China has overtaken the U.S. to become the EU’s biggest trade partner while the rest of the world slides into the red due to the Covid-19 pandemic.  

The country pushed past the United States in the third quarter to become the European Union‘s top trade partner, as the pandemic disrupted the US while Chinese activity rebounded.

Over the first nine months of 2020, trade between the EU and China totalled 425.5 billion euros ($514 billion), while trade between the EU and the United States came in at 412.5 billion euros, according to Eurostat data.

For the same period in 2019, the EU’s trade with China came in at 413.4 billion euros and 461 billion euros with the US.

Eurostat said the result was due to a 4.5 percent increase in imports from China while exports remained unchanged.

‘At the same time trade with the United States recorded a significant drop in both imports (-11.4 percent) and exports (-10.0 percent),’ Eurostat said.

The EU has been China’s top trade partner since 2004 when it overtook Japan, but this is the first time the inverse has been true, France’s Insee statistics agency said Wednesday.

After a Covid-19-related shock in the first quarter the Chinese economy has rebounded, with the economy growing year-on-year in the third quarter.

Insee said Chinese imports from Europe picked up in the third quarter, while purchases of personal protective equipment had boosted Chinese exports.

China’s economy has grown 4.9 per cent in the third quarter from last year proving the country is back to its pre-pandemic trajectory with consumer spending and industrial production going back to normal levels. 

The figures are far more favourable than the dire economic data coming out of most Western countries, showing how China has bounced back quickly despite being the first country to suffer the coronavirus outbreak. 

As the virus spread across the globe, China started to bring the outbreak under control and began to reopen its economy, growing 6.8 per cent in the first quarter of this year, and 3.2 per cent in the April-June quarter. 

China has been widely condemned for its handling of coronavirus. 

After initially covering up the outbreak, Beijing obscured an investigation into how it started and published infection rates which have been widely questioned and partly blamed for the West’s slow response to prepare for the pandemic.

Since China fought off the outbreak, Chinese firms have taken advantage of their good fortune while their global rivals grapple with reduced manufacturing capacity. 

Chinese firms have benefited from strong global demand for masks and medical supplies, with exports rising 9.9 per cent in September from a year earlier while factory activity also picked up. 

The country’s technology sector has also taken advantage of the work-from-home phenomenon with apps including DingTalk and WeChat bringing in huge revenues.

Now the International Monetary Fund is projecting China’s economy to expand by 1.9 percent in 2020 which means it’ll be the only major world economy to grow this year.

 It comes as a new study that found traces of coronavirus in US blood samples from December last year is adding to the growing evidence that the virus was circulating for months before China announced its existence, casting more shadows over the truth about the pandemic and fuelling suspicions of a cover-up by Beijing.

Claims the global outbreak began in a livestock market in Wuhan last winter have crumbled in the face of scientific evidence proving the virus was all over the Western world weeks and even months before China declared the first cases to the World Health Organization on December 31.

Research published on Monday revealed that 39 blood samples taken between December 13 and 16 last year in California, Oregon and Washington state had tested positive for Covid antibodies, meaning the people who gave them had been infected weeks earlier.

The evidence is the earliest trace so far of the virus on US soil, and a further 67 samples from between December 30 and January 17 tested positive in Connecticut, Iowa, Massachusetts, Michigan, Rhode Island and Wisconsin.  

It adds to a growing body of proof that the virus had spread thousands of miles outside of China long before its existence was acknowledged. Scientists in Italy say they now have proof the virus was there in September 2019, traces of it were found in Brazil in November, a French hospital patient had it in his lungs in December, and the virus was present in sewage in Spain in January.

With their veto of the EU budget and pandemic recovery package, Poland and Hungary have brought the European Union to one of its worst impasses in years. EU officials have long been in conflict with the governments of Poland and Hungary, accusing them of flouting the rule of law and anti-democratic tendencies.

In turn, officials from those countries accuse the European Union of aiming to punish them politically because they do not conform to the liberal ideals espoused by the the EU. At a meeting on Monday, Polish Prime Minister Mateusz Morawiecki and his Hungarian counterpart, Viktor Orban, reaffirmed their veto and are now waiting for a compromise proposal from Germany, which, until the end of December, holds the rotating presidency of the Council of the European Union.

