Watching China in Europe—September 2024
Three China Camps
As the clock ticks down to a US presidential election that, to the relief of capitals across Europe, is looking far more competitive than it did at the start of the summer, three camps are emerging on the future shape of European policy toward China. One is led by returning European Commission President Ursula von der Leyen, a second by French President Emmanuel Macron, and a third by German Chancellor Olaf Scholz.
Governance and Speed
Von der Leyen is convinced that China represents a systemic threat to Europe and that closer transatlantic cooperation is the only way to respond. As a result, she and her entourage are preparing something of a reboot of the EU’s China policy that would also serve as an olive branch to the next US administration, regardless of who leads it. This reboot has two main components—one related to governance and the other to the speed of the policy process.
On the governance front, von der Leyen is determined to break down silos in the Commission, turning it into a nimbler coordinator of different China policy strands spanning trade, investment, technology and security. In the political guidelines she unveiled in July, she used the term “economic foreign policy” to describe this new joined-up approach. This could be achieved by creating the equivalent of an economic security council under the Commission’s secretary-general. Based loosely on the US and Japanese models for coordinating national and economic security policies, such a council would synchronize and synthesize the work of key Commission directorates, or DGs, while serving as a central resource for EU member states struggling to address this complex nexus of challenges.
Another option would be the creation of a new economic security czar, who would have a coordinating function atop a cluster of commissioners and policy domains, bringing together, for example, the work of DG Trade, DG Competition and DG Grow. The natural person for such a role, several officials suggested, would be outgoing Trade Commissioner Valdis Dombrovskis. The hope is that better governance will facilitate a faster policy process, the second component of the reboot. The argument of people in von der Leyen’s entourage is that the slow pace of EU-level progress on the range of issues related to economic security could lead to a fracturing of the transatlantic market, as the United States—regardless of who sits in the White House—presses ahead with new policy initiatives and uses strong-arm tactics with Europe if it fails to keep pace.
US Pressure
As one EU official told me, “the US will not allow American firms to be disadvantaged competitively while the EU debates for years about what it is and isn’t prepared to do. We will see unilateral action from Washington. So the only question is whether we preempt this or wait and react to it.” US pressure has already ratcheted up several notches in recent months, according to numerous European officials with whom I spoke. The Biden administration has leaned heavily on the Netherlands and Japan to broaden export controls on chip-making equipment while seeking to bring other countries involved in the semiconductor supply chain, such as South Korea and Germany, into the fold. Next on the US agenda, officials say, is quantum computing, biotechnology and artificial intelligence, issues on which Washington wants to create exclusive plurilateral groupings of “like-minded” states to harmonize approaches.
Over the summer, just as most Europeans were heading out on summer vacation, the US State Department and National Security Council convened a meeting in Washington on the security risks associated with connected vehicles. In this area as well, the message to US allies was clear: Divergence from the American policy approach will have consequences. The German government and the Commission began their own assessments of the risks linked to connected vehicles earlier this year, and the results of the latter’s investigation are expected in March. The urgency to produce a European policy has become more acute, officials say, as the Commission presses ahead with its plan to impose duties on China-made electric vehicles (EVs), and European countries scramble to lure investments from Chinese carmakers. “We have no consensus in Europe, and time is of the essence,” one official from a large member state told me.
The French Camp
In the Macron camp are those who believe Europe should be pushing back more forcefully against the US pressure on China policy. These people would like to see the EU deepen conversations with Japan and South Korea to develop a robust, plurilateral response to Washington. All three US allies are worried, particularly in the event of a Donald Trump victory in November, that they could come under pressure to take measures against China that are at odds with their own values and interests. In Europe, for example, there is no appetite to exclude Chinese companies from the EV supply chain, as Washington is doing. This camp, which includes some trade officials in Brussels, would like the EU to be prepared to take the United States to the World Trade Organization and use its new anti-coercion instrument if a new US administration pushes Europe too far.
A piece by Giovanna De Maio and Célia Belin, “Europe’s America Problem”, published in Foreign Affairs last month, made the case for a more unified European strategy for dealing with Washington. The problem, as the article itself acknowledges, is that European member states remain deeply divided on pushing back against Washington. A second Trump administration would likely widen the division. The piece, in my view, also underestimates the role that China will play in the transatlantic relationship going forward. It suggests that, if Europe were to ask nicely, the United States might agree to put its ties to China and Europe in different boxes. The authors write that “Europe should request that the United States keep its efforts to contain and outcompete China separate from its trade and security policy toward Europe.” The truth is that US policy toward Europe is likely to be seen through a China prism for decades to come. Acknowledging this needs to be at the heart of any European approach to Washington.
The German Camp
The Scholz group is perhaps best described as the head-in-the-sand club. It seems equally spooked by the prospect of aligning too closely with the United States on China and by strategizing about ways to push back against Washington. The result is indecision and delay, based on a misplaced hope that hard choices may become easier over time. The China strategy unveiled by Scholz’s loveless coalition last summer was promising. But one year later, it is clear that the Greens-led ministries in Berlin that shepherded it through, and whose views align with those of von der Leyen and enlightened EU states such as the Netherlands, can achieve only so much with the ultra-cautious chancellor. One European diplomat described Germany, France and the Netherlands as “ships passing in the night” on the most important geo-economic issues facing Europe.
More Room
Which camp will win out? Von der Leyen can only do so much without the support of the big member states, which will balk at her push to centralize powers in the Commission, fast track Europe’s economic security policies, and lean closer to Washington. A cascade of official and unofficial threats from China in recent months, aimed at European brandy, cheese, pork and car producers (in response to the EU’s planned duties on Chinese EVs) and at the Netherlands (for looming chip controls), may lead some member states to become weak-kneed. Commission officials are not ready to give the all clear on their EV duties just yet, even if the chance that a blocking majority of member states comes together next month in a final vote looks slim.
But the woes of Scholz, who is grappling with a stagnant economy and a far-right surge one year before Germany’s federal election, and of Macron, who is struggling to emerge from a domestic political crisis of his own making, will leave more room for von der Leyen to push her agenda. “The political turmoil in Berlin and Paris opens the door for the Commission to assert itself more,” a senior European official predicted. “Von der Leyen got her second term. She doesn’t have to worry about winning another.” Still, Brussels would be remiss if it didn’t have a Plan B for what is likely to be a highly disruptive second Trump term. As the new von der Leyen Commission overhauls its China policies and prepares an offer for the new US president, it should also be honing its contingency plans in consultation with allies in Tokyo, Seoul, London, Ottawa and beyond.