EU-China "reset" in limbo
On Friday, European Commission President Ursula von der Leyen and European Council President Charles Michel will meet Chinese President Xi Jinping and Prime Minister Li Keqiang in their first virtual summit since June 2020. Originally, they’d planned to try and ease tensions after a rough two years for EU-China ties. But then Russia invaded Ukraine, and that has scrambled the EU’s priorities. We asked Eurasia Group analyst Emre Peker to explain.
What does the EU want out of the meeting?
The EU's top priority now is to persuade China to throw its weight behind the international effort to stop the Russian invasion of Ukraine, which the EU views as an existential threat. China's refusal to condemn Russia's actions has deeply frustrated EU officials. Some in Brussels hope that the bloc’s strong commercial links and less antagonistic relationship with China than that of the US with the Asian giant will help EU leaders nudge Xi Jinping to exert pressure on his pal Vladimir Putin to end the war.
Are there other things to discuss?
Prior to the Ukraine war, the leaders would have focused on the trade restrictions China slapped on EU member state Lithuania in retaliation for allowing Taiwan to open a de-facto embassy in Vilnius; cooperation on climate change; and improving commercial ties while paving the way toward unblocking a massive EU-China investment pact that's been stalled for a year over a spate of EU sanctions and Chinese countersanctions prompted by China’s treatment of the Uyghurs. These issues may fade into the background now.
So, how is the war in Ukraine likely to affect EU-China relations?
The consensus in Brussels and EU capitals is that China is not really interested in applying pressure on Russia. As long as that is the case, EU-China relations will suffer. More broadly, Russia’s actions and the international sanctions they have provoked have highlighted for the EU the dangers of excessive reliance on trading partners such as Russia, while exacerbating pandemic-driven concerns over the bloc’s reliance on many types of Chinese imports. EU officials had already been growing increasingly alarmed over aggressive Chinese behavior such as the trade restrictions placed on Lithuania. Russia’s actions and China’s commitment to its “no limits” partnership with Moscow will crystalize for the EU the need to prepare for all eventualities.
What will the EU do?
The bloc will be more receptive to the increasingly harder line toward Beijing advocated by Washington, as it has gone from trade spats with China during the administration of Donald Trump to a broader and more intense global rivalry under President Joe Biden. Yet the Europeans will want to tread cautiously. With high energy prices and rising inflation caused by the war, the last thing they want to do is risk their lucrative investments in China, not to mention pick a fight with the world's second-largest economy. An important plank of their efforts to push back against China is likely to be ramping up efforts to produce locally some strategically important goods currently purchased from China. The European Commission outlined last year a strategy to reduce imports across six categories—raw materials, batteries, active pharmaceutical ingredients, hydrogen, semiconductors, and cloud and edge technologies.
Will these developments push the EU closer to the US?
The Europeans are very upset at China over Ukraine and more aligned with the US over security concerns than they've been since 9/11. Still, Brussels is not (yet) willing to fully decouple from Beijing, as the Biden administration would like it to do.
One important upcoming event to watch is a meeting of the EU-US Trade and Technology Council in France in May, which will allow us to gauge the temperature of transatlantic efforts to push back against China. The Europeans think that since the TTC has been effective at implementing joint export controls against Russia, perhaps it could be used in a similar way against China. The US and the EU also want to promote Western standards on artificial intelligence, which China won't like.
Most EU-US talks in the near future will have somewhat of an anti-China vibe. Both sides want to cooperate more on screening Chinese investments and making their supply chains more resilient to disruptions from China. Brussels and Washington are clearly game to use policy on trade, climate, and other issues to fight China's state-led capitalism — and the economic dislocations it causes.
So, there’s not much chance of an EU-China reset?
Not in the near term. The EU-China investment pact is unlikely to be ratified before the second half of next year. Despite the challenges to finalizing the agreement, the EU will not kill it outright because of the opportunities unlocking a greater portion of the Chinese market would offer European companies. Meanwhile, China remains unwilling to lift countersanctions on several members of the European Parliament over the Uyghur issue, which is a pre-condition for EU ratification. And, of course, China's bullying of Lithuania and its position on Ukraine are major hurdles to overcome.