Fidel Sendagorta
The author thanks the whole team of the Project on Europe and the Transatlantic Relationship Program for their constant support during my year-long fellowship at the Belfer Center for Science and International Affairs: Nick Burns, Faculty Chair; Cathryn Clüver Ashbrook, Executive Director; Karl Kaiser, Senior Associate; Alison Hillegeist, Assistant Director; Erika Manouselis, Project Coordinator; and Elsa Kudzi, Junior Program Associate.
Attending the regular Belfer Center Director and Board events was always enlightening and valuable and I thank its Director Ash Carter and its Co-Director Eric Rosenbach for their invitation to participate in them.
I am grateful to Victor Pérez García who, as the Research Assistant of this paper, provided useful and timely documentation throughout its preparations.
The paper also benefited greatly from the insights and comments of many Harvard Kennedy School Professors and Fellows and particularly the following: Graham Allison, Philippe Le Corre, Rolf Mowatt-Larssen, Joseph Nye, John Park, Tony Saich, Ezra Vogel, Arne Westad and Stephen Walt. The author is grateful to all of them but accepts full responsibility for the contents of the paper.
Last but not least, the author wishes to thank the Fundación Rafael del Pino alongside the Ministry of Foreign Affairs of Spain, for creating and funding the Fellowship that has permitted the research work of this paper to be done. Special thanks to the Fundación President, María del Pino, to its Director, Vicente Montes and to its Director of the Global Leadership Program, Manuel Muñiz.
From Convergence to Competition
The purpose of this paper is to analyze how China’s new power is reaching Europe, the challenges that it poses, and the European responses to this new reality. This process has to be examined in the context of the current strategic competition between China and the U.S. and its reflection on the transatlantic relationship.
In 2018, relations between the United States and China took a swift turn from strategic engagement to strategic competition. This new stance was validated by the Trump Administration’s National Security Strategy, the National Defense Strategy and by Vice President Pence’s speech at the Hudson Center in October 2018. At the same time, the Administration approved successive packages of tariffs on Chinese products and demanded the extradition of Huawei’s chief financial officer from Canada.
What has been remarkable is how rapidly a consensus on China has built in Washington including across both political parties within Congress, among business and labor unions, think-tanks and the media. There is also a sense of urgency, implying that if the U.S. does not act now China will move irretrievably ahead in a number of fundamental areas, especially in the technology field.
As for Europe, it has found herself dealing simultaneously with three serious challenges:
A weakening of European integration underlined by Brexit and the emergence of anti-EU political forces in all member states.
A deteriorating relationship with the U.S., both in the trade and the security areas and a shift away from 70 years of bipartisan policy consensus in Washington concerning the unflinching support for NATO and the EU.
A return to great power rivalry with both China and Russia wielding their power to increase their influence in Europe and drive a wedge between the partners in the transatlantic relationship.
The convergence of these three challenges creates dilemmas for European governments and institutions but also produces incentives to overcome divisions and find common answers. More recently, after the effects of Chinese power in Europe were beginning to be felt in ways that could affect European interests and values, Europe has started to react in a more united fashion after the effects of Chinese power in Europe. In March 2019, a European Commission report went so far as to describe China as a “systemic rival” for the first time. It is true that member states have different perceptions about risks and opportunities in their relations with China, but the overall trend points to a firmer policy towards China.
Evolving Relations in the China-Europe-United States Triangle
Europe’s defensive moves
Under President Xi Jinping, China has embraced a double pillar strategy: the Made in China 2025 plan to make China a world leader in technology and the Belt and Road Initiative (BRI). Both have consequences for Europe. The increase of Chinese investment in Europe in the last few years, as part of the Made in China 2025 plan, has become a source of concern in Brussels and other European capitals in a number of ways. Germany and other member states have seen the Chinese takeovers of high tech companies in priority sectors defined by this plan with mounting distrust.