The official reason put forth by the governments of Poland and Hungary for their veto is the Rule of Law Mechanism, which would give the European Union a tool for sanctioning violations of stated democratic principles by cutting aid more quickly than is currently permitted. This would only apply to violations of the rule of law that involve the misuse of EU funds — including irregular public tenders. In July, the governments of Poland and Hungary appeared to have agreed to the mechanism. Now, however, officials say it was changed from the provisions to which they’d originally agreed.

There have, in fact, been slight changes to the draft. The most important stipulates that the mechanism can be set in motion as soon as the serious risk of misuse of EU funds is identified; a previous version stipulated that the misuse must have occurred. A significant obstacle was included to enforcement, however: Sanctions require the agreement of at least 15 member states whose populations total at least 65% of the European Union’s overall.

‘New Soviet Union’

The governments of Poland and Hungary have argued that the Rule of Law Mechanism violates the Lisbon Treaty and undermines the very principles that it purports to enforce rather than strengthening them. Officials from the countries have not, however, specified which provisions of the Lisbon Treaty the mechanism violates. They also argue that the wording of the Rule of Law Mechanism is vague and unclear, which could ultimately make it a political tool to be used against disobedient member states.

The 14-page draft of the Rule of Law Mechanism clearly defines when and under what circumstances it can be applied. It seems unlikely that the European Union would use the mechanism as a political weapon — in recent years, the bloc has been very defensive and cautious in disputes about the rule of law.

Morawiecki has said the term “rule of law” is “propaganda” that reminds him of the Communist era. Orban has been publicly skeptical of concepts of rule of law, saying the mechanism would mean a “new Soviet Union.” He charged that it was invented as a punitive measure for EU member states that refuse to extend the right of asylum to displaced people. The statements are most likely aimed at domestic audiences as the mechanism has nothing to do with EU migration policy.

Critics say the two countries are opposed to the Rule of Law Mechanism because it threatens their corrupt and nontransparent allocation of EU funds. In Hungary, the misappropriation of subsidies is a major problem. In fact, Hungary heads the list: From 2015 through 2019, the European Anti-Fraud Office (OLAF) identified 43 cases of misappropriation of EU funds, representing 3.93% of subsidies paid to Hungary during that period. OLAF investigated 235 cases over those years across the entire European Union that amounted to 0.34% of all EU subsidies. Hungary’s proportion of misused funds was over 10 times the EU average — and the number of incidences that were not uncovered could be much higher.

EU funds are very often awarded to Orban’s relatives or their associates. Tenders for projects to be financed with EU cash are sometimes tailored specifically for them. Hungarian law enforcement agencies often do not implement OLAF’s recommendations — they do not launch fraud investigations.

In Poland, the system is less overtly corrupt. OLAF identified 22 cases of misappropriation of EU funds from 2015 through 2019, amounting to 0.12% of the money from the European Union.

Though Deputy Prime Minister Jaroslaw Kaczynski, the leader of Poland’s ruling Law and Justice (PiS), presents himself as a modest and incorruptible politician, there have been cases of suspected graft close to the party. ARMIR, the state agency responsible for paying out agricultural subsidies, has been repeatedly linked to corruption. As political control over the judiciary increases in Poland, so does the danger that such cases will be less rigorously investigated.

Funded by EU

Poland and Hungary have benefited enormously from subsidies since they joined the European Union in 2004. The funds are important to the economies of both countries. In 2018, payments from the EU accounted for 3.43% of the gross national product in Poland and 4.97% in Hungary.

The Finance Ministry has estimated that a quarter of Poland’s growth over the past half decade is attributable to EU aid. Thanks to funding from Brussels, 600,000 jobs have been created. And, following the country’s accession to the European Union, Poland has received foreign investment totaling over €200 billion ($240 billion) so far.

In 2019, Poland got €12.1 billion from the European Union and Hungary brought in €5.1 billion — making the countries, respectively, the No. 1 and No. 2 net recipients of EU funds. Poland and Hungary are also expected to remain in the top group of net recipients in the budget period 2021-27.

The coronavirus pandemic has brought a sharp decline in growth in both countries this year; estimates put the figure at 4%-8%. The European Union’s coronavirus recovery fund would compensate for a large part of these losses — with recipient nations able to repay indirectly through fees and taxes on carbon and financial transactions.

Prime Minister Orban said Hungary would take out loans on the international financial market if it did not participate in the reconstruction program. In the long run, this would place a much greater burden on Hungary’s economy than participating in the EU’s pandemic recovery plan.

This article has been adapted from German.