Europe has handed China a strategic victory

This is the wrong time for the EU to agree an investment treaty with Beijing

Ursula von der Leyen, the president of the European Commission, says she wants to lead a “geopolitical commission”. But Ms Von der Leyen concluded 2020 by sending a truly awful geopolitical message — as her commission signed off on an investment treaty between the EU and China.

Over the past year, China has crushed the freedom of Hong Kong, intensified oppression in Xinjiang, killed Indian troops, threatened Taiwan and sanctioned Australia. By signing a deal with China nonetheless, the EU has signalled that it doesn’t care about all that. As Janka Oertel, director of the Asia programme at the European Council on Foreign Relations think-tank, puts it: “This is a massive diplomatic win for China.”

It is also a considerable kick in the teeth for Joe Biden. The US president-elect has stressed that, after Donald Trump, he wants to make a fresh start with Europe. In particular, the Biden administration wants to work on China issues together with fellow democracies. Jake Sullivan, Mr Biden’s national security adviser, issued a last-minute plea for the Europeans to hold off on signing the deal — at least until they had a chance to discuss it with the new administration. He was ignored. 

EU officials offer several justifications for their decision. They say that many of the concessions the EU has got from China have already been granted to the US, as part of America’s own “phase-one” trade deal. (These include sectoral openings in several industries, as well as changes to joint-venture requirements.) Brussels officials point out that the US did not ask for European permission before concluding its own deal with China. They justify the EU’s decision as a demonstration of “strategic autonomy”. 

These EU arguments sound tough-minded. But, in fact, they are naive. It is naive to believe that China will respect the agreement it has signed. It is naive to ignore the geopolitical implications of doing a deal with China right now. And it is naive to think that the darkening political climate in Beijing will never affect life in Brussels or Berlin.

The EU says that this deal will “discipline the behaviour” of China’s state-owned enterprises, which will now be required “to act in accordance with commercial considerations”. But China made very similar commitments when it joined the World Trade Organization in 2001. Pledges to rein in state subsidies made 20 years ago are now being offered up again as fresh concessions. Beijing’s promise to “work towards” enforcing international conventions on labour standards are also laughably weak. As Shi Yinhong, a prominent Chinese academic, pointed out: “On labour, it’s impossible for China to agree. Can you imagine China with free trade unions?” 

Over the past year, China has repeatedly demonstrated its willingness to ignore treaty commitments. Its new national security law violates an agreement with Britain that guaranteed the autonomy of Hong Kong. China has also imposed tariffs on Australian goods in violation of the China-Australia free trade agreement

The timing of this deal is exquisite for Beijing, since it presents the Biden team with a fait accompli. Reinhard Bütikofer, chairman of the European parliament’s delegation on China, says: “We’ve allowed China to drive a huge wedge between the US and Europe.”

The EU-China deal was pushed hard by Angela Merkel, the German chancellor, and concluded right at the end of her country’s presidency of the EU. Ms Merkel is seen as a champion of liberal values. But her approach to China is largely driven by commerce. She knows that the German car industry has had a rough few years, and China is its largest market. 

Ms Merkel’s determination to press ahead may also reflect her own scepticism about the future of the US. In a speech in 2017, she said that Europe could no longer rely on America. The election of Mr Biden has probably not changed that view. Many Europeans also believe that the US is on the brink of a new cold war with China — and want little part of that. 

Some of these arguments are reasonable enough. It is hard to look at current events in Washington and feel totally confident about the stability of the US or the Atlantic alliance. A European desire to avoid military confrontation in the Pacific is also rational. 

But relying on an American security guarantee in Europe, while undermining American security policy in the Pacific, does not look like a wise or sustainable policy over the long run.

The Europeans are also kidding themselves if they think they can be blind to the increasingly authoritarian and aggressive nature of Xi Jinping’s China. For the past 70 years, Europeans have benefited from the fact that the world’s most powerful nation is a liberal democracy. If an authoritarian nation, such as China, displaces America as the dominant global power, then democracies all over the world will feel the consequences. 

Even in the current geopolitical order, China has repeatedly demonstrated its willingness to use its economic power as a strategic weapon. By deepening their economic reliance on China — without co-ordinating their policy with fellow democracies — European nations are increasing their vulnerability to pressure from Beijing. That is a remarkably shortsighted decision to make, for a “geopolitical commission”.

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