For some Euro watchers, this arrangement between Europe and China is only the latest example of “the scramble for Europe”. Borrowing the phrase from the 19th century competition between European states to acquire colonies in Africa, skeptics use the term broadly to argue that the surge in Chinese acquisitions of European companies and related investments will undermine European competitiveness. In the words of a French official, “It’s a real war, with highly subsidized companies coming to open markets with unusually low prices and undercutting the competition.” Moreover, this may lead to a split EU policy on China, with “cash-strapped deal-seekers”, like Portugal, Italy, Greece, and Spain (PIGS), simply seeking investments, while “frustrated market-openers” like Germany and France seek a united European consensus to protect domestic firms both in Europe and abroad in China.

Especially in the eyes of countries like Germany and France, China’s investment patterns in Europe present a concern. A disproportionately large percentage of China’s global investments are in Eastern Europe (10%) and PIGS (30%) – the traditionally weaker EU economies. Combined with the fact that Chinese firms have been beating out European firms for large public-sector contracts in Bulgaria, Croatia, Greece, Poland, Romania, Serbia, and Slovenia, this leads wealthier EU states to eye China’s intentions warily.

Undoubtedly, this arrangement has real benefits for weaker EU states, which can now obtain infrastructure at fire sale prices. However, the lack of transparency of many Chinese corporations is a cause for concern. Although EU law forbids state-run companies from bidding for public contracts, many Chinese multinationals that bid for these contracts have close ties to government, maintain a shadow party structure, and most importantly, obtain government subsidies, which give them a further leg up on their European competitors. Furthermore, Chinese firms can keep costs lower than their European competitors by importing low-cost laborers from China and paying them significantly less.

Why is this a problem for European unity? While poorer EU members see only the benefits of discounted costs, wealthier EU members see anti-competitive practices as harmful for domestic firms. Furthermore, when European firms from wealthier nations go abroad, they are frustrated by China’s lack of reciprocity. While European firms are nominally allowed to bid for projects in China, they rarely win, as the rules are skewed almost always to favor domestic firms. Therefore, the vast majority of China’s internationally known mega-projects such as the Three Gorges Dam, Olympic stadiums, and bullet trains are administered instead by the National Development and Research Commission (NDRC). So while the “market-openers” cry foul and attempt to overhaul existing EU legislation, the “cash-strapped deal-seekers” do not see it in their interest to comply with any policy to change the status quo.

To argue that China actively seeks to weaken the EU by reaching agreements with individual member states to create a divisive “China lobby” within the union may be a stretch. China has little to gain from the dissolution of the EU. Nonetheless, Europe must put its economic house in order, encourage China to open up its market to foreign firms, and finally mitigate the unfair advantages that Chinese firms have while bidding in Europe. To achieve the first goal, the EU must evolve beyond its original intent and become a monetary and a fiscal union. Though this would most likely face serious resistance from many EU states, the debt crisis in Europe today is a direct result of a failure on the part of the EU states to coordinate fiscal policy. It is important to remember while China demands certain conditions for its purchase of euro bonds, this originated from a lack of European coordination that precipitated this disaster. By allowing each state to pursue its own interest independently, each state ended up collectively worse off than if they had coordinated their policies together. Moving towards a fiscal union will benefit the EU in the present by giving investors confidence in EU bonds, and will benefit the EU in the future by making it easier to head off the type of debt crises that we see today, reducing the need for the type of outside intervention that Europe is soliciting from China now.

In addition, more regulation will be required to prevent foreign firms from using subsidies to gain unfair advantages in bidding. Since there already exist a myriad of regulation in China, the European Financial Stability Fund suggests that the EU should reciprocate, especially in fields such as defense, critical technologies, media, and education.

While Chinese investments have exposed weaknesses in the EU’s structure, these are all manageable issues that, in time, can be resolved. Although the alarmist reports in the media have painted a portrait of newly ascendant China righting past wrongs by reverse-colonizing Europe, the truth is that China is neither belligerent nor friendly – it is simply in pursuit of its own self-interest, and Europe should respond accordingly by strengthening existing ties between states.

