Towards Strategic Autonomy: the Role of the EU in the Growing China-USA Rivalry

Following the COVID-19 outbreak, what began as a health crisis soon turned into an economic and social emergency. In view of the growing rivalry between the United States and China, the pandemic poses a threat to the western economic liberal model and risks jeopardizing the world geopolitical order itself. The gap between the two superpowers is such that some media outlets started ironizing about the advent of a possible new Cold War. Be it a new Cold War or anything else you want to call it, one sure thing is that Europe, for the second time around, finds itself squeezed between two powers.

If the pandemic hit hard on the economic giants, particularly true was for the European Union, where COVID-19's wave shed light on Brussels' enormous dependence on the two opposing powers. As of China, a relatively new economic partner, the virus highlighted the extent to which the continent is dependent on areas nowadays considered critical for prosperous growth, i.e., health, technology, AI, and data. Conversely, on the other side, is the American giant, the historical partner, on which Europe relies not only economically, but also in terms of security.

Throughout history, financial crises have paved the way for economic coercion, leading states to devalue their strengths and set aside their interests to comply with the coercer's demands [1] . Stuck between American protectionism and Chinese pressure, Europe risks devaluing its own potential. Standing, as of today still, as the world's second-largest economy, when trying to face the crisis, Brussels must not succumb to the trap of transforming the current economic depression in a sell-off of its critical infrastructure and technology [2] .

In view of what some have called a new Cold War, it is in Europe's interests to maintain a dialogue with both, acting as a "stabilizer" between the two players, while at the same time developing its structure in those areas likely to provide it with greater strategic autonomy and safeguard its global relevance. As Vice-Chairwoman of Parliament's Committee on International Trade, Marie-Pierre Vedrenne [3] pointed out, sometimes, it is better to refuse an agreement than to remain tied to an unprofitable one.

Following the COVID-19 outbreak, what began as a health crisis soon turned into an economic and social emergency. In view of the growing rivalry between the United States and China, the pandemic poses a threat to the western economic liberal model and risks jeopardizing the world geopolitical order itself. The gap between the two superpowers is such that some media outlets started ironizing about the advent of a possible new Cold War. Be it a new Cold War or anything else you want to call it, one sure thing is that Europe, for the second time around, finds itself squeezed between two powers, risking ending up, once again, as the battleground between the two different blocs.

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If the pandemic hit hard on the economic giants, particularly true was for the European Union, where COVID-19's wave shed light on Brussels' enormous dependence on the two opposing powers. As of China, a relatively new economic partner, the virus highlighted the extent to which the continent is dependent on areas nowadays considered critical for prosperous growth, i.e., health, technology, AI, and data. Conversely, on the other side, is the American giant, the historical partner, on which Europe relies not only economically, but also in terms of security. Defined as Europe's “security umbrella” [4], and under NATO alliance, the United States, having troops stationed in many EU states, have proposed themselves as the main guarantor of that security that Europe, over the years, has forgotten to implement.

With the US pushing for decoupling from China and, on the other hand, China lobbying silently for greater economic dependence (FDI, private investment, technology), the growing conflict is putting global cooperation into question. This time, however, as Marie-Pierre Vedrenne (Vice-Chairwoman of Parliament's Committee on International Trade) stated [5], the EU, which with all its 27 Member States, stands out as the world's second-largest economy, cannot once again end up being a victim. US unilateralism and Chinese assertiveness triggered a rethinking of the EU's strategic landscape [6]. To prevent Europe from being swept aside by the opposing powers, in the drafting of a new EU Recovery Plan, particular attention has been paid to what appears to be the key objective for Europe in the coming months, namely, strategic autonomy.

Admittedly, Europe, like many other Western countries, was poorly prepared on many fronts when it came to the COVID-19 pandemic. Still, the need for a more robust political and economic approach did not arise alongside the virus outbreak in February. It was still November when European Union President Ursula Von Der Leyen started talking about the need for a new European Geopolitical Commission capable of boosting Brussels' political role in the world arena. Due to the coexistence of nation-states and the single market, cooperation between all 27 states is not always easy to be reached, as shown by the rise in recent years of opposing narratives such as populism and authoritarianism. Indeed, a plan is needed, or Europe will risk, as announced by French President Emmanuel Macron, to disappear geopolitically.

