A Foreign Policy Conundrum: Merkel and the EU Trapped between China and the U.S.

She wants the summit to take place no matter what. Last Wednesday, German Chancellor Angela Merkel held a video conference with political group leaders from the European Parliament to discuss Germany’s upcoming European Council presidency, which begins in July. For six months, Berlin will be setting the agenda for the European Union, and it has long been clear that Merkel views China as the top foreign policy priority. Indeed, she has planned a large summit in Leipzig from Sept. 13-15, to be attended by heads of state and government from the EU along with Chinese President Xi Jinping.

In the video conference last Wednesday, Green Party parliamentary group leader Ska Keller wanted to know if the plan should perhaps be reconsidered given China’s violations of international law in tightening its grip on Hong Kong. But Merkel doesn’t even want to get involved in that discussion and she avoided the question. Ultimately, it is clear: The EU approach to China is to be the foreign policy cornerstone of Germany’s council presidency. Period.

Never before in the history of the bloc have all 27 EU leaders conferred as a group with a foreign head of state. And now, the first ever such consultation will not be with the president of the United States – the NATO partner and guarantor of European security – but with the president of the authoritarian People’s Republic of China.

The summit would thus be a symbol for how international influence and alliances are currently shifting in a world order that is increasingly defined by the competition between the U.S. and China. The September meeting would define Europe’s and Germany’s role in that rivalry – not, of course, at China’s side, but in intensive dialogue with Beijing and at a significant distance from Germany’s traditional American allies.

The coronavirus pandemic has accelerated developments that have long been apparent: the U.S. retreat from the international stage; China’s naked power grab; the growing confrontation between the two powers; and their ruthless reliance on propaganda to influence the rest of the world. “COVID-19 has raised the temperature between the U.S. and China. The West’s vulnerability has grown,” says one high-ranking German official.

From the German perspective, alienation from the Trump-led U.S. continues apace. On the one hand. On the other, though, China’s is becoming increasingly self-confident as it seeks to expand its influence and, in Hong Kong, Beijing is issuing a direct challenge to the West. Europeans must recognize “China’s determination to claim a leading role,” the chancellor said in a video address to the Konrad Adenauer Foundation, the think tank connected to Merkel’s center-right Christian Democratic Union (CDU).

Not a Fan

Germany and Europe are trying to identify their role between a formal ally that is behaving less and less like a partner, and an authoritarian hegemonial power that can’t be considered a partner at all. At the same time, the pressure is growing to join one side or the other. In Berlin, concern is on the rise that Washington could deliver an ultimatum to Germany and the EU: Either you are with us or against us. “The U.S. demands fealty on China policy, but we don’t have that on offer,” says Niels Annen, a member of the center-left Social Democrats who is state minister in the German Foreign Ministry.

Berlin is also not a fan of Trump’s efforts to isolate China. The U.S. president even threatened recently to cut off all relations with China. And Germany is not prepared to join in with a policy of “decoupling.” “In a globalized and networked world, isolation is not the correct instrument,” says Economy Minister Peter Altmaier of the CDU. He is echoed by Norbert Röttgen (CDU), chair of the Foreign Affairs Committee in German parliament. “A policy aimed at isolating China is not in Germany’s or Europe’s interests,” he says.

Merkel’s desire to define Europe’s position between China and the U.S. has become more difficult as a result of corona, but it has also become more urgent. “Europe must finally develop a joint China policy,” Röttgen demands.

That was precisely Merkel’s plan: In a months-long coordination process, European countries were to compare and coordinate their positions on China in an effort to develop a joint approach. At the same time, the investment agreement with China, which has been under negotiation for years, was to finally be completed. But then the coronavirus arrived.

A visit by European Commission President Ursula von der Leyen to China was cancelled, with the meeting now to be held via video link at the end of June. But the envisioned development of a joint European policy can no longer be made up for.

It is, however, badly needed. The approach to China is different from country to country in the EU. In March 2019, to be sure, European leaders agreed that the EU would consider China both as a “strategic partner” and as a “systemic rival.” For many EU member states, however, particularly those in Eastern and Southern Europe, the emphasis has clearly been on seeing China as a trading partner. Chinese investments in countries like Greece and Italy have been more than welcome. Meanwhile, Hungarian Prime Minister Viktor Orbán finds not only China’s economic model attractive, but also the country’s authoritarian societal model.