With respect to the BRI, Chinese companies have been buying stakes in key infrastructure sectors such as ports, energy and utilities in countries of Southern and Eastern Europe. Many analysts have come to realize that China’s goal is to acquire a predominant position both in Eurasia and in the Indo-Pacific. The risk is that Europe might become the weak tip of a Eurasia with Beijing as its geopolitical center, and two authoritarian powers—Russia and China—weighing heavily on the continent. Add to that the perception that the U.S. is weakening its ties with European allies and long-term prospects become dimmer.
As a result of these developments, European-level legislation has been introduced to screen these investments, setting up lists of strategic sectors in which these projects could be discouraged or ruled out.
The increasing economic presence of China in Europe has raised fears that China is using its new leverage to garner political support from certain countries in matters such as the South China Sea, human rights or the treatment of minorities, therefore preventing the EU from uniting around common positions. In the longer run, the prospect of a powerful authoritarian country with a global reach and strong influence over Europe and other areas, is a source of increasing concern. As China is promoting its own authoritarian approach all around the world, its model has become a relevant dimension of the BRI at the crossroads between digital technologies and increased social control through surveillance. Inevitably, all of these trends point to increased ideological tensions between China and European countries.
The U.S. fully invested in competition
The U.S. policy shift on China toward strategic competition is having deep impact on Europe. As the rivalry with China hardens, both powers are extending their competition on a global scale in order to promote their influence or prevent the other from widening it. In the future, when American officials meet with their European colleagues, China will be a frequent agenda item. The planned deployment of 5G networks across Europe and the eventual participation of Chinese firms in it is one such example.
Technology and its links with national security has become the central focus in the competition with China. 5G in Europe has become the first battlefield. European countries would like to balance their economic relations with China and their security ties with the U.S., attempting to find an uneasy compromise between complete access of Chinese technology to 5G networks and an outright ban. The U.S. is ready to decouple from Chinese 5G technology, to create a trusted network for themselves and their allies. European countries consider this approach a bridge too far. But a recent decision by the Trump administration to restrict the export of American technology to Huawei could seriously undermine the company’s value as a partner for European firms in 5G deployment.
It is highly likely that competition with China will drive an increase in activities across a number of sectors by the United States in Europe. We can expect more engagement with governments, especially in Eastern and Southern Europe, where the rise of Chinese political influence has been more evident in the last few years.
One area in which the current U.S. Administration is not seeking EU cooperation is trade. On the contrary: the U.S. has applied tariffs on EU exports of steel and aluminum, rejecting its European demands to eliminate these outright and to work together to negotiate trade issues with China. Instead, the U.S. opted for a bilateral approach with the goal of maximizing outcomes to benefit American manufacturers, not to be shared with third countries.
China plays offense
China has always considered European integration as a positive process in the context of its wider policy of promoting a multipolar international system. But, Chinese perceptions of the EU have changed for the worse in the last few years, first with the Euro crisis, followed by Brexit and more recently the rise of nationalist parties across the continent. As a result, China’s more recent focus on Europe has become more sub-regional, as with the creation of the 16+1 platform. Still, the EU has not lost strategic relevance for China neither economically nor politically.
The EU is the largest global economy and China’s largest trading partner. It is a prime target to advance Chinese economic interests. But over the last years the balance of economic relations has shifted significantly. While the past decades were marked by a focus on attracting European firms to the Chinese market to at once lower their production costs and transfer technology and know-how to China, now “China going West” policy emphasizes investment in Europe, where Chinese firms acquire IT firms with state-of-the art technology and the ambition to gain control over key infrastructure in the continent, especially in maritime transportation, energy and other sectors.
China wants to extend its political influence in Europe and is using the leverage provided by its increasing economic presence, especially in countries more in need of investment. Apart from its inroads in EU member states, China is working to gain a stronghold in the Balkans, taking advantage of a political vacuum for countries in a holding pattern toward EU membership.
China’s objective is to weaken the transatlantic link and to emphasize Eurasia as the new center of global gravity in this new scenario of U.S.-Chinese rivalry. The BRI is instrumental to promoting this geopolitical concept around the centrality of Beijing.
