Preserving Europe’s Interests Amid U.S.-China Strategic Rivalry

The rise of China in the international system and the emerging U.S.-China strategic rivalry have affected a large section of the globe, including international institutions and businesses. The European Union (EU) is no exception.

Europe is at a critical juncture due to its close strategic and economic ties with the U.S., and, China being its second-biggest trading partner after the U.S. Apart from close economic ties, Europe and China however do not see eye to eye on normative factors such as Europe’s free-market economy, democracy and China’s model of state capitalism and authoritarianism. These differences play a significant role in shaping Europe’s perception of China.

Debates in Europe

Therefore, new debates have emerged in Europe about managing the U.S.-China rivalry, securing economic interests with China, or what should be Europe’s China strategy. Arguments in this debate have been divided along a few lines. The prominent view is that Europe should stand with the U.S. because the U.S. has been a close strategic ally of Europe since 1945. Further, China is challenging the existing rules-based world order, as evidenced by human rights violations in Xinjiang, China’s close relations with Russia, geopolitical tensions involving Taiwan and the South China Sea, growing technological challenges (e.g., 5G and AI), domination of critical minerals for the green technology revolution (e.g. lithium for EV batteries) and economic malpractices such as so-called ‘debt trap diplomacy’, etc. At the same time, the EU also faced resistance to China’s trade measures when Lithuania, an EU member-state, opened Taiwan’s office in Vilnius, the capital city of Lithuania. Such incidents have escalated tense relations between the EU and China at the World Trade Organization (WTO).

The second line of argument is that the EU itself cannot avoid or maintain a distance from China due to the complex economic interdependence between the EU and China. Major European countries like Germany and France have close economic ties with China – German auto producers, particularly – and want to continue them. Many European countries are also part of China’s Belt and Road Initiative (BRI). However, Italy has recently expressed its intention to discontinue the BRI; however, it also has expressed its desire to continue economic ties with China. China’s permanent position in the United Nations Security Council (UNSC) and Europe’s dependency on China for addressing climate change and its dominance in green technology play a more prominent role in Europe’s engagement with China.

The third line of argument is that the EU should maintain ‘strategic neutrality’ and must not become entangled in the U.S.-China rivalry. It should not be influenced by either the U.S. or China.

Sharp distinctions within the European countries make it more challenging to establish a collective European stance on China. As Ursula Von Der Leyen, President of the European Commission, said “Europe’s relations with China cannot be seen in black and white”. There are multiple “grey areas” that must be taken into consideration. Therefore, the EU should consider the following policy options while navigating its policies in such geopolitical flux.

Options that Europe Should Consider

The first option could be ‘strategic neutrality’. One can see sharp distinctions in debates in international relations, such as democracy vs. autocracy, North-South, East-West, etc. If European countries joined any bloc, it would intensify bloc politics across the globe. One could, therefore, envisage a scenario where a Western bloc, led by the U.S., Europe, and other countries such as Australia and Japan, is in opposition to another bloc comprising China, Russia, Iran, North Korea, and their close partners. Such bloc politics would be unhealthy for the current international system and the rules-based world order. To avoid such a scenario, the EU should pursue its independent China policy according to its threat perception. Europe has supported U.S. policies in the Middle East, due to which Europe had to face severe criticism. Now, the U.S.’s new challenge is China, which again affects the geopolitics of the entire globe. In such a complex scenario, it might be better for the EU to navigate its policy towards China without being influenced by U.S. strategy.

Second, French President Emmanuel Macron recently expressed that “Europe should not follow the U.S. or China on the Taiwan issue”, and it is not in Europe’s interest to be “caught up in crises that are not ours”. But in reality, Europe can’t distance itself or ignore the Taiwan issue. A potential military conflict between the U.S. and China in the South China Sea or the Taiwan Strait would seriously disrupt global supply chains and the European economy as a result. Furthermore, Taiwan upholds democratic values and principles; thus, taking a firm stand over Taiwan is crucial due to the strategic, economic (given its dominance of high end semiconductors) and normative factors. To address the Taiwan issue, the EU should consider engaging with other like-minded countries, such as India, ASEAN countries, Australia, and countries from the Global South, for discussion and developing a common consensus in taking an independent stand over Taiwan.

Third, the EU should recognize that no country wants to become embroiled in the U.S.-China strategic rivalry due to the potential economic repercussions of war. Most of the principal actors in the region are primarily concerned with securing their economic interests and supply chains. Therefore, the ongoing focus of stakeholders is on shifting supply lines from China to other countries, albeit with mixed success so far. Some actors are attempting to establish alternate production lines in third countries. For instance, US firms such as Intel, Nike, and Apple have started shifting some of their manufacturing lines to ASEAN countries and India. Japan has also provided subsidies to their companies to shift supply lines. Therefore, the EU should primarily focus on securing its economic interests and transferring its supply lines to other countries. Thus, the EU should maintain peaceful ties with China for the next ten years instead of indulging in strategic rivalry.

Fourth, the EU has the leverage to mediate between the U.S. and China due to its close partnership with both countries. The EU has no boundary dispute or serious geopolitical conflict with China, unlike India, the U.S., ASEAN countries, etc., Therefore, the EU is a potential power that could attempt to mediate between the U.S. and China; however, it also has limitations which constructively need to be overcome simultaneously, e.g., unity amongst all EU and NATO countries. Europe is also considered a normative power and has soft power influence in other parts of the world. Therefore, the EU can consider seeking assistance from countries of the Global South in a dialogue to build a solid and common consensus on the U.S.-China rivalry and possibilities of mediation.

To do that, a grouping of EU nations and Global South can be formed, which will primarily stay neutral and initiate talks to de-escalate tensions between the U.S. and China. Such attempts were made during the Cold War by the non-aligned countries, e.g., India was involved in a conciliatory position between the U.S. and USSR during the Suez Canal and the Hungary crisis in 1956; European countries were involved in mediation between the U.S. and USSR for the nuclear arms control treaties, etc. The situation is gradually getting tense in the East Asia with countries gearing up for military conflict: Taiwan is under the umbrella of attack from China while Japan has started re-militarization due to the threat from North Korea and China. Therefore, 10 years down the line, small flashpoints could lead to the intense conflict in the region. Considering such geopolitical realities, it’s advisable to initiate discussions led by Europe and the Global South on critical geopolitical issues.

Therefore, in the era of Cold War 2.0, the EU should maintain ‘strategic neutrality’ and focus on securing its economic interests. And further to attempt a mediation between the U.S. and China to establish a secure, peaceful, and rules-based world order.