© 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.

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© 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.

The COVID-19 pandemic has accelerated many of the trends and dynamics underlying recent geopolitical shifts, a new poll conducted by Koerber Stiftung for a special edition of The Berlin Pulse has found. In fact, from a German point of view, the coronavirus crisis has deepened major cracks in each of the three pillars that have underpinned Berlin’s foreign policy almost since World War II: European integration, the transatlantic alliance, and the export-driven economic model.

Each pillar depends on a rules-based order that is increasingly under threat. Recognizing this, Germany has gone to great lengths to promote a renewed commitment to international cooperation: from new initiatives in the UN Security Council, where the country took up its seat as a non-permanent member in January 2019, to the launch of the Alliance for Multilateralism, Berlin has placed multilateralism front and center of its agenda.

But how are these challenges, and the purported solutions, viewed by the German public, particularly in the context of the pandemic?

First off, Germans continue to feel rather comfortable in a deeply interconnected world. A majority of them believe that globalization has benefited their country (59 percent) and them personally (52 percent, compared to 47 and 49 percent, respectively, in the United States, as data gathered by the Pew Research Center shows). In a similar vein, Germans remain staunch supporters of international cooperation: 89 percent favor cooperating with other countries to solve global challenges (there’s been a slight decrease from 96 percent in 2019). When it comes to international challenges, clearly Germans do not like to go it alone.

However, there are limits to the support for global interconnectedness: a strong majority of 85 percent would like to see the production of essential goods and critical infrastructure like 5G technology returned to German soil, even at the risk of higher costs.

So how do these preferences relate to their views on European integration, the transatlantic partnership, and relations with China?

Conflicted on Brussels, Disillusioned with Washington

On Europe, Germans appear rather conflicted: A plurality of 38 percent say that their view of the EU has deteriorated amid the COVID-19 crisis, compared to 33 percent whose view has improved. While nearly three quarters agree that, given its status as a relatively wealthy country, Germany should contribute more than other countries toward solving global problems, it is not clear how this would pan out in Europe: a majority of 59 percent comes down against so-called “coronabonds”, among the most controversial topics over recent weeks.

Support for European integration becomes less ambiguous where tangible benefits are at stake: for instance, an emphatic majority of 85 percent favors a return to the Schengen Agreement, with no border checks among participating states, once the virus is defeated.

German attitudes toward the transatlantic relationship have taken a significant dive. While skepticism predates the pandemic, the Trump administration’s response to the pandemic has clearly accelerated a feeling of estrangement on the German side: 73 percent of Germans say that their opinion of the United States has deteriorated—more than double the number of respondents who feel the same way toward China. And despite the close security cooperation between Washington and Berlin, merely 10 percent of Germans consider the US their closest partner in foreign policy, compared to 19 percent in September 2019.

US out, China in?

The trend of transatlantic estrangement is further underlined by the fact that the number of Germans who prioritize close relations with Washington over close relations with Beijing has decreased significantly, from 50 percent in September 2019 to the current number of 37 percent, almost equal to the number of those who see it the other way around (36 percent).

So out with the US, in with China? Not quite: Yes, the fact that the public is leaning toward a position of equidistance between Washington and Beijing should worry policy-makers. However, this is not to say that Germans are uncritical toward the People’s Republic. Over 70 percent believe that the Chinese government could have mitigated the pandemic by being more transparent in its handling of the coronavirus outbreak. Neither do Chinese propaganda efforts appear to resonate with many Germans. In contrast to Serbian President Aleksandar Vučić, who in March declared that, given a lack of European solidarity, he was putting all his trust in Beijing, 87 percent of Germans believe that the EU is contributing more to the fight against the pandemic than China.

Negative Effects

So, what does all of this mean for the future of German foreign policy? The benefits of EU membership remain popular. However, the results suggest that the pandemic’s net effect on the EU’s image among Germans is negative. Looking west, the Atlantic seems wider than ever. Data from previous surveys suggest that German perceptions of the US closely correlate with their perceptions of the incumbent president and may thus change again. However, the growing gap between public opinion and official German foreign policy provides openings some parties are willing to try and exploit. Some in Germany’s center-left Social Democrats (SPD), Chancellor Angela Merkel’s coalition partner, recently advocated the removal of US nuclear weapons stored on German soil in the context of the NATO’s nuclear sharing scheme—a policy that is essential to Germany’s role within the alliance. This may just be a taster of similar debates coming up.

And China? A number of German policymakers have repeatedly warned that, wherever democratic states retreat from the international stage, authoritarian states will be quick to fill the gaps. In terms of public opinion, China appears to be on the cusp of filling the vacuum resulting from the waning of US popularity. As experts and politicians alike predict that Germany eventually will be forced to pick a side, Beijing’s growing popularity will undoubtedly complicate such a decision.

As the coronavirus pandemic underlines the urgent need for international cooperation, multilateralism appears to be faltering in both spirit and practice. Germans for one remain staunch optimists about the future of international collaboration, however, with 42 percent believing that the pandemic will lead to an increase in international cooperation. They may be in for a rude awakening.

The post Keeping an Equidistance appeared first on Berlin Policy Journal - Blog.

© China Daily via REUTERS

The coronavirus has caused a global health crisis that risks fueling a pandemic of authoritarianism, nationalism, economic autarky, and malign foreign influence of the kind that the United States and its European allies constructed alliances and institutions to guard against after 1945. This is a time for democracies across the Atlantic to help and support each other, but also to rally around protecting the free and open international order from authoritarian assault.

By virtue of their open societies, Western nations are more vulnerable to this pandemic; their governments are more limited in their ability to control citizens’ behavior than the dictatorships in China and Russia, which are not subject to the same legal constraints. At the same time, both the Chinese Communist Party and the Kremlin view the crisis now mostly playing out in the West as a strategic opportunity to extend their influence at the democracies’ expense. Meanwhile, strongmen are using the cover of the crisis to consolidate power in ways that threaten the democratic integrity of the European Union.

Four Threats to Democratic Systems

Both the US and Europe will emerge from the fog of the immediate crisis and face a new world order profoundly reshaped by COVID-19. Western democracies will grapple with a new balance between the state and the economy, new powers in the hands of governments to surveil their populations in order to manage public health, new pressures on established political parties from nationalists and autarkists on the left and the right, intensified migration pressures from nations in the Middle East and Africa unable to handle the epidemic, new forms of malign foreign influence associated with leveraged Chinese and Russian forms of health assistance, and revolutionary demands from citizens for health and welfare safety nets following the extraordinary insecurities produced the pandemic.

In this new world order, questions of democracy and governance will be more, rather than less, relevant as governmental and societal responses to the crisis expose fissures and vulnerabilities within democracies. Throughout Europe, we already see these cleavages being exploited by China and Russia. At the same time, competing narratives of unity in the face of the crisis—ranging from those who advocate a more robust response capacity at the EU level to those who emphasize national unity, sometimes with a decidedly anti-EU cast—will shape transatlantic politics for years to come. So, too, will the consequences of emergency measures and societal controls and various forms of state-driven surveillance and enforcement introduced in response to the pandemic.