A: It is necessary to differentiate between tax offenses which represent a “minor offense” and are collectively known as “tax evasion,” and tax offenses which are collectively known as “tax fraud,” considered criminal offenses under Liechtenstein law and pursued appropriately by our courts. In the case of tax fraud offences, we have been assisting foreign countries in the enforcement of related laws for many years. With the so-called “Liechtenstein Declaration” of March 2009 Liechtenstein recognised the standards set out by the OECD for the exchange of information related to tax evasion with foreign tax authorities upon request (i.e. such information is not provided automatically). Any third-party state can now sign a bilateral agreement with Liechtenstein on the exchange of tax-related information. Only specific requests for specific information on a specific person are covered by these agreements.

Q: Liechtenstein has historical and cultural ties to Germany. As foreign minister, could you talk about your relationship with Angela Merkel’s government?

A: Liechtenstein has had an excellent relationship with Germany for many decades. As the question suggests, that relationship is founded on a common language and a similar cultural-geographical position in the European landscape. It is reflected in a wide range of joint initiatives carried out by the two countries and a close cooperation in areas such as justice and environmental protection.

At a certain time during Chancellor Merkel’s tenure, the relationship between our countries was clouded by an unusually aggressive stance towards Liechtenstein by the incumbent German Finance Minister. The discussions were on a specific incident – the criminal sale of data to the German authorities by a Liechtenstein citizen – which was the basis for a broad campaign against “tax evaders” by German authorities. With the above-mentioned policy change the dispute eased to a large extent. It has been possible to arrive at an agreement on tax-related data, and a double taxation agreement is set to be concluded in the near future. We are looking forward to continuing the regularly excellent relationship with Germany.

Q: Liechtenstein is a member of the European Economic Area (EEA) and the European Free Trade Association (EFTA) but not the European Union (EU). What is the relationship between Liechtenstein and the EU and why has the country not joined the EU?

A: Liechtenstein has now been a member of the EEA for 15 years, and that membership has proved to be an especially suitable model for Liechtenstein’s integration into Europe, especially  given the size of the country. Its EEA status entitles Liechtenstein to pursue and benefit from all four “freedoms” – freedom of persons, freedom of goods, freedom of capital and freedom of services – and this in turn makes Liechtenstein an outstanding environment for both residents and businesses. Liechtenstein is obliged to grant those same freedoms to other EEA member states, which include all 27 EU countries and not just Liechtenstein, Iceland, and Norway. The EEA does not, however, include political cooperation, which is restricted to EU countries, nor cooperation on tax-related issues. The latter requires the adoption of other legal instruments, for example the Schengen Agreement or the Anti-Fraud Agreement. Liechtenstein has already given the green light to both agreements, while EU ratification is still outstanding.

Given the advanced level of Liechtenstein’s integration into Europe, an EU membership is currently not discussed in Liechtenstein. For its part, the EU has never made a statement on the way in which it would handle accession requests from small states.

Q: The monarchy of Liechtenstein has significant amounts of power, even the constitutional authority to veto (almost) any law. How is Liechtenstein’s government consistent with representative democracy?

A: Liechtenstein is a constitutional, hereditary monarchy on a democratic and parliamentary basis. The power of State is embodied in the Reigning Prince and the People and is exercised by them in accordance with the provisions of the Constitution (article 2 of the Constitution of 1921). The Constitution stresses that the head of state (the Prince), the government, and the parliament are to work together in adopting laws. The right of Liechtenstein citizens to request a referendum and to introduce a bill is comparable to the one of Swiss citizens.

Though it is true that every law and significant element of foreign policy requires approval from the head of state, it is nevertheless extremely rare that the Prince exercises his power of veto. The contents of new laws are agreed with him well in advance. This situation is comparable to countries that have a president as their head of state – just think of the level of power and status given to the President of the United States. The only significant difference is that Liechtenstein’s head of state is not elected, but defined by the right of succession – the so-called “House law” – of the Liechtenstein Royal Family. The citizens of Liechtenstein passed the country’s constitution by a significant majority, and under specific circumstances, the constitution even allows for the removal of the head of state on the initiative of the people.

