Transatlantic Cooperation to Counterbalance China Needs More Nuances

There is a desire on both sides of the Atlantic to cooperate on China policy. Europeans and Americans met once again on December 1 at a very high level with Deputy Secretary of State Wendy Sherman and European External Action Service secretary general Stefano Sannino heading the delegations for their regular U.S.-EU Dialogue on China. This initiative provides a platform to coordinate China policy and builds on another effort, the U.S.-EU Trade and Technology Council.

Cooperation on China is one of the most complex, difficult, and important areas for the United States and European Union to work together. The new U.S. National Security Strategy leaves no doubt that even if the Russian invasion of Ukraine shifted more resources to Europe, China is the most important item on the U.S. agenda. Outcompeting China is an utmost priority. The story on the other side of the Atlantic is, however, rather nuanced.

Even if cooperating with the United States is in the hearts and minds of many transatlanticists, the strong fear of a Trump-like president taking over the White House is still very present. This is why there is a certain caution in the European Union for not putting all the eggs in the American basket.

In addition, competition between the European Union and the United States when it comes to trade—the Inflation Reduction Act has been the latest demonstration of that—poses an obstacle to further coordination on China.

Despite the hesitance, however, there are concrete areas where the European Union and the United States can collaborate to manage Chinese impact. This list includes items like counterbalancing China’s footprint in the European Union’s immediate neighbourhood to coordinating screening of tech transfers. Transatlantic allies should ditch the discourse on decoupling and focus on the substance of cooperation without forgetting that the nuances could also be beneficial after all.

Understanding the European Outlook

The European continent is going through very dramatic changes. The Russian war of aggression has initiated a rapid energy decoupling, a cost-of-living crisis due to rising inflation, decreasing competitiveness for European industry, millions of Ukrainian refugees to Europe, and renewed defense investments—all at the same time.

In Europe there is a talk of three dependencies at this very moment: dependency on the United States when it comes security and defense, dependency on Russia when it comes to energy, and on China when it comes to supply chains in general—critical raw materials in particular.

Since the war has shaken the European Union to its core, it is trying to rethink all these dependencies while trying to adapt its policies to cope with a new era of intense geopolitical competition.

When it comes to China, The European Union’s perception is very multifaceted. For the European Union and its member states, China is a crucial trade partner, competitor, and rival all at the same time. China is an immense market—especially for the industry of key member states, such as Germany. It is also the supplier of critical raw materials and products crucial for the energy transition.

Having said that, China is also the country that has sanctioned members of the European Parliament—as a response to EU sanctions in March 2021—for serious violations of human rights. Following that, the approval of EU-China Comprehensive Agreement on Investment (CAI) was put on ice—pleasing the Americans.

Complicating the picture further are the issues related to EU unity. When German chancellor Olaf Scholz organized the very first visit right after President Xi Jinping’s reelection, he received lots of criticism from its partners in the European Union. Many others—including the French leader Emmanuel Macron and the Spanish president, Pedro Sánchez—used G20 summit in Bali to have private sideline conversations with their Chinese counterpart, however.

Charles Michel also visited China very recently without European Commission president Ursula von der Leyen, resurfacing the discussions about inter-institutional rivalry. Emmanuel Macron is planning his solo trip for early 2023. There are many national and institutional priorities at sight when China policy is being decided. While lack of unity is a weakness (exploited by China on every occasion), it also is a source of nuance for better policymaking.

The United States should understand that the European Union does not have the luxury of decoupling from the Chinese market, especially at a moment of great economic stress and as it decouples from Russia. It may not be as bold as the United States itself when it comes to export restrictions. The United States may not like it but acknowledging and respecting that reality will open up ground for better cooperation.

It should also be clear that the European Union cannot stand equidistant to Washington and Beijing. In Europe decisionmakers are very much aware of the value of the transatlantic alliance—and presumably the same is true in Washington under the leadership of Joe Biden. For this reason, both sides should work on flashing out concrete areas where the European Union and the United States can collaborate to manage Chinese footprint.

Where EU-U.S. Cooperation Should Be Focused

If the United States wants greater alignment with the European Union, it has to increase the intensity and depth of consultations with the European Union and should take into consideration its interests and concerns. In actions of significance—like Nancy Pelosi’s Taiwan visit, for example—more coordination would lead to building confidence. The Trade and Technology Council (TTC) and regular dialogues on China would be good platforms for that.

Sharing best practices when it comes to rethinking about strategic dependencies would be a second step. Even if decoupling does not resonate in Europe, decreasing strategic dependencies does. Strategic sovereignty is one of the most salient debates in the European Union. Even if the multifaceted perception of China has not changed, the reality has hit: when it comes to strategic infrastructures, tech transfers, and semiconductor dependencies in supply chains, a detailed assessment is needed. There lies an immense space of transatlantic cooperation.

A third area of cooperation is related to a great concern of the European Union: China’s investments—including critical infrastructure—in the European Union’s immediate neighborhood. The United States has historically supported EU enlargement and consolidation of the European Union in the continent. Now would be a good time to do the same and contribute to the strategic thinking of wider Europe. U.S. involvement would be very beneficial when it comes to counterbalancing China’s footprint. It will also be very much in line with NATO’s new Strategic Concept.

Lastly, more and more EU documents talk about counterbalancing Chinese sphere of influence in different regions. The entire Global Gateway—the European Union’s program for smart, clean, and secure connections—is for countering China’s Belt and Road Initiative where necessary. Von der Leyen had an open call to the president of the United States for cooperation to counter China and Russia in other regions in her State of the Union speech. The U.S. administration has a very good working relationship with the European Commission. It should put it to good use when it comes to defining concrete areas of joint action.

Why the Nuances Are Also Important   

In the years ahead, the European Union should seek to be autonomous enough to push back against ill-considered, overly hawkish, protectionist policies that it sees undermining a rules-based international order. This way it can also play the role of the arbitrator if necessary—and be a balancing power that works to decrease tensions between China and the United States when needed.

The relations between these three actors, the United States, the European Union, and China, will also define the future of global economy. The three have a historic responsibility. It is important to ask the question of what kind of an economic model is desired for the future and act accordingly. For globalization to prove resilient and for multilateral institutions to be reformed and functioning, varied interests should be taken into account. The nuances the European Union brings to the table could serve to that aim. The European Union and the United States could partner up only if the approaches are calibrated carefully.

President Biden said he “will manage this competition [with China] responsibly.” This is also the responsibility of all transatlantic leaders at this point in time.

Ilke Toygür is a non-resident senior associate with the Europe, Russia, and Eurasia Program at the Center for Strategic and International Studies in Washington, D.C.

This piece benefited greatly from the discussions from the private roundtable organized by CEPS Brussels on November 16. The author is also grateful to Max Bergmann and Zachary Paikin for their valuable comments.

Ilke Toygür
Senior Associate (Non-Resident), Europe, Russia, and Eurasia Program