Those who believe in the ultimate strength of democratic forms of government to deliver best for the people that they serve—in particular Europeans and Americans—must begin now to prepare and act to win the battle for the post-crisis narrative. Even in the midst of the crisis, at least four potential post-COVID-19 threats to the democratic systems that the US and Europe have worked so hard to build since the end of World War II are becoming evident. It is incumbent on those who believe that a strong transatlantic response to these challenges is necessary in the wake of the crisis to begin to plan now for how we will address them, together.

Freedom Takes a Back Seat

In the short term, of course, the virus is putting enormous strain on freedom of movement as most European nations have effectively closed their borders, thereby reversing one of the founding tenets of European integration: the free movement of people. At the same time, some leaders are using the opportunity presented by the pandemic to centralize control and weaken institutions that countervail executive power. In Hungary, parliament has passed State of Danger legislation allowing Prime Minister Viktor Orbán to rule by emergency decree. In both Serbia and Turkey, the governments have used the crisis to crack down even harder on the press and the capability of the opposition to function.

In the short term, democratic political and civil society leaders need to step in wherever necessary to stem moves to sidestep democratic processes, as illiberal politicians try to take advantage of the crisis to move their own political agenda forward. More broadly, in the aftermath of the crisis, democratic political leaders will need to address questions regarding how well democracies responded.

It is thus critically important that Europeans and Americans prepare for this eventuality by marshalling the resources to strengthen democratic institutions. European nation-states and the EU itself have an extensive infrastructure of such organizations at their disposal. So, too, does the US. Working together, we can effectively demonstrate what will be the real lesson of this crisis: that citizen-centered government that both communicates with and responds to the needs of the people it serves is best positioned to act effectively to meet the challenge—including supporting health and economic recovery over the long term. With a united response, we can help to build and rebuild trust between government and citizens, assist political leaders to respond in crisis situations, and amplify local, citizen-led responses.

The Temptation of Autarky

As the state takes more control over the economy in various countries in the transatlantic community, we must plan for calls for “industrial self-sufficiency” to grow louder in mainstream politics.

Few countries will want their pharmaceutical and broader medical supply chains dependent on China or other foreign countries. The question is whether this will simply be a readjustment to globalization, or whether there will be politically viable calls for each country to have its own production capacity for major products, in which case we risk reverting to a 1930s-like wave of introversion within European nations and in the US. Here, too, we risk losing a major accomplishment of the post-World War II era in Europe: the free movement of goods and services.

In fact, it is the private medical sector in the US and Europe that is most likely to come up with a vaccine for coronavirus. It is private markets on both sides of the Atlantic, not lumbering government bureaucracies, that will devise innovative health solutions to serve citizens who may expect too much from overextended governments. No amount of government spending will be capable of restoring nations to economic health should their large and small enterprises fail to lead their economies out of recession by re-hiring workers and restoring production and services. Furthermore, no nation will innovate its way out of this crisis on its own; institutionalized and multilateral forms of collaboration will be central to devising solutions to the pandemic’s fallout across so many national boundaries. Pulling up economic and political drawbridges would also only cede strategic space to Chinese and Russian efforts to build out new spheres of influence, including in eastern and southeastern Europe.

An Intergenerational Struggle?

It is now well-established that COVID-19 affects people very differently according to their age: while the elderly are especially vulnerable to succumbing not only to the virus but also to existing underlying conditions, younger people seem to have a much higher survival rate. This is a spectacular intergenerational change of fortunes in places like the south of Europe, where millennials and generation Z are the ones who have been the most socially and economically vulnerable recently—particularly in places like Italy or Spain. Now, it is the older members of society that are existentially vulnerable—and it is their turn to feel threatened by younger citizens’ visible unwillingness to change their lifestyles. This could have lasting consequences on intergenerational relations in the future and could lead to political tensions.

Additionally, data from studies we conducted in Europe indicate that the younger generations—even in advanced democracies—are much less prone to believe that democracy is the best possible form of government. Historical amnesia may be partly to blame—they don’t remember the police states that terrorized citizens behind the Iron Curtain, or the fight against fascism that occupied what Americans call the Greatest Generation. It is clear that we need a forward-looking transatlantic response to the concerns of younger generations that will have been shaped by the pressures of both the 2008 financial crisis and the coronavirus pandemic. This is a wholly different frame of reference than that of those who fought the Cold War and saw 1989 as a crowning achievement, and it will require both different forms of communication and engagement to ensure their commitment to the democratic process.

Propaganda Targets

As if the acute domestic pressures on democratic systems were not enough of a challenge, in the post-COVID-19 era, the transatlantic community will also have to contend with aggressive attempts by malign authoritarian powers to turn the crisis to their advantage.

In this regard, Europe’s southern peninsulas are the most economically vulnerable on the continent, and they are also the ones that are so far hardest hit by the virus. High levels of social contact in public spaces have contributed to the rapid spread of the virus in places like Italy and Spain, and since the confinement began, many citizens have expressed the opinion that they were left to fend for themselves by their purported friends and allies in the EU and the US—even though Western assistance to allied nations has in fact been higher (and of higher quality) than far-better-publicized Chinese and Russian forms of sometimes questionable medical support.

Chinese and Russian propagandists have picked up on this trend and launched operations to bolster their image at the expense of European governments. Chinese Communist Party propaganda is aggressively attempting to confuse people about the origins of the virus (contending that the US or even Italy were the source of the contagion), and is attempting to curry favor by sending masks and medical equipment to Italy, Serbia, and other places. Local politicians in these countries have praised the Chinese Communist Party for its generosity, and in Serbia, President Aleksandar Vucic said it most plainly on Serbian television: “European solidarity doesn’t exist—that was a fairy tale on paper,” contending that the Chinese “are the only ones who can save us.” Russia, for its part, has dispatched military medics and equipment to Italy and Greece to deal with the crisis—all while ignoring cases at home. The subtext of these efforts is that “we are all in this together,” so there’s no value any longer in continuing the EU’s sanctions on the Kremlin for its aggression in Ukraine.

In the propaganda narratives from Beijing and Moscow, there is also an obvious glorification of their respective regimes at the expense of democracies. In China, the focus is on the heroics of President Xi Jinping and the CCP, which they claim are doing what is needed to stop the spread of the virus, unlike ineffectual democracies—even though it was China’s authoritarian suppression of medical and media reporting on the virus at its inception, including the punishment of local officials who sought to sound the alarm, that helped turn COVID-19 into a global pandemic. Meanwhile, the Kremlin initially behaved as if COVID-19 had not reached the country at all and even sent scarce medical equipment abroad as part of its propaganda push. Indeed, the Kremlin seems to have devoted more resources to information warfare against the West than to protecting Russian citizens who will inevitably suffer from the pandemic.

It now seems that the tide of the narrative here may beginning to turn, as more and more stories of inter-European and US assistance efforts come to light. Similarly, it is increasingly clear that “assistance” from the CCP comes at a high price, as Chinese diplomats leverage assistance for political and economic concessions. Nonetheless, Chinese and Russian sharp-power influence in Europe was a significant and growing issue before the COVID-19 crisis broke, and there is every reason to assume it will continue afterward.

