Europe's moment of truth with China

For much of the past year, China has been preoccupied with its trade conflict with the United States. Now that it has a clinched a “phase-one” deal with Washington, it is turning its attention to Europe. The problem? Europe hasn't made up its mind about how to respond, says Noah Barkin. 

When Wang Yi, China’s top diplomat, came to Brussels in December, he delivered two messages to Europe. The first was rather benign: "We are partners, not rivals," he told his audience at the European Policy Centre think tank, calling on the EU and Beijing to draw up an "ambitious blueprint" for cooperation.

The second was more of a thinly veiled threat: Europe and China had to “get mutual perceptions right,” he declared. Failure to do so would risk “unnecessary disruptions” to the relationship. Wang didn’t mention pro-democracy protests in Hong Kong, reports of human rights abuses in Xinjiang or security concerns surrounding telecoms giant Huawei. But his message was clear: If Europe wants smooth relations, it should stop criticizing China.

Europe, however, is still clarifying its stance toward China and may not be ready for the hard choices implied by Wang's quid pro quo.

Back in March, when the European Commission issued a toughly-worded paper that described China as a “systemic rival,” the EU seemed to be heading down a more confrontational path with Beijing. But in the intervening months, momentum has stalled. German Chancellor Angela Merkel and French President Emmanuel Macron both traveled to China but focused primarily on business ties. Most European countries have delayed increasingly urgent decisions over whether Chinese telecoms equipment giant Huawei should be allowed to build their 5G mobile networks.

In 2020, Europe - whether it likes it or not - will be under intense pressure to finally pick a lane, with several high-profile events on the agenda including an EU-China summit and a meeting between Chinese leader Xi Jinping and EU national leaders in Leipzig in September, under the German presidency of the EU.

Here are the factors that are most likely to shape Europe’s relationship with Beijing.

Huawei conundrum

As 2020 dawns, Europe’s biggest countries — Germany, France and Britain — are still debating whether Huawei should be given a role in their 5G rollouts.

Lately, the discussion has been most intense in Berlin, where Merkel has faced a revolt, led by her former environment minister, Norbert Röttgen, over her refusal to ban Huawei. Other parties, including her coalition partner, the Social Democrats, but also the Greens, the liberal Free Democrats and the far-right Alternative for Germany, are pushing back. It should become clear in the coming months whether Röttgen’s rebellion has a chance of succeeding.

After repeated delays, Britain faces a similar decision, with Prime Minister Boris Johnson forced to weigh up the risks of Washington curtailing intelligence cooperation if he gives Huawei the green light, against the costs of a Chinese backlash if he does not.

The European Commission will unveil its 5G “toolbox” in mid-January, which will give member states a menu of options for mitigating security risks linked to their next-generation mobile networks. After studiously avoiding decisions in 2019, the big European players will need to come down one way or the other in 2020. Their decisions will have a ripple effect for smaller countries.

US trade pressure

For the past year, amid the ups and downs of the U.S.-China trade conflict, European leaders have been worried about one thing: that Trump would strike a cosmetic deal with Beijing and then zero in on Europe.

Now, Europe’s nightmare scenario could become a reality. In December, U.S. Trade Representative Robert Lighthizer spoke openly about the “very unbalanced” trade relationship with Europe, signaling that this will be Washington’s focus in 2020.

If Trump follows through on his threat of car tariffs, it could trigger a tit-for-tat downward spiral in the transatlantic relationship that pushes Europe toward a more conciliatory stance with China.

The Trump administration has also begun rolling out proposals for export controls on emerging technologies. U.S. officials have been reaching out to Europe and other "like-minded countries” to get their buy-in. But if Trump is waging a trade war with Europe, the appetite to go along with Washington’s plans to curb technology exports to China will be limited.

EU-China investments

The German chancellor has signaled that she wants to clinch a comprehensive investment agreement between the EU and China in time for her September summit in Leipzig. But some EU officials have described the challenge of doing so as “impossible.” Sabine Weyand, the European Commission’s director-general for trade, has said talks with the Chinese are moving “at a snail’s pace.”

This might change in the coming months. If it doesn’t, the EU will be confronted with the question of how to respond to China’s intransigence. The new Commission is examining ways to curb unfair competition from state-owned enterprises and its new investment screening mechanism will be up and running in October.

These initiatives, designed to shield Europe from certain Chinese investments, could make progress with Beijing in other areas more difficult. “There is a big gap between what we say and what we do,” one senior EU official said. "That gap has been reduced but we are still not where we need to be.”

Human rights

The wild cards in the Europe-China relationship are the ongoing protests in Hong Kong and the growing backlash against Beijing’s re-education camps in Xinjiang. Both will remain prominent in news headlines in 2020, weighing on ties, souring public opinion on China and limiting the room for European leaders to work closely with Beijing.

The EU’s new foreign policy chief, Josep Borrell, seems unlikely to shy from criticizing China on human rights. Speaking in the European Parliament in Strasbourg in December, he promised to push member states to toughen their response to rights violations in Xinjiang, where an estimated 1 million Uighurs have been detained, and to fight for an EU equivalent of the U.S. Magnitsky Act, which would allow the EU to sanction individuals complicit in human rights abuses.

Pressure on European companies to curb their activities in Xinjiang is also likely to grow in 2020.

New Commission

Under former European Commission President Jean-Claude Juncker, the EU took a decidedly firmer stance against China, agreeing to a new investment screening mechanism and labeling China a “systemic rival.”

His successor Ursula von der Leyen has promised a more “geopolitical” Commission. As German defense minister, she was highly critical of China. In her first weeks in the job, she has stuck to a hard line on issues like 5G. But she, like Borrell, is new to the job and the tone she strikes on China will be closely scrutinized in 2020 for clues about a shift in policy.

One of von der Leyen’s key challenges will be to get the various commissioners and the European External Action Service working seamlessly together — alongside national governments — to confront new challenges from China at the nexus of technology and security. Whether she can do so will determine the strength of a common EU strategy toward Beijing.

US election

Talk to European officials these days and they will tell you, in resigned tones, that Trump’s re-election is all but inevitable. With nearly a year to go until the vote, there is ample time for this to change. But if U.S. Democrats struggle to unite behind a strong candidate and shift the momentum as the November election approaches, European countries are likely to hedge against a second Trump term by softening their tone with China.

The last thing they want is open confrontation with Washington and Beijing at the same time. As one veteran U.S. diplomat put it: “I fear that Europe will retreat to a transactional view of the world, doing deals with Russia and China.”

This article was first published by "Politico" on January 13, 2020.

The views expressed in this article are those of the author and not necessarily reflect those of the Mercator Institute for China Studies.