Under no illusions

The EU is once again reassessing the benefits of friendly relations with China now that the US has shown its true colors

The future of relations between China and Europe is among the most closely watched issues in current international relations. As the era of a unipolar world is coming to an end and the world prepares to embrace an era of multipolarity, the growing great power competition poses tough questions for the future of the world order. Is the multipolar world destined to be a battlefield where all fight all, or will healthy competition between different poles contribute to global development amid the common challenges such as climate change, pandemics and transnational crimes? In the current environment of challenges and opportunities, the future of Europe is a focus of attention. Will Europe act as an independent pole, or will it be a part of the US-led pole, along with the United Kingdom and probably with some Asian allies of the United States? If Europe is a part of the US-led unified Western pole, then the European Union will embrace the main goals of the US foreign policy, including the containment of China.

In recent years, the US has made significant efforts to involve Europe in its China policy. The efforts have resulted in the inclusion of negative wording on China in NATO's new Strategic Concept. It argued that China's ambitions and "coercive "policies and the deepening strategic partnership between China and Russia challenge the interests, security, and values of the NATO members.

In March 2022, the EU adopted a strategic compass for security and defense, arguing that China was a partner for cooperation, an economic competitor, and a systemic rival. Meanwhile, the strategic compass emphasized that the EU and China have areas for cooperation, such as climate change, while mentioning that the EU needs to ensure that China's development happens in a way that contributes to upholding global security and does not contradict the rules-based international order and the EU's interests and values. The EU emphasized that would require strong European unity and working closely with other regional and global partners. On Jan 10 this year, NATO and the EU signed their third joint declaration on cooperation. The two organizations claimed that China's growing assertiveness and policies present challenges that NATO and the EU need to address.

Meanwhile, the conflict in Ukraine and the economic sanctions imposed on Russia by the West have created significant economic challenges for the EU.While, as of now, the EU is committed to continuing the economic pressure being applied on Russia, some Europeans have started to question the current course, arguing that it will lead to the deindustrialization of Europe. The recent US steps to increase the attractiveness of the US economy, including the adoption of the Inflation Reduction Act and the Chips and Science Act, have led some European businesses to relocate to the US. Washington's Inflation Reduction Act has introduced subsidies so generous that many companies no longer see a point in investing in Europe. For instance, battery developer Northvolt has paused its German factory expansion to focus on its US operations, while solar component producer Meyer Burger is launching a factory in Arizona, casting doubts on further investments in its German plant. The EU's decision to significantly reduce the purchase of fossil fuels from Russia resulted in the increase of US LNG exports to Europe. In parallel with the significant increase of defense industry production in the US, it provides billions of additional profits for the US economy while making the EU economy less competitive and more prone to crisis.

In the current volatile economic situation, the development of economic cooperation with China may well serve the EU's economic interests by continuing to open the Chinese market to European exporters while providing the EU with products. In this context, the relaunch of negotiations on the ratification of the EU-China Comprehensive Agreement on Investment could serve as a good base for improving bilateral economic relations. The EU-China investment agreement has undergone a complicated journey since negotiations concluded in December 2020. At that time, members of both the outgoing Donald Trump and the incoming Joe Biden administrations in the US criticized the deal, arguing that it did not sufficiently address China's use of forced labor, among other issues that have been fabricated to smear China. Most probably, the US pressure played a role in stalling the ratification process. However, it seems that there is a growing understanding in at least some European countries that the EU needs to cooperate with China, and the full embrace of the US strategy of containing China will not bode well for the future of the continent. In November 2022, German Chancellor Olaf Scholz traveled to Beijing to meet with Chinese President Xi Jinping, accompanied by a business delegation of German CEOs. Scholz was the first European leader to do so in three years. Just prior to the visit, Scholz backed China's Cosco Shipping's proposed investment in the Tollerort container terminal at Hamburg port. According to the deal, Cosco would buy less than 25 percent instead of the 35 percent stake it sought and would have no voting rights at Germany's busiest port. The visit by the German chancellor was followed by the visit to Beijing of the president of the European Council Charles Michel. During his visit, Michel stated that EU-China relations were significant for both sides, as China is the EU's top trading partner in goods amounting to almost 2 billion euros ($2.18 billion) every day, and China accounts for over 22 percent of European imports.

These two visits and the planned visit to China by French President Emmanuel Macron in the coming months are signs of the shifting perceptions of the EU on its relations with China. Macron's planned visit will come as the EU is seeking to recalibrate its trading position toward both China and the US. The EU is in the process of building a new industrial policy as the US Inflation Reduction Act subsidizes domestic companies. The growing numbers of European politicians, experts and representatives of academia have started to view relations with China as a significant pillar of the EU's economic resilience. It does not mean that the EU will move against the US in the geopolitical battles of tomorrow, but it means that the EU will probably stop fully emulating the US policy against China, seek to develop economic cooperation and take steps to solve common problems.

The author is the chairman of the Center for Political and Economic Strategic Studies in Yerevan, Armenia. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn