China EU

The Emperor’s new clothes – Corona reveals fundamental flaws in EU China relations.

Europe is China’s largest trading partner. But in recent months, relations between the two  have taken a definite downward turn. Corona has significantly turned the tide of public opinion in Europe. On top of this comes the worsening situation in Hong Kong and a growing awareness of aggressive Chinese disinformation campaigns aimed at Europe in wake of the pandemic. The meeting this week between EU chiefs, President Xi Jinping and Premier Li Keqiang brought little progress on stalled trade talks. It did show a growing firmness of approach from the EU however. Ambassador Zhang Ming, Head of the Chinese Mission to the EU, repeatedly highlighted the importance of multilateralism in EU/China relations at an online event last week. But his comments also came with warnings of Chinese capital ‘voting with its feet’ if there was ‘backsliding’ from Europe on its commitments to China.  

As Ambassador Zhang Ming pointed out, the relationship between China and Europe has been over 40 years in the making. During this time China has worked on reforming and opening up its economy. Indeed the Ambassador went so far as to say that China ‘had learned a lot from our EU friends on the value of the market economy’. To the extent that ‘we often see the EU as our Professor’ in this regard. However the pandemic has caused many in Europe to re-examine the Sino-European relationship. The EU wonders whether the student has not long surpassed the teacher in economic growth, geopolitical strategy and military strength.  

Ambassador Ming warns of ‘active consequences’ from Beijing in response to tougher line from the EU.

In a post-corona world, containment by the EU has involved a focus on foreign direct investment. A White Paper, released in June this year is designed to deal with ‘the distortive effects caused by foreign subsidies in the Single Market’. No direct reference to China is made. But the initiative has developed out of a growing concern by the EU at aggressive take-over strategies of vulnerable European companies by China, post-corona.  The EU is increasingly mindful of the influence of state-sponsored enterprises from China, like Huawei, and the need for foreign direct investment screening. When asked about China’s response to such measures, Ambassador Ming spoke of discussions he had had with Chinese investors in Europe. He commented that he could ‘feel their anxiety at these changes’ and warned of ‘active consequences’ for the EU.

‘We have to realise that we do not share the same values’ – EU Chiefs on China.

European Council President Charles Michel and European Commission head Ursula von der Leyen’s press release after this week’s EU-China virtual summit suggests that Europe is divesting itself of previously held illusions regarding Sino European relations. ‘We have to recognise that we do not share the same values’ and that the EU will engage with China in ‘a clear-eyed’ manner, ‘robustly defending EU interests and standing firm on our values’. Strong words indeed.

Dr Dennis Sammut, Director of LINKS Europe, recently pointed out that corona has put a spotlight on China in a manner that is unprecedented. ‘People have woken up to the fact that China is not merely an economic power, but a very strong geopolitical power in its own right’.’ The Sino European relationship has been categorized by both competition and cooperation but lately the word ‘containment’ has come up more frequently, he notes.  

‘There is no fundamental conflict of interest between China and the EU’ – Ambassador Ming

President Michel and President von der Leyen also accused China of leading a disinformation campaign around the coronavirus epidemic. Von der Leyen said at Monday’s meeting: “We’ve seen cyberattacks on computing systems, on hospitals, and we know the origin of the cyber attacks.” ‘Some noises of the battle of narratives’ were  acknowledged by Ambassador Zhang Ming but insists that ‘there is no fundamental conflict of interest between China and the EU’. Although the EU and China have different political systems and ideologies, ‘we should not see each other as systemic rivals’. Instead he suggests interaction be based on ‘a vision of mutual success’ rather than ‘a knock-out match that allows only one winner’. He reiterated the need for Sino European co-operation on the green economy and the digital economy. ‘China remains firmly committed to opening up.’

‘What the Chinese are able to do in Europe, the Europeans are unable to do in China’ – Dr. Dennis Sammut.

But China’s lack of openness when it comes not only to its political system but also its markets, is precisely what the EU is concerned about. As Dr. Sammut states very clearly, ‘what the Chinese are  able to do in Europe, the Europeans are unable to do in China’.  Over time, this lack of reciprocity has ‘poisoned trade relations’. China’s standard response to requests for greater market access has hinged on its increasingly dubious categorization as a developing economy. As Director of CEPS, Daniel Gros, asked Ambassador Ming, ‘If China is so strong, why does it not open up more quickly?’ He also pointed out the need for concrete implementation of agreements already reached, for example, in the World Trade Organisation, rather than more declarations of general principals. Unfortunately, sweeping statements regarding the direction of China’s development, rather than its speed, defined Ambassador Ming’s response.

His frequent references to multilateralism and the need to ‘dispel external influences’ suggests a desire to draw distinctions between the EU/China relationship and that of the US under Trump. Ambassador Ming made it clear that Beijing is ‘looking for China and the EU to jointly uphold multilateralism in order to counter unilateralism’. Cooperation on fighting the pandemic is clearly part of such an approach. But it is also designed to create further distance and decoupling from the US which works to China’s advantage.

‘Multilateralism is the common language of China and the EU’ – Ambassador Zhang Ming.

‘Multilateralism is the common language of China and the EU’ says Ambassador Ming. However, China’s own initial handling of the pandemic remains shrouded in mystery in spite of calls from various governments for more information. As China rings the praises of multilateralism, its own approach in Europe has focused on building bi-lateral relations with individual EU member states. This includes the involvement of countries like Italy and Hungary in China’s Belt and Road Initiative, its ’17 + 1’ grouping with central and Eastern European nations as well as extensive trade agreements with the Eurozone’s largest economy, Germany.

