China-US rivalry risks dividing the EU

TIMOTHY LESS

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The EU was forged in the bipolar conditions of the Cold War, expanded under American unipolarity and could plausibly disintegrate as the world returns to a state of bipolarity, this time with China as one of the poles.

The deepening geopolitical contest between the US and China is pulling the EU apart. Washington is on a drive to co-opt the EU into its anti-China coalition and to distance itself from Beijing, spurred by Russia’s invasion of Ukraine and the growing threat to American dominance from its regional rivals.

As a traditional ally with a shared commitment to American ideals such as liberal democracy, the rule of law and the free market, and with massive military, economic and diplomatic power, the EU is a vital element in US hopes of containing an emerging China.

On the one hand, Washington wants the EU onside to strengthen its own alliance which would be more powerful than any coalition China can assemble. On the other, the US does not want the EU’s power made available to China in a way that might assist its rival’s ambitions to become the new global hegemon.

Ideally, European support would come in the form of a political commitment from the EU to bandwagon with the US, backed by policies intended to weaken China, much as western Europeans rallied behind the US in opposition to the Soviet Union during the Cold War and, in some measure, are doing in response to Russia’s invasion of Ukraine.

Such policies would include an end to exports of technology to China; a reshoring of manufacturing and a reorientation of trade and investment to other parts of the world; a robust defence of Taiwanese sovereignty, preferably involving a bilateral trade deal of the kind which Washington has just reached with Taipei; alignment with American sanctions on Beijing; and European support for American-led positions on China at the UN.

To the satisfaction of the US, this effort has found support in the EU – at least its eastern half, which has strong reasons for favouring the American position. Most important is security and the need to keep the US onside for protection against Russia, especially as the western Europeans demonstrate their reluctance to provide security for Ukraine.

As a matter of tactics, ensuring American support for the eastern Europeans’ international goals means helping the US with its own objectives, whatever they may be. As senator Marco Rubio has warned, if the EU does not see China’s ambitions towards Taiwan as a European problem, then Washington might choose not to see Russian ambitions towards Ukraine as an American one. ‘You guys handle Ukraine and Europe’, he tweeted in April.

The calculation is, however, not only tactical for eastern Europe. As China and Russia enter into a strategic alliance of their own and Beijing seemingly backs Russia’s position towards Ukraine, China has made itself an opponent of the eastern Europeans. As Lithuania’s foreign minister has explained, ‘if Xi Jinping befriends a war criminal like Vladimir Putin, it is our duty to get very serious about China’.

Such views are buttressed by the perception that China is not only helping Russia but is also fundamentally akin to its neighbouring giant – a hostile bully which tries to control smaller neighbours like Taiwan, with which the eastern Europeans can readily empathise given their recent experience of great power domination. Statements in April by China’s ambassador to Paris questioning the right of post-Soviet states such as Estonia, Latvia and Lithuania to independence have only reinforced this perception.

Practically, support for US demands is possible because of the eastern Europeans’ relatively low dependence on China for their prosperity. Sales from the region to China are limited. For Poland and Romania, eastern Europe’s two largest economies, China is only their nineteenth biggest export partner.

Chinese FDI into eastern Europe is also minimal, despite pledges by Beijing to bolster this by means of the Belt and Road Initiative and its 17+1 forum comprising China and, formerly, 17 eastern European countries, which began early last decade with the practical aim of agreeing cross-border infrastructure projects with Chinese involvement. Chinese FDI amounted to just €385 million in 2021 (before China locked down again) or 3.6 per cent of its total investment into Europe. By contrast, Taiwan is a major investor in eastern Europe with an FDI stock of nearly €600 million in Slovakia alone, making it the EU’s second-largest recipient of Taiwanese FDI.

Nor does the region have any objection to American hegemony or a relationship in which European states serve as junior partners under Washington’s overall leadership. There is little interest in eastern Europe in establishing the EU as a great power in its own right which competes for global leadership with the US. On the contrary, most countries are opposed to deeper European integration if that implies a dilution of the sovereignty they regained only thirty years ago, with the collapse of the Soviet Union.

As a consequence, the region has largely swung behind the American position. The Baltic States have all left the 17+1, and Bulgaria, Romania and Slovenia have downgraded their membership by refusing to send heads of state to its meetings. Romania has excluded Chinese companies from strategic sectors such as nuclear power and telecommunications. Lithuania has called for a decoupling of the EU and China’s economies, and the sooner the better.

Others have upgraded their diplomatic and economic relations with Taiwan, especially the Czech Republic, which has sent various delegations to Taipei, most recently in April, and Lithuania, which has allowed Taiwan to open a trade office in Vilnius, to the anger of China which has hit both countries with sanctions – a full trade embargo in the case of the latter.