Any movement toward reduced emissions cannot ignore the two largest emitters in the world: China and the US. Both industrial powerhouses produce a combined 40% of all greenhouse gases. If neither country is at the heart of climate change efforts from the beginning, global attempts to reduce emissions will be useless. By taking the lead, however, tangible US and Chinese carbon reduction policies will provide the international community with a workable goal. Of the two nations, the US, rather than China, is best positioned to take the lead on climate change. China, then, will do its best to follow the United States. Underdeveloped nations similarly turn towards the US for tangible greenhouse gas emissions reductions, realizing that, without the US, any emission reductions on their part will be a drop in the bucket. Without US leadership, an international climate change movement is impossible.

If the U.S. leads by example, the rest of the world will follow. The EU has already pushed Washington to set clear emissions reduction targets for the next few years and has pressured President Obama to take a more hard-line approach to climate change; they are on board. More importantly, China, surprisingly to some, has also shown its willingness to cooperate. Just a day after Obama announced concrete targets on emissions reductions, President Hu Jintao followed up with China’s own pledge. In the coming years, China will have to walk a fine line between environmental protection and economic growth. China has realized, however, that the two are not mutually exclusive but are, in fact, intertwined; without limiting the effects of climate change now, China stands, as all countries stand, to limit long term growth. As the world’s single largest emitter of carbon, China recognizes that it will shoulder much of the blame for—as well as the negative natural effects of—climate change if it does tangibly limit greenhouse gas emissions. The U.S. can expect an increasingly cooperative partner in Europe and China on the issue of climate change.

In particular, U.S. leadership on climate change has the potential to capitalize on China’s increasing willingness to cooperate on this particular issue by creating a precedent for further opportunities for more extensive bilateral cooperation in the future. The President’s recent tour of Asia produced little progress in Sino-American relations, as both countires failed to agree on issues ranging from human rights to China’s consistent devaluation of its currency. Obama, however, did make small breakthroughs on climate change. The series of practical measures announced during Obama’s meeting with Hu Jintao —including an electric-vehicles initiative and energy efficiency plan—suggest that emissions regulation may be a bridge towards stronger alliances with China. Leadership, however, must come first from the U.S., as Hu Jintao will likely be unwilling to act without assistance and promises from developed countries. There is strong public sentiment in China that the U.S. is urging its economic rival to embrace clean energy only as a means to undermine the Chinese economy. If Washington takes the first step in this regard, however, it can reassure the Chinese by debunking any suspicions that the U.S. is trying to gain an economic advantage over their country. Strong U.S. leadership on climate change will likely result in better relations between the U.S. and China.

Another concern that other nations have expressed is that unlike China, a relatively young and still developing industrial power, the U.S. has historically emitted more total climate-altering gasses than any other nation in the world. Therefore, the U.S. has the heavier obligation to take the lead on climate regulation especially since underdeveloped nations, which emit the least carbon, would receive the brunt of climate change’s devastating effects. If the worst offender of climate change is unwilling to step up as the leader, it would be difficult to justify the participation of anyone else.

Obama, as well as the Danish Prime Minister Lars Lokke Rasmussen, agreed in November that no binding follow-up to Kyoto would be reached in Copenhagen. In reality, what is to be the upcoming failure to act in Copenhagen is just another symptom of general inaction by all countries involved, none of which is willing to make the first move. The U.S. Senate has bound Obama’s hands, refusing to pass the cap-and-trade program unless China and other developing nations make a commitment, too. China and India, on the other hand, will only institute broader and more drastic measures if the U.S. promises substantive emissions reductions. Mutual hesitancy has certainly delayed any prospect of a binding international agreement.

For the U.S. to take leadership, Congress should not make legislation contingent upon the actions of other countries, but instead push the cap-and-trade system through, knowing that other nations will then jump on board. Doing so would demonstrate to the world that the U.S. is serious and committed to combating climate change. The Senate, however, has been particularly resistant to addressing climate change. Obama, already entrenched in difficult battles on health care and Afghanistan, may lack sufficient political capital to persuade reluctant senators. As a result, liberals run the risk of having to water down the current bill even farther than it already has been watered down in order to pass something.

Any reasonable carbon emissions bill that emerges from Congress will provide the U.S. with momentum that will then lead to a global emissions reduction agreement. Copenhagen will test how receptive the world is to American leadership and a global initiative against greenhouse gas emissions, but environmentalists should not expect much. At best, as former vice president Al Gore notes, “a very significant framework … can still be completed.” Instead, policymakers should place their hopes on the US and push for American leadership in a warming world.