Playing on Eastern European Sensitivities

France and Germany, by contrast, are interested in protecting European companies from Chinese companies. In Brussels, too, concerns are growing about the political influence that Beijing is buying.

It is a divide that China is actively trying to widen. Since 2012, for example, the Chinese prime minister has been meeting annually with a group of leaders from Eastern and Central Europe – a group that has grown to include the leaders of 17 countries, including Poland, Hungary and Greece. The cooperation is primarily aimed at expanding trade as part of Beijing’s Belt and Road Initiative, frequently called the “New Silk Road.”

But it also serves to play on Eastern European sensitivities, a region that often feels ignored by an EU dominated by France and Germany. China was also able to cleverly use the coronavirus pandemic to its own foreign policy advantage. By delivering urgently needed protective clothing to Italy and other countries, China scored a public relations victory at a time when Germany had issued a temporary ban on exporting such materials to its EU partners.

China is now in a position to translate its diplomatic and economic engagement in Europe into political influence. In June 2017, for example, a passage on investment protection in an EU summit declaration was weakened at the insistence of the Czech Republic and Greece, two member states with tight ties to China.

The EU leadership duo of Commission President von der Leyen and Council President Charles Michel has thus far failed to develop a clear course on China. And recently, Brussels has succumbed to Chinese pressure on a number of occasions. The EU ambassador in Beijing, for example, agreed to strike an allegedly China-critical passage from an op-ed piece he had written with ambassadors from the 27 EU member states for publication in the state-run newspaper China Daily. And in a report compiled by the European Union External Action Service about coronavirus-related disinformation coming from China, some of the most direct criticism was redacted.

The risk that the EU could prove as divided as ever at the September summit in Leipzig has also grown because Merkel won’t likely have any successes to present. There simply hasn’t been an opportunity to adequately prepare. Germany’s most important goal, that of signing the investment deal, doesn’t look achievable by September, despite the seven years of negotiating that has already taken place. The deal is to replace bilateral agreements on the mutual protection of investments.

Berlin has even begun threatening to cancel the summit altogether if Beijing doesn’t demonstrate a willingness to compromise. State Minister Annen says that the determination as to whether the summit will go forward or not isn’t solely dependent on the coronavirus situation, but also on the leadership in Beijing. China must show movement on the investment deal, he says. One alternative under discussion is to postpone the summit.

European Trade Commissioner Phil Hogan also warns that China must demonstrate a greater desire to overcome the current differences. “The EU wants a deal that is worth the effort,” he says. The EU’s priorities are well-known, he says, including greater balance when it comes to market access, equal investment conditions and the sustainable development of economic ties.

Willingness to Compromise?

Currently, though, there are no indications that an agreement on the treaty is imminent. On the contrary: “It will be the end of the year at the earliest,” says an official who is familiar with the negotiations. Bernd Lange, an SPD member who is chair of the International Trade Committee in European Parliament, also believes the idea that a “treaty will be ready for signing in Leipzig is an illusion.” The best-case scenario, he believes, would be “a political agreement in certain economic sectors, such as automobile manufacturing.”

Another issue on which Merkel would like to make progress with China is climate protection. In Davos in mid-January, Merkel was enthusiastic about the idea of linking the European emissions trading system with that of China, saying doing so would “cover a huge portion of the world.” But because of the coronavirus, the UN climate summit that had been scheduled for November in Glasgow has been postponed. Across the world, saving the economy has been elevated above saving the climate on the priority list. Meanwhile, China’s willingness to compromise has shrunk, with the country still deeply invested in coal.

Both Berlin and Brussels believe that the only person who can save the China-EU summit is the woman who wants it so badly: Angela Merkel. She is the only European politician who is thought to have a modicum of influence in Beijing, primarily because of her direct ties with President Xi Jinping. It remains unclear, though, whether Merkel will still make her 13th visit to China this summer as planned.

