Editorials

European Union confronts the China challenge

Europe is waking up to the China challenge. Last month, the European Commission published a plan to reorient European Union’s economic relations with China, calling for a tougher, more skeptical policy toward Beijing. Yet, days after the European Council debated that proposal, Italy hosted Chinese President Xi Jinping, and during his visit Rome officially joined the “Belt and Road” initiative (BRI), the first Group of Seven member and the largest European government to do so. A split among its members will undercut EU efforts to take a hard line toward China: Beijing is already doing its best to foster such divisions.

The EU-China “comprehensive strategic partnership” includes an annual summit, regular ministerial meetings and over 60 sectoral dialogues. The defining feature of this relationship is its economic dimension: China is the EU’s second-biggest trading partner behind the United States and the EU is China’s biggest trading partner. Trade between the two topped $360 billion and China enjoyed a trade surplus in goods of $200.4 billion in 2017.

That deficit alarms European businesses, who have joined the international chorus accusing Beijing of unfair trade practices. They argue that state-owned enterprises and other national champions have decisive advantages in the Chinese domestic market and charge Beijing with promoting or supporting unscrupulous means to transfer technology and win market share abroad.

European governments are also worried about the national security implications of Chinese investment in sectors such as ports, energy, technology and agriculture. The darkening European outlook was summarized in a European Commission document, submitted last month, that calls China “an economic competitor in pursuit of technological leadership and a systemic rival promoting alternative models of governance.”

At the same time, however, the strategic partnership continues to frame the relationship. China and Europe agree on the need to address climate change, to sustain the Iranian nuclear deal despite the withdrawal of the United States, and to support the multilateral trade order.

As EU High Representative for Foreign Affairs and Security Policy Federica Mogherini explained, “We pursue strong bilateral and multilateral cooperation on files where we share interests, from trade to connectivity, from (Iran nuclear deal) to climate change. And we are willing to keep engaging robustly where our policies differ or compete.”

French President Emmanuel Macron summarized the new thinking well when he noted that “The period of European naivety is over.”

The European Commission report also warns that “full unity” is required if the EU is to address the many challenges that China poses and thus far, member governments have been quicker to pursue discrete national interests rather than those of the union. Italy was the most recent offender when it hosted Xi last month.

In Rome, Xi and Italian Prime Minister Giuseppe Conte signed a memorandum of understanding that marked Italy’s participation in the BRI, the multibillion-dollar initiative that Beijing has put forward to link Asia to the rest of the world, and extend its influence. Chinese investors also signed 29 deals worth $2.8 billion in projects, among them port infrastructure development in Trieste, Genoa and Palermo.

For the Italian government, the move is a no-brainer: It provides much needed funds for infrastructure development, gives Rome financial options that evade Brussels’s restrictive budget rules and should facilitate more robust trade with China. Brussels worries that those ties offer Beijing a check on EU efforts to enforce its new policy. That fear is not unfounded: in March 2017, Hungary would not sign an EU joint letter on the alleged torture of detained lawyers in China and three months later Greece blocked an EU statement at the United Nations that sought to criticize Beijing’s human rights practices.

As Europe contemplates a harder line against China, Japan’s reinvigorated relationship with the EU assumes greater significance. Japan and the EU concluded the Economic Partnership Agreement last year, which created one of the world’s largest free trade and economic zones. Most importantly, it reinforced and strengthened a global economic order based on free and fair trade and the rule of law. In short, Tokyo and Brussels aligned themselves against Beijing’s abusive and predatory practices.

At the same time, however, Brussels — like Tokyo — is right to try to work with Beijing on issues of mutual interest and concern. China’s cooperation is essential to the resolution of most international problems. Europe’s new, harder line — if effectuated — will not prevent that cooperation and indeed might even facilitate it.