At What Expense? – EU and China Seal a Deal Behind Biden’s Back

Written by | Wednesday, March 3rd, 2021

After his election as US president, Joe Biden reiterated his pledge to engage with allies, especially in dealing with an increasingly assertive China. In his inauguration speech, he raised expectations further, promising to ‘repair our alliances’. Mood music from both sides of the Atlantic seemed to herald a honeymoon in which the European Union and the United States would put peace and cooperation at the centre of their collective action, in contrast to the global free-for-all in closing borders and fighting for medical supplies that accompanied the coronavirus pandemic and the ensuing economic recession. There were few doubts in Washington and European capitals about the hard road ahead, and the shared common ground was reaffirmed emphatically by both sides.

Relief at America’s imminent return to dialogue and cooperation, however, seemed to be put on hold only weeks after Biden’s election by an unexpected move from the European Union. To the dismay of many in the incoming US administration, the EU unexpectedly announced a high-level accord with China, the Comprehensive Agreement on Investment. Just days before the deal was announced, Jake Sullivan, Biden’s national security adviser, asked for ‘early consultations with our European partners on our common concerns about China’s economic practices’, but his plea was not heard. The agreement involves access for European companies to the Chinese market, focusing on the liberalization of investment, the elimination of quantitative restrictions, rules against the forced transfer of technology and new obligations about the behaviour of Chinese state-owned enterprises.

Hurriedly negotiated in the final sprint of Germany’s presidency of the EU, it will face opposition from several quarters in Europe. Member states are dependent on China to differing degrees, with many prioritizing the transatlantic relationship, while there are significant political forces keen to challenge the EU’s paper-thin commitments on human and labour rights when it comes to China. This level of opposition may mean that the agreement never legally enters into force. Yet it remains of deep political significance because it encapsulates two problems: the dilemma Europe faces in its attempt to define a more assertive international role for itself and the challenge of rebuilding America’s alliances, fragmented after four years of the Donald Trump presidency and the Brexit drama. The consequences will play out not just within historic partnerships, but also in the unfolding geopolitical competition in the global south – where American and European pledges to support health and economic recovery after the coronavirus pandemic face a challenge from China.

UNCOMFORTABLE CHOICES — The Trump administration’s transactionalist policies forced the EU into uncomfortable choices on China. Spurred by Xi Jinping’s aggressive ‘wolf warrior’ diplomacy, Brussels became more concerned about the nature of Chinese investments on the continent but also sought space to step away from the US-China rivalry the Trump administration embraced to the extent of starting a tariff war. Nowhere is this more evident than in the investment agreement with China surreptitiously concluded ‘in principle’ just days after a cliff-hanger Brexit finale. The agreement has been regarded as a symbolic win for the Chinese, another box ticked by the German EU presidency and a slap in the face to the incoming Biden administration. European politicians have justified the agreement with China precisely in terms of the need to forge a common position and shared interest among member states, overcome the ‘divide-and-rule’ tactics that Beijing has pursued with success in Europe and give European companies better access to the Chinese market. The argument goes that the agreement had been in the works since 2014 and should have come as no surprise given the EU and China’s firm commitment to finalize the deal by 2020.

Seen from the perspective of transatlantic relations, however, the EU’s choice was not just awkward timing. Brussels might have had better negotiating capital had it allowed time to consult with Washington. In the end, those preparing the agreement preferred to pre-empt US pressure on the EU and offer Beijing a diplomatic win at the risk of casting a shadow over the reset of relations with America. Setting aside these different interpretations, one thing is clear: the agreement bears many of the hallmarks of the EU’s approach to its relationship with China in recent years and the way it will continue in the future. In 2019, the EU outlined how it intended to view China simultaneously as a cooperation partner, an economic competitor and a systemic rival, while calling for a flexible and pragmatic approach based on the EU’s interests and values. This rationale provides the framework for EU statements on how it will protect its interests and is used to make the case for a ‘geopolitical Commission’ and European ‘strategic autonomy’.

