© picture alliance/ZUMAPRESS.com/Idrees Abbas

On June 15 of this year, the armies of India and China clashed in the Galwan valley region of the Himalayas, resulting in the death of 20 Indian soldiers. While India and China share a long and contentious border, this clash was of vital importance for a number of reasons.

First, this was the first time in decades that the India-China border has seen this level of violence, as well as an increase in the buildup of Chinese troop numbers at multiple points along the border. Second, the clash shattered trust between India and China built carefully over years through agreements dating back to 1993, confining “the entire border architecture to the heap of history.” Third, while India continues to be a secondary concern in China, public opinion in India has decisively shifted to viewing China as a major security threat. Many in New Delhi believe this crisis reflects an inflection point that will fundamentally change the trajectory of India-China relations.

A Pattern of Border Tensions

India and China share an extremely long border running more than 3,000 kilometers, which is divided into sectors—western, middle, and eastern. After the last major boundary war between India and China in 1962 this border wasn’t clearly defined but a Line of Actual Control (LAC) was established. There are several disagreements and the LAC is vague, but both India and China agreed to not alter or re-define it unilaterally.

It was in the western sector in the remote mountainous region of Ladakh that Chinese and Indian soldiers clashed in the Galwan river valley on June 15^th. This violent attack was unprecedented, even on this contested border, representing the first violent deaths on the border since 1975 and the most fatalities in the region since 1967.

This begs the question why now and why this area? This region is strategically important to both countries. As Dhruva Jaishankar of the Observer Research Foundation (ORF) notes, in the 1950s China constructed a vital highway through the region claimed by India to connect to the critical regions of Xinjiang and Tibet. For India this region is important for supplying Indian forces along the disputed border with Pakistan, thus making the area critical for Indian security and “the geopolitical balance of power across a large part of Asia.”

Over time both sides have been building critical infrastructure including roads and airfields in the region, which have led to an increasing number of incidences—at the Depsang plains in 2013, then again in 2014 when Chinese troops crossed the border at Chumar coinciding with President Xi Jinping’s visit to India, and finally in 2017 at Doklam where Chinese troops entered a region they had “only patrolled sporadically before.” Galwan differs from these incidents not only because of the scale of the violence, but because this time Chinese troops “came in larger numbers, amassed troops and artillery ranged all along the boundary in Ladakh.” While both sides have blamed each other for sparking the incident most analysts conclude that China unilaterally altered the status-quo on the border by stationing a large number of its troops in the region.

The implications of this incident are bound to be significant. First, whatever the motives, it is evident that China is making more aggressive territorial claims in the region. Second, trust between India and China is at an all-time low. Since 1993, India and China had negotiated a series of agreements and operational procedures to prevent such skirmishes, known as the Border Peace and Tranquility Agreement but that has now essentially been voided. Most observers in India believe this was a pre-meditated and well-thought-out action on China’s part, making it very difficult to rebuild trust between the two countries and definitively turning the tide of public opinion against China.

An Inflection Point

While in the short-term, India’s priority will be the restoration of the status quo at the border, in the long term a rethink of India’s China policy seems imminent. Former National Security Advisor Shivshankar Menon argues that “the reset of India-China relations is now inevitable and necessary,” while C. Raja Mohan, director of the Institute of South Asian Studies, National University of Singapore, writes that any illusions Indian policy makers might have had about Asian and anti-Western solidarity with China have now been crushed.

This shift has certainly been accelerated by the border crisis, but it has been a long time in the making. As India and China grow in economic size and geopolitical ambition, a clash in policy between the two was in some ways inevitable. For example, Menon notes that freedom of navigation in the South China Sea has become an important issue for India just as China started doubling down on its claims in the region. Tanvi Madan, senior fellow at the Brookings Institution, points to other long standing problems in India-China relations—the widening trade deficit, limited market access for India, the growing proximity between China and Pakistan, China’s increasing activities in India’s neighborhood, and Beijing working against India at international forums such as the Nuclear Suppliers Group (NSG) and United Nations Security Council (UNSC).

While a reset is certainly being called for, realistically in the short-term India’s relationship with China will take three parallel tracks—cautious engagement, internal strengthening, and external balancing. India’s engagement with China will continue but with some clear differences. Military balance on the border will be a crucial factor in determining how India-China relations evolve. But as both countries continue to build border infrastructure and roads, such clashes are bound to increase. In economic terms, there are growing calls for India to “decouple” from China. This would be difficult to implement since China is currently India’s largest trading partner, and second only to the US once services are added. Chinese economic investments in crucial sectors like start-ups and fintech in India are estimated to be around $26 billion.

While decoupling is not an option, India will limit Chinese investment in critical infrastructure particularly 5G, telecom, power grids etc. Huawei being included in India’s 5G infrastructure is now certainly out of the question. India recently also banned 59 Chinese apps stating security concerns. The more difficult task is for India to build its domestic capacities and resilience, which would need sweeping policy reform, something that is often difficult to implement in an electoral democracy. For example, to strengthen its economy India needs to be better aligned with the global economy. However, protectionist tendencies run deep, and the Modi government has not delivered on promises of economic reform despite having a clear majority in the Parliament. Similarly, India’s defense sector is in desperate need of reform, but progress has been slow so far.