The Path Ahead

Europeans and Americans should understand clearly that both Beijing and Moscow define a strategic interest in weakening the cohesion of the Atlantic alliance in order to enhance Chinese and Russian influence in Europe at American expense. The Kremlin also defines an interest in weakening European unity, including by supporting political extremists, in various European countries in order to build out a Russian sphere of influence in the east at Brussels’ expense. Meanwhile, the Atlantic allies’ uneven and belated responses to the pandemic risk discrediting democratic systems in the eyes of fearful publics.

To meet these challenges, the transatlantic democracies must position themselves to shape the post-pandemic order. First, they must ensure that temporary measures limiting basic freedoms put in place to limit the spread of the virus remain just that: temporary. Emergency powers exercised by governments to beat back the pandemic by surveilling and controlling their citizens cannot become the norm. When the crisis is over, we are convinced that democracy will once again have proven itself vis-à-vis its authoritarian detractors to be the most effective—and certainly the most transparent and accountable—form of government in meeting the needs of the people. We must remain vigilant to push back against backsliding that undermines this basic truth: that sovereignty rests with the people and not a permanent class of political elites unwilling to yield power.

Second, democratic governments must resist the temptation to disengage their economies from one another, pursuing the fantasy that each one of them can build (or rebuild) an infrastructure making it fully self-sufficient. Economic globalization has helped produce a broadly middle-class world for the first time in human history. While countries will be more prudential about supply-chain security in the post-pandemic international economy, rebuilding prosperity will be impossible without an open international trade and investment regime. Europe and the US could even consider an economic version of NATO to protect intellectual property, consolidate free-world supply chains and innovation networks, and encourage a qualitatively superior form of market access than that accorded to imperialistic authoritarian powers outside the West.

Third, political parties, government leaders, and civil-society organizations must redouble their efforts to ensure engagement across generations in the political process to help minimize tensions between them driven by the different experiences they have suffered in the various crises that have buffeted the transatlantic space since 2008. The challenge for political parties will be giving young people a greater voice in politics so they do not become alienated and radicalized by disruptive economic conditions.

Fourth, democracies in Europe and America must further develop their capacities to push back against the malign forms of foreign authoritarian influence that risk undermining democratic institutions—and democratic unity among allies—in the West. This includes protecting their citizens from Russian and Chinese misinformation as well as piercing the information bubble that denies Russian and Chinese citizens objective news reporting and leads them to believe their governments’ self-serving and deeply anti-Western propaganda.

German Chancellor Angela Merkel, in her first national address on the pandemic, noted that the COVID-19 crisis presents the greatest challenge Germany has faced since the end of World War II. With old and new democracies working together, Europe and the United States overcame that challenge and built the most prosperous and free community of nations in the history of humanity.

Even as former enemies were able to put their immediate pasts behind them to rebuild Europe, today’s transatlantic democracies must do the same. Crises have a way of focusing the mind on what matters most. And what will matter most after the COVID-19 health crisis has passed is protecting the political liberties and democratic institutions that enable free nations to work together to serve their citizens, uphold their common security, and rebuild their prosperity.

Just as coronavirus presents a mortal threat to public health, so the aggressive authoritarianism of revanchist great powers presents a mortal threat to American and European leadership in the world. Building political resiliency to protect and sustain democracy through the pandemic will be as important as developing the medical antibodies against COVID-19 and restoring public health—and public trust in government—across the West and the world.

The post Protecting Democracy 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.

Source: Bureau of Economic Analysis; foreign affiliate sales: estimates for 2018; total trade: data for goods and services 2018

The novel coronavirus COVID-19 is currently wreaking havoc on the world economy. Disrupted supply chains are forcing companies to throttle back production. As China was the epicenter of the crisis, headlines thus far have focused on how German and European companies have had to adjust because they are so reliant on deliveries or component production in China.

These stories seem to have reinforced a fairly widespread—yet false—view that China has become Europe’s top commercial partner. Spending time in Germany this year I have been struck by repeated assertions by German government representatives that this is so. Those making such statements usually point to sizable bilateral trade in goods.

There is no doubt that commercial ties with China have become more significant for Germany and Europe. But that does not mean that China is the country most important to the health of the German or European economies.

Reducing complex commercial ties to one metric—trade in goods—ignores the commercial importance of investment links, services, digital connections, innovation ties, and foreign sources of “on-shored” jobs for the European economies. On each of these other metrics, the ties that bind Germany and Europe to the United States are much thicker and far deeper than those with China.

These additional arteries are literally the lifeblood of the transatlantic economy. If COVID-19 chills these connections, the ripple effects on the German and European economies are likely to be far worse than what we have seen thus far from China. On the other hand, if the United States and its European partners are able to avoid additional commercial tensions and actually sustain their deep commercial bonds during this crisis, the overall impact of a COVID-19-induced recession is likely to be much lower.

Half Right, All Wrong

US exports of goods to the EU totaled $337 billion in 2019, up 6 percent from 2018 and more than three times larger than US goods exports to China ($107 billion in 2019). US imports of goods from the EU were even larger, $515 billion in 2019. 2019 figures for trade with China are not yet available, but in 2018 the EU exported €351.2 billion in goods to the US and €210 billion to China. The EU imported €213.4 billion in goods from the US and €395 billion from China. That means that total EU-China trade in goods of €605 billion was roughly €40 billion more than EU-US trade in goods.

Keying in on this single metric, on March 6 Germany’s statistics office, the Statistisches Bundesamt, issued a bald statement that “China was Germany’s largest trading partner in 2019 for the fourth year running.” I have heard many government and industry representatives parrot the same line. Strangely, the professional number-counters only count trade in goods. They omit trade in services—the fastest growing segment of the global economy. In short, Germany’s official statisticians get it only half right, and therefore all wrong. Apparently, one of the best kept secrets in Berlin is how German and European firms actually operate.

The Trade Flows You Can’t See

In 2017, the last year of available data, the EU exported €236 billion in services to the US and €42.6 billion to China. It imported €223 billion from the US and imported €30.2 billion from China. So, in sum, EU services trade with the US was €469 billion compared with only €72.8 billion with China.

Here’s the reality: the US and Europe are the largest services economies in the world. They are each other’s largest services market, and dense transatlantic services linkages mean that the transatlantic services economy is the geo-economic base for the global competitiveness of US and European services companies. Europe accounted for 38 percent of total US services exports and for 42 percent of total US services imports in 2018.

In short, if you put trade in goods and services together, then it is clear that the largest trading partner for Germany and the EU overall is actually the United States. And it has been thus for decades.

And this is just the beginning of the story. Most German and European companies actually prefer to deliver services via their investment ties rather than through exports. Allianz of America provides insurance, DHL Holdings offers courier services, and SAP Americas delivers software services across the United States. Volkswagen, Daimler, and BMW all supplement their US-based manufacturing operations with a range of customer services. In 2018, sales of services by European companies based in the US amounted to $585 billion, more than double European services exports to the US in the same year. Similarly, sales of services by US companies based in Europe of $882 billion were 2.5 times larger than US services exports to Europe. And all of this dwarf the sales that American and European companies are able to make in China, due in part to the many restrictions the Chinese impose on Western companies.

Why Export When You Can Invest?

