Watching China in Europe - March 2021

Welcome to Watching China in Europe, a new monthly update from GMF’s Asia Program. Now more than ever, the transatlantic partners need clarity and cohesion when it comes to China policy. In this monthly newsletter, Noah Barkin—a veteran journalist, managing editor at Rhodium Group and a senior visiting fellow at GMF—will provide his personal observations and analysis on the most pressing China-related developments and activities throughout Europe. Click here to subscribe.

Selmayr on EU-China

Two years ago, the European Commission and the EU’s diplomatic service published a document with the simple title “EU-China – A Strategic Outlook”. In it, China was described as a partner, an economic competitor, and a systemic rival. It was the last term that got everyone’s attention. The 11-page document was an example of EU foreign policy at its best: a forward-leaning Commission pressing member states to rethink their language on an issue of vital strategic importance. Not all European leaders have made this language their own. German Chancellor Angela Merkel, for example, has never used the term “rival” in public when talking about China. But many others have—and there is no denying the important role the document has played in shaping how Europe speaks and thinks about China.

Nevertheless, much has changed in the two years since it was published. We’ve seen a pandemic break out in China and sweep across the globe. We’ve seen a security crackdown by Chinese authorities in Hong Kong. We’ve learned gruesome new details about the repression of the Uighurs in Xinjiang. And we’ve seen a more assertive China abroad—mask diplomacy, wolf warrior diplomacy, and now vaccine diplomacy. Despite all this, we also saw the EU clinch an investment agreement with China in the final weeks of 2020. This has triggered a fair amount of criticism—within Europe and abroad. Some allies are now wondering whether the partner-competitor-rival trinity is really just an excuse for Europe to sit on the fence. Some fear Europe’s push for strategic autonomy may—despite protestations to the contrary—be leading it down a path towards “equidistance” between the U.S. and China.

In my first “Watching China in Europe” podcast, I put these concerns to Martin Selmayr, the influential adviser to Jean-Claude Juncker when he was president of the Commission. Selmayr, now the Commission’s top representative in Austria, was the driving force behind the EU’s 2019 China strategy. Some in Brussels are happy that the man once dubbed the “Monster of the Berlaymont” is now biding his time in Vienna. But others say his departure has left a void, with key initiatives—like the EU’s connectivity strategy—stalling amid institutional infighting. “We’re missing someone who can knock heads, cut through the bureaucratic rivalries, and get things done,” one senior diplomat in Brussels told me recently. Love him or hate him, Selmayr speaks with a strategic clarity about the EU’s approach to China, the United States, and geopolitics that is sometimes missing these days. “If you want to do a real active foreign policy, as the European Union has the power to do,” he told me, “then we cannot always go for the lowest common denominator. We need also sometimes to lean a bit forward.” You can listen to the full podcast here.

The EU's Human Rights Test

Whether the EU is prepared to lean forward on China in 2021 is the big question following the clinching of the investment agreement. We should know by the end of March whether Competition Commissioner Margrethe Vestager will turn her White Paper of last June (a blueprint for tackling distortive subsidies in the Single Market) into a legislative proposal. But the real test for Europe’s China policy over the coming months can be summed up in two words: human rights. Will the EU go from talking the talk to walking the walk—particularly on the issue of Xinjiang? In response to criticism of the EU-China investment agreement and China’s non-committal language on forced labor, officials at DG Trade have pointed to the bloc’s new human rights sanctions regime as the proper tool for responding to the mass detention of China’s Uighurs. It is one of several human rights-related measures in the EU pipeline—including a legislative proposal on corporate supply chain due diligence (expected in the second quarter) and a new push to crack down on exports of surveillance technology, following a reform of the EU’s dual-use export controls regime. “After all the criticism of the CAI, there is pressure to double down on our use of other tools, to show that we have other weapons—and responding on human rights is at the top of the list,” one EU official told me.

Late last week, EU countries reached a preliminary agreement to sanction four Russian government officials for the jailing of opposition leader Alexei Navalny. But sanctioning Chinese officials linked to Xinjiang will be tougher—even if the repression there is on a vastly larger scale. The EU needs unanimity from its member states to proceed. But EU problem child Hungary is getting vaccines from China and reluctant to pull the trigger. Still, officials in three European capitals told me that there are active discussions underway about how to win over the skeptics. “We have experience with unanimity. There are ways to get around this,” one told me. Another said that imposing sanctions against Chinese officials would amount to “crossing the Rubicon” for the EU. “The Chinese leadership would take this very badly. But some member states feel we need to act.”