Diversifying Partnerships

As India aims to bridge its massive economic and military asymmetries with China, it will continue to follow a policy of external balancing by building “issue-based coalitions” with a number of partners. Stronger US-India ties are a prime example. In this crisis the US provided India with “rhetorical support, diplomatic cooperation, the use of military equipment acquired from the US and, reportedly, intelligence sharing.” While India is wary of becoming a pawn in US-China competition, aiming to forge closer ties with the US is part of a broader policy of diversifying its partnerships. It is important to note that over the last few years India’s relationships with Japan and Australia have strengthened tremendously—two partners who have also followed a policy of cautious engagement with China. As part of its broader Indo-Pacific policy, India has also increased security and economic engagement with Vietnam, Singapore, Indonesia and other ASEAN countries. In this new constellation of partnerships while India-Russia ties might seem to have taken a backseat, they are still important as most of India’s major weapons platforms are Russian, and that is unlikely to change in the short term. As part of this logic, India’s approach towards Europe has also shifted, though India-France ties have been the biggest beneficiaries. It is important to note that the China question also figured prominently in the recent EU-India summit which took place in July 2020 and instituted dialogues on 5G, connectivity, maritime security, and on deepening the Europe-India trade relationship.

Lessons for Europe and Germany

The Galwan valley border crisis didn’t make headlines in Europe, partly because of the confusing topography and history of the LAC but also because the conflict is essentially seen as far away. However, this isn’t one isolated incident. Over the last few months, coinciding with the coronavirus crisis, China has engaged in military intimidation towards several countries in the South China Sea, Taiwan, and Japan. It introduced the national security legislation in Hong Kong. It has issued threats of economic retaliation in response to domestic debates in Australia and New Zealand. These moves are important to note as they give an indication of what kind of international actor a rising China wishes to be.

Europe is in the middle of a debate on its new China strategy. Under the German Presidency of the EU Council, Germany’s Foreign Minister Heiko Maas has called for a unified European approach to China. A new approach and strategic assessment of China will not be complete and effective if it doesn’t take into account how China behaves outside of European borders and with Europe’s partners. Especially because, while Europe doesn’t face a territorial threat from China, on a number of questions of economic security and political interference the dilemmas faced by Europe are the same as many countries in the Indo-Pacific. India, Japan, and Australia are all reconsidering their dependence on China in strategic sectors, in many ways mirroring the debate in Europe.

Second, while the conflict might seem far away, Europe has a stake in the security of the Indo-Pacific. The EU is the largest trade and investment partner of many countries in the region including India. The dynamic economies of the Indo-Pacific will continue to be extremely important for export-focused countries like Germany. In the wake of coronavirus crisis as Europe looks to diversify supply chains, this region will be central. Hence keeping an eye on the security dynamics in the region, which could quickly disrupt supply chains and have an impact on European economies and security, is crucial. And finally, as Europe is diversifying its partnerships beyond China, and strengthening relations with India, Japan etc. it cannot forever stay on the sidelines of these conflicts and developments, refusing to take positions. Political agnosticism has its costs too.

In the past, border crisis between India and China have had two kinds of outcomes. They have either derailed the relationship significantly, as seen in the aftermath of the 1962 war. Or they have served as an opportunity to reset and revitalize the relationship. The latter looks increasingly unlikely especially since altering and questioning territorial status-quo seems locked into Chinese foreign policy choices—whether in the South China Sea or the Himalayas.

Given the geostrategic importance of this region, border tensions are not going to go away. Recent reports show the conflict is still very much active and de-escalation hasn’t taken place. This crisis also comes at a time when India is already struggling to grapple with another external shock—that of the coronavirus pandemic. In a speech last year, India’s External Affairs Minister Subrahmanyam Jaishankar noted that these disruptions in the past have led to a rethink and start of new phases in Indian foreign policy and that India has advanced its interests most “when it made hard-headed assessments of contemporary geopolitics.”

By all current assessments, unless Chinese behavior changes or there is a framework for de-escalation agreed upon, the path of engagement seems more constrained and India will focus on making issue-based coalitions and diversifying its partnerships to strengthen its internal and external position vis-à-vis China. These tensions will remain and external players like Europe will no longer be able to ignore these in their foreign policy calculus.

The post Death in the Himalayas appeared first on Berlin Policy Journal - Blog.

© Claude Cadi

In 1974, the comedy “Les Chinois à Paris” created a minor diplomatic crisis. The plot of the film: Communist China has conquered Europe. France falls without any resistance. Setting up their headquarters in the Galeries Lafayette department store, the Chinese turn Europe into their economic hinterland: Germany is ordered to produce cars, the UK bowler hats, and the Dutch bicycles. The French offer their services as experienced collaborators.

When the movie hit the screens, Beijing’s ambassador to Paris was appalled by the portrayal of China as an imperialist power and threatened “consequences” should the Élysée not ban the film. The left-wing newspaper Libération called for a boycott of the film. Jean-Paul Sartre, Simone de Beauvoir, and other French intellectuals were celebrating Mao’s “cultural revolution” at the time.

The film was meant as an implausible comedy and a parody of France under German occupation; but maybe it was just ahead of its time. With its Belt and Road Initiative (BRI) Beijing is now trying to plug Europe into the Chinese sphere of influence. And the Chinese are quite literally taking control of the Galeries Lafayette; 30 percent of the luxury department store’s revenue is generated by Chinese tourists!

But contrary to the movie’s French submission, France is today at the forefront of Europe’s resistance to China, for two reasons: the geopolitical and the economic.

Paris-Delhi-Canberra

For Paris, Beijing’s hegemonic posture poses a security challenge. 1.6 million French citizens live in the Indo-Pacific. France’s overseas territories in the Indian and Pacific Oceans include huge exclusive economic zones. Paris wants brakes on Chinese expansionism and maritime law to be upheld in the region.

Macron is thus trying to build an “Indo-Pacific axis” between Paris, Delhi, Canberra, and perhaps even Tokyo in order to increase its weight vis-à-vis Beijing. “If we want to be respected as equals by China, we have to organize ourselves,” Macron said in 2018 at an Australian naval base.

Since that speech, France has concluded a strategic partnership with Australia. It also regularly holds “two-plus-two” talks between defense and foreign ministers with Japan to discuss maritime issues in the East and South China Seas. What’s more, the Élysée sends warships to pass through the Taiwan Strait and French submarines patrol around New Caledonia’s coast.