Making America Great Again: the Strain on EU-US Relations

The alliance between the EU and the United States has been going on for quite a long time. The partnership is evidenced by the fact that both blocs are each other's first exporting partner, with annual trade worth around $1.3 trillion. The alignment is also reinforced by the fact that both blocs share common values, namely democracy, respect for human rights, economy, and political freedom, in line with UN Charter three main pillars (peace and security, human rights, and development). In recent years, however, the relationship between the two has evolved, and not for the better. Under Trump's administration, Europe is facing a situation where, for the first time, an American president does not share the very idea of the European project (Macron).

Alongside its notorious motto “America First”, Trump's administration has taken several initiatives which, besides creating tensions in the world order, have put the US-EU partnership at risk. Among the most heated ones were the steel and aluminum tariffs, import tariffs on EU aircraft Airbus, and the threat to impose higher rates on car imports from Europe. Beyond the economic aspect, tensions have also arisen in the field of security. The American President has long called on his Transatlantic allies to respect the rule according to which 2% of member countries' GDP has to be allocated to NATO defense spending fund. Moreover, by firmly pushing for unilateralism and protectionism, the US presidency has also expressed its intention to withdraw from some of 21st-century key treaties, such as the Paris Emissions Treaty and the Iranian Nuclear Deal. Furthermore, as a result of growing tensions with China, Trump has also recently threatened to permanently cut US founding to the UN health body, WHO. Simultaneously, tensions have escalated after a series of harsh statements — “the Chinese virus” — which have added further strain to the US-China situation.

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As far as US-EU relations are concerned, two key points should be borne in mind: security and technology. According to figures, the United States would currently store 92% of Western world data, and, at a time when wars are fought on digital terrain, data access appears crucial. Here the importance of digital innovation for Europe. In contrast to strategic defense, actual defense, i.e., military defense, on the other hand, is far from being achieved in Europe. Not having an army on its own, and due to the significant presence of American troops on EU territory, Europe is unlikely to detach itself from the US “security umbrella”, at least for the near future. This is partly why, instead of talking of pure autonomy, experts have chosen the word “strategic” to underline that independence must be achieved in those areas which, due to the globalized world order, have an impact at a strategic level, such as, for instance, the field of cybersecurity. Apart from its military capacity, Europe remains the world's second largest economy, and despite the long economic and historical link, should not blindly follow the United States if this doesn't meet its interests.

From ‘Strategic Partner’ to ‘Systemic Rival’: EU-China Relations

Much more recent, when compared to the opponent's, EU-China relations began deepening in 2008. As a result of the global financial crisis, many European companies, one of the most affected regions, opened to Chinese capital and investment, creating valuable trade links. Over the years, the relationship significantly developed, resulting in a series of diplomatic initiatives, such as the EU-China Summit, dedicated to strengthening of the cooperation between the two in dealing with global challenges through the rules-based international system.

Historically, in terms of partnerships, Europe has tended to establish closer ties with “like-minded” countries [7] as of the United States. When looking at China, at that time, still considered a developing country, in the 1990s, Transatlantic policymakers saw the advent of the internet on the continent as a factor leading to greater openness and transparency [8]. On the contrary, however, in particular under Chinese President Xi Jinping, the implementation of technology resulted in increased political control and repression (Tibet, Uighur reform camps, Hong Kong). An evolution that has surely not gone unnoticed by European politicians. “Europe has lost its naivety” (Macron). Evidence of this is also provided by the fact that, for the first time, in 2019, EU Strategy Paper on EU-China relations referred to the country as a “systemic rival, promoting a different kind of governance”.

While the COVID-19 pandemic highlighted Europe's dependence on China's supply chain (health sector), EU-China trade relations have long been affected by unequal market access. The lack of “competitive neutrality” [9] between the two, evidenced by policies, such as the “Made in China 2025” one, stems from the fact that China in seeking to favor its own national champions, wouldn’t grant in equal measures market access to foreign companies, among which Europeans.

