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Original illustration for Echowall by Tse Yuet Ching.

10:35 am | 28. May 2020

A Defensive Europe in Search of Rebalance

The COVID-19 crisis seems to have deepened the sense that a logic of divergence now prevails between China and Europe. Is a rebalance of the EU-China relationship possible? And if so, how? 

By Mathieu Duchâtel

Within the past five years, EU-China relations have experienced considerable change. The origin of this change is Europe, even though it came as a response to trends in Chinese governance and policy choices. Under the Juncker Commission (2014-2019), the EU undertook a complete reassessment of relations with China, resulting from three main factors. First, there was the experience of the Commission – particularly the experience of the External Action Service, the EU’s diplomatic service, and the department of trade, or DG Trade – in conducting relations with China. Second, perceptions of China were changing in several European capitals. Finally, there was a new international environment to contend with, characterized by US-China confrontation after the election of Donald Trump in 2016.

A first milestone in the review of relations came in 2016 as the Commission’s “elements for a new EU strategy on China” adopted the concept of “reciprocity” as a guiding principle to conduct relations with China. The release in March 2019 of the EU’s new “Strategic Outlook on China” marked the end of this process of review.

The “Strategic Outlook on China” paper begins with the observation that “the balance of challenges and opportunities presented by China has shifted.” This is a strong statement, breaking with the former emphasis on the Comprehensive Strategic Partnership. The paper also characterized China as a “systemic rival,” a term that reflected both the market distortions created by China’s state capitalism, and the competition between governance models. This change amounted to a formal acknowledgment that the illusion of convergence, long the main conceptual basis for Europe’s engagement with China – namely, the idea that deeper social and economic ties was leading to an embrace of democracy and human rights in China – had been replaced by a logic of divergence. This trend seems to accelerate as a result of the COVID-19 crisis, with the EEAS accusing China of conducting a “battle of narratives” and disinformation operations against Europe, and the discussion in Europe being focused on how to limit European dependence on Chinese industrial power.

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Looking for the critical factor in the change of European moods on China? The leadership of Xi Jinping is a top candidate. Image by Palácio do Planalto available at Wikimedia Commons under CC license

Relations in the Xi Era

While US policy debates have had some influence over Europe, a similar logic of divergence having defined US-China relations in recent years, the more critical factor behind the European change of mood has been the leadership of Xi Jinping, and not the actions of the Trump administration.

Since Xi Jinping came to power in late 2012, an increasingly authoritarian system has utilized the revolution in digital technology to build a surveillance state, in direct opposition to the liberal values Europe had hoped China might increasingly embrace. But Europe’s mood change has also resulted from trends specific to EU-China relations, including China’s inflexibility on trade and investment issues; the difficulty in addressing technology transfers in a new environment in which China has become a technology competitor; and an elusive international cooperation agenda. Indeed, despite peace and security having been defined as a “pillar” in the EU-China 2020 agenda for strategic cooperation, adopted in 2013, the record of cooperation is far below the initial expectations.

But questions at the structural level also play a role. In its National Security Strategy, the Trump administration has qualified China as a strategic rival that, together with Russia, challenges “American power, influence and interests, attempting to erode American security and prosperity.” Against the backdrop of this return of bipolarity in world politics, the EU faces the question of how to position itself strategically between the United States and China.

As part of a series discussing European strategies toward China, this article highlights the differences of priorities, goals and perceptions in China and Europe regarding the relationship, and analyses the European response, including the middle-of-the-ground defensive approach that currently characterizes the EU’s China policy. Is it a sustainable approach in an increasingly bipolar international system? Is a rebalance of the EU-China relationship possible? And if so, how?

Mismatched Narratives, Incompatible Goals

The current diplomatic narratives in Europe and in China to describe the EU-China relationship reveal partly incompatible strategic goals and divergent priorities. Europe’s priority goal is to reach a rebalance in the relationship in terms of trade, investment and technology transfers. Because China has remained largely inflexible, the EU has turned its focus inward. In practice, this means the construction of a defensive net to recalibrate engagement with China and immunize Europe from the negative effects of China’s expanding global footprint – including inside Europe.