And of course, Macron hopes that establishing France as an “Indo-Pacific power” will yield some further benefits: increased geopolitical importance for France and a rebalancing of Beijing’s European focus from Berlin to Paris. Arms sales in a region that is diversifying away from US suppliers is another objective. Australia has signed a contract for 12 French submarines, India is considering stepping up its order of 36 Rafale fighter jets, Indonesia wants French fighters and submarines and Malaysia French frigates.

Paris-Berlin-Brussels

When it comes to the economy, Paris—unlike Berlin—has seen China’s rise as more of a threat than an opportunity for some time. Yes, the Chinese have become the most important buyers of French luxury goods. But the widening of China’s French trade surplus runs parallel to France’s multi-decade decline as an industrial power.

Moreover, Paris has a tradition of thinking about the economy in strategic terms. Asked whether France will exclude Huawei from France’s 5G network, Macron replied that “I’m just saying we have two European manufacturers: Ericsson and Nokia,“ before adding “this is a sovereign matter,” as it concerns data protection and security issues. In Beijing, Macron stated that the BRI cannot just be “one-way” and that “these roads cannot be those of a new hegemony, transforming those that they cross into vassals.”

Paris has no illusions about its lack of leverage vis-à-vis Beijing. The Élysée thus wants to Europeanize economic relations with China. When President Xi Jinping visited Paris in March 2019, Macron asked Chancellor Angela Merkel and then-European Commission President Jean-Claude Juncker to join their meetings. At the end of the year, Macron invited European trade commissioner Phil Hogan and Germany’s research minister to join him on his trip to China. Addressing a group of French and German business leaders in Beijing, he said: “The more we play the Franco-German and in particular the European card, the more we are credible. The better results we will have.”

Macron thus supports Merkel’s initiative for an investment deal with China. But he doesn’t want to settle for small change. He wants an “ambitious agreement” that provides “full reciprocity.” And he wants to set the right incentives. It was Macron who initiated the idea of an EU-wide foreign investment screening mechanism, which was adopted in 2019. Today, Paris wants to strengthen the EU’s anti-subsidy measures in extra-European trade.

In this context, China is trying to mollify Macron. Huawei promised to build its first European manufacturing site in France. In 2019, Beijing signed an agreement protecting geographical indications of French cheese and wine, a long-standing obsession of French trade diplomacy. Macron is happy to take these tributes but, so far, he hasn’t offered much in return.

Macron, the Realist

The era of French presidents like Charles de Gaulle and Jacques Chirac explicitly welcoming China’s rise hoping it would lead to a more multipolar world order are over. Macron doesn’t want “Les Chinois à Paris” nor does he want them in New Caledonia.

But notably, the Élysée is careful not to join Washington’s anti-China front either. Paris fears that a binary Sino-American competition could provoke a cascading conflict akin to the pre-World War I period. By organizing an alliance of secondary players that is willing to confront China, but with a focus on upholding the multilateral order rather than engaging in great power competition, Macron hopes to change the dynamic.

And yes, Paris has become Beijing’s most assertive partner within the EU, but Macron doesn’t think it is helpful to step on Xi’s toes when there is not much to gain. Since the beginning of his presidency, realist Macron has deprioritized human rights issues in foreign relations. Hence, the silence over Hong Kong. Instead, Macron says things like “I have the greatest respect for President Xi Jinping, and I expect no less on his behalf.” This is ultimately what Macron’s coalition building is about: make Beijing respect France.

The post Pariscope: Macron’s Ententes Cordiales Against China appeared first on Berlin Policy Journal - Blog.

© REUTERS/Aly Song

The coronavirus pandemic is a prime example of what former UN Secretary-General Kofi Annan described as “problems without passports.” Highly infectious diseases do not care much about national border guards holding up stop signs. To fight their spread and their effects, we depend on the cooperation of all states, no matter which political differences otherwise separate them. To this end, China is of central importance. This also applies to other global public goods, most prominently controlling the climate crisis: without China—which represents one-fifth of the world’s population and already has higher CO2 emissions than Europe and the US combined—there is no solution.

We must step up cooperation with China on global public goods. That does not mean, however, that we have to curry favor with Beijing to do so. China has a strong interest of its own in cooperating on global challenges, as it is also heavily affected by pandemics and the effects of the climate crisis. We therefore can and should vigorously defend our interests in what is a competition of systems with authoritarian state capitalism, while at the same time intensifying cooperation on global challenges. With regard to COVID-19, this means: we can take a strong stand against anti-Chinese racism, recognize the suffering and achievements of Chinese citizens in the fight against the coronavirus, and promote cooperation between government agencies and experts without making ourselves the mouthpiece of the Communist Party of China (CPC) narrative.

A Disinformation Campaign

The official Chinese narrative is clear. For the Chinese newspaper People’s Daily, the fight against the virus highlights “the obvious superiority of the leadership of the Communist Party and the system of socialism with Chinese characteristics.” The Central Propaganda Department recently published a hagiographic book entitled A Battle Against Epidemic: China Combatting Covid-19 in 2020. According to an announcement by the Xinhua News Agency, the book—which is to be published in English and other foreign language editions—shows how President Xi Jinping has demonstrated “his commitment to the people, his far-reaching strategic vision. and outstanding leadership as the leader of a major power” in the fight against the virus.

Internationally, Beijing is conducting an aggressive campaign against all those who have criticized the lack of transparency in the actions of the Chinese government. In Nepal, for example, the Chinese ambassador attacked a newspaper for publishing a critical guest commentary on the lack of openness and trust in the Chinese government at the beginning of the epidemic. Beijing aggressively went after Nobel Prize laureate Mario Vargas Llosa and also expelled three Wall Street Journal journalists from the country because the newspaper published a commentary with the historically charged title “China as the True Sick Man of Asia.”

