Distrust of the US is behind the EU’s cooperative stance toward China

1. Japan, the US, and the EU are edging toward reconciliation in their China diplomacy

Since November, new developments have been made in diplomacy toward China.

On November 4, German Chancellor Olaf Scholz visited China to meet with President Xi Jinping and other dignitaries. He was accompanied by the CEOs of 12 major businesses based in Germany.

It was reported that French President Emmanuel Macron expressed his wish to join Mr. Scholz but opted out after taking account of all the factors involved. He is reportedly planning to visit China separately in January.

On December 1, European Council President Charles Michel also visited China.

A diplomatic expert based in the EU hinted at the possibility that Mr. Michel and Mr. Xi discussed steps to resume negotiations for a Comprehensive Agreement on Investment (CAI) on which the EU and China had reached a basic agreement at the end of 2020.

Immediately after concluding the basic agreement, the EU and China began to exchange sanctions over human rights issues in the Xinjiang Uyghur Autonomous Region. Since May 2020, deliberations toward a final agreement on CAI within the EU have been put on hold.

This series of diplomatic moves toward China by the leaders of Germany, France, and the EU shows that the diplomatic stance of major EU countries on China is becoming more cooperative, especially in the economic sphere.

In the United States, meanwhile, the Democratic Party fared better than expected in the midterm elections on November 8.

The election results somewhat lessened the pressure to step up the hard-line stance toward China – a pressure that had been mounting out of consideration for the Republican Party, which calls for a harder line toward the country. This gave the administration of Joe Biden a little leeway to make its policy toward China more assuaging.

It is unlikely, however, that the US-China rivalry will subside significantly because the US will largely continue to take China’s surging economic and military power as a threat.

Still, diplomatic experts believe that the US and Chinese leaders at their November 14 meeting agreed to increase dialogue between the two countries to head off a possible armed conflict over the Taiwan issue among others.

This move indicated the intention of Washington and Beijing to ease the deepening confrontation to some extent.

Furthermore, all participating countries at the G20 summit in Bali, Indonesia, unanimously adopted a joint declaration on November 16, including China and Russia. Such an adoption had been considered a long shot.

This agreement reportedly owed much to efforts by Indonesia, the chair of G20, and India, the next chair.

At their summit meeting on November 17, the Japanese and Chinese leaders agreed on the importance of improving Japan-China relations. They also agreed to work toward launching dialogue aimed at establishing a constructive and stable bilateral relationship.

All these developments since November suggest that relations between Japan and the US/Europe on the one hand, and China on the other, are gradually improving. Behind these developments lies major European countries’ increasingly cooperative stance toward China.

2. Differences in China policy between the EU and the US

One thing that should be kept in mind in looking at different countries’ diplomacy toward China is that the EU and the US differ in their basic stance on China.

The US tends to see China in the context of an ideological conflict between authoritarianism (autocracy) and democracy, thus stressing antagonism toward China.

Experts in the EU agree that such a view of China by the US is too naive.

The EU’s view of China is multi-faceted, regarding the country as a competitor in the market, a collaborator in addressing such global issues as climate change and infectious diseases, and a rival in terms of political system.

The EU may disagree with China when it comes to politics and diplomacy; however, it sees the country as an important economic partner.

In a nutshell, the EU decouples economics from politics, and business from politics and diplomacy, in relation to China.

The Biden administration somewhat distances itself from the bipartisan hard-line stance toward China in Congress and keeps itself from leaning toward extreme anti-China diplomacy. This is substantiated by, for example, President Biden’s opposition to the recent visit to Taiwan by House of Representatives Speaker Nancy Pelosi.

It is also a fact, however, that de-facto US-China decoupling remains in place. Washington has maintained the levels of trade tariffs against China that were raised during the administration of Donald Trump. It has also tightened semiconductor export controls as well as restrictions on transactions with Chinese communications-related firms.

The EU’s China policy is distinct from the US counterpart.

3. The EU distrusts the US

Major EU countries’ distrust of the US lies behind these differences in China policy between the US and the EU.

Former US President Donald Trump supported Brexit, criticized the North Atlantic Treaty Organization (NATO) as being anachronistic, and withdrew from the World Health Organization (WHO).

Such an America First policy broke down US-EU relations.

Ever since, the EU’s distrust of the US has remained deep. The EU welcomes the Biden administration’s cooperative stance toward it but wonders what the next US administration will do.

A chasm in US politics plays a part in such distrust of the US. The EU lost confidence in the US foreign policy after the Trump administration broke away from the tradition of the basic policy remaining unchanged regardless of which party was in power.

The Biden administration is taking a cooperative stance toward the EU. But if the Republican Party wins the 2024 election, the policy of reconciliation toward the EU will likely be repudiated no matter who becomes president, thus tarnishing US-EU relations again as during the Trump administration. This is the source of the EU’s concern.

As long as such distrust remains in place, it is highly likely that the EU and the US will be unable to recover the mutual trust that existed before the Trump administration.

Let us take a look at the divide in US internal politics, which lies at the bottom of the EU’s distrust of the US. Right after taking office, President Biden stated he would give top priority to mending the political and social divide in the US. Almost two years have passed since the inauguration of the Biden administration, but little progress has been made.