The “systemic rival” strategy paper last year represented a dramatic departure from the cooperative language of the Comprehensive Strategic Partnership. The term “systemic rival” suggests confrontation, but it neither summarizes nor fully encapsulates the EU’s China policy. That policy, instead, is subtler and less clear-cut.

The strategy paper describes China as being “simultaneously, in different policy areas, a cooperation partner with whom the EU has closely aligned objectives, a negotiating partner with whom the EU needs to find a balance of interests, an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance.” This language makes clear that engagement remains the central paradigm underpinning the EU-China relationship, and it introduces the key notions of balance of interests and technological competition, two issues that are to be addressed through diplomacy and internal measures in Europe.

The strategic paper lists three priorities in EU-China relations:

  • Deepening engagement to promote common interests at the global level
  • More balanced and reciprocal conditions governing the economic relationship
  • Adapting domestically to maintain European prosperity, values and social models

This trio represents a contraction of the number of goals previously pursued by the EU. But beyond the diplomatic language, the first goal is no longer generally seen as realistic one. The second one is Europe’s real priority. The third, meanwhile, is not a foreign policy issue, but essentially an intra-European issue, a major change of focus for Europe that François Godement has described as a “Copernican revolution,” meaning that Europe, rather than place hope in China for changes to its behavior, should focus instead on its own defensive policies.

When conducting its EU policy, China now has to work against a set of constraints – including an increasingly restrictive environment when it comes to access to European technology, attempts to constrain Huawei’s market share in Europe’s telecommunication infrastructure, and a deteriorating image in Europe. China has failed over the past two decades to reach two of its main goals in relations with Europe: the lifting of the arms embargo, discussed in 2004-2005 but never achieved, and the designation of China as having market economy status (MES), an issue visited in 2016. Today, given the turn of the policy debate in Europe and the ongoing securitization of parts of the economic relationship with China, it would be unrealistic for China to define positive goals in Europe. More within reach, it would seem, is to avoid the worst outcomes.

China’s goals must now be defined in more defensive and negative terms. Realistically, China’s best outcome is European fragmentation. Indeed, China has a stake in preserving the status quo in the trade and investment relationship and an easy access to European technology. China also has a strong interest to avoid European unity and full transatlantic convergence on a variety of issues where strong divergences exist, such as China’s human rights record in Xinjiang, technology transfers and Huawei’s presence in European critical infrastructure.

China’s goals must now be defined in more defensive and negative terms. Realistically, China’s best outcome is European fragmentation.

 

This is not, however, how China’s EU policy is currently framed. Wang Yi, China’s state councilor and foreign minister, maintains a very upbeat description of the state of EU-China relations, and an optimistic tone regarding China’s prospects for progress. In a talk given in Brussels in December 2019, he described EU-China relations as standing at a “new historical starting point.” Wang repeated the usual Chinese line that, for China, supporting European unity and prosperity is a “strategic choice” given the absence of “geopolitical contradictions” and “conflicts of interest.” Further to these declarations, in his annual press conference at the National People’s Congress, Wang Yi repeated that “the relationship between China and the EU continues to be defined by cooperation and demonstrate great potential” despite the context of COVID-19. He also called the two sides to “remain each other's comprehensive strategic partners and not become systemic rivals.”

But this upbeat and positive statement stands in stark contrast with the list of problems enunciated by China’s ambassador to the EU, Zhang Ming, also in December 2019. Ambassador Zhang concentrated his criticism of Europe on two main issues. First, he argued that investment screening and Europe’s discussions regarding the participation of Huawei in the construction of the continent’s 5G network were leading to a climate of “suspicion” among Chinese entrepreneurs, risking what he characterized as “disastrous” consequences for Europe. Second, he attacked Europe’s “unjust and dishonest rhetoric and behavior” with regards to China’s human rights record. This shortly followed the European Parliament’s awarding of the Sakharov Price to Ilham Tohti, a Uighur public intellectual and defender of Xinjiang autonomy who is now serving a life sentence in China.

