Macron's EU Agenda Meets Stiff Resistance

By Emre Peker and Stacy Meichtry Features Dow Jones Newswires

French President Emmanuel Macron's bid to revitalize the European Union is bumping into longstanding divisions over trade, with countries that depend on Chinese cash resisting his push to scrutinize foreign investments.

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Following Mr. Macron electoral victories on a pro-European platform, he received a warm welcome at his first EU summit in Brussels. His ambitious agenda, however, quickly got bogged down as some EU governments attacked Mr. Macron's proposal to screen the flow of global capital into Europe.

"Poland will protest against protectionist measures," Prime Minister Beata Szydlo said Friday, as the two-day gathering of EU leaders ended.

The French president also drew ire for implying Eastern European countries were treating the bloc like a "supermarket" by tapping its benefits without upholding its democratic values.

"His start has not been very promising," said Hungarian Prime Minister Viktor Orban, who is in a dispute with the EU over his migration policies and crackdown on critics. "He thought yesterday that he could kick the central European countries. This is not how it works here."

The sparring illustrates the hurdles that Mr. Macron faces in uniting a bloc that has grappled for decades with bridging competing priorities. To overcome the challenge, the French leader's top goal is to forge common policies with German Chancellor Angela Merkel to revamp the Franco-German engine that has traditionally driven European reforms.

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At stake is the EU's ability to champion free trade in response to U.S. President Donald Trump's protectionist policies, without exposing European workers to what populists call "savage globalism." That push comes as the bloc also struggles to pry open China's market for European businesses, just as Chinese investments in EU companies hit a record $48 billion last year, according to data provider Dealogic.

France and Germany have long sought to block Chinese access to strategic industries, but some EU members have stymied that effort to safeguard billions of dollars from China.

"Attachment to free trade and multilateralism does not mean naiveté, " Mr. Macron said. "Fair competition is preferable to the law of the jungle."

Asked about Mr. Macron's tough line, a Chinese Foreign Ministry spokesman noted the "surge in protectionism" that the EU and many countries are facing, but said EU leaders recently pledged to cooperate with China. "We hope the EU can offer a sound and unbiased environment for Chinese companies," the spokesman, Geng Shuang, said at a daily briefing Friday in Beijing.

Starting with a suggestion that the EU respond to Mr. Trump's "Buy American" policy in kind, Mr. Macron has emerged as the outspoken champion of shielding European industries from unfair competition.

That cause is also finding traction in Germany, where Chinese acquisitions have hit a record and fueled concern in Berlin that the country is losing control over its most competitive and advanced companies. At the same time, European investments in China have declined for four years due to obstruction from Beijing, according to a joint report by Mercator Institute for China Studies and Rhodium Group.

"In times where protectionism is at the top of the agenda for some countries, a clear commitment to free but rules-based trade is very important," Ms. Merkel said during a joint press briefing with the French president.

Mr. Macron's election has contributed to the momentum slowly building behind a Paris-Berlin proposal, also supported by Rome, for the EU to scrutinize foreign investments. Its evolution could serve as a bellwether for Ms. Merkel and Mr. Macron's ability to shape policy in Brussels.

The effort got a boost Friday, when EU leaders said they welcomed an initiative by the bloc's executive -- the European Commission -- to "analyze investments from third countries in strategic sectors."

Resistance from many EU members forced France and Germany to significantly water down the commission's directive, which initially sought to lay the groundwork for a bill.

"Some feel this should be done in a European scale and others feel this is a national competence," an EU diplomat said. "We're not ready to jump to a conclusion that we need new legislation."

But Friday's summit put the issue of screening foreign investments firmly on the EU agenda.

A similar effort fizzled out in 2011, and the success of the current initiative is far from certain. While conditions are improving, economic disparities within the bloc and different global trade links create difficulties for developing a common agenda on foreign investments.

"There's a push by Macron, there's resistance by some members," an EU official said. "Portugal, Greece, others -- they need investment for growth, they're eager to get Chinese money to get themselves out of the water."

There are other hurdles for Mr. Macron as he proposes deeper integration to overcome the EU's crisis-marred, decadelong slumber. The French president has criticized European countries for not taking refugees and accused them of "social dumping," or sending cheap labor, to Western Europe while luring away its manufacturers with lower wages.

"We differ in our opinions about many matters," Ms. Szydlo, Poland's prime minister, said. "But being open to dialogue and trying to find consensus is a good prospect."

Valentina Pop and Julian E. Barnes in Brussels and Charles Hutzler in Beijing contributed to this article.

Write to Emre Peker at emre.peker@wsj.com and Stacy Meichtry at stacy.meichtry@wsj.com

(END) Dow Jones Newswires

June 23, 2017 14:59 ET (18:59 GMT)