Rather, the political and social divide has deepened. The US Supreme Court unexpectedly ruled against abortion rights, which had been deemed constitutional for five decades. It also decided against the right of states to impose their own regulations on gun ownership.

Behind these court rulings lies in the partisan divide within the Supreme Court, a negative legacy of the Trump administration.

A sense of crisis with regard to such a state of affairs promoted the electorate to go to the polls, allowing the Democratic Party to fare well in the midterm elections.

Republicans, however, are showing no intention to make compromises with the Democratic Party in light of the election results. Rather, they are taking an increasingly hostile stance for the next presidential election in 2024.

Thus, if the Republican Party wins the 2024 election, the new Republican administration will likely repudiate the policies of the previous administration one by one as the Trump administration did.

It will be difficult for the US to dispel the EU’s distrust unless it mends such a divide in internal politics.

4. Economic factors behind closer EU-China ties

Economic factors also play a major role in closer relations between the EU and China.

Russia’s suspension of energy supply has put the EU in an economic predicament. The EU thus needs to bolster its resilience against Russia by strengthening economic relations with China.

For major companies in the EU, China is the most attractive international market as they can gain maximum profit from it.

Faced with a number of challenges, the Chinese economy is thought to have exited the period of rapid economic growth in 2021 and entered the period of transition toward stable growth in 2022. (For details, see my article dated September 16, 2022=https://cigs.canon/en/article/20220916_6999.html).

Still, the Chinese economy is expected to grow faster than Western counterparts, which are heading toward recession as they have no choice but to raise interest rates to reign in soaring inflation.

Economists predict that the Chinese economy will likely maintain a real GDP growth rate of 3–4% over the medium term despite the economic downturn.

The IMF’s World Economic Outlook, released in October 2022, forecasts that the Chinese economy will amount to as large as 87% of the US economy by 2027. The Japanese economy, the third largest in the world, will be only 17% of its US counterpart that year.

Even though the Chinese economy slows, the fact remains that the US and China will continue to be the two biggest economies in the world.

On top of that, there is little room for EU companies to be hugely successful in the mature US market.

Meanwhile, the Chinese economy remains dynamic even though it is somewhat slowing; Chinese income is still growing and the industrial structure is rapidly changing.

In addition, market needs are being sophisticated and technological capabilities are being improved at a high speed in China.

Competitive global corporations based in Japan, the US, and Europe all agree that there will be no other markets more attractive than the Chinese market in the world for the next ten years.

With this understanding, the EU is trying to find a way out of the predicament due to the energy disruption from Russia by improving economic ties with China.

China has been in the phase of economic slowdown over the medium to long term since 2022 following the rapid economic growth.

The outlook for the Chinese economy was revised downward recently. It is thus difficult to expect that consumption and investment – two key drivers of domestic demand – will recover the way they did before.

For the past four decades since the 1980s, China has based its economic development on its opening-up policy. China cannot change this structure soon.

What China counts on amid the slow recovery of domestic demand is foreign corporations to increase their investment in China.

Over the long-term, economic development will continue in other developing and emerging economies in Asia, including India. It is thus expected that the economic benefits of the Regional Comprehensive Economic Partnership (RCEP) and the One Belt One Road Initiative will strengthen the link between these economies and the Chinese economy, thus bolstering the sustainable development of the latter.

As it stands, however, the combined gross domestic production (GDP) of India and major countries of the Association of Southeast Asian Nations (ASEAN) amounts to only about one third of that of China. In addition, the quality of market needs is low in these countries, which thus constitute too small a market for China to rely on.

The EU, on the other hand, is almost on par with China in economic scale. Working with the EU economy is thus significant for the Chinese economy.

5. Closer ties between Japan and China on one hand and other emerging and developing economies in Asia on the other

In such economic terms, Japan’s GDP is only one fourth of that of China now.

Still, Japan’s sophisticated market needs provide an incentive for China businesses to tap the Japanese market.

Furthermore, local governments in many parts of China continue their drive to lure Japanese businesses.

Meanwhile, other Asian countries wish to maintain stable relations with both the US and China while keeping a delicate balance with them. If Japan serves as an intermediary, its relations with them will become even closer.

These Asian countries have much trust in Japan because the two sides have long maintained close economic relations, and Japan has contributed to economic development in these countries.

Japan should join the circle of cooperation involving China and other emerging and developing economies in Asia as an intermediary between the US and China. This would ease anxieties among these economies and make it easier for China to build stable relations with them. Both China and these economies would thus welcome Japanese businesses more often than not.

Such multilateral cooperation can develop into a multilateral relationship that is favorable to ASEAN, India, Japan, and China.

In view of such a scenario, Japan should act for its long-term national interests rather than solely following the US’s hard-line stance toward China.

It is and will be important for Japan to strengthen the Japan-US alliance and work together for mutual economic security.

Given the prolonged US-China rivalry and the current internal politics in the US, however, Japan must carefully assess the possibility that keeping in step with the US will sometimes run counter to Japan’s national interests.

From this perspective, the EU’s policy toward the US that values its independent diplomacy has much to offer Japan.

The key here is to value long-term benefits for the Japanese people, focus on building the trust of the international community in Japan, and identify what should be done to achieve these two ends in the national vision and long-term strategies.

Seen in this light, Japan has much to learn from the EU’s vision for foreign policy based on its independent diplomacy.