At the time of writing, the COVID-19 crisis has accelerated EU-China divergences and brought to a new light the issue of offense versus defense in China’s policy towards the EU. China is conducting an offensive battle of narratives through some of its embassies to combat the notion that its initial mismanagement of the disease outbreak in Wuhan at the end of 2019 is one of the root causes of the global pandemic. It also seeks to capitalize on the successful containment of the spread of the disease domestically, by promoting more actively its narrative of superiority of the Chinese governance system over liberal democracies and placing more resources on suppressing the attention that the Taiwanese democracy has in fact been more successful than China against the epidemic.

The COVID-19 crisis has thus led to an escalation of the problem of mismatched narratives to a specific battle of narratives, that intersects with the issues of competition between governance models and the question of how to neutralize disinformation campaigns from authoritarian states. The EU’s May 2020 disinformation report mentions “the efforts of state actors like China to deflect blame, to use the pandemic to promote their own governmental system and enhance their image abroad,” but also to spread disinformation regarding for example “clandestine US biological laboratories.” The controversy around the publication of the report – that the Chinese mission to the EU worked to water down the conclusions by influencing the EEAS – also suggests that the issue of disinformation and influence operations is moving cognitive divergences up to the level of open conflictuality.

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Raising Europe’s Defenses

In line with the “Copernican revolution” to which Godement referred, a process of “securitization” of Europe’s trade and investment relations with China is in motion. This is Europe’s attempt to reach a less disadvantageous balance by acting at home given the extreme difficulty of negotiating Chinese concessions. At the EU level, this has materialized in three main actions: 1) the adoption of trade defense measures; 2) an investment screening mechanism; and 3) a toolbox of 5G security measures to manage “high-risk vendors” (read Huawei).

In the era before Xi Jinping, the structuring debate for EU-China relations was the European complaint that the EU-China strategic partnership was strategic in name only given the lack of substance in bilateral cooperation. To this, Premier Wen Jiabao was known to respond in the 2000s that the relationship was strategic because of trade only. At 1.7 billion USD per day in 2018, trade is indeed a major interest for both sides. But Europe’s 185 billion USD trade deficit reflects the market distortions induced by China’s state capitalism.

This is the wider context to the EU’s decision to reform its trade defense instruments. The reform results of the EU’s decision not to grant market economy status to China, but also going around the problem. The EU’s trade defense instruments circumvent the WTO distinction between market and non-market economies in order to maintain the capacity to impose anti-dumping and anti-subsidies tariffs on violators on the basis of a new methodology that at least matches the WTO provisions. To elaborate on this new policy, the Commission released an in-depth study running to 450 pages detailing the various violations of market principles by China, starting from the notion of a “socialist market economy” as enshrined in the PRC Constitution, and outlining the characteristics of state-owned enterprises and the public procurement market in China in specific sectors, including steel, aluminum and energy.

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The adoption of an investment screening mechanism by the European Union reflects the changed politics of China policy in Europe. The surge of Chinese investment in the EU has raised highly political questions regarding intangible technology transfers and the risks of excessive leverage because they concentrate on critical infrastructure and access to technology in support of Chinese industrial policies. The problem is less about the quantity, therefore, than about the quality. Chinese foreign direct investment in the European Union was worth EUR 17.3 billion of completed transactions in 2018, after having peaked at EUR 37 billion in 2016. This decline continued in 2019.

But the source of Europe’s defensive reaction lies not in the volume of transactions but rather in the nature of the targets of Chinese investment. These have included technology companies such as Kuka, the German robotics firm, and semiconductor companies in the Netherlands, Sweden and France. Critical transportation infrastructure, such as the Piraeus Port Authority in Greece, has been another target. In fact, a sizable share of Chinese FDI in Europe is real estate property in the UK. Such investment generally does not pose a severe national security threat – though the US now screens real estate investment to avoid the purchase of property close to sensitive military sites.

