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Beauty Pageant on Ice: How China and the Eu Compete for the Arctic’S Resources

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Beauty Pageant on Ice: How China and the Eu Compete for the Arctic’S Resources China Goes Global 2013- September 25-27, Bremen, Germany BEAUTY PAGEANT ON ICE: HOW CHINA AND THE EU COMPETE FOR THE ARCTIC’S RESOURCES Reinhard Biedermann Department of Global Politics and Economics Tamkang University, Taiwan (R.O.C.) [email protected] ABSTRACT • Purpose: This paper compares China’s and the European Union’s economic diplomacy towards the Arctic region with focus on Greenland. The Arctic, due to climate change, has become the new frontier on intense global competition for resources and raw materials like rare earth elements. The paper gives an innovative insight in the interaction of competition for resources between the EU and China on democratic third markets. • Design/methodology/approach: The exploration is based on rational choice analysis and comparison of economic diplomacy along a framework that highlights the external situation of the Arctic for the EU and China, actor recognition, governance and diplomatic instruments, the role of norms in a democratic environment, sector interests, and negotiation results. • Findings: While China’s government supports its state-owned corporations, looking for ‘deals’, the EU is a multilevel governed, liberal market economy, that wants to establish a common floor of rules, including rights of indigenous people, environment protection, and democratic values. Cooperation between China and the EU on Arctic matters would be promising for both, but is currently not in sight due to China’s internal and external economic policy on resources. • Keywords : China, EU, economic diplomacy, Arctic region, strategic resources, rare earth elements 1. INTRODUCTION Over centuries the North Pole has been mystified, once upon a time known by children being the workshop and home of Santa Claus, that even has a Canadian postal address (“HoHoHo”). Recently, however, the North Pole has been symbolically demystified when in August 2007 the crew of two mini submarines fixed a Russian metal National flag on the seabed deep under the sea just less than two miles away from Santa Claus’ home. I The Arctic region around Arctic Circle has become an arena for geopolitics as climate change makes the region navigable and the abundant resources like hydrocarbons and minerals accessible. The Arctic icecap today is less than half the size what was measured between 1979 and 2000 during Arctic summer. The accelerating Arctic melt is seen as an opportunity for access to resources by many nations. II Experts of the U.S. Geological Survey (2008) estimated Arctic’s share on gas and oil on world reserves to reach 30 and 13 percent, respectively, while the huge 1 island of Greenland might possess ten percent to one third of global rare earths elements (REE) 1 and many other resources, like uranium, gold or iron ore. The most important political player in the Arctic are Russia, the USA, Canada, Denmark (via Greenland), as well as Norway and Iceland as Arctic littoral states with large sovereign rights of the Arctic’s resources in deep sea. Finland and Sweden as European Union (EU) members also have Arctic territory, but are land-locked countries regarding the Arctic sea. China and the EU show keen interest in the Arctic region, especially its resources. China has been the most active political player in recent years, although it has no geographical or historical ties as “Arctic outsider”. The EU, an Arctic player through its Arctic member states, has formulated an Arctic strategy in 2008 for the first time, as well as a “Raw Materials Initiative” to protect the EU’s interests for resources globally, also trying to find answers on China’s economic diplomacy on resources (Biedermann 2011). Of special interest for the EU are the REE which are crucial for all high tech industries of 21 st century. Although REE are not that rare on earth, mining is only economically in a few places outside of China. While China claims that its own resources on REE are depleting fast to justify export restrictions, it discovered Greenland as a new potential supplier. The EU is entirely dependent on imports for 14 of the 17 REE and feels concerned about what happens in its vicinity the Arctic, where China has become a “far more aggressive player” III . China is forcefully claiming its natural right being present there as a global player. Since 2012, the EU and China are in a World Trade Organization (WTO) dispute settlement conflict on access to REE from China, which still holds a monopoly of the elements. The conflict on China’s REE works as a catalyst that speeds up resource competition for the Arctic’s resources. The paper analyses and compares China’s and the EU’s economic diplomacies towards the Arctic region, with