flags united states european union china

By Theresa Fallon

The COVID-19 pandemic has exacerbated geopolitical trends, in particular the China-US rivalry. China’s rise has continued steadily for the last two decades, reaching a point where it directly challenges US leadership in the world. In the last five years, it has increased its authoritarian features under Xi Jinping. In the face of increasing Chinese influence and worsening China-US relations, the EU finds it increasingly difficult to maintain good relations with both Beijing and Washington. It sits uncomfortably at one end of the triangle.

At the start of the pandemic, China withheld information about the virus and cracked down on independent reporters domestically. Subsequently, it tried to increase its influence abroad through its “mask diplomacy” and the provision of vaccines. It reacted angrily to any criticism of its actions in connection with the pandemic, reaching new levels of assertiveness with its “wolf warrior” diplomats. Despite a limited initial setback, the pandemic did not stop China’s economic growth. In fact, China seems to have emerged out of the pandemic in relatively better shape than the other main economies.

This encouraged China to continue and enhance its domestic repression and external power projection. China stepped up repression in Xinjiang and in Hong Kong, as well as its pursuit of international influence with the Belt and Road Initiative. Stopping short of full-blown conflict, China renewed its pressure along its borders in the Himalayas as well as in the East China Sea, South China Sea, Taiwan—testing US commitment to the defence of partners in the region.

The US has declared China a strategic competitor already under the Trump administration. The new US President Joe Biden confirmed this view, stating that the US-China rivalry is a structural feature of international relations for the years to come. The US has sought to create coalitions of democracies to respond to China’s growing influence, including India, Japan and Australia in the Indo-Pacific, but also its traditional trans-Atlantic partners, Europe.

The US wants Europe to take a clear stance in defence of democracy, rule of law and human rights in multilateral forums, not shying away from criticism of China. It also wants Europe to help stem Chinese military modernisation through bans on technology transfers, and to prevent China from controlling Europe’s telecommunication and other critical infrastructure, through security vetting of government procurement and investment deals. The US does not want Europe to be dependent on Russian gas through the Nordstream 2 pipeline, nor on Chinese telecommunication equipment through contracts with Huawei. The EU does not like hearing this, and has a more nuanced relationship wtih China. The EU was very happy when the US moved from Trump to Biden, who resumed US support for liberal democracy and multilateral solutions, for instance on Iran and on climate change. However, the EU was less happy that Biden had not changed course on China and required the EU to align with the US forming a common front vis-à-vis Beijing. At this year’s Davos World Economic Forum, German Chancellor Angela Merkel declared, “I would very much wish to avoid the building of blocs.”

In its 2019 Strategic Outlook on China, the EU identified China with three labels: as a partner (for example on climate change), a competitor (for example on trade) and a systemic rival (on values and governance). The EU still follows this policy. It is happy with its “multi-faceted” approach, and reluctant to side with the US against China across the whole range of policy issues. It is keen to benefit from Chinese trade and investment, fueled by China’s sustained economic growth.

Last December, the EU reached political agreement with China on a new Comprehensive Agreement on Investment (CAI), which improves access to the Chinese market for European companies. Chinese companies already enjoy largely free access to the European market. The EU rushed to conclude the deal in the last days of the Trump administration in the US. Arguably, the EU could have had better bargaining power if it had acted together with the US, or it could have gone for a multilateral agreement. However, Chinese President Xi Jinping intervened personally and made the final concessions necessary to secure the bilateral deal between China and the EU, thus driving a wedge between the EU and the US.

EU officials have defended their independent approach to trade and investment with China by explaining that unlike the US, the EU does not pursue economic “de-coupling” from China. In fact, the US does not pursue “de-coupling” either – the economies are too intertwined and it would not be possible to sever links completely. However, the US does seek to diversify supply chains to avoid dependence on China for critical supplies. It would like the EU to do the same. The EU seems to be less interested. For example, Germany decided to allow Huawei to provide equipment for its new telecommunication networks and France was happy to be on the receiving end of China’s Peace Cable for digital communication from China to Europe, and to welcome a Huawei factory on its territory.

On 22 March, the EU imposed sanctions on four Chinese individuals and one entity involved in repression in Xinjiang, in a coordinated move with the US and other partners. China reciprocated promptly and disproportionately on the same day, with a raft of sanctions on EU diplomats, Members of Parliament of all political factions, researchers and their families. Ironically, this will make it harder for the European Parliament to ratify the CAI. The public perception of China in the EU has also deteriorated sharply with COVID-19, economic coercion, and counter-sanctions.  It seems that China itself is driving Europe into the arms of the US.

Nevertheless, it would be wrong to conclude that China has forced the EU to make a clear choice of camp. On 16 April, the leaders of France and Germany had a special meeting with Xi Jinping in which they said they exchanged views on climate change, which falls into the EU “partner” box for relations with China, ahead of a virtual climate summit that the United States would host on April 22 and 23. On 19 April, the EU issued Conclusions on a new EU strategy for the Indo-Pacific, which contained references to the need to uphold international law and freedom of navigation, as well as to cooperation with like-minded partners, but also to the intention of taking steps toward the conclusion of the CAI. The document specified that the EU approach to the Indo-Pacific is “inclusive of all partners”, i.e., not directed against China.

The US continues to guarantee the security of Europe through NATO, and trans-Atlantic relations are indispensable to the EU. Furthermore, the EU has more points of convergence with the US under the Biden administration. However, the EU also wants to benefit from the trade and investment opportunities offered by China. Therefore, in the years to come, the EU will continue to pursue good relations with both the US and China, balancing security, values and economic interests, if China does not make this too awkward through its domestic and external behaviour. Much hinges on the German election in September to choose the new leader for the post-Merkel era. Xi Jinping’s assertive attempts to woo European leaders in order to coopt and neutralise them creates continued re-calculation in the Washington-Beijing-Brussels triangle.