The EU formally adopted the investment screening regulation in March 2019. The regulation, which creates an information-sharing mechanism for the Commission and member states on incoming foreign investment in Europe, is scheduled to be operational in October this year. The communication system currently being built by the Commission and the member states should be seen as a welcome development, creating the conditions to exert oversight over potentially problematic transactions that risk weakening Europe. Such transactions involve particularly sensitive information, and therefore the sharing mechanism comes with a strong guarantee of confidentiality (article 3.4 of the regulation). Once in effect, the investment screening regulation will face the complicated challenge of due diligence, as Member States where there is currently little oversight will have to increase their monitoring of incoming foreign investment. Due diligence in Europe is complicated by the fact that European subsidiaries of a non-European companies can invest freely in other EU member states.

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German-built Kuka robots are used in automobile manufacturing. Image from Mixabest available at Wikimedia Commons under CC license.

The EU Commission is not an executive branch for Europe. Rather, it creates consensus and promotes convergence among member states on best practices. By embedding all member states in a policy-making discursive process, it changes public policies at the national level. As a result of the investment screening discussions in Brussels, the number of member states with an investment screening system in place increased from 12 to 15, with Hungary, Lithuania and Latvia most recently adopting screening systems. One of the changing dynamics of China policy in Europe, it is particularly revealing that Northern European countries, those initially having a negative view of investment screening based on their commitment to liberal economics, have now embraced screening out of their new appreciation of the China challenge. One clear example of this is the case of the Netherlands.

In practice, the Commission or any member state can raise concerns about a particular transaction. However, the final decision power as to whether to block the transaction or impose remedies stays with the member states. Under the regulation, the Commission can “issue opinions when an investment threatens the security or public order of more than one Member State, or when an investment could undermine a strategic project or program of interest to the whole EU, such as Horizon 2020 or Galileo.” In practice, a controversial transaction in critical infrastructure or in the area of high technology would arise an intra-European debate, and politics would determine the outcome.  But  overall, the regulation creates a more constrained environment for Chinese companies to conduct sensitive business in Europe.

Overall, the regulation creates a more constrained environment for Chinese companies to conduct sensitive business in Europe.

 

It is important to bear in mind that the mechanism was built with national security and public order in mind, and with firm resolve that the mechanism would not become a bureaucratic tool of industrial policy serving Europe’s competitiveness. EU officials insist that Europe remains open for business and that investment screening will be conducted in a restrictive appreciation of risks – national security, and not economic interests. And screening investment is a work in progress, given how new it is for the EU. At his hearing at the EU Parliament, the new trade commissioner Phil Hogan made clear that it was his intention to “beef up” the screening mechanism to “protect our critical technologies and our critical infrastructure,” and that this would take a more “harmonized approach” for all member states of the EU. The COVID-19 crisis has so far accelerated the defensive trend in Europe with regards to foreign investment, with several national leaders and Commission President Von Der Leyen calling for vigilance to avoid that foreign actors acquire cheap European critical assets during these times of economic weakening in Europe – guidance was issued by the European Commission, with specific emphasis on health, medical research, biotechnology and critical infrastructure.

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Another area of securitization of EU-China relations is 5G infrastructure. In simple terms, Huawei and ZTE are treated as potential security threats, or in EU language, as “high-risk vendors” that deserve specific risk management measures.

Before moving to the security area, the EU was already playing a role in 5G deployment across the continent. The European Commission has put forward a common calendar for a coordinated 5G commercial launch in 2020, and is involved in work with member states and industry to identify and allocate spectrum bands for 5G. It also is active at promoting common global 5G standards. Again, there are limits to what the Commission can achieve, but it plays an important role in promoting convergence and best practices. The power of the EU institutions is limited by the lack of a single European telecommunications market. Instead, all member states auction frequencies to national carriers, often globalized companies like Vodafone or Orange.