a main focus on Greenland. It recurs on the concept of institutional competitiveness and rational choice analysis on economic diplomacy. The EU and China compete on Greenland’s resources not only using their foreign economic diplomacy, but also in representing their domestic institutional setting and policies they follow towards the Arctic region politically and institutionally. Different to many autocratic countries where China heavily invests, the Arctic consists mostly of progressive democracies. Therefore, the government would have also to consider the interests of civil societies. However, such concerns do not fit to Chinese diplomatic traditions that are exclusively focused on state-to-state relations. This paper proceeds as follows. Next section will introduce the analytic framework to analyze and compare the economic diplomacy of China and the EU towards the Arctic region. The main part of the paper will analyze the different aspects of overall and embedded economic diplomacy and its instruments, actor recognition, policy 1 Rare earth elements (REE) are a group of 17 metals (as classified by the British Geological Survey) like neodymium, lanthanum, and another group of raw materials like indium, germanium, magnesium, beryllium, antimony, or niobium. Most of the REE are attached to a certain place, regional and not reproducible. They have similar chemical properties divided into the light, middle, and heavy REE. Especially the heavy ones, which are needed in the defense industry, are mainly found and mined in China, but Greenland also has huge untapped resources. REE are used in computer, DVD-player, semiconductors, batteries, renewable energy technology, and so on. 2 papers, norms, concrete steps and preliminary negotiation results. The conclusion argues that cooperation between the EU and China on getting access to Greenland’s resources would be promising for both because of the capital- , technology-, and labor intensity of the future projects. However, due to China’s internal and external raw materials diplomacy, cooperation is not in sight. 2. ECONOMIC DIPLOMACY: THE ANALYTICAL FRAMEWORK This chapter outlines the analytical framework to structure the elaboration on competition between the EU and China for the Arctic resources. The concept ‘nations compete’ is contested and some perceive it as a ‘dangerous obsession’, discussing whether nations or only firms can compete (Krugman 2006). However, Porter (1998) identified the national (and the institutional) dimension as relevant to explain national competitiveness. Regional or national institutions may shape competitiveness of firms abroad, and help or hinder them in competition with firms of other countries. Competitiveness of nations includes new levels of technology, the advantages of large-scale operation, further measurements (dynamic instead of static) and new political considerations like normative values (environmental protection, accountability, etc.; see Pedersen 2010). Since many players operate on micro- and macro level, strategic interaction of economic and political players and the level of complementary of business and politics as well as the interaction between institutions have become central to the explanation of comparative advantages (Crouch 1005, p. 46-73; Hall and Soskice 2001, p.17; Amable 2003, p.56-66; Kohler-Koch 2006). In a multipolar political economy, countries are seldom able to enforce results, so they have to negotiate and adapt to the specific situations. Rational approaches to economic diplomacy perceive sector interests as a key independent variable (Woolcock 2012, p. 26). Other interests like environmental or human rights might be articulated as highly relevant in policy papers, but are de facto less important than economic ones. However, such norms or values might help to promote economic goals, when they fit to the specific situation, like in a democratic environment. The EU economic diplomacy is operating in a multilevel system, although it plays a significant role in international trade and policy (Woolcock 2013). In recent years, the EU’s interests, actor characteristics or actorness, and capabilities in the Arctic region attracted greater scholarly attention (Pieper et al., 2011; Hossain 2010; Myrjord 2003, Ojanen 2000). Pieper et al. (2011) argue that European transports companies are affected by maritime policy in the Arctic region, environmental issues are related to the EU’s policy in climate change, and the EU also has the interest to have access to new energy sources. However, the degree of EU actorness varies. Pieper et al. conclude that the EU only plays a limited role as an international actor in Arctic governance, despite the region’s increased importance. However, the conclusion the EU being a limited actor in the Arctic region resembles earlier works from Myrjord (2003) and Ojanen (2000). Recently,
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