EU vs China: how many divisions?

by Francois Godement*

The oncoming EU-China Summit will not lead to grand changes in both superpowers’ fraught relationship, and it is high time the EU starts thinking collectively on pushing back against China’s bullying ways, Institut Montaigne’s Francois Godement writes.

As the next EU-China summit is due to take place in Beijing on 7-8 December, one is reminded of Stalin’s witty “how many divisions has the Pope”? In the case of the EU, the question is not only about the leverage Europe can muster to move China, but also about the internal divisions and cracks that show among Member States.

Such divisions have, for a very long time, been the bedrock on which the People’s Republic of China (PRC) relies to stonewall the EU’s asks.

An exception to that was the short window between Joe Biden’s election in 2020 and his inauguration – when Beijing suddenly felt the urge to conclude an investment treaty with Europe – a clear triangular game aimed to influence the new American president.

Even then, concessions were either minimal or part of a Chinese-imposed calendar of opening limited sectors of the Chinese economy as they mature. When EU sanctions came on Xinjiang and the mistreatment of the Uyghur population, Beijing retaliated – including against all major parties at the EU Parliament – thus ensuring that the investment treaty was over for good.

Can December be different?

Is this December’s Summit going to be any different? Two factors should push the PRC toward compromises. Its economy has entered a new phase of slowdown, with foreign investment hesitant and pulling out more or less discreetly, and with growing distrust from the Chinese.

Meanwhile, all of the major industrialised countries, with the notable addition of India, have agreed measures in favour of national and economic security. Whether they mention China or not, it is the primary country of concern, and there remain key differences on a strategic alignment with the PRC, and potential conflicts.

And yet this is not likely to usher in a new phase in EU-China relationships, for reasons partly beyond the EU’s control. Russia’s war on Ukraine is raging on, and China has a big stake in seeing its strategic or “systemic” rivals divert their resources.

China’s export drive, particularly in key sectors such as automobile, clean tech, infrastructures, IT and biotech is also not about to abate, because it is the main engine of growth at a moment when the domestic economy is faltering, and it provides a financial cushion for China President Xi Jinping’s expensive military and innovation goals.

“De-risking” hesitations

But the biggest reason why the PRC will not budge beyond the occasional verbal sweeteners is that Beijing’s cold calculus has not changed. Despite European Council resolutions, and a Commission that has fully understood the ‘Chinese challenge”, Member States are often hesitant about “de-risking”.

First, a limited number of private sector companies, which embody large and influential interests, have no incentives to loosen ties with China.

Second, and perhaps most of all, China fears the United States – a federal government with the world’s largest military – much more than the EU, which is constrained by its common budget and decision-making.

Politically, Xi has plenty to fear from a Trump victory next year, and even more from a rational Republican leadership that would keep a steady hand in confronting China. As it is, the Biden administration stands mostly firm on a mix of national and economic security decisions. The president has not obtained significant concessions from Xi.

It’s a pause, not a thaw.

Immediate and longer-term steps

The measure of success for the coming summit will therefore not be its outcome. What matters for the EU when it gets to Beijing is to stand firm on two fundamental asks: nudging China towards fair(er) trade and halting the PRC’s slide towards ever more support of Vladimir Putin’s Russia.

China is unlikely to oblige. Europe must be clear on the consequences: stronger and quickly rolled-out economic defensive instruments over a broad range of issues, and sanctions for egregious acts of support to Russia’s war enterprise.

The longer-term steps imply changes on the EU side, beyond those decided under the pressure of recent crises. This includes improving the efficiency of existing trade tools, such as inward investment control. It also involves proceeding quickly on export control and screening outward investment, by identifying supply and leakage risks for critical technologies.

Member States cannot just pay lip service to European Council resolutions. They must abandon their wait-and-see approach. Since neither us nor Japan or today’s US wish to implement a tough protectionist agenda, we must commit to the much harder objective of identifying key vulnerabilities and patching them up. The ‘small-yard-high-fence’ approach sounds easy. It is in fact the hardest thing in the world to implement, given the global imbrication of innovation, industrial production, and supply chains.

Passe federal Europe?

Can we believe that the required instruments and decisions can be spread efficiently across 27 nations, while EU institutions consist of 32,000 public servants for 450 million citizens, and a budget that is 1% of Europe’s GDP?

Can we stick to the old habit of haggling until the last moment until Member States actually make decisions?

“Stopping the clock” is a luxury we no longer have on these new issues.

One understands the wish to preserve the prerogatives of Member States. But China’s challenge points to more Commission human resources, with standards and processes synched at the level of Member States.

Whilst we’re at it, the EU should also loosen some of its self-imposed multilateralist philosophy.

The time for playing national or subregional partitions is gone: we need political scaling in front of China.

What looks like a completely utopian or passe narrative for a more federal Europe is actually the only realist path to preserve Europe’s future. If we don’t understand it now, perhaps we will understand it later.

But later will be too late.

*Special Advisor, Asia and America, at the French Institut Montaigne thinktank
**first published in: Euractiv.com