The Chinese government also ensured that Taiwan was not allowed to sit at the table at World Health Organization (WHO) crisis meetings. Senior Chinese diplomats have pursued a disinformation campaign spreading conspiracy theories about the US military as the source of the new coronavirus. Against this backdrop, the way WHO Director-General Tedros Adhanom Ghebreyesus is attempting to curry favor with Beijing is fundamentally misguided. The WHO chief is on record saying that “China is setting a new standard for the response to an outbreak;” he has also praised the government for its “transparency.” Ghebreyesus’ adviser Bruce Aylward, who led a WHO delegation to the Hubei crisis province, is also heaping praise, particularly with regard to China’s use of technology. In a recent interview, he refused to answer a question on Taiwan’s corona response, instead insinuating that Taiwan is just a province of China. There should not be any place for sycophancy when dealing with Beijing when it comes to how to respond to pandemics.

The same principle should apply to climate protection: we should seek cooperation with China without shying away from confrontation on other issues—be they technology, security, trade practices, or human rights. But that is exactly what some voices on both sides of the Atlantic suggest. Stephen Wertheim, one of the prominent left-wing foreign policy experts in the United States and co-founder of the new think tank, the Quincy Institute, said in regard to competition between the US and China: “The American people can live with an authoritarian China. They cannot live on an uninhabitable earth.” This suggests that the advancement of CPC-style authoritarianism should not be taken too seriously in the face of the climate crisis.

Self-Interest in Climate Policy

And with regard to criticism of China, BASF CEO Martin Brudermüller warned at the end of last year that there should be “a real, honest, social discussion about all the consequences,” making reference to the fact that many jobs in Germany depend on China. And he brought the climate crisis into play: “If China does not cooperate on climate protection, it will not work. In that case, they will continue to build coal-fired power plants.” This suggests that China will build coal-fired power plants out of spite when political relations become strained in other areas. But when it comes to climate protection, the CPC leadership acts out of self-interest, not because we in the West are tame and servile. The CPC elite is convinced that China will be hit hard by the effects of the climate crisis. In addition, there is pressure from the population that wants to see a reduction in air pollution (e.g., from old coal-fired power stations).

To be sure, security considerations do play a role in China’s climate policies. The fact that China is not giving up coal also has to do with energy security. Coal is readily available in China and therefore security of supply is less at risk. And anyone talking about decoupling China from the Western economy should be aware that this could be bad news for the production of low-carbon technologies, as researchers John Helveston and Jonas Nahm have shown. China currently produces two thirds of all solar cell panels, one third of all wind turbines and three quarters of all lithium-ion batteries. This dominant market position is also the result of violations of intellectual property rights and fair trade practices. Nevertheless, we should not completely forego China’s cost advantages in the production of these technologies—the cheaper the price at which these technologies are available in large numbers, the faster they will be deployed globally.

At the same time, Germany and Europe should not have any illusions about the hurdles for cooperation with Beijing on the climate crisis. A joint European-Chinese “Green New Deal” is not only a long way off because it is unclear whether Europe is serious about it but also because Beijing currently makes for a very questionable partner. At present, China is the largest exporter and financier of coal-fired power plants—often with outdated and thus particularly harmful technology. China’s gigantic Belt and Road Initiative has a very poor climate balance, and a merger of China’s and Europe’s emissions trading systems, as called for by climate researcher Ottmar Edenhofer, raises fundamental questions about how a market economy system could possibly merge with a state-capitalist instrument without ensuring the necessary transparency and trust.

Playing the Victim

Yes, we should try to intensify cooperation with China in tackling the climate crisis. But China will not export fewer coal power plants simply because we choose not to react if it violates our interests in other areas. We can and must do both: strongly defend our interests vis-à-vis China and lay the foundations for robust cooperation to tackle common problems.

That should also be the maxim in the arena of multilateralism. When accepting the Kissinger Prize at the American Academy in Berlin in January, German Chancellor Angela Merkel warned that “we should not fall into a new bipolarity, but rather try to include a country like China and treat it at least equally, based on our results and experiences with multilateralism.” China Daily widely distributed the video clip of Merkel’s speech on social media. It is easy to understand why the CPC organ was so enthusiastic about Merkel’s statement: it reinforces China’s victim narrative that others are treating the country unfairly in the global arena.

In her statement, Merkel insinuates that China is not involved in multilateralism and is not treated equally. Neither is true. China is a permanent member of the United Nations Security Council and is prominently represented in many UN special organizations with top personnel (no other country had more citizens as heads of UN agencies). Yes, China should have more weight in the IMF, but apart from that it is not treated unequally. Equal treatment doesn’t mean looking the other way but calling China out where necessary like we do with other countries. If China violates human rights, there is no reason not to say so.  Indeed, it tries hard to undermine the universal validity of human rights in UN bodies. And if China systematically violates the spirit of the WTO agreements through state-capitalist practices, then ignoring this doesn’t help multilateralism.

Meanwhile, Beijing has self-confidently established its own multilateral organizations, like the Asian Infrastructure Development Bank (AIIB). Signature initiatives such as the Belt and Road Initiative are essential bilateral dressed up in a multilateral guise by bringing together all participating states at an annual forum in Beijing. During the current coronavirus crisis, China is delivering assistance to countries (also in Europe) with great fanfare. In a call with Italian Prime Minister Guiseppe Conte, Xi Jinping spoke of a “health silk road” China was seeking to build. This again is a purely bilateral initiative seeking to maximize Beijing’s PR gains.

China has so far refused to contribute to genuinely multilateral efforts such as the Coalition for Epidemic Preparedness Innovations (CEPI) that is developing a coronavirus vaccine. Germany, Norway, and the United Kingdom have all generously contributed to this multilateral effort while Beijing (like US President Donald Trump) puts a premium on its own national efforts to develop a vaccine. China does all these things not because it has been excluded by the West, but because it is a status-conscious country, with the Communist Party’s unconditional claim to power as the central organizing principle.

