Europe’s Choice: Re-Engagement With Or Decoupling From The Dragon – Analysis

By Abigaël Vasselier

Europe is at a crossroad—making choices about the future of its security architecture, its capacity to provide a sustainable future to its citizens, and building the capacity to push for a digital transformation. The time is critical because Europe finds itself in the midst of a polycrisis, and a world that is fragmented and uncomfortable with the future of the rules-based international order, while also having a war at its doorstep. The post-WWII world from which Europe has benefitted is disappearing to leave space for a transactional and interests-based reality in which norms and principles are increasingly questioned.

China’s political and economic rise has translated into increasing geopolitical competition, which has reshaped the political dynamics on the world stage. Its global ambitions are today driven by the conviction that China’s power should be at the centre of the world. As President Xi Jinping told Vladimir Putin at the doorstep of the Kremlin in March 2023, “right now there are changes, the likes of which we haven’t seen for 100 years. And we are the ones driving these changes together”. To accommodate its rise and ambitions, China’s efforts to reshape the international order—and with that the existing set of rules, norms, values and principles—come at the expense of the existing rules-based international order and an efficient multilateralism.

Europe’s capacity to deal with China, today, will have an impact on its own future, as well as its capacity to be a geopolitical player. There is a sense of urgency in responding to the China challenge for Europe, both for the future of European prosperity and security, but also for maintaining a functioning international rules-based order in which Europe can thrive.

Europe’s accelerated Long March towards recalibrating engagement and derisking 

Europe had gone through several phases before realising that it needs to deal with China in a complex and nuanced way. In 2016, when the decision on whether to grant China Market Economy Status came—which it was meant to be granted under the 2001 WTO Accession Protocol—it coincided with a series of hostile Chinese takeovers in Europe in strategic sectors. These were the first discussions in Europe about the balancing of economic opportunities with national security issues when it came to China. The trade war between the United States (US) and China pushed that conversation further. To consolidate its position, the European Commission presented its member states with a strategy in March 2019 that became a turning point in the European approach to China.

First, it acknowledged that Europe needs to become nuanced and complex in its dealings with China. On the basis of a European multifaceted approach, member states started to engage with China as a cooperation partner, a competitor, and a strategic rival. Second, this strategy acknowledged that the balance between challenges and opportunities had shifted, and Europe needed to urgently address the absence of reciprocity, lack of a level playing field and the asymmetries in the relationship.

China’s position on the Ukraine war and its No-Limits Partnership with Russia fostered a degree of realism, pragmatism and unity in European dealings with China. The war put an end to the illusion that China would have an offer for Europe. In addition, China’s support to Russia’s aggression against Ukraine has accelerated this sense of urgency that Europe needs to secure its supply chains, choose its dependencies, and reduce its vulnerabilities. The war reinforces the idea that Europe can both recalibrate its engagement with China and maintain open channels of communication, while de-risking at home from what the Union identified as risks or vulnerabilities vis-à-vis China.

The European methods in dealing with China 

Europe is in a delicate balancing act between recalibrating engagement with China while derisking. With 2.3 billion Euros exchanged between China and Europe on a daily basis, decoupling is not an option. Despite a difficult business environment, the European companies that have not left China still believe in the economic opportunities that the scale of the Chinese market can represent. In addition, there will be no fight against climate change or debt relief without China. This means that Europe has no alternative but to engage with a difficult partner with whom the value gap is growing together with the number of irritants and fundamental divergences.

Recalibrating European engagement vis-à-vis China is a difficult task. Engagement can take several forms, ranging from having channels of communication open to cooperating in sectors and areas in which interests converge. Over the past years, there has been a deterioration in the quality of the engagement due to a toughened European approach, China’s economic coercion of Lithuania, tit-for-tat attitudes over trade barriers, the closure of China during the pandemic, the question of Taiwan, the oversecuritisation of almost all issues, and China’s support to Russia.

Entangled in its perception of Europe only through the lens of Europe’s relations with the US, Beijing has also failed in coming up with a meaningful offer for Europe. This would entail China seriously considering the European asks and to appreciate that building the relationship is about give and take. Europe has come to China with ideas ranging from connectivity to climate change and the intention to address trade issues, but the level of Chinese commitment has not matched this ambition. Nonetheless, channels of communication have remained open, and this can be appreciated in light of the several crises that Europe-China relations has faced over the past years.

“Europe is derisking but not decoupling”. The mantra of the European Commission President Ursula von der Leyen to her Chinese counterpart became the mantra of many like-minded partners such as the US in their relations with China. Derisking means, in concrete terms, that Europe would carefully consider its relations with China, especially in the economic and trade domain, and reduce its vulnerabilities when a risk or an over-dependency is identified. This European effort to secure its future prosperity and security should not be confused with protectionism but with a realisation that if China places security as a comprehensive approach to all its policies, Europe has the legitimacy to do the same. It is indeed a calibrated response to the weaponisation of trade and dependency that Europe has experienced. Nonetheless, Europe will remain an actor that believes in free trade and for whom the role of the WTO is essential. So derisking can only take place for Europe as part of the existing rules-based international order.

Derisking has taken different forms, ranging from raising awareness of all stakeholders by preparing a large-scale risk assessment across Europe to developing a defensive toolbox based on security concerns that can be used when necessary. This has been coupled with an effort to partner for scaling up the offensive measures and the necessity to diversify European supply chains. The European trade strategy takes into account this necessity to secure and diversify. The challenge, now, is the articulation between derisking and economic security. While the European Commission has been proactive in articulating an economic security strategy with the efforts to derisk, the actors and stakeholders at national level, which would be responsible for taking forward the EU proposal, are lagging behind. At this stage, the real challenge for Europe on economic security is to remain united and spread the risks across the Union while working with partners on the best way forward.

Looking ahead in European China relations 

The European method in dealing with China with pragmatism and nuances has been successful. Few parameters are key to look ahead and assess the future of this trajectory. Internally, the European Union will go through elections and with that the creation of a new Commission. While there has been a degree of continuity in the European approach to China, elections are always the moment to rethink and question what the previous leadership has done. The second element is China itself. In a moment of domestic uncertainties and economic difficulties, Beijing is looking inward and the priority is to address issues at home. This means that the space for dealing with Europe and looking forward is limited, especially in a year of elections in the US. In fact, Zhongnanhai is looking at the dynamics in the US to constantly recalibrate its approach to Europe. This is the perfect window of opportunity for Europe to continue derisking and developing its economic security agenda while maintaining a limited but existent European offer to China.

  • About the author: Abigaël Vasselier is Head of Foreign Relations at the Mercator Institute for China Studies, Germany
  • Source: This article was published by the Observer Research Foundation