US and China on Taiwan's economy and the future of US strategic ambiguity as a deterrent against a potential hostile invasion of the island. This is an update of the 2019 EPRS briefing Taiwan's political survival in a challenging geopolitical context, PE 635.606.

Asian Infrastructure Investment Bank: How lean, clean, and green is the AIIB?

08-02-2021

In 2013, China proposed to establish the Asian Infrastructure Investment Bank (AIIB) as a new source of infrastructure financing in Asia. Like the China-led Belt and Road Initiative, the AIIB reflects the emergence of China's new, much more assertive foreign policy posture. The AIIB opened for business in 2016 shortly after the signature of the Paris Agreement, with the pledge to be 'lean, clean and green'. Notably the United States (US) perceived the bank as a game-changer for established multilateral ...

In 2013, China proposed to establish the Asian Infrastructure Investment Bank (AIIB) as a new source of infrastructure financing in Asia. Like the China-led Belt and Road Initiative, the AIIB reflects the emergence of China's new, much more assertive foreign policy posture. The AIIB opened for business in 2016 shortly after the signature of the Paris Agreement, with the pledge to be 'lean, clean and green'. Notably the United States (US) perceived the bank as a game-changer for established multilateral development banks (MDBs) and the global financial architecture. Despite pressure from the US, most of its allies − except Japan − joined the AIIB, arguing that shaping the bank's business model from the inside was a better option than criticising it from the outside. With over 100 members at the end of 2020, the AIIB has become the second largest MDB after the World Bank. The fact that the AIIB numbers advanced economies among its members has won legitimacy for China's new platform for economic diplomacy, boosting China's reputation as a proponent of (often selective) multilateralism. The bank's strategy of attracting Western donors as members with limited voting rights, of recruiting senior staff from other MDBs and of initially only co-financing projects with other MDBs, using their standards, has earned it credibility, 'triple A' credit ratings and easy access to capital markets, prerequisites for rapid expansion into sectors such as digital infrastructure. However, the AIIB has been criticised for its innovative governance features, the flexibility embedded in its strategies, selective convergence of its standards with those of traditional MDBs and the gap between its green rhetoric and the failure to green its fossil fuel-dominated lending portfolio. The AIIB is set to adopt a revised environmental and social framework in April 2021. Integrating stringent green targets in line with its 2020 strategic target of giving climate financing a 50 % share of all project approvals by 2025 could align the AIIB with other MDBs and ease cooperation with European banks.

Enforcement Regulation review

13-01-2021

The blockage, since December 2019, of the Appellate Body of the Dispute Settlement Body of the World Trade Organization (WTO) creates legal gaps for the enforcement of international trade rules. To bridge these gaps, the European Commission proposed to broaden the scope of Regulation (EU) No 654/2014 concerning the exercise of the EU's rights for the application and enforcement of international trade rules ('the Enforcement Regulation'). The European Parliament is scheduled to vote at first reading ...

The blockage, since December 2019, of the Appellate Body of the Dispute Settlement Body of the World Trade Organization (WTO) creates legal gaps for the enforcement of international trade rules. To bridge these gaps, the European Commission proposed to broaden the scope of Regulation (EU) No 654/2014 concerning the exercise of the EU's rights for the application and enforcement of international trade rules ('the Enforcement Regulation'). The European Parliament is scheduled to vote at first reading during the January plenary session on the text agreed in trilogue with the Council.

China's economic recovery and dual circulation model

11-12-2020

After a delayed response to the outbreak of the novel coronavirus in late 2019, China has expanded its sophisticated digital surveillance systems to the health sector, linking security and health. It has apparently successfully contained the virus, while most other countries still face an uphill battle with Covid-19. China emerged first from lockdown, and its economy rapidly entered a V-shaped recovery. As in 2008, China is driving the global recovery and will derive strategic gains from this role ...

After a delayed response to the outbreak of the novel coronavirus in late 2019, China has expanded its sophisticated digital surveillance systems to the health sector, linking security and health. It has apparently successfully contained the virus, while most other countries still face an uphill battle with Covid-19. China emerged first from lockdown, and its economy rapidly entered a V-shaped recovery. As in 2008, China is driving the global recovery and will derive strategic gains from this role. However, China's relations with advanced economies and some emerging markets have further deteriorated during the pandemic, as its aggressive foreign policy posture has triggered pushback. This has created a more hostile environment for China's economic development and has had a negative impact on China's hitherto almost unconstrained access to these economies. The need to make the Chinese economy more resilient against external shocks and the intention to tap into the unexploited potential of China's huge domestic market in order to realise the nation's ambitions of becoming a global leader in cutting-edge technologies have prompted the Chinese leadership to launch a new economic development paradigm for China. The 'dual circulation development model' still lacks specifics but is expected to be a key theme in China's 14th Five-Year Plan (2021-2025) to be officially approved in March 2021. The concept suggests that, in future, priority will be given to 'domestic circulation' over 'international circulation'. China's more inward-looking development strategy geared towards greater self-reliance in strategic sectors requires major domestic structural reform and investment to unleash the purchasing power of China's low-end consumers and the indigenous innovation efforts to achieve the technological breakthroughs needed. These innovation efforts are expected to be largely state-driven. For the EU the envisaged shifts create challenges and opportunities. On the one hand, competition with China will become fiercer and, on the other, the EU can pursue openings for supply chain diversification with like-minded countries and thus boost its open strategic autonomy.

EU–China Geographical Indications Agreement

05-11-2020

During the November I part-session, Parliament is due to vote on giving its consent to the conclusion of the EU China agreement on cooperation on, and protection of, geographical indications (GIs), i.e. distinctive signs attached, mainly, to agri-food products that have a given quality, reputation or other characteristics that are attributable to their specific geographical origin. The agreement adds a new element to the legal framework for EU relations with China that is currently based, in particular ...

During the November I part-session, Parliament is due to vote on giving its consent to the conclusion of the EU China agreement on cooperation on, and protection of, geographical indications (GIs), i.e. distinctive signs attached, mainly, to agri-food products that have a given quality, reputation or other characteristics that are attributable to their specific geographical origin. The agreement adds a new element to the legal framework for EU relations with China that is currently based, in particular, on the 1985 European Economic Community–China Trade and Cooperation Agreement. It seeks to protect 100 EU GIs and 100 Chinese GIs in each other's territories against imitation and usurpation, and to bring the principle of reciprocity to bear in EU-China ties.

Amazon deforestation and EU-Mercosur deal

29-10-2020

After coming to a political agreement on the trade pillar of the three-pronged EU-Mercosur association agreement in June 2019, the EU and the four founding members of Mercosur (Argentina, Brazil, Paraguay and Uruguay) reached agreement on the political dialogue and cooperation parts in July 2020. However, as environmental deregulation and deforestation continue unabated in Brazil, opposition to the deal is growing. It is unlikely to be submitted to the European Parliament for consent in its current ...

After coming to a political agreement on the trade pillar of the three-pronged EU-Mercosur association agreement in June 2019, the EU and the four founding members of Mercosur (Argentina, Brazil, Paraguay and Uruguay) reached agreement on the political dialogue and cooperation parts in July 2020. However, as environmental deregulation and deforestation continue unabated in Brazil, opposition to the deal is growing. It is unlikely to be submitted to the European Parliament for consent in its current form. A study of the trade pillar's provisions concludes that, taking the risk of deforestation into account, the deal's environmental costs are likely to exceed its economic gains. This raises doubts as to whether Brazil's compliance with its climate change commitments can realistically be achieved based on provisions devoid of an effective enforcement mechanism.

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