Interdependence by Design

This insight must guide how we shape cooperation with what the European Commission last year in a strategy paper called a “systemic rival.” The current corona pandemic has reminded us of interdependence with China. But it’s crucial to realize that not all interdependencies are alike. With regard to diseases or climate, we deal with interdependence by nature. But the majority of cases are those of interdependence by design. Interdependence with regard to supply chains or technologies are the result of conscious decisions. Only now is it becoming clear to a larger public that we strongly rely on China for the production of active ingredients for medicines or protective gear.

This should give us reason to pause, because major powers like to use interdependence as a means of exerting pressure. The US political scientists Abraham Newman and Henry Farrell call this phenomenon “weaponized interdependence.” Germany and the EU would therefore do well to examine where dependencies and vulnerabilities toward China should be reduced. This is what a sound understanding of economic security demands. This means, for example, that we should not become dependent on Chinese technology for critical infrastructure such as the 5G mobile network. This does not have to be detrimental to cooperation with China in other areas, such as climate protection. Dependencies in sensitive areas only fuel distrust, which does not make cooperation in other sectors any easier.

Cooperation with Beijing on global public goods inevitably takes place against the backdrop of a competition of systems. Policymakers in Germany and Europe should invest in cooperation with Beijing on global public goods. But they should do so without any illusions that this will be easy and without any hesitations to vigorously defend German and European interests against Beijing’s authoritarian state capitalism.

The post Europe and China: Cooperation without Blinkers appeared first on Berlin Policy Journal - Blog.

© REUTERS/Jonathan Ernst

We are conducting this interview on a sad day, January the 31^st. The United Kingdom is departing the European Union tonight. With the EU’s second largest economy gone, where does this leave the EU? The immediate reaction of the EU has been to circle the wagons and to maintain and re-emphasize unity—in the face of the first such event, the first time a country has left the EU, and obviously concerned about potentially hostile relations in a hostile world. So, in the first place the EU has strengthened its unity. The second point is, that Britain’s departure hasn’t made any of the obvious problems within the EU any easier, except that it’s removed one moderately problematic member—but until the Brexit vote happened, not an enormously problematic member, because in some of the most difficult issues the EU faced, Britain wasn’t involved: the eurocrisis, where the UK was neither helpful nor a hindrance. It’s obviously not really involved, or hasn’t been at least since the early 2000s, in relations between the old members and the new members of Central and Eastern Europe or in the relations with Russia. It doesn’t actually even have very much to do with relations with America. But that might change.

So, I don’t think Britain’s departure solves any problems for the EU. Third, there’s a diminution in the perceived international weight of the EU. Because of its history and location, Britain has exceptionally close—exceptional by the standards of other members—relationships with countries around the world. You know, people know Britain pretty well, in Asia, the Americas. There are other member countries with important relations like Spain with Latin America, but I think Britain was exceptional. So, people feel this is an EU they know less well. Germany is less well-known, for example. And they also feel that, I think, if Britain is leaving, something is wrong with the EU. There is a sort of weakening of credibility, which will have to be re-established, and the sense, well, maybe there will be more break-ups.

And finally, I think that Britain’s departure will probably mean a sort of change in the policy culture of the EU itself. I would expect it to become more southern—it must do so—less economically liberal, more continental. And I would expect therefore cumulatively over time the orientation of the EU and the policy choices of the EU will be somewhat different than they would have been if Britain had remained a member. Remember that the single market, as we know it, wouldn’t have happened. It would have been quite different, it’s quite a big deal. I expect the EU to be somewhat more inward-looking, somewhat more defensive, somewhat more regulation-minded.

The ambitions of the European Commission led by Ursula von der Leyen, of course, go a completely different way. Absolutely. And we will have to see if she succeeds.

Von der Leyen promised a “geopolitical commission,” most likely using geo-economic tools. If you look into the EU’s toolbox, is there much to look at? I think the problem the EU has is that it has lost its big alliances, particularly with the United States. The EU is not and—whatever they pretend—will not in the near future be a security player of big weight. That would require a policy revolution, above all in Germany. And we’re not seeing much sign of that at the moment. So, it’s geo-economics. There are two big areas where in theory the EU could play big role. The first is trade. Globalization is a big interest of the EU. It is a very open economy. Actually, it is the most open of the large economies. If you regard the EU as a whole, it’s substantially more open than China or let alone the US. And the other one is climate.

The problem in both cases is that though the EU is big, it’s not big enough on its own to shift the world. And it’s not clear who its allies are going to be. The United States obviously has become highly unilateralist and protectionist. So, that makes a globalization program very difficult. Indeed, the effort is going to be devoted clearly just to managing the bilateral relations with the US. And vis-à-vis China, it is very difficult to know how to make progress with China. It’s a very complicated story. The EU has a lot of interests in common with the US, but the US is not coordinating with it or not very much. Creating a critical mass of willing countries that will make a really big difference to the progress on the trade front will not be impossible, but it will be very, very difficult.

And on climate it’s basically the same story. You’ve got the US out of the picture, which is a big loss, and again China is in a very different place in terms of its development, its ambitions. It may be possible to construct some sort of climate alliance with China, but it’s going to be a tremendously big problem. The EU is in a very different stage of development with very different priorities from China, which is still a very fast-growing, emerging economy. So I think in those big areas, the EU can do interesting things and important things. I don’t underestimate them, but shifting the global dial is going to be very, very difficult.

