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Economy

America’s Trade War with China: An Opportunity for the EU?

Jul 18 , 2018
  • Kerry Brown

    Professor of Chinese Studies, Lau China Institute at King's College, London

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For veterans of EU-China summits over the last decade or so, the outcomes of the most recent, in mid-July in Beijing, were startling. Most of the time, a tepid air pervades the atmosphere. Chinese and EU leaders seem to be going through the motions, according each other respect, but with little real passion or conviction. This year, though, the love seemed to flow – and from the unexpected direction of the Chinese side. This ardour came across in the joint statement arising from the meeting. This announcement observed the importance of a global rules-based trading order, reaffirmed commitment to the World Trade Organisation, praised each other on work on the environment, and, most remarkable of all, had the EU thanking the Chinese for movement on trade liberalisation and standardisation.

There is a simple enough reason for this. With tariffs flying between them, China and the U.S. are moving almost inexorably towards what many believe might be a full blown trade war. Already, there are $60 billion of mutual tariffs and these are likely to be enhanced by another $200 billion. The Trump presidency has rattled Beijing as never before, creating a host of new uncertainties, and a world in which one of the surest and most reliable cards – economics and trade – is now fast becoming its biggest source of uncertainty. The bottom line is clear: China suddenly needs new friends, and the EU for once looks like the best of all possible candidates.

The 2018 summer summit was prepared by a number of moves by China to capture the attention of the Europeans. Beef imports from France were allowed into China after several years of bans. Airbus aircraft sales have been scheduled, one of the big ticket items in bilateral trade. A mutual investment treaty has made more rapid progress now than at any time in the recent past. In view of the fact that European leaders usually present themselves in the halls of power in Beijing for these kind of summits with faces grim from the list of issues they feel have not been properly addressed, 2018 marks a startling change. And for that, Donald Trump, rather than Donald Tusk, President of the EU, needs his fair share of commendation.

For it is President Trump more than any other leader that has forced the EU to think more sharply beyond its usual bureaucratic, principle led, and sometimes cumbersome framework. The EU, after all, is at heart a technocratic coalition – though since the 1990s it has accrued a number of social and political values to supplement these. It exists to promote rules-based order, objective laws and principles – and these are most relevant when talking about trade, investment and commerce. In these areas, China has always loomed large, and problematically. Its non-compliance with the spirit, if not the letter, of many stipulations from the WTO, the EU has claimed, was one of the principle reasons why the Union never conferred market economic status on its largest trading partner. And over the years, from bra wars to solar panels, the two have had moments of fierce disagreement.

In 2016, China's trade with Europe amounted to €460 billion. But this was overshadowed by its over $660 billion in trade with the U.S. China was able to look both ways, pitting Boeing against Airbus, and European markets against America's. It was able to achieve the ultimate divide and rule, with two partners who were clearly committed to global free trade and open markets. China could pursue its interests with both of them, largely unimpeded and unhindered, sitting comfortably in the middle.

The EU’s broad alignment with U.S. trading values and philosophy pre-Trump meant that while there were areas of disagreement and competition, for the vast majority of the time, the two were after the same thing – better market access in China, fairer observation of rules, and enforcement of intellectual property standards. Their strategic approach was the same, largely uniting where they could to put pressure on China, and gaining sporadic, incremental returns. On the whole, however, their need to pursue self-interest prevented them from cooperating too deeply – the EU fought for Europe, and the U.S. for Americans.

That landscape has changed, and for the first time the EU has to think in a much more strategic and opportunistic way. Long used to using the soothing words of high minded observation of universal principles and abstract ideal outcomes, it is confronted with a situation in which China, as never before, needs it, and is willing to accord it some, perhaps many, of the things it has been asking for years. For once, it is China coming as a supplicant, not the EU. The question is whether Europe can be supple, clear eyed, and pragmatic enough to come up with a strategic response.

The EU cannot and would not ever want to question its security relationship with the U.S. And it continues to have the same concerns over fair treatment of companies and the rule of law in China that the U.S does. But under Trump, doubts and uncertainties prevail everywhere. The world seems to be reverting to an ‘everyone for their own’ environment. The fractious G7 and NATO summits which Trump attended were a sharp reminder that a new attitude prevails in Washington – one where the most dependable alliances seem to be fraying. In this context, like it or not, the EU needs to pursue its own interests as never before – and China’s new willingness to open to it and concede to some of its demands is a chance to do so, at least for the moment. The question is whether the EU can swallow many of its finer ideals and reach out and grasp that opportunity, even though it poses some risks and challenges. There has, after all, probably never been a better moment to try to influence China, and have it address some of these issues in the EU’s favour.

Past experience of the EU operating as a more strategic body, and defining, then pursuing new opportunities that are in its interests, however, is not good. It has been accused of being the ultimate impotent actor – full of grand intentions, but never having the energy to act on them in time, and with the necessary flexibility. During his campaign to be president, Trump castigated Jeb Bush, one of his opponents, as a ‘low energy guy.’ If the EU were a person, that description would be apt. The EU now needs to have the clarity, the speed, and the conviction to take the opportunity China presents and forge something new. If it doesn’t, then it forgoes the right to complain in the future. It will have shown that it does not, and probably never will, have the ability to operate strategically, and for that, it has no one to blame but itself.

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