If there is no doubt that the two continents share different set of values and distant rules of governance, further cooperation with China represents both an opportunity and a necessity (Charles Michel) [10], especially in view of a world order becoming every day more polarized. In Europe’s eyes China would simultaneously represent:

• Cooperation Partner. Sharing the same objectives on the global scene, both could count on mutual aid in fields such as Climate Change (as of today China stands as the first country in the world for emissions, but at the same time as one of the most committed to the Paris Protocol) and global trade. In this regard, WTO modernization appears fundamental, especially to Europeans, in order to ensure that the current rivalry between the American and Chinese blocs does not result in a trade war.
• Negotiation Partner. Although efforts to normalize dialogue between China and Europe are still ongoing, the creation of an annual China-EU summit (the last one taking place via Zoom in June of this year) represents an important step toward ensuring that the interests of both blocs are mutually respected.
• Economic Competitor. Especially in critical sectors such as supply chain, technologies, AI and data.

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• Systemic Rival. Presenting a different form of governance and not acting in accordance with the three pillars established by the United Nations Charter (peace and security, human rights and development) concerning the respect of human rights, for the moment, an alignment like that with the US is still far from being conceivable. As noted by European Deputy Brando Benifei, it isn’t easy to engage in an on ongoing dialogue if you can’t have free debate [11].

Being Europe, the leading exporting country for China, and given current US administration reluctancy to implement multilateralism, it is in the interests of both countries that trade relations continue and that cooperation in critical areas such as climate change and international agreements is intensified. However, to accomplish this, some reforms must be implemented, especially when it comes to a more rules-based trade system. While EU and China are still far from the “like-minded countries” perspective, on the economic ground in order for collaboration to be fruitful for both parties, higher openness must be reached, namely creating a more balanced as well as more reciprocal level playing field.

NextGenerationEU

On May 27th, the European Commission announced its Recovery Plan, setting out the necessary economic steps to “repair and prepare for the next generation”. In order to achieve this, Brussels is prepared to allocate substantial funds: €750 million to boost the 2021–24 EU budget — NextGenerationEU — along with a longer-term reinforced budget in the region of €1.1 trillion for the period 2021-27. This ambitious plan assumes a new evolutionary phase of globalization in which there is a trade-off between the desire to reap the benefits of the free market and the necessity of maintaining the sovereignty and security of new global players [12]. In this context, the EU must too evolve, such that it can continue to promote multilateralism while at the same time being more responsive to its own interests.

Founding elements of the new plan are:

• Diversification of supply sources. Through reinforced strategic stockpile building, especially in the health sector, Europe will boost its capacity to handle future crises, while, simultaneously, reducing its over-dependence from other world players such as China and the USA. In this context, of particular importance is RescEU, the European crisis management body, which will be reinforced through the strengthening of emergency response infrastructure, transport capacity and more active emergency teams, thus increasing EU’s resilience;
• Relocation of EU strategic activities. The implementation of shorter supply chains to bring them as close as possible to their place of consumption will not only ensure a higher level of strategic autonomy but will also result in a positive impact on the environment. By cutting transport, corporate footprints will be profoundly reduced. Of particular importance, in this context, key markets, which should be kept within the European Union (Borell);
• Free trade safeguard. Given today’s globalized world order (in contrast to the bipolar USSR/US situation), full economic benefits are only attainable in an international environment [13]. In order for this goal to be achieved, protectionism needs to be limited, while on the contrary, openness, cooperation, and coordination must be further promoted and implemented. In accordance with this logic, WTO, UN's trade regulator, appears to be of particular importance;
• FDI Strategic Guidance. Several guidelines have been issued by the European Commission to protect its strategic interests with regard to foreign investment. For this to happen, it is essential that relevant information relating to the monitoring of current or future foreign investment is coordinated and shared between the Union member states according to a system based on precise rules;
• EU Green Deal. By investing in a greener economy and increasing the circular economic model, the strategy aims to modernize EU buildings and critical infrastructure and provide the EU Member States with affordable, nutritious, safe, and sustainable food. New employment opportunities will additionally be created through initiatives such as Renovation Wave and Just Transition Fund;

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• Digitalization. As with oil in the 20^th century, data in the 21^st is increasingly becoming a major currency. As a result, those who control data are more likely to be significant players in the international political economy. Therefore, the EU's objective is to invest in better connectivity alongside the development of its industrial and technological presence. The investment in data and a more digital economy will also provide additional job opportunities. To achieve this, Europe will need to implement its data sharing legislation, setting out clear rules and strategies to boost cooperation at the European level, together with the capacity to preserve EU infrastructure secure.