These numbers highlight an additional reality: trade itself is a misleading benchmark of international commerce. The real backbone of Germany’s international economic standing is investment, not trade. And here again, America is the preferred destination. The US accounted for 62 percent of Europe’s non-European assets around the world in 2018. The total European stock in the US of $3.0 trillion was four times the level of comparable investment from Asia. Germany’s total FDI stock in the US totaled $324 billion in 2018, and German investment flows to the US grew 54 percent in the first three quarters of 2019. China plays a marginal role in comparison.

Europe’s role vis-à-vis the United States is very similar. Europe accounted for about 60 percent ($18 trillion) of total US global assets in 2018. This is more than four times the amount of comparable US investment in the entire Asia-Pacific region. Moreover, Europe’s share of total US FDI is going up, not down—57.5 percent over the past decade. And when US FDI flows to Caribbean offshore financial centers are subtracted from the total, Europe’s share climbs even higher, to almost two-thirds of US direct investment flows.

An inordinate fixation on trade ignores the reality that most German and European companies prefer to deliver goods and services by investing in other countries in order to be close to their customers, rather than sending items across the ocean. Sales by European companies based in the US in 2018, for instance, were more than triple European exports to the United States. Sales by US companies based in Europe, in turn, were roughly one quarter larger than the comparable US sales throughout the entire Asian region. Ford, GE, Amazon, IBM, Hewlett-Packard, 3M, Caterpillar, Goodyear, Honeywell—American companies have a long-established presence in Germany and other European countries, and their sales reflect that. Sales by US companies in Germany alone were over two-thirds larger than combined US sales in Africa and the Middle East.

So, despite the headlines about US-European trade wars, American and European companies also earn their money on each side of the Atlantic, not in China. In 2019, US affiliate income in Europe rose to a record $295 billion and European affiliate income earned in the United States in 2019 was also at a record $140 billion. Over half of the income US companies earn abroad comes from Europe. That is roughly three times more than what US companies earn in all of Asia.

At Home, Abroad

All of these facts run counter to the fashionable narrative that US and European companies prefer China or other low-cost nations to developed markets. The reality is different, for several reasons.

First, investing in Europe or the United States is relatively easy, while investing in China remains difficult because of onerous restrictions on foreign ownership and forced technology transfer rules. Second, growth prospects in China have slowed not only because of the coronavirus but because Beijing has shifted toward more consumption- and service-led growth and away from export- and investment-driven growth. Third, in addition to being two huge markets, the US and Europe are wealthy, which is correlated with highly skilled labor, rising per capita incomes, innovation, and world class R&D infrastructure, among other things. Together the US and Europe account for half of global consumption, and gaining access to wealthy consumers is among the primary reasons why US and European firms invest in each other’s markets.

Deep and thickening transatlantic investment ties contrast starkly with FDI coming to each continent from China. For some years Chinese FDI in both the US and Europe soared from a relatively low base. However, Chinese investment is now plummeting on both continents due to bilateral commercial tensions and tighter US and European scrutiny of such investments. Chinese investment flows to the US declined to approximately $4.5 billion last year, and Chinese FDI in Europe fell by 40 percent to $13.4 billion. Looking at the paucity of deals in the pipeline even before the coronavirus crisis struck in such dramatic fashion, it appears 2020 will be a year of weak Chinese investment in both North America and Europe.

Finally, the transatlantic economy is also the fulcrum of global digital connectivity. North America and Europe generate approximately 75 percent of digital content for internet users worldwide. Transatlantic flows of data continue to be the fastest and largest in the world, accounting for over one-half of Europe’s data flows and about half of US flows. 55 percent more data flows via transatlantic cables than over transpacific routes. In 2018 US exports of digitally-enabled services to Europe were double US digitally-enabled services exports to the entire Asia-Pacific region. Similarly, EU exports of digitally-enabled services to the United States alone were greater than EU exports of such services to all of Asia and Oceania.

Misleading Focus

An inordinate focus on trade in goods is deeply misleading. The health of the German economy and Europe’s international competitiveness is not just dependent on this one particular segment of commerce, but on the many other ways Germany and its European partners are bound to others around the world. A fuller understanding of these forces makes it clear that, despite much talk of de-globalization and de-coupling and siren calls of “America First” or “Europe First,” the United States and Europe remain deeply intertwined and embedded in each other’s markets, and that their respective links with each other—not China—remain the driver of the global economy. To argue otherwise is to miss the forest for the trees.

COVID-19’s hit to European-Chinese commercial connections was simply the first phase of this cascading crisis. A shutdown of transatlantic commercial ties, which are much deeper and wider, would be far more devastating. Now is not the time to exacerbate transatlantic commercial tensions. On the contrary. Ensuring that transatlantic flows of goods, services, and investment are sustained is one of the most important things that can be done right now to mitigate the economic impact of the pandemic.

N.B. This article is based on the author’s and Joseph P. Quinlan’s publication The Transatlantic Economy 2020, which will be released on March 26, 2020.

The post Transatlantic Commerce: Ties That Bind appeared first on Berlin Policy Journal - Blog.

Source: Eurostat

As European governments debate whether to allow Huawei to build critical 5G infrastructure, fears of economic retaliation by China play a major role in their thinking. While this is a legitimate concern, it would be a mistake if such concerns were allowed to dominate decision-making on strategic issues.

China certainly has serious economic weight, and its market is increasingly important to some European countries, but its real retaliatory power is often overstated. Governments across Europe tend to overlook an obvious fact: the EU single market—not China—is by far their most important source of economic growth.

Following the Chinese Call

As part of accelerated Chinese Outbound Foreign Direct Investment starting around 2012, Europe began to emerge as a preferred investment destination. A surge in Chinese companies’ activities to diversify their portfolio abroad resulted in mergers and acquisition of technology assets in the wealthiest European countries, and infrastructure investment in Europe’s periphery.

Against this backdrop, China sought to institutionalize political and economic cooperation with EU members, both bilaterally and through sub-regional formats. In the aftermath of the eurozone crisis and in the context of rising euroskeptic movements, Beijing benefited from the perception that China could offer attractive economic opportunities in the face of weak GDP growth and be an alternative to Brussels. The launch in 2013 of China’s global trade and infrastructure project, the Belt and Road Initiative (BRI), further reinforced this perception. This has prompted European governments to sign Memoranda of Understanding (MoUs) with Beijing in hopes of securing economic benefits.  At the same time, they made sure to avoid criticism of China for fear of losing out on such opportunities.

Now, the threat of Chinese retaliation if governments decide to exclude or limit the role of telecom equipment provider Huawei in their countries’ 5G is making countries that are more dependent on the Chinese market think twice. However, a look at the numbers shows that European nations have less reason to be afraid than one might expect.

A Narrative of Dependency

In 2018, the EU single market accounted for on average 66.1 percent total exports of the individual EU 27 members plus the United Kingdom, against an average of 2.4 percent going to China.  For member states (and the UK) exports outside the single market, the share of exports to the US was on average 9.3 percentage points larger than those going to China.

These figures should help put the importance of the Chinese market for European economies in perspective and debunk the narrative that China is a source of unlimited economic opportunities. By the same token, these figures show the limits of China’s retaliatory power vis-à-vis European countries and indicate an untapped potential for the EU to leverage its economic power in relations with Beijing. In some states, the narrative about economic dependency on China is likely driven by an over-exposure of some large corporates, such as the German automotive industry, which is heavily invested in the country.