Washington’s efforts, though, are only half the story. At the same time as the US is trying to co-opt the EU into its anti-China coalition, in the Far East, China itself is trying to draw the EU, which it similarly views as a crucial component in the new geopolitical contest, into some kind of long-term strategic partnership.

Realistically, Beijing cannot hope for an alliance of the kind the US is seeking with the EU, given the absence of shared values or any real history of co-operation between Brussels and Beijing, but it would like a pragmatic relationship with the EU that supports China’s continuing rise to power.

Politically, that means a decision by the EU not to bandwagon with the US and instead to adopt a position of neutrality in which Brussels and Beijing collaborate where the two have shared interests in the face of opposition from Washington. In the economic sphere, Beijing wants to deepen China’s trading relationship with the EU, its single largest export market and a source of crucial R&D and technology.

To Beijing’s satisfaction, this vision has its supporters, at least in the EU’s western half, which, for various reasons, has an interest in closer collaboration with China. Unlike the east, western Europe is dependent on China for its prosperity, as a major export market for high-end, luxury goods, such as German cars. This dependency has only grown as the Russian market is closed off and trade with the UK involves new, post-Brexit administrative hurdles.

China is also a massive source of imports, including nearly all the rare earths and minerals on which the EU depends for its planned transition to carbon neutrality, and is a huge investor in the economies of western Europe, especially France and Germany, where China has spent heavily in sectors such as information technology, automobiles and batteries for electric vehicles.

Western Europeans also do not perceive China as a danger in the way eastern Europe does due to their greater geographical distance from Russia to which western Europe is less exposed – not to mention the EU’s distance from China itself. To the extent that China is viewed as aggressive, Germany and others believe it can be tamed via closer engagement – the policy of Wende durch Handel or ‘change through trade’ – much as the US believed during the Obama era.

Meanwhile, the western Europeans are relatively uninterested in upholding the hegemony of the US, with which relations have been fraying since the end of the Cold War, made worse under Donald Trump but hardly improved under Joe Biden, who has also managed to annoy the western Europeans.

At home, Biden has pushed his Inflation Reduction Act, a $391 billion package of subsidies for American companies working on the green transition, which threatens to squeeze European rivals out of the global market. In western European capitals, he is seen as having provoked Russia with a policy of militarising the EU’s east and pushing NATO’s eastward expansion.

In this context, some in western Europe would welcome a genuinely multipolar world in which the US is held in check, not least in France, where President Macron has responded to demands from Washington with a renewed call for a ‘strategically autonomous’ EU, politically and militarily integrated, with an independent foreign policy scripted in Brussels rather than Washington, that sides with the US or China – or neither of them – on an issue-by-issue basis.

Against this backdrop, a succession of political leaders from western Europe has made their way to Beijing since China reopened after the pandemic late last year, including Macron himself, Germany’s chancellor Olaf Scholz, Spain’s prime minister Pedro Sanchez and the presidents of the European Commission and European Council, Ursula von der Leyen and Charles Michel respectively, accompanied in the case of the first two by huge national trade delegations.

Germany has also called for the activation of a Comprehensive Agreement on Investment between the EU and China which has been dormant since its unveiling in December 2020, and is proceeding with plans to sell part of Hamburg port to China’s state-owned COSCO. Later this month, Scholz will also host China’s Premier Li Qiang at a summit of German and Chinese government officials in Berlin, where they will discuss matters of bilateral trade and politics. Ahead of this, Germany has published a new security strategy which identifies China as a partner in resolving global issues.

For its part, China has sought to massage its relations with western Europe with a new charm offensive, targeted at the friendliest European countries. In February, the new Director of the Politburo’s Office of the Central Foreign Affairs Commission Wang Yi paid visits to Munich, Paris and Rome, where he offered to mend political relations by lifting sanctions imposed in 2021 on members of the European Parliament and endorsed Macron’s concept of strategic autonomy.

The US has tried to counter this by deepening cooperation with the EU in the areas of trade, technology and regulation, and allowing European companies to benefit in some measure from the funds available under the Inflation Reduction Act. It has also tried to convince the western Europeans that China is a foe by sharing intelligence pointing to Beijing’s support for Russian aggression in Ukraine.

Such interventions appear to have had limited effect, at least as far as the public is concerned. A new survey by the European Council on Foreign Relations (ECFR), conducted mainly in western Europe, has found among other things that 74 per cent of the public believe the EU cannot rely on the US, only 35 per cent see China as an adversary and 62 per cent believe their countries should remain neutral in any conflict between the US and China over Taiwan. Only 23 per cent of respondents favoured taking the American side.

Potentially, this growing divergence between eastern and western Europe in their approach to the deepening superpower conflict can be contained, and the two halves of the EU reconciled around a single approach.