The arrival of the Trump administration and Brexit were two events that pushed the EU in the direction of working more strategically on its assets, which are in trade and, to a lesser extent, investments. An international environment in which economic and financial tools are used for foreign policy gains and trade is weaponized against partners – as embraced by Trump and Britain after it voted to leave the EU – shook the bloc into viewing its own economic tools as a political asset. Contradictions abound in this policy and the claim that the agreement with China reflects a balance between the EU’s interests and values is open to question. On interests, it depends which ‘interests’ are referred to: economic or security. The EU’s geo-economic capacity appears in the process of being sharpened with little consideration as to how dependent Europe remains on Nato and on US commitments in the alliance. The seeming centrality of business interests leaves little leverage to pursue ‘values’ such as human rights and the rule of law. The championing of human rights by Brussels has always rung hollow when it came to criticizing China, not least when it cannot get its own house in order with regards to Hungary or even Poland. In the face of China’s crackdown in Hong Kong and the evidence of the use of forced labour in Uighur communities, the US and Britain have been far more vocal. A ‘geopolitical’ EU, by contrast, seems to have abandoned any pretence at upholding its values by affirming the primacy of economics.

THE COMING TEST — These paradoxes will cast a shadow on the EU’s ability to develop partnerships with emerging democracies elsewhere and put a strain on its influence, or soft power. In mid-2019, the EU released a new strategic agenda that had no less an ambition than using ‘its influence to lead the response to global challenges’. The coronavirus pandemic will be the first litmus test for the EU in this regard. And yet, the West’s current behaviour of hoarding vaccine supplies – as much as five times more than the actual number needed to vaccinate its population in the case of Canada – prompted Tedros Ghebreyesus, the World Health Organization director, to admonish rich countries for their stockpiling – a ‘catastrophic moral failure’ that he said would only prolong the pandemic. At the same time, the Chinese government has been on a mass pandemic diplomacy campaign offering an alternative for developing countries facing long waits for supplies of vaccine.

Last June, Josep Borrell, the EU’s high representative for foreign affairs and security policy, and Thierry Breton, European Commissioner for the internal market, wrote that the ‘time has come for Europe to be able to use its levers of influence to enforce its vision of the world and defend its own interests’. Regardless of how that vision and interests are defined, such a comment augurs a brewing geopolitical rivalry between the West and China in the rest of the world, and in particular, the developing world where spheres of influence are in flux. For now, there are widespread doubts about the reliability of Chinese vaccines and the political strings they come attached with. But these doubts do not ensure an endless supply of goodwill towards the EU in the developing world. Turkey, a Nato ally that sealed a deal to buy 50 million doses of coronavirus vaccines from China’s Sinovac Biotech in November 2020, is just one in a growing list of examples of where the pandemic is widening cracks between the EU and countries which used to look towards the bloc for help in times of need.

Only time will tell if the EU’s cherry-picking approach to its engagement with China will prove successful. One thing, though, is clear: the EU, America and its allies will need to work harder on collaboration if they are not to be outpaced by China. The EU-China investment agreement, America’s Phase One trade agreement that halted Trump’s tariff war, and even the China-led Regional Comprehensive Economic Partnership in the Asia-Pacific region are all part of a process to resolve structural issues posed by the integration of China into the world’s economic system. These wrenching shifts in the global economy are now overlaid by the urgent need to contain the pandemic.

This is not a winner-takes-all competition between China and western countries over who gets the kudos for getting the world vaccinated. Partners need to work together, vaccine-producing countries and those who can pay for them need to pool their resources to help end the pandemic. Political will and political action needs to be invested in Covax, the global vaccine-sharing scheme that the Biden administration has promised to join. In the end, this is about spheres of influence in the global south – who wins them, the values the winner represents and the transactional costs involved. This could shape the direction – East or West – many countries face for years to come.

‚EU and China Seal a Deal Behind Biden’s Back‘ – Article by Rosa Balfour and Lizza Bomassi – Chatham House / The Royal Institute of International Affairs.

The Article can be downloaded here

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