Despite this reality, the economic opportunity/retaliation argument is still disproportionately affecting how governments think about China, including on issues that have strategic and national security implications. It is possible that Chinese ambassadors’ activism across Europe is contributing to this perception.

Ambassadorial Pressure

In December 2019, Beijing’s envoy in Berlin, Ambassador Wu Ken, said that “If Germany were to make a decision that led to Huawei’s exclusion from the German market, there would be consequences. The Chinese government will not stand idly by.” Members of the Bundestag are convinced that in case of an unfavorable decision on Huawei, Beijing would go after the German car industry in China.

It turns out that Germany–which along with France has promoted itself as a leading force behind a coordinated European China policy—may be the EU member state most vulnerable to Beijing’s pressure in bilateral economic relations. In Europe, Germany has the highest share of exports to China (7.1 percent of its total exports, and 17.3 percent of its exports outside of the EU in 2018 according to Eurostat), far above the EU member state average of 2.4 percent and 7.3 percent respectively. German investment in China is also the highest in the EU. The Chinese market is particularly vital to German carmakers. Volkswagen, for example, generates almost half of its revenue in China. All together BMW, Daimler, and Volkswagen made over one-third of their car sales in the People’s Republic in 2018. In January 2019, the influential Federation of German Industries (BDI) urged companies to reduce their dependence on the Chinese market in response to China’s selective market opening and its ambitious industrial policy, which aims at reducing its reliance on foreign companies.

However, while China and the US are Germany’s single most important export markets outside the EU (7.1 percent and 8.7 percent respectively), its export markets are highly diversified, with the EU single market accounting for 59 percent of exports in 2018. So even though Germany is far more exposed than other member states to both the United States’ and China’s retaliatory power, its overall economic dependency on China is smaller than it is often made out to be, and not enough to justify an accommodating position on strategic issues.

Growing Disappointment With China

For years, European governments’ China policies were based on the premise that maintaining friendly political relations, even at the expense of standing up for their own values and interests, was key to unlocking special economic treatment in bilateral relations. Euroskeptic governments have been especially keen on showing Brussels that they had an economic alternative in China. This has made them  cautious not to upset Beijing—an approach that has occasionally extended to economic policy, for example when the previous Italian government worked to water down and eventually abstained from voting on the EU investment screening framework that its predecessors in Rome had asked the European Commission to draw up.

Different European countries are now starting to be more clear-eyed about the gap between China’s promises and the trade and investment reality. For example, the Chinese market still only plays a minor role in the economy of the twelve eastern EU states that are part of the 17+1 framework for cooperation with China. They all joined the China-led format and signed BRI MoUs to cash in on Beijing’s promises for trade and investment. But on average, exports to China still only account for 1.4 percent of their total exports, and Chinese investment has continued to flow to western Europe, neglecting their region. Some of the format’s members, like Poland and the Czech Republic, have voiced their disappointment. Importantly, an average of 72.4 percent of these 12 countries’ total exports go to the EU internal market.

Italy finds itself in a similar situation. The previous euroskeptic government signed a BRI MoU with the stated goal of exporting more to China. However, Italian exports to China declined in 2019, and the Chinese market still accounts for just 2.8 percent of its total exports, compared with 56.6 percent of exports that go to the EU single market. Rome is now also taking a more realistic approach to China and has joined Berlin, Paris, and Warsaw in the push to revise EU competition policy to stand up to China and the US.

Learning from China’s Neighbors

While countries like Germany, the UK, and Finland are slightly more reliant on the Chinese market, lessons from Japan, South Korea, and Taiwan show that economic dependency does not have to translate into an accommodating position toward China.

Beijing’s East Asian neighbors depend much more strongly than European countries on China (individually, their export share to China was between 20 and 30 percent in 2018). However, they are forced to adopt a comprehensive approach that goes far beyond economic interests and factors in national security considerations, not least because of their proximity to China, which they see as a strategic rival. When Beijing weaponized its economic power against them in the past—for example over the Senkaku/Diaoyu islands dispute with Japan or over South Korea’s deployment of the THAAD missile shield—they took measures to foster economic sovereignty in response, effectively limiting China’s economic leverage instead of giving in to Chinese pressure.

European governments should learn from East Asian nations. They should put strategic considerations first and not be overly worried about China’s economic retaliation. This requires growing more comfortable with compartmentalizing the relationship into areas of cooperation and competition. In addition, while the Chinese backlash temporarily hit individual companies (e.g. South Korea’s Lotte), economic ties between China and the three East Asian nations have remained stable overall.

Indeed, another lesson from China’s immediate neighbors is that while Beijing would quickly take advantage of a Europe that was being too accommodating, it is unlikely to substantially follow through on its threats. If Europe took more measures to promote economic sovereignty, China would most likely adapt its own approach in order to continue profiting from good relations with the EU and its members instead of jeopardizing this crucial relationship.

After all, European countries shouldn’t forget that close economic ties run both ways: the EU is China’s most important trading partner. China needs the EU bloc economically and geopolitically in its competition for global leadership with the United States. As Brussels works to rebalance its economic and political relationship with Beijing, leveraging the EU’s economic power should be part of the solution.

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Governments like to talk up the cooperation between China and Central Asian states. But the Sinophobia in Kyrgystan and Kazahkstan is very real.

“They eat people, you know. They eat dogs, insect—-even babies.” There’s an uncomfortable silence in the car, as I consider how best to push back against my Kazakh taxi driver’s casual racism. He’s talking about the Chinese, and he’s responding to a simple question that I like to slip into all of my conversations in Central Asia: “So, what do you think about China?”

In the end, I cowardly opt for a non-confrontational tone of disbelief. “Really? I don’t think that’s true…”

“It’s true,” the taxi driver replies matter of factly.

China is the most important economic actor in Central Asia, and so for countries in the region, good relations with Beijing are a priority. But in Kyrgyzstan and Kazakhstan especially, Sinophobia is rampant, and negative public opinion of China undermines the line spun by officials and state media that the Chinese are welcome. Animosity is less severe in Uzbekistan, which doesn’t share a border with China, while in Tajikistan, authoritarianism and a taboo against speaking ill of China make it difficult to assess public opinion. In general, though, Beijing has a long way to go in winning hearts and minds in Central Asia, despite ostensibly rosy governmental relations.

The Poetry of Mistrust

Sinophobia in Central Asia is well established. The empire to the East is a traditional enemy of the nomadic Turkic tribes, and following the Sino-Soviet split, propaganda in the USSR purposefully reinforced Sinophobic tendencies in the region. In Kyrgyzstan, this inheritance still colors the debate on China. At special occasions, Kyrgyzstanis still recite an epic poem about the exploits of the legendary Kyrgyz hero Manas, whose chief foe was the Chinese.

I hear a snippet of this epic at a Saturday night feast in Bishkek. I’m in the company of a couple dozen players of Kok Boru—a popular Kyrgyz sport that is a little like rugby, were rugby to be played on horseback with a goat carcass instead of a ball. Patriotic feeling is running high, and after we’ve finished eating, the “Manas-teller”—a respected patriarch with an air of mysticism about him—bursts into hypnotic chant-like song. In this case, the story he tells is of a daring exploit to infiltrate an enemy Chinese camp.

