21 December 2018

Chatham House: How Europe will try to dodge the US–China standoff in 2019

European countries share some of America’s concerns about China, but a hawkish stance from the US will push them to develop a more independent approach, writes Chatham House Director Robin Niblett.

[...]Europeans are avoiding the overt confrontation favoured by the White House.

They have eschewed the Trump administration’s approach of imposing unilateral trade sanctions on China. Instead, they have teamed up with US and Japanese negotiators at the WTO to push through reforms that will limit the rights of WTO members like China to subsidize state-owned enterprises and allow retaliation when they do.

They are introducing tougher national and EU-wide screening of Chinese takeovers of sensitive assets. And they are working to reduce their dependence on Chinese companies for their telecoms infrastructure.

But they are unlikely to put in place sweeping US-style bans on Chinese investment in sensitive sectors, given the deep trade interconnections between the two markets. As a case in point, Britain’s nuclear regulator recently gave the green light to China General Nuclear to proceed to the next stage of its planned nuclear reactor at Bradwell-on-Sea.

In fact, the EU might go further and take advantage of the US–China trade war to secure concessions in its ongoing negotiations for an EU–China bilateral investment treaty, which would open up protected sectors of the Chinese economy to European investors.

In addition, reflecting the sharp transatlantic divide over the importance of multilateral cooperation, European governments are cooperating with China on a number of key multilateral initiatives, from implementing the Paris agreement on climate change to trying to preserve the nuclear agreement with Iran.

And European governments want to keep China engaged in the G20. Without the sort of willing support China offered in 2009, the G20 cannot serve as a credible insurance policy against the next global financial crisis.

The more the Trump administration hardens its stance against China, the more the outlines of an alternative European approach are taking shape. Future US policymakers may come to rue the day when President Trump drove Europeans to develop their own ‘Europe First’ policy towards China, with more pragmatic, hard-nosed policies that suit their economic and strategic interests.

Full article on Chatham House

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