Network security is also a national responsibility, and it is only as a result of Europe’s problem with Huawei’s 5G offer that a serious European-level discussion started to take place. Security is a whole new challenge to be addressed at the EU level. Should Europe let Huawei build the continent’s critical infrastructure when 5G will enable the internet of things and bring deep transformation to the health, transportation and energy sectors, but also to industrial production? What limits should be placed on the presence of the company in European networks when risks of espionage, sabotage and denial cannot be ruled out with confidence?

A Toolbox in Development

In January 2020, the European Commission published the “EU toolbox” of risk mitigating measures, with the aim to “identify a possible common set of measures which are able to mitigate the main cybersecurity risks of 5G networks, and to provide guidance for the selection of measures which should be prioritized in mitigation plans at national and at Union level.” High-risk vendors are defined in the toolbox in language that is specific to China’s digital ecosystem. The EU’s security assessment highlights the risks of interference, for example, when a particular supplier has strong links with a national government. The lack of legislative or democratic checks and balances in place in the country of origin of the supplier is also considered a risk.

The text makes clear that "technical measures alone would not allow [member states] to address non-technical vulnerabilities” and lists in its "strategic measures" the importance of "assessing the risk profile of suppliers and applying restrictions for suppliers considered to be high risk, including necessary exclusions to effectively mitigate risks, for key assets." In such cases, exclusion is not mandatory, but rather is suggested as a policy response specifically in instances involving "key assets."

What difference will the toolbox make? First, it is a further sign of the increased securitization of the EU’s China policy. As such, it consolidates the trend toward the security approach, and at the same time sends a signal of continuity as one of the first decisions taken by the new Von Der Leyen Commission. Second, like the investment screening system, it can be expected to shape the threat assessment in many member states, especially those that have hitherto had a weak security outlook on telecommunications. Third, it is likely to shape the behavior of telecoms companies. Vodafone, for example, has announced this year that it is removing Huawei equipment from its 4G network, a decision justified by the EU security toolbox. This is a significant decision because path dependence – a history of working with the company and its hardware,  in other words – is a reason many operators opt to continue working with Huawei for the first phase of 5G deployment, which in practice is an extension of the 4G networks that builds on existing hardware.

The most likely outcome of the current 5G debate is that Huawei will, by 2025, the target date for comprehensive rollout of the 5G network in cities, continue to own part of Europe’s telecommunication infrastructure – possibly more than 20 percent. This will hold even if the European environment becomes more constrained for the growth of Huawei’s 5G business, as the company’s penetration of the European telecommunications infrastructure is already quite strong. As of January 2020, Huawei had signed 47 5G commercial contracts in Europe, including with mobile phone operators in Finland, Hungary, Italy, Latvia, Lithuania, Malta, Spain and the Netherlands. This raises a major strategic question for Europe. If by 2025 there is a major crisis in US-China relations with little space for Europe to maintain its neutrality, can transatlantic unity survive Chinese leverage over states that already have Huawei infrastructure in place?

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The Düsseldorf, Germany, headquarters of the Chinese telecom giant Huawei. Image by Kalligraf available at Wikimedia Commons under CC license

Elusive Global Governance Agendas

This incomplete process of securitization is progressing as Europe has downsized ambitions in terms of international security cooperation with China. Security cooperation was in the past a major European objective that encountered Chinese reluctance. It was only in 2013,  in the midst of Xi Jinping’s visit to Brussels, that the EU and China agreed to include peace and security cooperation as a fourth pillar of their cooperation in their agenda 2020. The 2020 agenda calls for consulting “fully and effectively on major bilateral, regional and international issues of mutual concern” and to “gradually raise the level of EU-China dialogue and cooperation on defense and security, advancing towards more practical cooperation.”

The process of review from 2016 to 2019 resulted in far more sober expectations in Brussels. On the one hand, Europe and China have disagreed on many international security issues (for example on the South China Sea, Ukraine and Syria). On the other hand, on those issues on which they seem to have agreement, no results have been achieved despite European efforts at engagement. This is true even on issues where they share disagreement with the approach of the Trump administration.