Do you think the rapid worsening of transatlantic relations can be reversed after President Donald Trump? It obviously will depend, first, on what happens in the presidential elections and the congressional elections later this year. Speaking now, it looks rather likely to me that Mr. Trump will be re-elected. But I think, there’s a second question, which is how much difference it would make if a Democrat won. It would depend rather on who the Democrat was, but I think, the general balance of opinion in the US has shifted in a more inward-looking direction, a more protectionist direction, a more anti-Chinese direction. I think a Democrat will be much friendlier to the Europeans; it would make it much easier to have good international relations, but I think, it will be very difficult to get a Democratic administration to focus on any huge, ambitious global endeavor. I mean, the world in which the Europeans and the Clinton administration completed the Uruguay Round for example, 26 years ago, seems unimaginably distant.

Donald Trump is on tape saying the EU was constructed to “screw up” the United States… And he’s not entirely wrong. This was very clearly not the German view in the 1950s and 1960s, but it was a French view. One of the raisons d’être of the EU and more recently the euro was to challenge American power. The French have a pretty consistent view going back to Charles de Gaulle. They got out of NATO; later they wanted to upgrade the euro as a rival currency. So, the Americans aren’t completely wrong. Nonetheless, the dominant view of the US until the end of the Cold War was that the Europeans were very important allies. There were on the forefront in the global war with Communism. And the stronger Europe was economically and politically, the better. They didn’t take the French threat too seriously for perfectly good reasons.

The end of the Cold War changed everything. The first period, the 1990s , were “the holiday from history.” Everything was fine, the world was perfect. Then you got into the post-9/11 period and you got into a really big split between America and Europe over the Iraq war, and it’s an important split. The Europeans were right, but that doesn’t make the Americans like them better, and there was a split within Europe, because the British went their own way, which was itself, I think, a revealing fact.

But at that point, Europe began to just look less important. It’s no longer the front, because there is no front there anymore. Russia has gone away, that’s what we felt, and we are now interested in the Middle East and the pivot to Asia, which came later. What’s Europe got to do with that? Nothing. It’s a nuisance in the Middle East and as far as Asia is concerned, it’s irrelevant. So, the Americans increasingly became a mixture of hostile and indifferent, more indifferent than hostile, but there was some real hostility.

Then in the post-financial crisis period, there’s been the long period of economic crisis in Europe, at least it was seen as a crisis. I talked to a lot of American policy makers: Was Europe a help? No, it was a nuisance. There was a tremendous worry that Europe would create the next stage of the financial crisis and then, finally, we get to the Trump era. Now, Putin is a bit more of a threat, but he’s not seen as a threat like the Soviet Union by most Americans. Trump likes him, whereas Europe is not seen as central to America’s concerns and is seen—on the right—as moralistic and unhelpful.

There are still some Americans in the center-left who admire Europe, admire Europe’s civic culture, they admire the social democratic systems and values. Probably, if you talked to Elizabeth Warren, she would say actually Europe is the way we should do things. I don’t underestimate that, but I think basically Europe simply doesn’t play the same role in America’s interests. And then you get this very Trumpian, protectionist view: Europe is running a big trade surplus with us, so it’s hostile. Europe depends on our defense umbrella and it’s not paying enough for it, so we’re providing them with a valuable thing for free, so they’re freeloaders and then they moralize at us all the time and tell us how bad we are.

So I think for Trump, given his protectionist views on climate change, his very transactional view of international relations, Europe is really, really irritating. And then it’s stuffed full of liberal democracies and he doesn’t much like liberal democracies. So, for him to be lectured by the German chancellor about how to behave as a decent democrat is, I think, pretty well unbearable. And the fact that I agree with Angela Merkel doesn’t make it any better.

Is there any chance of the EU achieving the French aim of strategic autonomy? Well, it would be possible for Europe to achieve a fair degree of strategic autonomy. It is very big, 450 million people. It is still the second largest economy after the US, depending on how you measure it. It has clear economic weaknesses, it is slow-growing, very slow-growing, it is aging, it is not doing as well in the frontier technologies with America and China, but still it is a big power.

But the real question is whether it can develop a collective will and purpose to achieve that. Does it really want strategic autonomy? Does it want to exert power in the world with its economic wealth and weight? There two pretty big obstacles to doing this. One is Germany. What is it that Germany wants? My strong impression is that Germany remains emotionally very committed to not being a great power, which is the post-war situation. Second, Europe remains a mosaic of very different countries and cultures with very different attitudes. Can you create a genuine, coherent whole out of it? Otherwise, if you cannot do it, you need much more political integration. Much more!

So, I do not think it is likely to be. The French ambition, which is basically the French idea, when they say, “Europe must have strategic autonomy,” they mean, “You must do exactly what France wants and put everything behind France.” Well, that is not how it is going to work. I have to say, in these matters France is actually closer to Britain than it is to Germany and Germany is a very different, for very obvious reasons.

Would a US-China confrontation reverse the trend of deteriorating transatlantic relations? This is a really important question. Trump is very peculiar in that he is so unilateralist and so indifferent to a lot of alliances. Another president may also be concerned with balancing China while having very substantial interests and views in common with Europe. I have talked to German businesses in China: they have very similar concerns to those of the Americans.

So in economics it is perfectly possible to imagine an alliance of Europe and America, and Japan as well, confronting China. But of course in a geopolitical and geostrategic confrontation with China, Europe is not going to be relevant. It does not have relevant forces outside economics, to bring to bear in this. Europe is no longer a strategic front, which is a very good thing. Who wants to be the strategic front? It was not much fun when the Soviet army were here [in Berlin].

By the way, there is another possibility, which is relevant to this: Europe has the potential to extend its economic influence by forging very close relationships with what used to be the Trans-Pacific Partnership (TPP) and is now minus America. At some point I think the US will go back in. So, an alliance of liberal-market democracies on the economic side is conceivable and China could break that. That could yet be an important strategic opportunity.

So, if the Americans are moderately intelligent, you could imagine a world, five to ten years from now, in which you have China and probably Russia on the one side and a Western-led alliance of liberal democracies on the other. And Europe would be an important part of that. That would involve a pretty big shift in American thinking at the moment, but I could imagine that happening.