Later in the evening, I find the opportunity to ask the Manas-teller about Kyrgyzstan’s contemporary relationship with China.

“We receive a lot of credit from China,” he tells me. “We need to be very careful about paying this back.”

“China is more dangerous than Russia,” he warns. “We have experience with Russia, and the process of Russification is slower than what China are capable of.”

Although China has risen to regional economic supremacy in the decades following Soviet collapse, the political and cultural presence of Russia is much more keenly felt throughout Central Asia. Even those who are wary of Russian influence will often begrudgingly choose Moscow over Beijing.

“I don’t want to be with Russia either,” the Manas teller continues. “But we are small, if not Russia, we would easily be captured. The United States is too far away. It would be good to get closer to the European Union, but China and Russia are just too near.”

In Kazakhstan, people occasionally tell me that they feel squeezed between two great empires. In most cases, they prefer the devil they know. A huge number of migrants from Central Asia work in Russia. Their experiences with racism in Moscow don’t always leave them with a sense of post-Soviet solidarity, but the fact is that remittances make up a third of official GDP in Tajikistan and Kyrgyzstan. Many people have family in Russia, and after over a hundred years of Tsarist or Soviet rule, the Russian language is still widely spoken. Russian media is dominant, and worldviews are closely aligned with Moscow, especially among the older generations. The border with China on the other hand, often feels as if it represents an insurmountable gulf of cultural difference.

“One and a Half Billion Chinese”

Russians and Central Asians also share a fear of China’s demographic superiority. The prospects of Chinese migrants leasing land and marrying local women have sparked protests in Kazakhstan. There is a visceral fear that the “one and a half billion Chinese” are set to trickle in over the border, taking jobs, buying land, and diluting local populations until the region becomes a de facto province of China.

Bordering Central Asian populations fear not just migration but also outright conquest. These fears stem from ancestral memories of Qing expansion, as well as post-Soviet territorial disputes that saw Beijing appeal against 19th century treaties struck with the Qing. More recently, resource for debt deals and an opaque 2011 land swap between Tajikistan and China have reinforced suspicions of Beijing’s expansionist intent.

These fears are not baseless, but they are rooted more in conspiracy and legend than fact. Dig a little deeper, and it often emerges that Sinophobia in Central Asia is locked in an ugly, racist fear of the Other. An alarming number of respondents dislike China simply because the Chinese are “dirty,” or because they are rumored to have peculiar diets.

A fewer number point to much more rational sources of mistrust. The cultural difference between the Turkic peoples of Central Asia and Han China is indeed vast, and Chinese companies, as well as the Chinese government often appear unwilling or unable to bridge this divide. Even more than other “expats,” Chinese communities find integration a challenge, and it is incredibly rare to find a Chinese businessperson in Central Asia who speaks Russian or the local language. Anecdotally, Chinese companies find communication with local communities difficult. One local officer at a European embassy in Bishkek tells me, “a lot of investors don’t work with local people, but the Chinese are worse—they don’t speak at all. The Canadians do a bit, the Russians do most of the time, but the Chinese just turn up without saying anything and start building.”

Chinese operations also have a reputation for poor environmental practices and low standards. It is difficult to generalize and companies obviously vary, but most respondents in Central Asia still have a much higher level of trust in non-Chinese internationals. While the standards of Chinese companies and products are improving dramatically on a global scale, poor countries like Tajikistan and Kyrgyzstan are usually last to see the best of what China can offer. It is also true that Chinese operations sometimes flout local regulations to employ higher ratios of Chinese workers. While these companies are also creating local employment opportunities, the optics reinforce the idea that the Chinese are stealing jobs.

One line of reasoning in regional Sinophobia stands out in particular. Beijing has long had a reputation as an opponent of Islam, but the more recently extreme programs of forced assimilation in Xinjiang have entrenched wariness of China among the Turkic, Muslim populations of Central Asia. China’s critics in Europe and America often overestimate pan-Turkic sentiment and Muslim solidarity. From Berlin, Kazakhs and Uyghurs may sound and look the same, but there are massive inter-ethnic tensions in the region. At the same time, it is hard for Central Asians to ignore Beijing’s attitude toward the minorities it has dominion over. Hearts may not bleed as heavily as Europeans and Americans might expect for the plight of China’s Uyghurs, but Beijing’s oppressive policies in Xinjiang provide a perfectly logical reason for locals to fear Chinese Communist Party influence.

An Open-Minded Younger Generation

China is having more success at rolling back Sinophobia among younger generations in Central Asia. Beijing’s soft power efforts are often ridiculed by those monitoring clumsy, saccharine Xinhua propaganda, but China is also spending vast resources on training and language programs in the region. The efforts are very much still in their infancy, but Gallup polls from 2018 suggest that young people today think of Beijing slightly more favorably than their counterparts in 2006. In Bishkek, the first student I speak to on the street turns out to have spent a year in Beijing. “Life is better in China,” she tells me in well-spoken Chinese. “The wages and the quality of education are better.” Gira knows about the oppression in Xinjiang, and she says her mother doesn’t want her to return to China for fear of how she’ll be treated as a Kyrgyz. But although Gira is critical of the Chinese government’s policies in Xinjiang, she thinks the situation in Beijing is different, and she is largely positive about China’s influence. Another Chinese language student I meet in Bishkek tells me in flawless English and an American accent—“I have studied in the US, but now I want to learn Chinese because I know China is the future.”

What with the still-strong gravitational pull of Russia, such deeply ingrained apprehensions about China, and the example Beijing sets with its sinister policies in Xinjiang, it is still difficult to imagine a Chinese future for Central Asia. Increasing numbers of young Central Asians are falling into Beijing’s orbit, but China’s economic importance races ahead of its popularity in the region. The reality of Chinese strength mean Central Asian governments have to play nice with Beijing, but negative public opinion presents endless potential challenges to China’s interests.

Dispatch from Hanoi, Vietnam.

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© REUTERS/Umit Bektas

1. At its core, systemic competition with China consists of rival visions of human nature. The European ideal of the autonomous individual, responsible for its own actions, has come under severe threat by digitally-driven behavioral conditioning. However, from a Chinese point of view, the Enlightenment view of human nature is a transient historical phenomenon, a luxury that only a few wealthy societies can afford.

In our epoch of interactive digital media, gamification and artificial intelligence, the autonomous individual—capable of thinking, deciding and acting for itself—has been increasingly called into question. That individualistic figure had underpinned the Enlightenment’s optimistic vision of human nature. But today, vast quantities of data amassed by digital platforms and the gaming and advertising industries have proven the extent to which human desires and preferences can in fact be exploited and manipulated, as well as analyzed for their supra-individual properties. It is also increasingly clear how easily most “netizens” can be influenced by the targeted manipulation of information and human emotions. Networks of influencers and followers—in other words, digital thought leaders and acolytes—are by now a powerful vehicle to steer collective mimetic behavior.