The most abject failure of EU-China cooperation has been their ineffectual support for the Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA). After the United States withdrew from the agreement in May 2018, the EU and China underlined their support for the agreement in numerous communiqués. In December 2019, after a meeting of the political directors of the Foreign Ministries of France, Germany, the UK and China in Beijing, China’s foreign ministry stressed in a communiqué that “China and Europe, as two major forces for multilateralism, agreed to strengthen communication and coordination . . . . and ensure the full and effective implementation of the JCPOA.” This followed joint statements, including at EU-China summits, that emphasized the necessity of continuing to enforce the terms of the agreement.

The problem is that it is impossible to enforce the JCPOA against the will of Iran and the United States, and Iran has responded to the American withdrawal by a series of moves that test the limits of the agreement. American unilateral sanctions on Iran have denied Europe and China leverage they might have had over the course of multilateral diplomacy. The immediate outcome was that business actors from Europe and China whose activities were protected by the terms of the agreement preemptively left the country, showing no trust in the ability of Europe and China to create sufficient political space for them to carry out business as usual with Iran. This includes corporate giants like Daimler, Maersk, Total, Siemens and CNPC. The fact that these companies look to the US and Iran rather than to Europe and China is full evidence of the lack of strategic substance in a Europe-China axis in support of the survival of the nuclear deal.

Therefore, while Europe-China cooperation during the negotiation of JCPOA was often characterized by EU diplomats as the main success of the EU’s effort to engage China on international security issues, and despite the conclusion of the agreement showing an objectif positive record of Europe-China coordination (among the other dimensions of a complicated multilateral negociation), these would-be achievements have not survived the course of events. The same is true of another much broader agenda, the common defense of a multilateral international order, this being language central to EU-China diplomacy since the Trump administration came in office. For example, the joint statement issued after the 21st EU-China Summit held in Brussels in April 2019 mentions a “commitment to multilateralism” and the importance of more “contributions in upholding multilateralism.” 

The joint statement begins by addressing the World Trade Organization. The EU and China agree that reform is necessary to the institution, but they disagree on the most essential part – the nature of China’s economy. China’s position paper on WTO reform starts with a defense of China’s status as a developing country, which comes with advantages and waivers within the WTO system. But the EU no longer views China or treats it as a developing country. As a result, China’s agenda for WTO reform is in fact very close to a defense of the status quo, and in this respect China represents a force of inertia.

The pattern holds in two areas where consensus should logically be easier to achieve, namely arms control and environmental issues. Since 2012, China has voted against all proposals lodged at the Commission for the Conservation of Antarctic Marine Living Resources to establish new marine protected areas. These proposals seek to ban fishing and other commercial activities over an area of close to 3 million square kilometers, including parts of the Weddell Sea. This places China along with Russia in direct opposition to the position of the European Union..

Rather than with environmental concerns, the Chinese priority seems to be on the potential economic benefits of exploitation of Antarctic resources, and on the strategic importance of siding with Russia on global governance issues. Another striking example is China’s decision to side with Russia at the Chemical Weapons Convention against a European proposal to expand the organization’s mandate so that it can conduct attribution investigations, after the Skripal case in the UK and repeated illegal attacks in Syria.

In addition, the COVID-19 crisis has already led China to revisit previous commitments regarding the reduction of carbon emissions. At the National People’s Congress, Premier Li Keqiang has abandoned targets for the reduction of energy consumption per unit of GDP. There are also reports that China plans to delay issuing its updated nationally determined contributions (NDCs) under the Paris agreement and long-term decarbonization strategy until after the November 2020 US presidential election. This is a reminder that geopolitical and economic growth considerations take precedence over climate action in Beijing, showing the difficulty for the EU to work efficiently with China on Europe’s green priorities.

The COVID-19 crisis has already led China to revisit previous commitments regarding the reduction of carbon emissions.

 

2020: Recalibration or Status Quo?