The interview was conducted by Henning Hoff. Assistance: John-William Boer and David Schmitt. Martin Wolf was speaking at the “After Populism” conference organized by the German Council on Foreign Relations (DGAP).

The post “The EU Is Not Big Enough to Shift the World” appeared first on Berlin Policy Journal - Blog.

(c) MERICS

The Shifting Context of China Policy

While China’s long-established relations with Western states and markets remain indispensable, the country is trying to find ways around Western influence and is strengthening its relations with non-Western powers. This includes major challengers of the West, such as Russia, along with smaller marginalized countries, such as Venezuela or Zimbabwe. China is also no longer willing to limit itself to Western-dominated international institutions. It is therefore currently building a broad range of parallel alternative mechanisms that bypass the US-led, post-Cold War order. In the Asia-Pacific region, the long-downplayed great power rivalry between China and the US is a blunt fact today, encroaching on all regional interactions.

Domestically, China’s political leadership is taking a much tougher approach, not just against internal corruption and dissent, but also against long-established forms of civil society cooperation with foreign organizations. A number of non-governmental communication channels with China that had worked without interruption for decades – including Western NGOs and foundations – currently find themselves under suspicion of belonging to “hostile foreign forces” working toward undermining Communist Party rule.

On the economic front, Chinese growth is markedly slowing, and major sectors such as property, construction, finance, and manufacturing appear increasingly fragile. Overcapacities and cut-throat price competition are making China’s business environment much more difficult. In addition, an aggressive national industrial policy that aims at protecting strategic industries and promoting national champions has built up novel pressures on foreign investors who had once benefited handsomely from their market presence, or even sectoral dominance, in China. Without a doubt, China’s economy has entered a new stage of development. Lower long-term growth rates and painful restructuring are likely to render trade and investment relations less lucrative in many branches of the economy. Yet due to both its huge size and its continuing above-average growth, the Chinese market will remain irreplaceable for foreign businesses in the foreseeable future.

All this poses a fundamental gravitational dilemma for diplomatic and economic relations with China: Even as diplomats and firms see growing risks and seek to diversify their activities away from China, they will not be able to detach themselves from it.

Berlin’s Catalytic Role in EU-China Affairs

Germany’s China policy will need to develop a creative response to this gravitational dilemma. It must adapt to the shifting conditions in China’s development and critically assess traditional goals and priorities.

Germany’s central objectives in dealing with Beijing have traditionally consisted in: supporting China’s integration into the structure of established international institutions and organizations shaped by the West; promoting domestic economic and political liberalization by engaging China in intense business and diplomatic exchanges; and securing the economic interests of Germany as a global trading power in the Chinese market, particularly by taking a stand for open market access and effective protection of intellectual property.

All three goals are being challenged in the current shifting geopolitical and geoeconomic environment.

First, through the establishment of novel China-sponsored international organizations and funding schemes, China is attempting to create governance alternatives to traditional Western-dominated institutions and to reshape global patterns of interaction, especially on the South-South axis.

Second, neither rapid economic-technological development nor intensive transnational and bilateral exchanges with the West have fostered domestic liberalization within China to the expected degree. On the contrary, we are currently witnessing a hardening of China’s foreign and domestic policy stances.

Third, China policy will need to change alongside the shifting fundamentals of economic relations. Key challenges include increased competition from Chinese companies (within China and globally), a risky overdependence of major German industries (cars, machinery) on the Chinese market, a potential loss of traditional advantages in major industrial technologies (mid-tech machinery as well as energy and environmental technologies), and novel patterns of Chinese outbound investments and Chinese business within Europe itself.

These challenges are serious. They do not, however, necessitate a sweeping negation of traditional goals and principles, but rather an adjustment of expectations and policies. German China policy must hold onto overarching principles such as human rights, the rule of law, open markets, and environmental sustainability. However, every inch of progress down this road will be much more difficult than previously assumed and slowed by recurrent setbacks. Expectations must be adjusted accordingly.

More importantly, Germany and Europe should have a clear understanding of their limited capabilities: The traditional, rather self-absorbed ambition to transform China into a European-style democracy through outside advice is unrealistic and should be banished from the policy agenda. China’s political modernization will be brought about by Chinese themselves. It will be based on trajectories and institutions that diverge profoundly from Western historical experience. Neither Americans nor Europeans will be able to provide magic recipes paving the way for democracy in China.

EU China Policies Remain Uncoordinated

With a view to the severe limitations of European China policy, German foreign policymaking needs a sobering reality check. With the notable exception of trade relations, chances for effective coordination of the EU’s China policies are extremely slim. Despite the issuance of numerous EU strategy documents, all previous attempts to develop a joint and comprehensive European approach toward China have resulted in repetitive declarations of intent and poorly coordinated dialogue mechanisms.

Such weakly coordinated and haphazard interactions with China are not just a feature of EU-level China policy. Weak capacities and recurrent disruptions of the foreign policy set-up also constrain the China policies of many individual EU member states, which lack either the standing or the resources to pursue their interests and priorities vis-à-vis China in a consistent manner.

In order to avoid across-the-board stagnation of European China policy, Germany must act as a catalyst on substantive issues. Berlin has both the standing with Beijing as well as the capacity and continuity within its national foreign policy community, to take the initiative and make consistent efforts to expand diplomatic, legal, and social interactions with China beyond trade and technology cooperation. As soon as Brussels gains the capacity to devise viable coordinated China policies, Germany’s bilateral initiatives can be integrated into EU mechanisms. For the time being, however, Berlin is the only European government that can work to keep channels of communication with Beijing open in the most contentious areas of China policy, such as market access, industrial espionage, the Law of the Sea treaty, or modernization of China’s legal system.

