China or the US? Europe’s ‘impossible choice’ in the trade war
Growing tensions between China and the United States over the escalating trade dispute – and the resulting global uncertainty – are forcing other countries to choose between the two economic superpowers.
The European Union, which is the world’s largest trading bloc and a top trading partner of both China and the US, is in a difficult spot since US President Donald Trump’s decision to ratchet up pressure on Beijing early this month – a move that included signing an executive order which effectively banned Chinese telecoms giant Huawei from accessing US supply chains.
“Europe is finding itself today in an extremely inconvenient position in which countries that seek to coexist with both China and the US are called to make an impossible choice and prove their allegiance to one of the parties over the other,” said Gal Luft, co-director of the Institute for the Analysis of Global Security, a Washington-based think tank.
As nationalist rhetoric heats up in the wake of an early-May breakdown in US-China trade talks, top officials from both countries have engaged in intense shuttle diplomacy aimed at securing support and shoring up alliances across Europe.
Chinese Vice-President Wang Qishan, a close ally of President Xi Jinping who formerly led trade talks with the US, is visiting Germany and the Netherlands this week, just days after another top Xi aide, Li Zhanshu, the Communist Party’s third-most powerful cadre, wrapped up a trip to Hungary, Austria and Norway.
Wang’s trip will coincide with US Secretary of State Mike Pompeo’s arrival in Berlin for talks with Chancellor Angela Merkel on Friday. The US State Department said Pompeo would also visit the Netherlands, Switzerland and Britain.
Pompeo’s four-nation trip is expected to pave the way for further travel by Trump himself, who is set to visit Britain and France early next month.
The EU is in a delicate balancing act, as deteriorating US-China relations coincide with its own widening rift with the US over trade. European ties with Beijing stand at a crossroads, amid signs of a gathering storm and growing rivalry.
In a landmark shift in its policy on China, the European Commission – the executive arm of the EU – for the first time labelled it an “economic competitor” and “a systemic rival” in a policy paper in March.
Observers say that, with the return of trade war tensions, Europe – already caught in the middle of the unfolding US-China rivalry – will become an important battlefield for the two giant nations’ geostrategic political machinations.
“The common view in Europe is that the EU basically agrees with the substance of American criticism of China, but does not agree with the methods and manners of confrontation,” said Tamas Matura, a China specialist who is an assistant professor at Corvinus University of Budapest and president of the Central and Eastern European Centre for Asian Studies.
“The EU and its member states are deeply interested in the stability of a free and global economy, and disruption from any side is undesirable,” he said.
John Seaman, a research fellow at the French Institute of International Relations, said European countries in general shared most of the US’ concerns about China.
Those concerns include market openness and reciprocity, fair competition and the outsize role of the Chinese state and the Communist Party in China’s economy, security risks to critical infrastructure, authoritarian politics, human rights, Beijing’s political influence abroad and, in particular, China’s growing technological prowess.
Seaman called Washington’s latest moves against Huawei “a clear turning point in the US approach to China”.
“It seems that we’re still at the beginning of a much more structurally confrontational approach on the part of the US, wherein the Trump administration is looking to leverage all dimensions of American power,” he said.
Philippe Le Corre, a senior fellow in the Europe and Asia programmes at the Carnegie Endowment for International Peace, also saw Trump’s actions on Huawei as the moment that the world’s largest telecoms equipment maker became “a symbol of Chinese brands going abroad”.
US officials have accused Beijing of reneging on commitments to end its allegedly improper trade policies – prompting the Trump administration to raise tariffs on US$200 billion worth of Chinese imports from 10 to 25 per cent after the sides wrapped up an 11th round of talks earlier this month in Washington without reaching a deal.
Washington has for months tried to forge an international alliance against Huawei, which has risen to become a pillar of Beijing’s bid to expand its global influence on trade and technology.
While Australia and Japan have taken their own action against Huawei, closing ranks behind the US, many American allies in Europe remain undecided about whether to adopt sweeping bans against the Chinese company.
This is despite having similar security concerns over Huawei’s leadership in the development of fifth-generation, or 5G, mobile telecommunications technology that enables data to be transferred at a speed 20 times faster than existing standards.
During their trip to Europe, Trump and Pompeo are expected to further press traditional US allies to side with Washington on China and Huawei in particular, citing concerns that the company’s products may support spying by Beijing and disrupt the allies’ communications networks.
But leaders in France, Germany, Britain and the Netherlands have so far vowed to stay the course and break with Washington over its effort to keep a ban on Huawei equipment.
Despite concerns about the potential pitfalls of using the Chinese company to supply vital digital infrastructure, many European leaders insist they have set tough rules and security standards for the supplier.
Merkel and French President Emmanuel Macron have said they will not block Huawei or any other company because Europeans are “pragmatic and realistic”.