The respect for Merkel within the Beijing power apparatus is also rooted in the fact that the German chancellor has tended to choose more moderate tones when criticizing the country’s human rights violations. She believes that if they are to have any effect at all, appeals should be made behind closed doors. But this kind of backroom diplomacy has also become more difficult as a result of the coronavirus.

The German government has consistently rejected demands from Washington to adopt a more confrontative approach to Beijing because it is simply not in Germany’s national interest. Germany, after all, isn’t just dependent on China as its largest trade partner. Berlin also sees the country as a vital partner when it comes to solving international crises and global problems. A European refusal to engage in dialogue, it is said in Berlin, does nothing to help the human rights situation.

Escalation of Tensions

Plus, Beijing is needed at the moment in the battle against COVID-19, even if China’s massive failures in the early days of the pandemic have not been forgotten. Until the middle of January, the coronavirus epidemic wasn’t even mentioned in discussions German diplomats held in Beijing. Once the Chinese leadership finally admitted that the disease could be transmitted from person to person in late January, cooperation on measures to combat the pandemic improved, say diplomats. In early April, Merkel promised the delivery of aid supplies to China, with President Xi Jinping ensuring in return that Germany would have access to a state-run Chinese company that produces protective clothing.

The Germans view Trump’s attacks on China for its handling of the pandemic primarily in light of his reelection campaign. The escalation of tensions between Beijing and Washington, the German government believes, is coming from the U.S. president and his administration, not from the Chinese.

Still, the German chancellor has no illusions about either of the superpowers. A source close to Merkel says she has explained the situation as follows: There is little one can do to influence the two superpowers anyway. Germany can merely choose which one it finds least troubling.

Nevertheless, the difference in tone she uses in public statements is striking. Whereas she has repeatedly made it clear how little respect she has for the U.S. president, Merkel has been much more reserved with criticism of the course charted by the Chinese. And while she seems to try to avoid Trump, she will spend hours in talks with Xi during her visits to Beijing.

Profiting Handsomely

Indeed, Merkel has focused heavily on China during her tenure, having visited the country 12 times since taking office, usually heading out to a province following her stay in Beijing. In 2010, she celebrated her birthday with her husband Joachim Sauer in Xi’an, southwest of Beijing.

Last September, Merkel headed to China with a large business delegation at the apex of the demonstrations in Hong Kong. She urged Beijing to exercise restraint in dealing with the protesters, but the trip itself sent a message that Germany wouldn’t make its ties with China dependent on Beijing’s approach to human rights.

Merkel has a significant amount of respect for the unprecedented economic rise China has experienced during the 15 years she has been in office. China’s share of global trade has doubled during that period, its economy has risen to become the second largest in the world, gross domestic product has increased by a factor of 10 and over 200 million people have been pulled out of extreme poverty. Germany has profited handsomely from China’s economic rise.

For the fourth year in a row, China was Germany’s largest trading partner in 2019, with the bilateral trade volume at 206 billion euros. German companies exported 96 billion euros worth of goods to China, a situation that creates a certain degree of dependence and one about which politicians in Berlin are concerned. “It isn’t a good idea to turn back the clock on globalization,” says Economics Minister Altmaier, “but the corona crisis has demonstrated that we must minimize one-sided dependencies and assert or reclaim national sovereignty in sensitive areas.”

Fearful of Chinese takeovers during the coronavirus crisis, Altmaier’s ministry changed German law to give the Economics Ministry the right to block the purchase of company shares above a certain level by non-EU investors. Indeed, the government can step in even if the danger of such a purchase is merely theoretical and not acute.

“Germany remains an open investment location, but we have to have a better idea of which successful and strategically important companies are in the focus of takeover efforts so that we can react as needed,” says Altmaier. That applies, for example, to the production of vaccines and medical protective equipment, he says.

Sanctions on European Companies?

Since the advent of the corona crisis, German companies have grown increasingly concerned that they could get trapped between the fronts of the competition between China and the U.S. And the danger doesn’t just come from a China that ruthlessly pushes through its economic interests. They also see a threat from the other side of the Atlantic. They are concerned that Trump could impose sanctions on European companies if they continue to do business with China.