Politics

Ukraine Has Soured the European Union on China

Russia’s invasion of Ukraine has driven a wedge between the European Union and China, and for the first time in the history of their relationship, Brussels is ready to go on the offensive.

The world’s second and third-largest economies have been at loggerheads since March 2021, when the European Parliament halted ratification of the Comprehensive Agreement on Investment over human rights concerns. But since Russian forces entered Ukraine on Feb. 24, relations have cratered, and there seems to be little prospect of any reconciliation.

Brussels is irate at Beijing’s refusal to condemn Russian aggression in Ukraine. In the early days of the war, EU officials hoped that China would try to broker a peace deal, but a frosty virtual summit between EU leaders and Chinese President Xi Jinping on April 1 dashed these expectations. More importantly though, the war in Ukraine has forced Europe to start thinking geopolitically for the first time since 1991. EU countries’ growth expectations for 2022 have been slashed amid spiking energy prices. The EU’s long-standing assumption that economics can be a substitute for actual foreign policy in dealing with authoritarian states now looks like a bad bet.

Russia’s invasion of Ukraine has driven a wedge between the European Union and China, and for the first time in the history of their relationship, Brussels is ready to go on the offensive.

The world’s second and third-largest economies have been at loggerheads since March 2021, when the European Parliament halted ratification of the Comprehensive Agreement on Investment over human rights concerns. But since Russian forces entered Ukraine on Feb. 24, relations have cratered, and there seems to be little prospect of any reconciliation.

Brussels is irate at Beijing’s refusal to condemn Russian aggression in Ukraine. In the early days of the war, EU officials hoped that China would try to broker a peace deal, but a frosty virtual summit between EU leaders and Chinese President Xi Jinping on April 1 dashed these expectations. More importantly though, the war in Ukraine has forced Europe to start thinking geopolitically for the first time since 1991. EU countries’ growth expectations for 2022 have been slashed amid spiking energy prices. The EU’s long-standing assumption that economics can be a substitute for actual foreign policy in dealing with authoritarian states now looks like a bad bet.

In the past few weeks, the European Commission has introduced an ambitious suite of policies to distance itself economically from China. Some predate the war: The proposed anti-coercion mechanism that would enable Brussels to impose trade retaliation measures on imports from countries that apply economic coercion to EU member states was put forward by the European Commission in December 2021. It clearly targets Beijing, which in 2021 put Lithuania under a de facto trade embargo after Vilnius allowed Taiwan to open a representative office in the country. But most of the European Commission’s new, China-oriented policy initiatives were minted after Feb. 24.

In May, at the EU-Japan summit, Brussels and Tokyo pledged to “deepen our exchanges on China, notably with regard to … security dynamics.” That same month, Brussels announced that it would conduct an “upgraded” trade dialogue with Taiwan in June, one ostensibly aimed at deepening EU-Taiwan cooperation in semiconductor manufacturing. In reality, it was a signal that the EU is willing to reopen discussions on boosting links with Taiwan irrespective of China’s reaction: This proposal was previously floated in late 2021 but scrapped for fear of backlash from Beijing.

More initiatives are in the pipeline, not explicitly directed against China but offering tools for a drawn-out fight. EU institutions are negotiating a new mechanism that will allow the bloc to assess trading partners’ industrial subsidies and apply compensatory tariffs. Brussels could certainly use this against China, which has heavily subsidized many of its export-oriented domestic industries. This year, the European Commission will table another trade mechanism to prevent imports made using forced labor from entering the bloc. This, too, could create an open-ended instrument for trade regulators to dial up protectionist pressure on Beijing.

To become law, the European Commission’s proposals need member states’ signoff. Before the war, this was the key sticking point. No longer. Central and Eastern Europe have turned particularly hawkish. Russia’s aggression has reminded them how much they depend on the U.S. security umbrella. Taiwan has stepped up its economic engagement with the region. And those Eastern European leaders with close ties to Beijing are increasingly isolated. Hungarian Prime Minister Viktor Orban can still hold Brussels hostage over foreign-policy votes, where EU rules require unanimity, but not these other initiatives, which require only a qualified majority

Western EU member states with decadeslong economic links to China are prevaricating, but the consensus there is shifting too. Germany’s implicit policy toward authoritarian states, known as Wandel durch Handel or “change through trade,” lost all legitimacy on Feb. 24. During a recent tour in Asia—which did not include China—German Chancellor Olaf Scholz called for reducing German dependency on individual countries, a barb aimed at Beijing. Italian Prime Minister Mario Draghi has invoked “golden power” rules to block Chinese corporate acquisitions. With 3 percent of Italian exports and nearly 8 percent of German exports bound for China every year, Rome and Berlin are not seeking full economic decoupling but will certainly be less hostile to the European Commission’s initiatives on China than in the past.

European politics is diverse and complicated, with many veto points. This makes it hard for the bloc’s foreign-policy stance to change quickly. Brussels’s initiatives to reduce the bloc’s economic and political exposure to China have more traction in some EU member states than in others, and business groups will keep working behind the scenes to prevent decoupling. Yet the trend lines are clear—and probably irreversible. Before Ukraine, Brussels-Beijing relations were already cooling. The year 2022 will be remembered as the year the frost settled in.



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