Europe’s China diplomacy seeks silver linings to US trade war

As the Chinese vice president visits Germany, the EU sees opportunities in the ongoing US-China trade war.

Merkel Chinese VP Wang Qishan EPA
German Chancellor Angela Merkel hosted Chinese Vice President Wang Qishan, with trade likely high on the agenda of talks in Berlin [Felipe Trueba/EPA]

Chinese Vice President Wang Qishan has visited Germany this week, first visiting Hamburg’s harbour, where a Chinese firm is building a new container terminal, then holding talks with Angela Merkel, the country’s chancellor and German President Frank-Walter Steinmeier in Berlin on Friday.

His German tour follows a two-day trip to the Netherlands.

The Europe trip is important. “Berlin’s stance on China – for better or worse – affects its European neighbours’ views and policies,” Joshua Webb, of the Koerber Stiftung think-tank’s Berlin Foreign Policy Forum, told Al Jazeera.

“From lobbying for Huawei to gauging whether there is potential to lure Berlin from its orientation towards Washington, there is certainly enough to discuss from a Chinese point of view.”

In fact, Wang is just the latest in a series of high-profile Chinese visitors to Europe. It is clear that the ongoing, escalating trade war between China and the United States makes the European Union, the world’s largest trading bloc, more important to the Chinese.

There’s no doubt that trade was on the agenda in Berlin, alongside bilateral relations, observers say.


Europe certainly feels the effects of the tit-for-tat tariffs and economic sabre-rattling in which the US and China are currently engaged. But rather than seeing the European Union as helplessly trapped between two economic superpowers, most experts working in this area believe any trade war may well bring Europe more opportunities than disadvantages.

“Conflict between the US and China presents a good moment for the EU to exert pressure on China and get some concessions,” Gustaaf Geeraerts, codirector of the Centre for China-EU Relations at Fudan University in Shanghai, told Al Jazeera.

“For years, [EU] reciprocity meant calling on China to adapt to the EU’s rules and norms.”

Change in Europe’s posture

Beijing has frequently said it would be willing to compromise on such issues, but, realistically, the Chinese never followed through and the Europeans never pushed them on it, he added.

That is about to change, Geeraerts said. Recently, European powers have been taking “a more cautious and realistic approach” instead of that previous openness, “qualified by some defensive measures”. There was a clear turning point in April, he notes.

A tougher stance from Europe resulted in some success at April’s EU-China summit in Brussels, with the Chinese promising to stick to deadlines, to prevent further forced technology transfers and to seriously discuss state subsidies for the first time. “If China does not open its economy, the EU may close its own market to Chinese investors – or introduce barriers similar to those that China has,” Geeraerts concludes.

“The EU would like to show China that its new policy no longer involves just a carrot, but also a stick.”

And this is where the US is helping, albeit perhaps inadvertently.

“The internal situation in China is quite complicated,” Susanne Weigelin-Schwiedrzik, a professor of China studies at the University of Vienna, told Al Jazeera.

“[President] Xi has to balance the various wings of his party and, above all, the Communist Party of China needs the economy to run smoothly. With all the pressure the US is putting on, the Chinese may now want to provide business conditions to the EU that are more favourable than they have been for the past five or six years. Personally, I would look at this as an opportunity.”

Cautious optimism

Market numbers also appear to provide good news for the EU.

As David Owen, chief European economist for US-based investment bank Jefferies International pointed out in his monthly markets commentary in mid-May, several studies – one from the United Nations Conference on Trade and Development, one by Brussels-based think-tank Bruegel and recent research by the European Central Bank– suggest the EU could actually be benefitting from changes in international trade patterns.


However, as Owen also warned clients, “much depends on how much diversion there is, away from the US and China, to the EU and China, and the EU and the US. Trade is not a zero-sum game and operates through complicated global supply chains … much will ultimately depend on whether, after China, the US administration’s focus switches more to the EU.”

Duncan Freeman, a research fellow at the EU-China Research Centre at Belgium’s College of Europe, suggests the negative impacts on global trade could still outweigh any positives. “Some EU companies may benefit from the exclusion of US competitors from China, but this will be outweighed by the wider global economic disruption,” he told Al Jazeera.

There is another challenge to viewing the US-China trade war as an opportunity for Europe, suggests Freeman.

While analysts and think-tanks have frequently suggested that Europe play a balancing role, acting as a mediator in the fight rather than picking sides in what has been described as a long-term tussle between nascent and ageing superpowers, Freeman says the EU shares some of Washington’s concerns about China – but prefers a more diplomatic and less protectionist approach.

Getting there could prove tricky, however. “A unified EU position is problematic because member states have divergent views of the relationship with China,” Freeman said. “And this is mainly because member state economies and their interests are very different [from each other].”

Acting tactically, China tends to approach vulnerable countries that need its help, Weigelin-Schwiedrzik adds.

In March, EU countries looked on uneasily as Italy signed up to China’s Belt and Road Initiative, a global infrastructure development strategy that has increasingly been viewed with suspicion. Other European nations, including Greece, Portugal and the Czech Republic have also welcomed multibillion-euro Chinese investments.

Europe will continue to welcome Chinese investment but is not likely to abandon its recent cautious approach, which appears to be yielding dividends.

“The outgoing Commission found a prudent strategy in creating and strengthening defensive measures such as the foreign investment mechanism,” said the Berlin Foreign Policy Forum’s Joshua Webb.

“However, there remain significant differences with China, and the debate around Huawei and 5G services demonstrates that the EU won’t always be able to avoid taking a clear stance.”


Source: Al Jazeera