To use a rather pointed metaphor: the ecosystems of interactive apps are a playground for modern herd behavior among humans. This herd behavior can be observed in the imitation of prefabricated lifestyles, fashions and looks, but it also extends to individual positions taken on divisive, in-or-out questions, and to forms of collective online denunciation, aggression, and hatred. What confronts us in social media, the gaming industry, and digital advertising are not images of self-aware, mature individuals. We are witnesses to a pandemic of herd behavior.

In a vast number of experimental studies, neuroscience and behavioral economics have demonstrated that herd and mimetic behavior remains a determining element of human nature, notwithstanding the great efforts made by state and society toward individual education, freedom of decision, and self-responsibility. The reestablishment of authoritarian and totalitarian modes of social order has its basis in collective needs for security and order and in herd behavior that is prompted by sheer terror or mass fear. In this way, the digital proliferation of herd behavior benefits the social engineering of the Chinese Communist Party, which it is now deploying with ever greater confidence and championing elsewhere in the world.

2. The CCP’s design for social order is based on a vision of human nature compatible with both Leninist principles and the digital age. Human beings are understood as herd creatures requiring guidance and steering. Under the guidance of a wise, strong Great Herdsman, the herd can be formed into a placid, productive, and technologically innovative society, but only as long as it is protected by vigilant herding dogs and has its agility maintained by loyal junior herdsmen.

China’s communist revolutionaries and the founders of the People’s Republic always rejected Western individualism as a bourgeois smokescreen; they thought close control of the “masses” by a political avantgarde to be essential. However, Mao Zedong and Deng Xiaoping never had access to the digital technologies of power that Xi Jinping relies on today. China’s model for digital civilization consists of an agile hierarchical order, deploying targeted, seamless digital control technologies in order to steer a conflict-prone mass society down well-defined political paths. As it currently stands, this Chinese model offers a worryingly productive combination of political and commercial conditioning with economic and technological agility. This sort of social order appears particularly compatible with the possibilities inherent to our emerging digital civilization. It can potentially serve as an example for other governments and societies also in search of political stability and economic prosperity.

3. Platform corporations like Alibaba or Tencent and innovation champions like Huawei function as authorized “junior herdsmen.” Under close observation by central political authorities, they must pass on unlimited quantities of data to state bodies for evaluation and control.

The metaphor of herd behavior also applies to other specificities of the Chinese context. The system of herd control, which China quite deliberately brought into being, is led by wise herdsmen: the party leader and the central governing ranks of the CCP. For controlling the herd, the central authorities rely on a division of labor between “junior herdsmen” and “herding dogs.” This is necessary since herd society requires carefully-supported pioneers and role models, who for their part remain agile and innovative. Individual pioneering acts of innovation, in particular in the economy, technology, and science, are publicized in so far as they are socially and politically useful within officially-established parameters. In this context, popular online idols created by the system serve to popularize overarching regime goals, including unquestioned nationalism and unconstrained enthusiasm for technology.

From the perspective central authorities, China’s pioneers should on no account be independent, freewheeling thinkers. Instead, they should desire to emerge from the herd, ascending to high-ranking positions in the official order, while never calling political hierarchies into question. Status and rank within the herd are acceptable values; individual power or even political freedom are not. Jack Ma, founder of Alibaba and a model member of the Communist Party, exemplifies this behavioral pattern: a loyal idol for the digital age.

All of this takes place under the watchful eyes of powerful herding dogs (cyber-administrations at every governmental level, digitally-upgraded state security bodies, state-run cloud operating companies, etc.). When in doubt, the authorities will bite quickly and hard to enforce subordination and discipline. The overall guardians are under instruction to allow considerable freedom of action to junior herdsmen who function as pioneers. The search for new grazing grounds (markets) and new nutritional sources (raw materials, products, business models) is of paramount importance to the highest-ranking herders to make the herd system prosper and expand.

4. The Chinese state, well-equipped with digital technologies, is becoming an agile conditioning apparatus impacting both society and the economy.

The Communist Party has powerful instruments at its disposal: AI-based facial, voice and gait recognition and analytic cameras in public spaces, as well as the ubiquitous smartphone, providing a constant supply of data on individual mobility, communications, and transactions. In part, this can be seen as a matter of surveillance and of early recognition of actual or presumed aberrant behavior. This entails an ongoing analysis of the unending data streams produced by all human interactions. On this basis, individual and collective behavior is regulated. Incentives and sanctions are used to shift overall behavior in the desired direction. All individuals and all legal entities, including official bodies, generate permanently updated data sets, which can in turn be used to evaluate and regulate their conduct. Political, social, and economic trustworthiness is no longer generated through human interaction or formal laws and contracts. Rather it emerges from the data streams and evaluations of trustworthiness apps—in other words through state-organized “social scoring.”

“Big Brother” or “Sauron’s Eye” are inadequate metaphors for this system of control. China’s rulers are aiming to have people internalize the system to such a degree that they no longer even perceive how much the Party controls them. Thereafter, inner resistance will no longer exist. External regulation and control at a distance are meant to become a self-evident and accepted part of life. So if the planners in Beijing have their way, a self-operating surveillance system may come into being, eventually meaning almost no need for police. Breaches of the rules will be socially proscribed, with no active participation on the part of state authorities. Each and every person in society must conform and practice self-discipline, otherwise they lose their trustworthiness ranking and are automatically forced out of society. Used in China’s unconstrained way, digital technology allows for constantly intensifying and granular behavioral control not imposed by a superior authority, but rather anchored and executed within the social fabric.

5. AI is a perfect instrument in the hands of a communist party.

Artificial Intelligence offers the possibility of centralized analysis of huge quantities of data, allowing the recognition of patterns and deviations, and systems of centralized regulation, all without active human participation. The particular strength of AI consists of producing optimized regulatory results for the largest possible population—in other words, it can overcome the chaotic, self-seeking individual pursuit of happiness. These ambitions have been among the central goals of communist revolutionaries since the early 20th century. This is why the IT investor Peter Thiel has accurately characterized AI as “communist.”

But after an initial phase of testing and optimization, AI will also be able to function without the deficient human organization of a communist party. For this reason, China can arrange to have its model of social order installed in other countries and societies without having first to develop a local party-state machine. In its enhanced, 21st-century form, AI will reconstitute the communist agenda of a collectivized, conflict-free society, a vision that was an utter failure during the 20th century. Moreover, it will do so much more effectively than any authoritarian party-state, past or present. Thanks to AI, the original vision of early 20th-century communist revolutionaries will at last come within reach: centralized planning, control, and programming of economy and society, aimed at overcoming all social defects and conflicts, both contemporary and historical.

6. The Chinese panopticon currently emerging arose as the realization of a Leninist dream: at any time, anyone can be observed by the central authorities. This will make possible the formation of a “New Human Being.”
Jeremy Bentham first described the idea of the “panopticon,” a method for enabling the perfect surveillance of large numbers of people by a single overseer. In the industrial age, as a result of cumbersome, large organizations, mass deviance from the norm, and many observational blind spots, this vision could never be consistently realized. However, the fusion of new digital technologies with the more traditional control instruments of Communist Party rule is preparing the way for a substantially more effective Digital Leninism that is currently taking shape in China. In the Chinese system of surveillance and conditioning, the individual cannot know with certainty whether he is actually under observation. But he knows that he is visible at all times, always observable: he thus will have to adapt his behavior in a kind of preemptive obedience.