Embracing Export Controls

Meanwhile, in DG Trade, the focus is on ensuring the implementation of human rights-related controls on cyber surveillance equipment once the European Parliament approves the new dual-use text in the spring. “We have a new tool and now it needs to be applied,” one EU official told me. “Member states will need to get organized. Both Hong Kong and Xinjiang could come into play.” In the Commission, this is being seen as a promising area for transatlantic cooperation. Brussels and the Biden administration could, for example, take a more joined-up approach to controlling sales of facial recognition technology. That could inject some momentum into what is expected to be a difficult transatlantic discussion on the more contentious issue of emerging and foundational technology controls.

A recent discussion paper by Kevin Wolf and Peter Lichtenbaum (who held top export control positions in the Obama and Bush administrations, respectively) provides a blueprint for future collaboration on export controls between the United States, the European Union, and Japan. The paper was prepared in January for a private GMF roundtable discussion, but Wolf and Lichtenbaum kindly gave me permission to present their ideas here. They are doubly interesting because Wolf is seen as a leading candidate to head up the Commerce Department’s Bureau of Industry and Security (BIS) under Biden.

The paper argues for the creation of a new “flexible and nimble mechanism” for export control collaboration among like-minded partners that would operate outside of multilateral regimes like the Wassenaar Arrangement. In addition to the United States, key EU countries, and Japan, the authors believe this informal coordination group should include South Korea and Taiwan. It would tackle so-called emerging technologies (AI, quantum computing, additive manufacturing) and aim to secure plurilateral agreement on controls of semiconductor development and production technology for export to China. For the new mechanism to work, the authors argue, European countries would have to give their export control authorities greater discretion to impose end-use and end-user controls.

This looks like a hard sell in Europe, where countries remain committed to the multilateral regimes and are reluctant to adopt a China-centric or end-user approach that would be akin to sanctions. Europeans were critical of the Trump administration’s use of “national security” as an excuse to do just about anything and worry that this approach could continue under Biden, even if it’s on a smaller scale. In its December communication on transatlantic cooperation, the Commission called for a “new common focus on protecting critical technologies.” But my sense is that this may turn out to be one of the most challenging areas to get a consensus between Washington and Brussels—especially if European firms are seen to be filling supply chain gaps left by American rivals that are subject to tighter controls.

Macron & The Middle Kingdom

A final word on French President Emmanuel Macron, who has been sending some interesting signals on China recently. Germany tends to take the brunt of the criticism for Europe’s conciliatory approach to Beijing, but as Antoine Bondaz explained in his detailed look at Macron’s China policy late last year, France has been just as soft in many respects. Macron swung quickly behind Merkel in December when she was pushing the EU to conclude its investment agreement with China. As that deal was coming together, I learned that the Elysée had tried unsuccessfully, shortly before publication, to water down an interview with France’s trade minister in Le Monde. In it, the minister questioned whether Paris could support the investment agreement without stronger commitments from Beijing on forced labor. A short while later, the minister walked back his remarks in an interview with Politico.

Since then, Macron has made clear in a conversation with the Atlantic Council, that he views the idea of an international coalition to push back against China’s behaviors as dangerous—in part because he believes this would reduce Beijing’s appetite for climate action. At a virtual Munich Security Conference last month, he skirted around the issue of China—in contrast to Merkel, European Commission President Ursula von der Leyen, and Britain’s Boris Johnson—and instead offered a vigorous defense of European strategic autonomy. A week later, an Elysée readout of a Macron-Xi phone call highlighted the commitment of both leaders to deepen their “strategic partnership” in areas like nuclear energy and aeronautics, but made no mention of human rights. Beijing’s readout of the same call was especially odd. According to the South China Morning Post, it spoke of Xi’s readiness to hold “proactive discussions” with France on cooperation in central and eastern Europe. This came after half a dozen EU leaders decided not participate in a virtual 17+1 summit with Xi, infuriating Chinese officials. Xi appears to be overtly cultivating his relationship with Macron, preparing for the day when Merkel is no longer around. With Macron in the Elysée Palace, no one should assume that her departure from the political scene later this year will lead to big changes in Europe’s approach to China.