A climate of change?

What does the future look like for EU-China trade? Has the recent APEC commitment on climate objectives between the US and China pushed the EU further down the pecking order in terms of setting the global agenda for climate action? In this interview for EuroBiz magazine, Interel's CEO, Fredrik Lofthagen gives his take on the issues and explains why Interel decided to open an office in China....

Why is Interel launching in Beijing now?

We were a European agency, and didn’t realise that we were going to take this step and become global, but that was more to do with necessity that anything else. This is not empire building, our clients expect us to be here.

So will you be assisting Chinese clients investing abroad as well as foreign clients investing in China?

Helping our existing clients, wherever they may come from, in China is our number one concern. But it’s really come to the fore that outbound business is also really starting to happen. There was also a realisation on the part of Chinese companies, particularly SOEs, that you really need good advisors for the markets in which you are going to invest. You don’t just invest in a company when you make an investment decision, you also become part of that community. If you don’t engage with stakeholders in the environment in which you’re investing, the chances are your business isn’t going to be particularly successful.

How much impact will the EU-China Bilateral Investment Agreement have on your business?

I am hoping it will have a large impact. There is currently a huge imbalance in the relative flows of trade between the EU and China, so it is well within the EU’s interests to get its act together.

Do you think that the EU is placing as much importance on China as it should?

My assessment is that, as important China is, TTIP [Transatlantic Trade and Investment Partnership] is an even higher priority and therefore attracts some of the focus that might otherwise be placed on China.

Do you think the recent APEC commitment on climate objectives between the US and China has pushed the EU further down the pecking order in terms of setting the global agenda for climate action?

If you look at what they’ve agreed, I think the EU certainly remains more ambitious. Whether they will be the ones leading the debate and holding the moral high ground, I don’t know. It could depend on who is actually going to be negotiating this in Paris. Who’s going to represent Europe? Is it going to be Šefčovič, Vice President for Energy Union, or any of the seven commissioners who have an energy responsibility?

The environment certainly seems to have been downgraded as an EU concern. Without wanting to poo-poo the Maltese commissioner, it’s now nestling alongside maritime and fisheries and other stuff, so it doesn’t seem to have the same priority that it did. I think energy and climate change does go hand in hand, so I think the argument that Šefčovič would make, is that if we make the right ‘smart’ investments from an energy standpoint, it’s going to not only help from a climate change standpoint, it’s also going to create jobs and growth and opportunities……

Why did you say the EU’s 2030 climate targets will be the new coalition’s greatest test?

In part it’s to do with complexity of the situation. The European People’s Party (EPP) lost out to the tune of 50 something seats; the socialists were more or less the same, and together with the liberals did not have enough for an absolute majority in parliament, hence the formation of the grand coalition. The socialists have a lot more say now than may have been expected, with the addition that you have a socialist president of the European Parliament in Martin Schulz. The socialist group, along with the greens—who form a coalition in and of themselves—wanted Europe to be more ambitious than the heads of member states had come to agree. So there is going to be a bit of banter back and forth on this subject, and that’s going to be challenging. Also, in terms of this being a ‘smart strategy’, it needs to be reconciled with a lot of other things—jobs, growth and competition, the TTIP—so it will be difficult to navigate.

What impact do you think Juncker’s ambition to make the EU a world leader in renewable energy could have on EU-China investment relations?

With the EUR 300 billion investment package that Juncker has earmarked—there are questions about where that money is going to come from—if you have a target for renewables, new technology, SMEs, all of that kind of thing on the one side, and you have a wad of cash on the other, there is going to be a connect. So that is going to generate companies, new technologies and new opportunities, so that is absolutely an opportunity for EU-China.

What do you think is the most effective way for EU companies to engage with China on their air quality crisis?

I don’t know to what degree China is investing in solving the problem, but I do understand that it is one of the priorities for the Chinese Government. If you put that next to investment in clean air technology, that seems like an opportunity waiting to happen.

My impression is that the Chinese are being quite pragmatic about it, because there is a desire on the part of the Chinese, from the government all the way down, that they will really invest in Europe and buy up technology to import.

Do you think that China can learn a lot from the EU emissions trading system (ETS)?

With the economic downturn Europe now has a surplus, so in reality the trading mechanism isn’t working, it’s become distorted. The starting point was simply not correct. In terms of the European experience, I’m pretty sure that China, and any other country or region that elects to introduce an ETS can learn from the European experience, because mistakes have been made along the way, so there is an opportunity to learn from them.

Commissioner Caňete seemed quite a controversial appointment at the time didn’t he?

From a parliament standpoint he certainly was, but he survived, where one or two didn’t. Any previous experience he had I’m sure was useful, and having it connect between business and politics is never a bad thing I suppose.

Is there a lingering perception that he isn’t squeaky clean?

I don’t think so. First of all he passed, and the European Parliament has been very clear about their requirements and the standards that they expect. There were a few that weren’t able to get through. I have absolutely no doubt that we have a college of commissioners that have a huge amount of integrity.

Interel’s China office offers international companies, industry associations and professional societies a window to understanding the mysterious maze that comprises public affairs in China. Our bilingual, multi-cultural teams enable us to deliver solutions that pair extensive local expertise with international understanding that are communicated effectively with your teams, whether they are local public affairs/government relations functions working in Chinese or head offices based abroad.

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