Identifying New Areas for Cooperation

There is both great potential and great necessity for new formats of political, economic, financial, and technological cooperation. As China’s economy and society keep developing, Chinese demand for German expertise has increased, especially in the areas of sustainable urbanization, spatial planning, water management, health services, medical technology, and the management of welfare organizations.

On the global level, none of the great challenges of the 21st century – from international and transnational security threats, obstructions to free trade, financial market regulation, or the establishment of a cyber regime – can be effectively addressed without a place for China at the table.

China’s new regional cooperation schemes, especially in Central Asia, require careful examination by European decision makers. Europe could benefit considerably from the establishment of new Eurasian transportation corridors and the economic mobilization of Central Asian societies. Germany should cautiously support China’s endeavors in Central Asia on a project-by-project trial basis by bringing those German and European infrastructure and energy programs into play that have been pursued with limited results during the past two decades but which may now be reinvigorated through joint projects with China.

Germany should also consider becoming involved – albeit cautiously – in individual parallel structures China is currently building and mirror the functions of traditional frameworks such as the Bretton Woods institutions (World Bank, IMF). For instance, German diplomats should consider taking an active part in the newly established Asian Infrastructure Investment Bank (AIIB), in spite of American diplomatic efforts to keep allies such as Australia, South Korea, and Germany away from the Chinese initiative. AIIB responds to massive investment needs in large parts of Asia that have been only partially addressed so far by the World Bank or the Asian Development Bank, and it may open up new diplomatic and business channels in the supported countries.

Building Up Constructive Leverage

In economic relations – which may become a lot more competitive in the future due to intensifying competition and aggressive industrial policies on the Chinese side – Germany urgently needs to build its leverage vis-à-vis China. On the European level, the ongoing negotiations over a bilateral investment agreement with China, as well as China’s wish to establish a full-scale Sino-European free trade zone in the longer term, offer Europe new opportunities to negotiate with China on equal footing.

Negotiations over the EU-China bilateral investment agreement provide a major opportunity for Brussels and Berlin to push for thorough improvements regarding market access, non-discrimination of foreign companies, competitive public procurement, and the protection of intellectual property rights. At the very least, European policymakers must insist on the consistent implementation of all WTO rules in China, including those on public procurement China has yet to acknowledge. As to central conflict-prone trade relations issues such as market access and equal treatment, European and German trade diplomacy must not make concessions but rather push for Chinese commitments in a determined manner.

To reduce the dilemma of overdependence posed by the immense pull of China’s market, German diplomacy and business must work more actively to diversify their political and economic initiatives away from China and toward India and other emerging economies. If only a handful of prospering Special Economic Zones could be established in India with the help of Western investment and know-how, the promotion of economic counterweights against one-sided gravitation toward China would become much more credible.

For cultivating a fallback position in the case of open conflict with China over diplomatic or security issues, Berlin would be well advised to strengthen the existing, sporadically-used communication channels between American and German diplomats and researchers who work on China affairs. If open disruptions occur in interactions with China, transatlantic coordination will be an indispensable back-up for a stronger joint position vis-à-vis China. At the same time, Germany and Europe must avoid being dragged into the intensifying great power rivalries between China and the US that obstruct a core European interest: keeping the Asia-Pacific as open as possible for multilateral engagement.

Engaging China Through Niche Diplomacy

Ambitious strategy papers that rest on lofty goals, linear assumptions, and static instruments are not conducive to making foreign policy in the volatile international context of the 21st century. Instead, especially when dealing with the rapidly shifting international role of China, contemporary foreign policy must be versatile in its instruments, yet persistent in its priorities, to maneuver in a profoundly unpredictable environment.

In recent decades, Germany’s foreign policy approach toward East Asia has met this requirement by focusing on niches within markets and between competing powers in the Asia-Pacific. German diplomacy and business have continuously worked to identify specific areas of feasible cooperation so as to keep exchanges with China open in as many niches as possible.

This niche diplomacy results from decades of diplomatic and business practice, not from a publicly formulated or coherently pursued strategy. Though several official papers on Asia policy have been issued by German government bodies since the 1990s, the practical implementation of policy remained incremental and cautious, yet nevertheless remarkably agile. Niche diplomacy sets its sights on limited areas of cooperation one by one, rather than submitting all policy fields to one grand strategy. This down-to-earth approach to China policy must not be written off as mere opportunism. Rather, it is a means of creating space for cooperation that would remain closed if pursued with more aggressive tactics. Niche policies have been a pertinent approach to working with China on the nuts and bolts of economic cooperation while also addressing controversial issues such as legal and judicial exchanges that contributed, for example, to major (yet inadequately implemented) reforms in China’s criminal procedure laws.

One crucial aspect of niche diplomacy concerns the question of linkage politics. In contrast to what the German public might expect, foreign policy will benefit in many areas over the long term if successful cooperation in one specific niche is not taken hostage by other niches. Thus, even if there may be occasional public calls to link trade with human rights or tie investment to environmental standards, successful niche policy will need to make sure that conflicts or even collapses in one niche do not damage or undo activities in other fields of cooperation. Niche policy can thus cultivate a framework of selective cooperation that is compatible with Germany’s capacities and priorities.

The feasibility of niche diplomacy vis-à-vis China rests on the foundation that industrial and technological cooperation with Germany has proven highly useful in the eyes of Chinese policymakers. This very foundation may be gone as soon as Germany loses its competitive edge in helping China’s industrial ambitions. So far, however, niche policy has opened up many channels in bilateral relations that go beyond trade and investment and today include administrative, legal, environmental, and cultural and educational exchanges. Silently, Germany has also been able to avoid being drawn into intensifying Sino-American rivalries. At the moment German China policy is moving to open up new important niches with many potential bilateral benefits, such as exchanges on fiscal policy or social insurance management. Thus, niche diplomacy continues to provide policymakers with the room to maneuver even through a turbulent international environment while reducing the risks and the costs in broadening exchanges with China.

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