Translating Competition Into Strategy
Europe and the U.S. can now agree on the characterization of China as a strategic competitor. From now on, Europeans will have to decide what they should do on their own and what can only be done in close coordination with the United States and other like-minded countries. For that dialogue to be fruitful, trust between the countries on both sides of the Atlantic must be restored. The signs are not encouraging in the short term but dealing with China’s rise is a long game.
What Europe can do on its own
Finding a new balance between cooperation and competition with China will require an overhaul of European policies in many areas. Most of them are included in the European Commission’s report “EU-China. A strategic outlook.” The rationale underlying this document is the fact that the EU should not continue to negotiate with China without building leverage first. The proposed lines of action include investment screening; reciprocity in state subsidies and public procurement; a new debate on an industrial policy which would allow the creation of European champions in sectors like artificial intelligence and electric batteries; new regulations to prevent the export of dual-use technologies to China; and the development of a common EU approach to the security of 5G networks.
What Europe can do with the U.S. and other like-minded countries in the Indo-Pacific
New strategic challenges cannot be addressed exclusively through a transatlantic viewpoint, as in the past. The EU must consider partnering with the U.S. or countries in the Indo-Pacific to face the challenges posed by a rising China. In the Cold War, security was divided in two theatres, Europe and the Far East, with the U.S. active in both. But now that China is projecting its power and influence both in Asia and Europe, this grouping no longer makes sense. Europe must look East out of recognition that some of its more pressing security challenges demand it:
First, because cybersecurity is non-territorial by nature and must be addressed in a coordinated manner by those democracies in the Atlantic and the Indo-Pacific that can be targeted by Russia or China.
Second, because the Belt and Road Initiative is a geopolitical challenge, and to compete with it will require an alternative strategy and strong cooperation across the board between like-minded countries both from the Atlantic and the Indo-Pacific.
The crux of the competition between China and the U.S., Europe, Japan, Australia and others lies at the crossroads between technology, security and values. And this contest takes place in the digital realm. As a result, Europe could propose the creation of a “Coalition for a free and trusted internet” with two pillars to the U.S. and other like-minded partners in the Indo-Pacific.
1. An Alliance for Cyber Security: It would cover both the military and the civil aspects of this issue. Members of NATO and the EU would join the organization as well as those countries in the Indo-Pacific willing to participate.
2. A Trusted Digital Fund: It would provide an alternative to the Chinese Digital Silk Road for those countries in Asia, Africa, Latin America and the Pacific that want to upgrade their digital networks and are tempted by Chinese offers of low-cost technology under attractive financial conditions. These offers are not value free and Chinese packages for Belt and Road countries increasingly include surveillance kits for social monitoring and political control. Europe, the U.S., Japan, India, Australia and others would pool their assets in this area to offer competitive options in terms of digital technology and funding.
Other lines of action for the U.S., Europe and the Indo-Pacific like-minded countries would make strategic sense but present more difficulties. Still, they should be part of the ongoing transatlantic debate:
1. To resurrect the Trans-Pacific Partnership (TPP): Many analysts agree that without the TPP, the Free and Open Indo-Pacific will lack economic traction and is unlikely to be able to properly compete with the Belt and Road Initiative. Looking at the future, a resurrected TPP merged with a limited version of Transatlantic Trade and Investment Partnership (TTIP) in a single instrument could be a powerful option if Democrats and Republicans in Congress could find a way to garner domestic support.
2. To prevent Russia from siding with China in a permanent way: An alliance between China and Russia, or even an entente, would be a serious handicap for a U.S. foreign policy increasingly focused on strategic competition with China. In these circumstances, can the U.S., Europe and like-minded countries in the Indo-Pacific try to drive a wedge between Russia and China to prevent their relationship from strengthening?
Competition with China is already on the transatlantic agenda. It was a significant point of discussion at the April 2019 NATO Ministerial meeting of the Alliance 70th Anniversary Summit. The EU, for its part, has a number of tools to deal with this multifaceted challenge and in the last few months has shown the will to balance cooperation and competition in its relations with China. For the time being, most of the measures under discussion are of a defensive nature. But Europe must also look at competition with China on a global scale. In this endeavor, Europeans and Americans are bound to work together no matter how serious the current differences between partners on both sides of the Atlantic.
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