So far, Europe’s China policy has taken a middle-of-the-road approach. It is characterized by an incomplete securitization of trade and investment relations with China, with a strong focus on avoiding unwanted technology transfers, checking Chinese influence and leverage over Europe, and seeking a rebalance in the bilateral relationship – an outcome that cannot rely on improbable Chinese concessions. Securitization remains incomplete because of the rather slow EU decision-making process and limitations on the power of the Commission. Facing similar issues, the US and Japan have acted faster and more decisively. At the same time, international cooperation between the EU and China has been cold and disappointing, showing no signs of recreating the positive dynamic that has disappeared from the trade and investment agenda.

As limits are placed on bilateral engagement, expectations have been lowered in Europe regarding the benefits of engaging China. This leaves Europe with one major question – whether it can avoid grave division if a major crisis occurs in US-China relations. As the COVID-19 crisis has hit the world, originating in China and devastating several EU member states, this hard strategic question will color Europe’s decisions on whether to recalibrate further relations with China. To what extent can Europe limit its dependence on Chinese industrial products for the sake of security and autonomy? How to adjust relations with China if its foreign policy starts integrating fake news, a bullying tone and/or an aggressive anti-democracy narrative, as observed in France, Sweden or the Czech Republic? Can Europe impose costs on China for accelerating the destruction of Hong Kong’s autonomy under One Country, Two Systems, and in the absence thereof, and will weak-principled reactions, inaction and passive endorsement embolden China to take even more aggressive stances against democratic systems?

With its presence in European economies, including in Europe’s critical infrastructure, it might be possible for China to neutralize a strong united European position supporting an alliance with the United States. While this is not a stated Chinese foreign policy goal – support for “European unity” remaining central at least in China’s diplomatic language – it would be rational for this to be China’s preferred outcome, especially as more positive goals are out of reach. In fact, there is already a track record of united European positions being neutralized through Chinese pressure, such as the blocking by Greece in 2017 of an EU statement on human rights in China, and opposition by Hungary,Greece and Croatia in 2016 to a united EU statement on the South China Sea.

Against this context of increased bipolarity in world politics, 2020 could see either a recalibration of the EU-China relationship, or the continuation of a status quo between an increasingly defensive Europe and the Chinese power of inertia. Decisions will be taken this year by many EU member states and telecommunications operators regarding 5G infrastructure. The investment screening mechanism will become operational in October. And 2020 is the deadline put forward by the European Commission to finalize the negotiation of a Bilateral Investment Agreement, a goal that appeared extremely ambitious even before the coronavirus slowed down all items on China’s domestic and international political agenda.

China has little incentive to accept concessions on trade, investment or technology transfers, or to be less authoritarian or more convergent with Europe on international issues. As a result, Europe will have no choice but to continue patiently building its defensive toolbox. A possible next step in this process could address the issue of lack of reciprocity in public procurement, a major issue with China on which the EU has never moved. Overall, this means convergence with the Trump administration on many areas of China policy, but this will be convergence with limits rather than transatlantic alignment. Convergence is particularly strong in the area of technology transfers, even though the US has moved much faster and harsher than Europe in reforming its export control and investment approval systems. More transatlantic cooperation, also involving Japan, is in the interest of Europe as it builds a more efficient defensive toolbox. The restrictions on access to dual-use technology and sensitive data should be a key focus area for US-Japan-EU policy coordination. As a possible next step, the EU may also address a more offensive agenda in support of strategic European industries by reforming its competition policy and rethinking its support for innovation in Europe. The COVID-19 outbreak seems to have tipped the balance in the direction of policy support for less reliance on Chinese industrial production – this is now a question of implementation and effectiveness

 

Rebalancing EU-China Relations

This series explores the shifting strategic debate in the European Union and various member states over the economic and political relationship with China. 

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A Defensive Europe in Search of Rebalance

28. May 2020
Author
Mathieu Duchâtel

Dr. Mathieu Duchâtel is Director of the Asia Program at Institut Montaigne since January 2019. Before joining the Institute he was Senior Policy Fellow and Deputy Director of the Asia and China Program at the European Council of Foreign Relations.