Geopolitical Supply Chain Rundown- May 7th, 2021.

The EU and China’s relationship is growing in distrust. 

The Comprehensive Agreement on Investment (CAI) was signed between Europe and China last year. The agreement is intended to increase investment between the EU and China by establishing a legal framework and common rules on issues ranging from state-owned enterprises to subsidy transparency. However, relations between China and the EU have nosedived over human rights concerns in recent times. The European Union joined America, Britain, and Canada to sanction Chinese officials and in response, Beijing retaliated by sanctioning EU officials as well.   

Recently, the E.U decided to hold back on the ratification of its Comprehensive Agreement on Investment with China. According to Valdis Dombrovskis, the EU’s trade chief, the ratification process cannot be separated from the evolving dynamics of the wider EU – China relationship.

The European Union’s position in the world may be threatened by China’s growing influence hence like other countries seek to reduce China’s influence. However, delaying the ratification may not immediately affect China. But, this may pressure Beijing to consider removing the sanctions since it wants the deal to be ratified.  

Organizations in the EU that seek to do business in China cannot rejoice yet as the ratification is most likely going to take some time. As a result, they must begin to look for other means to source, raw materials that may originally come from China. 

 

G-7 Leaders meet 

Foreign ministers from the G-7 countries met in London for the first time in two years this week. The group discussed global challenges, including climate change and threats to human rights. They also discussed Russia’s recent military buildup on the Ukrainian border and its treatment of imprisoned Kremlin critic Alexei Navalny. While it is not clear what their decision is on these matters, we expect to see reports soon. 

We know that the ministers of these countries will also spend some extra time discussing trade and geopolitics face to face after months of virtual diplomacy. Chief amongst the conversations will be how to prevent autocratic regimes. However, we expect to see more announcements from individual countries on decisions from this meeting and how it will affect global trade, procurement, and logistics.  The G7 meeting host, the U.K is also facing some backlash with its current foreign policy after it decided to cut overseas aid spending from 0.7% of national income to 0.5% – a reduction of more than £4bn.

 

China Test U.S and Philippine’s Red Flag. 

The Philippines is a crucial part of geography as it is located in the middle of the first island. This gives any naval power that allies with it the ability to disrupt vital Chinese sea lanes through South China and Bashi Channel. 

For years, China has shown interest in the Philippines and tried to get it on its side through rewards or consequences. In recent times, Beijing has flooded several sensitive areas with Chinese coast guard vessels and armed fishing fleets to block Philippine fishermen from accessing resource-rich waters and impeding the Philippines’ coast guard patrols. For example over the past couple of weeks, Chinese vessels reportedly harassed Philippine coast guard vessels sent to patrol the area, sparking outrage in Manila. In response, the Philippines and the U.S. kicked off two weeks of military drills in a showcase of their defense alliance.  The Philippine Foreign Secretary Teddy Locsin Jr. also uncorked a wild Twitter thread against China. If Chinese dredgers show up in the area, things will get complicated quickly.

 

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