Corona has played an important role in revealing the uncomfortable truth regarding China’s long awaited new clothes. Increased openness, transparency and respect for human rights appear to be illusions that both the US and now Europe have waited for in vain. As Mark Leonard recently pointed out, under President Xi Jinping, China has become more authoritarian. Xi’s signature policies like Made in China 2025 and China Standards 2035, have not only forced European companies out of the Chinese market, but have also exported China’s model abroad. The EU will have to be increasingly assertive of its own model in the decades ahead.  

transatlantic relations

Transatlantic relations: Where to from here?

Crises can help put things in perspective. They often highlight weaknesses and problem areas with alarming clarity. The Transatlantic relationship is no different. A key feature of the post-war world, it has remained relatively unchanged for over half a century. Yet the Trump presidency has created divisions that few imagined possible a decade ago. The pandemic has further widened and spot-lighted the cracks in this fundamental alliance. I recently attended an event hosted by the  Brookings Institute. A variety of experts from both sides of the pond were invited to speak on how and where Transatlantic relations may be rebuilt.  

As with all struggling relationships, both parties have erred. Trump’s devil-may-care approach sits poorly with a union that is built on the need for constant compromise between 27 member states. However, America’s concerns regarding defense spending, the digital economy and most of all China, are real issues on which cooperation would benefit both sides. More than one expert at this event agreed that a win for Joe Biden in the upcoming US presidential elections would clearly impact Transatlantic relations. However, Fiona Hill, senior fellow at Brookings, points out that no matter who is sitting in the White House come January next year, it will be impossible to put the clock back to the old Cold War framework that defined Transatlantic relations for over half a century. ‘We are in a whole new era, that is different even from the 1990s or even the 2010s’ she says.  

What happened?

The issue of defense spending has been a sore point for decades. The US accounts for nearly 70% of total NATO defense spending. In terms of GDP, the US spent approximately 3.4% on defense while the average for European NATO countries was 1.55%. Germany, France and Italy all spend less than 2% of their GDP on defense spending. Last week, Germany received formal notification from the US that it would withdraw 9500 American troops stationed there. The news was greeted with mixed responses. Trump pointed out that there would still be 35 000 American troops stationed in Germany, the highest number in Europe. But it is the manner in which the decision was reached and relayed to German officials that highlights once more, the damage caused by a consistent lack of diplomacy from the current US administration.

Ivan Krastev, founding member of the European Council  on Foreign Relations and chairman of the Centre for Liberal Strategies in Sofia, notes sagely that Transatlantic relations are complex. Some European leaders, like Hungary’s Victor Orban are betting on Trump’s re-election. While for a country like Germany, the election of Democrat, Joe Biden, could put them in an awkward position with regards to China.

Germany is China’s biggest trading partner in Europe and has been reluctant to criticize the superpower for human rights violations. This includes issues like the Uighur Muslim detention camps and the ongoing pro-democracy protests in Hong Kong. Amanda Sloat, Robert Bosch senior fellow at Brookings, points out that China is going to remain a difficult issue for Transatlantic relations, irrespective of who is in the White House. The Democrat’s are not expected to significantly alter the US position on China, although they might change their rhetoric.

Greater commitment to the multilateral order is important for Europe.

From the European side, Célia Belin, visiting fellow in the Center on the United States and Europe at Brookings and previously an advisor on US affairs in the French foreign ministry, highlights the need for a coordinated global approach to the pandemic, particularly in the development and distribution of a vaccine. This raises the issue of American funding of the World Health Organisation (WHO) and other multilateral institutions such as the World Trade Organisation (WTO) and the International Criminal Court (ICC). The latter has recently come under some pressure from the US. Belin argues that for Europe, continued US support for these long-standing, if imperfect institutions, is fundamental. A commitment to uphold the world order that Europe and the US set up at the end of World War II, one that outlasts a single administration, is missing from the Trump administration.

These concerns are real. Fiona Hill notes that US withdrawal from such international institutions often results in their decline. No other power has shown the same willingness to step in and fill the gap. Nevertheless, Molly Montgomery, non-resident fellow at Brookings Institution, points out that this European Commission shows more geopolitical ambition than previous ones have done. This can be seen most clearly in its stance on regulation of the digital economy. Tax issues in particular pose a problem for Transatlantic relations as the EU prepares to take on the likes of Facebook and Amazon. Montgomery warns of ‘a real fight between US tech giants and the EU’ in the future.

‘Stop China from eating free nations from the inside’ – Victoria Nuland

Former Assistant Secretary of State for European and Eurasian Affairs at the US Department of State, Victoria Nuland, suggests that the US and the EU work together to protect a digital economy that supports free nations. She also highlights the need for cooperation, to stop China from ‘eating free nations from the inside’. Here she references aggressive Chinese take overs that are then used to leverage political influence. Montgomery agrees that Transatlantic relations are at their best when the focus is on common values and a shared goal. Both agree that the shared goal should be China. Montgomery suggests that a common approach to this overarching issue could provide an umbrella that will incentivize the US and the EU to find solutions on a range of other thorny issues including tax, the digital economy and even the environment.

‘Europeans have been on an extended vacation from geopolitics’ – Mark Leonard

Celia Belin also agrees that climate change, trade, health security and China all provide areas of cooperation for these two global powers. Mark Leonard, Co-founder and Director of the European Council on Foreign Relations, argues that Europe has been ‘on an extended vacation from geopolitics for many years.’ This has made them bad partners for the US, during the good times. Now in the bad times, Europe has been forced to take more responsibility for its own affairs. This might, in turn, make the United States a more willing partner. A joint recognition that the world is a much less benign place for liberal values should and could help improve Transatlantic relations going forward.