For one thing, the position of the eastern Europeans is not monolithic. Hungary, which bears a serious grudge against the US for its criticisms of the Fidesz-led government, has opened up to Chinese investment, most notably a high-speed railway to non-EU member Serbia (another pro-Chinese state). In Russophile Bulgaria, only 13 per cent see the US as an ally, according to the ECFR.

There are also ambiguities in the position of the western Europeans. The Nordic states, which are exposed to Russia, have adopted a more eastern approach to the Sino-American rivalry: Finland and Sweden have thrown in their lot with the US by seeking to join NATO. At the request of the US, the Netherlands has initiated a ban on sales of microchip technology to China.

Germany’s ruling coalition is split on the question of how to relate to China, with junior coalition partners advocating a more confrontational stance. In March, the education minister, who belongs to the Free Democratic Party, paid a visit to Taiwan and the government as a whole has agreed to sail two navy vessels to the South China Sea next year. EU governments more broadly now routinely screen new Chinese foreign investments and the European Commission is pushing for sanctions on various Chinese companies, such as those suspected of supplying Russia with dual-use technologies.

Efforts are afoot to find a compromise position between east and west. Von der Leyen has promoted a middle road involving the EU’s ‘de-risking’ from China by reducing its dependence in critical sectors, while continuing to trade with China more broadly. The EU’s High Representative for Foreign Affairs Josep Borrell has similarly called for a ‘recalibration’ of policy towards China, comprising support for Taiwan and opposition to Beijing’s support for Russia, but falling short of the diplomatic snubbing the US would like to see.

France is also seeking a deal with the east. At a summit in Bratislava in May, President Macron offered to end his country’s long-standing opposition to EU enlargement into the western Balkans and the former Soviet Union, a high priority for the EU’s eastern members, in return for their support for strategic autonomy.

The scope for reconciliation between the EU’s two halves has its limits, however. Macron has poured scorn on von der Leyen’s idea of de-risking and warned the eastern Europeans not to take their cue ‘from the US agenda’. In Berlin, the government has called on Lithuania to row back its overtures to Taiwan to smooth the passage of the Comprehensive Agreement on Investment.

As a means to get their way in Brussels, a new ‘group of friends’ comprising France, Germany, Italy, Spain and the Benelux countries is seeking to remove the eastern Europeans’ right to veto matters of foreign policy in the European Council, with decisions made instead by qualified majority.

Unsurprisingly, this has been met with opposition in eastern Europe, which is pushing back against western European efforts to cajole the region into adopting a pro-China position, while accusing them of being played by Beijing and undermining the Transatlantic alliance. In response to calls by Macron for strategic autonomy, the Polish prime minister Mateusz Morawiecki has proposed a ‘new strategic partnership’ with the US.

If this is the new political reality, then the deepening geopolitical contest between the US and China presents yet another test to the viability of the EU, and one which is quantitively different from previous crises. This, after all, is not simply a dispute over policy but a schism over the defining issue of the age – what kind of international order the EU wants to see and whose side, if any, is it on. One led by the US with the Europeans as supporting partners? Or a world comprising multiple poles, including the EU?

At a minimum, this bodes ill for the EU’s functioning. As the west pursues its vision of strategic autonomy and balancing between the US and China, and the east pursues its vision of sovereign European states bandwagoning with the US, reaching agreement on second-order issues, even in vital areas such as security, trade and values, will be difficult – perhaps impossible – especially as the US courts the east and China courts the west into adopting one or other of their mutually-exclusive positions.

The risk as the crisis in Ukraine has shown is that, in the absence of a common EU position, individual members simply go their own way, risking the EU’s further decomposition, and challenging its very integrity. Witness the recent decision by five eastern European countries to block imports of Ukrainian grain in violation of the EU’s legal sovereignty over matters of trade.

On both sides of the divide, stark warnings have been voiced. In the east, diplomats have cautioned that, unless the EU sticks together in the face of the new geopolitical threat, its members will be hanged separately. In the west, Macron has insisted that giving up the struggle for strategic autonomy would be ‘tantamount to burying the European project’.

Such predictions would certainly be consistent with a pattern throughout history in which political entities come together and break apart due to shifts in the global balance of power. The EU was forged in the bipolar conditions of the Cold War, expanded under American unipolarity and could plausibly disintegrate as the world returns to a state of bipolarity, this time with China as one of the poles.

That is not an imminent danger. But the question of how the EU positions itself geopolitically cannot be avoided, any more than it could during the Cold War when all countries had to decide whether they were with the Americans, the Soviets or formally non-aligned. As the US and China gear up for an epochal confrontation, the EU faces perhaps its greatest challenge yet.