Behind the ambitions of the Chinese social credit system, we can discern the idea of the “New Human Being”: the dream of a civilization in which human behavior is changed to such an extent that it becomes a lasting collective form, entirely compatible with the broader aims of those in charge. The new trustworthiness system—unlike traditional power instruments like mass mobilization and state terror —is being sold to the Chinese people as technological progress, purported to make the individual’s life easier, safer, and more transparent. In fact, the new developments have been hailed by many, who wish to use, for example, a scoring app to find out whether the person they are meeting or the delivery company they are contracting is worthy of trust. In this assessment, however, one’s own judgment plays no further role. The grounds for evaluation now consist of ostensibly objective data profiles.

7. If we do not oppose the penetration of digital manipulation of preferences and behaviors more effectively than hitherto, time will bring the essence of Chinese developments to our own society: a politically and commercially fabricated and regulated herd organization.

With the pandemic of herd behavior in the digital age, the Chinese government’s vision of human nature has concrete potential to gain ground in many other societies. Systemic competition between China and the West—which first played out mainly in economic and technological realms—is now escalating in politics and ideology. That particular conflict focuses on fundamentally differing conceptions of human nature.
If, in the medium term, China turns out to be the superior economic and technological system, with China’s economy possibly double the size of the United States by 2050, it will have undoubted global consequences for 21st-century governance. Chinese views of society and economy as a herd order in need of surveillance and regulation may prove victorious around the world. And China will reveal itself to be the political and economic system that can make use of the whole range of possibilities within digital civilization the most effectively.

For these reasons, systemic competition with China turns on questions that are even more fundamental than political institutions, technological competition, and security threats. It is a question of the roles and rights of human beings in a future society. China is offering an alternative form of social order, aiming at omnipresent digital conditioning and granular behavioral control. This stands in radical contradiction to the vision of human nature dominant in liberal democracies and market economies.
However, the Chinese conception of ordering human beings, society, markets, and government is gaining attractiveness in many developing countries and emerging markets. China can promise comprehensive technological solutions for politically unstable, economically less productive and conflict-ridden societies, in particular in order to reorganize the wildly proliferating metropolitan areas, now often housing more than 15 million people. The tried and tested systemic solutions that China offers for managing megacities can address infrastructure, living conditions, mobility, energy, environment, and security. Chinese surveillance techniques for public spaces and for online communication have already been deployed in at least 18 separate countries.

Europeans criminally underestimate the strength of demand in many countries for Chinese “smart city” models, including infrastructure and security technology. We cannot rule out in advance that the Chinese-designed systems of authority may allow for peace, wellbeing, and even environmental sustainability in an increasingly densely populated and conflict-prone planet. But if current Chinese conceptions and practices of social engineering come to proliferate globally, the ideas of human freedom and self-determination will head for their digital demise.

8. What can freedom-loving societies do to counter the global advance of Chinese-style digital social engineering?

If we Europeans want to defend what we have struggled to achieve over centuries—individual freedom and choice—the digital transformation will prove an obstacle in many areas of life. European data protection regulations are an expression of this conflict. China’s social scoring system and surveillance state offer a counter-model. Even in China, it is not at all certain that social and political conformity can be implemented without resistance, as suggested by Chinese planners. The large-scale technical systems on which Digital Leninism is based are highly vulnerable. And the social reactions to omnipresent surveillance systems and behavior control will likely become manifest only when systems extend over all areas of life and offer no escape, not even within the most mundane scenes of daily life.
But it would be irresponsible to rely on a stumble, even a collapse, of the Chinese system. In the past, the CCP has repeatedly startled us with its capacity for learning and adaptation. For this reason, we cannot pin our hopes on a Chinese collapse. Rather, what we need to work hard at is a purposive and consistent separation between European and Chinese models of digital control in spite of possible economic costs and political conflicts in relations with China. The discussion on the role of Huawei, the Chinese telecoms equipment supplier, in the development of European 5G networks is only the beginning. Subsequently, we must address the worldwide communications, transactions, and data analysis that are enabled in particular by Tencent’s app “WeChat” and Alibaba’s e-commerce empire. Alibaba and Tencent are dominant ecosystems, not only within China itself, but also for the million-strong Chinese diaspora who all send enormous quantities of data to state-controlled server systems in China.

The fight, however, must not only be fought against manipulative uses of data coming from abroad. On the domestic front, we need to take on the predominantly US-based platform enterprises and targeted data services that have come to dominate the markets. Europe can only achieve its much invoked “digital sovereignty” if it prevents unacceptable practices of data collection and behavior manipulation by suppliers inside and outside Europe. Perhaps most importantly, as a precondition to even think about “digital sovereignty,” Europe needs to nourish the emergence of digital business models for its large domestic market that offers competitive services without destroying free societies.

The decisive question is whether European people, societies, and political institutions can find the strength to at least defend and preserve the core areas of freedom of decision in the manipulative world of digital platforms. Many concrete practical measures are on offer and are ready for implementation. Parts of European society and official regulators are pushing back hard against behavioral conditioning and herd behavior. Because why would any rational person want to be reduced to the human equivalent of sheep, lemmings, or even insects?

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Pictures © Jacob Mardell; composition by Thorsten Kirchhoff

“What do I get in return for this sacrifice?”, Wu says, echoing my question.

He’s chewing over those words, thinking about the last four years he’s spent apart from his family. Wu married his wife in 2015, and he left that same year, moving to work for China Road and Bridge Corporation (CRBC) in Kyrgyzstan. He spends three months over winter back in Hubei province, but those remaining nine months a year aren’t easy—his daughter, now two, was born to him while he was working over 5000 kilometers from home.

“That’s a very good question—I also ask myself this often,” Wu says, suddenly serious. I’m being shown around the construction site of an important project that will soon provide an alternate route between North and South Kyrgyzstan. At the moment, there’s only one road connecting the capital, Bishkek, to the south of the country, and in winter it can be closed for days.

Snowcapped mountains are painted against the sky on all sides, like a movie scene backdrop. The work camp is basic, pared back, but also a trove of sophisticated road building wizardry. In simple container box laboratories, asphalt cores are tested for maximum density and concrete blocks are cured in baths of water.

All but one of the Kyrgyz employees I speak to highlight the impressive work ethic of the Chinese, as well as the cultural gulf that lies between Kyrgyz and Chinese workers. “They came here to work hard and make money,” one tells me, “you’ve seen the huge projects—they need to work hard, only with their methods can they finish, can they do something so impossible.”

The Chinese workers sing a different tune. They may work non-stop in challenging conditions, but they have an easier time of it than they would at home. “The pressure in China is really great, I like the pace of life here, it’s much slower and easier,” one tells me. Central Asia is an underdeveloped space that can help absorb Chinese overcapacity, but it also provides an opportunity for escape on an individual level.

Working abroad also provides opportunities for ambitious young engineers. Wu repeats my question a second time: “What do I get…” Then he says more decisively, “There are three aspects to it: one, this project is big, and so I can increase my professional knowledge; two, I widen my personal field of vision living in a foreign country; three, just life needs—the benefits are good here.”

And with those words, his sadness sinks back below the surface, and the moment of vulnerability has passed.

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