Over 2018, China’s relations significantly sharpened with both the US and the EU. The most consequential of these is with the US, where the imposition of trade tariffs from later in the year was the first tangible sign that the relationship was entering an era of overt strategic competition.
Were this the only issue, then the EU would have a relatively easy decision to make. This would be to continue to stick close to its main security ally, and one of its most crucial technological and economic partners, the US. However, the US presidency of Donald Trump has also shown significant levels of unfriendliness towards the EU, expressing dissatisfaction over market access, and frequently questioning key parts of the security narrative between the two. The most difficult of these so far is the relinquishment of key agreements, from the Paris convention on Climate Change, which Trump decided the US should withdraw from, to the nuclear freeze deal with Iran, which he has jettisoned, and finally the nuclear arms treaty with Russia, which he has also withdrawn from. A more stable and predictable US pushing back against China would be strategically and diplomatically easier to deal with for the EU than a Washington which seems to by pushing back not just against China, but the rest of the world. This perhaps explains why the EU has been so cautious so far and is likely to continue to be do so.
China’s overtures to the EU from the middle of 2018, as the threat of a trade war with the US loomed, were part of a broad move for it to upgrade partnerships in the rest of the world which would make it less isolated. But as the major import summit held in Shanghai in November vividly illustrated, it seems it is talking to a highly sceptical world. Only 28 heads of state attended. The main leaders of EU member states stayed away. The hint of perhaps doing a more expansive trade deal in July between Brussels and Beijing stuttered to a halt when the President of the EU Commission, Mr Juncker, managed to head off imposition of tariffs by a visit to the White House and a deal agreed one to one with Trump. This single event showed that in the end, Brussels always looks west, not east. It helped to cool some of Beijing’s ardour.
For the EU into 2019 and beyond, however, the question of what new opportunities, and new threats, now exist needs to be attended to with some urgency. The situation of Huawei, the Chinese telecoms company, is a good case study. Blocked from major projects despite much lobbying in the US, and Australia, it had enjoyed some success in Europe, where it had secured deals in Britain and Germany. But the intense focus now being placed on it in Washington, and the clear signals that involvement with Huawei in Fifth Generation systems will mean no possibility of involvement by the US, has meant that a large part of the future market for the company in one of its most promising and largest targets is now frozen. It is hard to see how this situation is going to easily change without a transformation of the levels of trust between the two sides. Despite much co-operation and work over the last decades, that trust does not exist.
Nor, with China’s recent behaviour, does it look like this problem will be sorted out any time soon. At a time when many, shocked and disorientated by Trump’s capricious behaviour, and by issues like Brexit and the rise of populism in Europe, were starting to look at China with its stated support for liberal free trade and environmentalism a little more sympathetically, a series of moves by Beijing have largely led most of this good will to dissipate. The response to the detention of Huawei’s Chief Finance Officer in Canada, Meng Wanzhou is only one of many problems – with Beijing seeming to allow the detention of Canadian citizens in China in what looks like a punitive move. A far more serious reputational issue is the publicity around the erection of huge camps in the Xinjiang region of North-West China, where as many as a million Uyghur Muslims are being ‘re-educated’ on the grounds of security. The draconian nature of this policy, and the way in which it has been explained and then defended by Beijing, have undone many years of painstaking soft diplomacy.
On top of this, there is the rising nationalist tone of the language from Beijing. This is partly due to the response to falling growth, and a dip in confidence in the domestic Chinese economy. After four decades of locating so much of its legitimacy on economic performance, the Communist Party is seeking a new narrative by which to maintain its right to have a monopoly on power. Nationalism and defence of China’s interest against a world which is hostile and antagonistic to it is a natural enough tactic to take. But while it appeases the local audience, it often comes across poorly abroad. The most striking example of this was the speech made on 1stJanuary 2019 by Chinese President Xi Jinping on Taiwan, which, despite proposing no major new policies, was delivered in a manor and a way which promptly improved President Tsai Ing-wen of Taiwan’s flagging approval ratings.
2019 is shaping up to be a taxing year for China – and one where it looks set to be increasingly isolated. This might achieve some of the short term aims of the US in bringing about a bit more economic openness and reciprocity. But it cannot be a good thing that the world’s second largest economy is marginalised in this way. The EU probably knows this, and needs to wait till some potential mediation role might appear for it. This of course is only if it can be distracted from its own internal issues long enough, and is able to create some unity around how and in what ways it can perform this bridging act. At best, it can appeal to pragmatism on both sides, and use its strong alliance with the US, and its deep economic links with China, to show that the current trajectory of sharp conflict and disharmony serves no ones long term interests. The EU likes to think of itself as a civilizational power. 2019 might be the moment when it can urge on everyone civilised discourse, rather than the brutal language currently being deployed.