Seaman said the issue came down to what the Trump administration saw as the end goal of its confrontational approach and whether its hardline tactics would reflect a long-term strategy that could outlast Trump’s controversial, unconventional presidency.
For instance, on 5G, Seaman said, many governments had started from a network security approach. Their focus has been on measures that could be taken to make 5G networks safer and more resilient – and light on geopolitics.
“There is a sense that the two cannot be separated, but focusing only on geopolitical risk and failing to develop the principles, procedures and practices that will ensure that the backbone of tomorrow’s ultra-connected society is secure, is just as dangerous,” the researcher said.
Duncan Freeman, a research fellow at the EU-China Research Centre of the College of Europe in Brussels, said that although trade and technology were separate issues, Washington’s ongoing disputes with Beijing on those topics underlined the changing balance in bilateral ties.
“The recent conflict over trade and technology is occurring in the wider context of the rise of China and the decline of the US that has been taking place in recent decades,” he said.
“The US’ dominant global position is based on its economic and technological power which underlies its military strength, but it has become clear that the US is losing that position in key areas.”
While Freeman did not see Trump’s China policy as creating a tipping point in the long-term global balance of power, he agreed that the US approach to dealing with China marked a significant policy shift.
“The policy will not achieve its apparent aim of rebalancing the relative decline of the US and rise of China, and we can expect further friction as this process continues,” he said.
“A key factor will be how the US manages its long-term decline as a global power, and whether China manages its increasingly important position in the global system to avoid confrontation with the incumbent leading power.”
Freeman said it should also be remembered that, like Japan and many other US allies, the EU itself is a target of Washington on trade, as the Trump administration regards the EU as being almost as bad as China in its embrace of protectionism.
“It is difficult for the EU to adopt a completely independent position as it is dependent on both the US and China in key areas of its security and economy,” he said.
Freeman said that although the Trump administration’s policies had raised Europe’s concerns over security and economic relations with the US, and put transatlantic relations under question, EU-US ties remained central to EU policy.
Therefore, “there is unlikely to be any major shift away from this in the short term”, Freeman said.
What is more, China had had little success in its attempt to create common ground with the EU since Trump’s election in November 2016, Freeman said.
“In fact, the rhetoric on China in much of the EU has got tougher in recent years, although this is not uniform, especially in some member states which seek closer ties with China,” he said.
Matura of Corvinus University also said Trump and his top officials would be making a grave mistake if they were to alienate their European allies, when Trump clearly wanted to score a major success in his conflict with China ahead of next year’s presidential contest.
“The policies of the Trump administration have been very mixed so far, as it confronted China and degraded US global leadership at the very same time,” he said.
“If Washington really wants to contain China, the economic-political-social decoupling will continue. But the US cannot be successful without rebuilding global trust in its leadership.
“Bullying everyone, including its very own allies, is not a viable way to preserve US dominance in the world.”
Matura and other observers agree the US’ allies in Europe and Asia eventually might be dragged into the looming economic cold war between Washington and Beijing.
“Although many say that it is due time for the EU to get more independent from the US, it would take many years to develop the necessary technological or military capabilities to act as an independent major player,” Matura said.
“Despite its theoretical ambitions, the EU has never been able or never been pushed to grow up to its potential.
“The most optimistic scenario is that in case of a US-China confrontation, Europe would try to gain just enough time to develop its own capacities.
“In reality, however, I expect the EU to play the role of a mediator between the two sides.”
Luft noted that although some European countries, such as Italy, had chosen to side with China on flashpoint issues – such as Xi’s aggressive trade and infrastructure push, the Belt and Road Initiative – “few in Europe are courageous enough to openly confront Trump for fear of his wrath”.
Seaman said Trump’s unilateral, “America first” crusade might have caused agitation in Europe and even fuelled some deep resentment of the US president, his policies and his country, but it had not led to an embrace of China.
“Broadly speaking, Europe is looking to hedge in the best way it can and avoid getting dragged into a US-China confrontation in which it has to make stark choices,” Seaman said.
“The risk for the US comes in over-leveraging their economic power in such a way that it generates a rift [in Europe] that won’t play out in the short term, due to the state of dependency, but [leads to] a longer-term strategy to become more resilient to the various levers of American power,” he said.
And what will become of European political leadership and cohesiveness after the recent European parliamentary elections, which saw modest wins for the anti-EU populist right-wing movement?
“There is a risk that Europe itself will become even more fragmented than it is today, at a time when the geopolitical context demands that Europeans band together,” Seaman said.
“We’re already seeing Washington and Beijing trying to push their influence on the continent, with the Huawei/5G case as a clear example."
“But a further fragmentation of the EU will only increase the need for China and the US to pay closer attention to Europe as a field of competition.”