Throughout history, financial crises have paved the way for economic coercion, leading states to devalue their strengths and set aside their interests to comply with the coercer's demands [14]. Stuck between American protectionism and Chinese pressure, Europe risks devaluing its own potential. Standing, as of today still, as the world's second-largest economy, when trying to face the crisis, Brussels must not succumb to the trap of transforming the current economic depression in a sell-off of its critical infrastructure and technology [15].

In view of what some have called a new Cold War, it is in Europe's interests to maintain a dialogue with both, acting as a "stabilizer" between the two players, while at the same time developing its structure in those areas likely to provide it with greater strategic autonomy and safeguard its global relevance. As Vice-Chairwoman of Parliament's Committee on International Trade, Marie-Pierre Vedrenne [16] pointed out, sometimes, it is better to refuse an agreement than to remain tied to an unprofitable one.

1. European Council on Foreign Relations, Hackenbroich J. ”China, America, and how Europe can deal with war by economic means” (2020), URL: https://www.ecfr.eu/article/commentary_china_america_and_how_europe_can_deal_with_war_by_economic_meansn

21. EC Introductory statement by Commissioner Phil Hogan at Informal meeting of EU Trade Ministers (16/04/2020), URL: https://ec.europa.eu/commission/commissioners/2019-2024/hogan/announcements/introductory-statement-commissioner-phil-hogan-informal-meeting-eu-trade-ministers_en

3. Marie-Pierre Vedrenne for Pole Evénementiel Jeunes Européens, “The world after COVID-19: Europe’s role between the United States and China” webinar

4. McKenzie M., Loedel P., “The Promise and Reality of European Security Cooperation” (1998) pg. 72-73

5. Marie-Pierre Vedrenne for Pole Evénementiel Jeunes Européens, “The world after COVID-19: Europe’s role between the United States and China” webinar

6. Egmont Royal Institute for International Relations “Europe in the face of US-China rivalry” (2020) URL: http://www.egmontinstitute.be/content/uploads/2020/01/200122-Final-ETNC-report-Europe-in-the-Face-of-US-China-Rivalry.pdf?type=pdf

7. Palgrave Studies in European Union Politics, “The European Union and Multilateral Governance” (2012)

8. CSIS (Center for Strategic & International Studies), Ortega A. “The US-China race and the fate of transatlantic relations. part II: Bridging differing geopolitical views” (2020) URL: https://www.csis.org/analysis/us-china-race-and-fate-transatlantic-relations-0

9. Joint communication of the European Parliament, the European Council and the Council, “EU-China – a Strategic Outlook” (2019), URL: https://ec.europa.eu/commission/sites/beta-political/files/communication-eu-china-a-strategic-outlook.pdf

10. EU-China Summit video conference, 22 June 2020, URL: https://www.consilium.europa.eu/en/meetings/international-summit/2020/06/22/

11. Brando Benifei for Pole Evénementiel Jeunes Européens, “The world after COVID-19: Europe’s role between the United States and China” webinar

12. European Council on Foreign Relations, Borrel J. ”The post-coronavirus world is already here” (2020), URL: https://www.ecfr.eu/publications/summary/the_post_coronavirus_world_is_already_here

13. European Commision introductory statement by Commissioner Phil Hogan at Informal meeting of EU Trade Ministers (16.04.2020), URL: https://ec.europa.eu/commission/commissioners/2019-2024/hogan/announcements/introductory-statement-commissioner-phil-hogan-informal-meeting-eu-trade-ministers_en

14. European Council on Foreign Relations, Hackenbroich J. ”China, America, and how Europe can deal with war by economic means” (2020), URL: https://www.ecfr.eu/article/commentary_china_america_and_how_europe_can_deal_with_war_by_economic_meansn

15. EC Introductory statement by Commissioner Phil Hogan at Informal meeting of EU Trade Ministers (16/04/2020), URL: https://ec.europa.eu/commission/commissioners/2019-2024/hogan/announcements/introductory-statement-commissioner-phil-hogan-informal-meeting-eu-trade-ministers_en

16. Marie-Pierre Vedrenne for Pole Evénementiel Jeunes Européens, “The world after COVID-19: Europe’s role between the United States and China” webinar