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The Trends Driving Transatlantic Convergence on China

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The Trends Driving Transatlantic Convergence on China

With similar concerns on both sides of the Atlantic, there are six main factors that will define whether we see a policy convergence on China. 

The Trends Driving Transatlantic Convergence on China
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China’s global ambitions and reach are stimulating debates about new forms of strategic competition, rising to the top of the transatlantic economic and security agenda. The United States stressed its strategic competition with China in its 2022 National Security Strategy, warning that China “harbors the intention, and increasingly, the capacity to reshape the international order in favor of one that tilts the global playing field to its benefit.” The United States “remains committed to managing the competition responsibly,” the strategy added.

This focus on competition with China started during President Barack Obama’s tenure (2009-2017), with his “pivot to Asia policy” acknowledging the region’s growing economic importance. A key part of the Obama administration’s approach was “encouraging China to ensure that its economic policies establish a rules-based level playing field consistent with its international obligations.” During President Donald Trump’s administration (2017-2021), U.S. China policy undertook what was called “the most significant shift in U.S. foreign policy in a generation,” with China now seen as “once-in-a-generation challenge.”

The European Union has undergone a similar geopolitical and diplomatic awakening. In its Strategic Outlook, published in March 2019, the EU shifted its perspective on China from a “strategic partner” to a “negotiating partner.” It also described it as an “economic competitor” in the pursuit of technological leadership, and a “systemic rival… promoting alternative models of governance.” This shift has been a result of developments driven by Beijing’s efforts to increase its economic and geopolitical influence in Europe. 

With similar concerns on both sides of the Atlantic, there are six main trends that will determine whether we see a transatlantic policy convergence on China in the future. 

1. China’s Muscular Diplomacy: China’s increased assertiveness in international relations has become a transformative element of Beijing’s foreign policy amid its quest for great power status. The Belt and Road Initiative, a foreign policy narrative that exports the “China Dream,” cemented in the constitution of the Chinese Communist Party (CCP), codified a new strategy of expanding Chinese interests in the world. The BRI has become a platform to expand Beijing’s alliances and partnerships around the world, allowing China to project power and gain supremacy in the global economic system. Furthermore, China’s military spending has increased. It has focused on power projection by building the largest navy, cultivating nuclear second-strike capability, and restructuring the chain of command under President Xi Jinping. The CCP has been clearly sending a message to the West that China deserves a more dominant position in global governance. 

2. The Dark Side of the “China Model” Becomes Clear: Skepticism in Europe is growing as there is realization that the “mirror imaging” and rationalizing of the West toward China’s behaviors – and the notion that China might move toward Western norms as it develops economically – was just wishful thinking. The Chinese economy has become more state-driven, and Chinese leaders have more explicitly disavowed Western liberal values. EU leaders have also expressed concerns about human right abuses in China.

Meanwhile, the current pace of China’s transformation and rapid build-up of technological comparative advantages is unprecedented. Unfair business practices, state subsidies, illegal and forced technology transfers, economic coercion, and unreciprocated market access have negatively affected the EU economy. The weight of the EU economy has shrunk from 20 percent of the global economy in 2001 to 14.5 percent in 2023, according to IMF data. In the meantime, the Chinese economy has grown from 7 percent to 19 percent of the global economy. Last year, the Chinese economy was as much 107 percent of the share of the European economy, compared to 16 percent two decades ago. 

3. Overdependence on China: The COVID-19 pandemic and its negative economic repercussions proved that deficiencies in the diversity of supply chains could disrupt the global economy and cost lives. The lesson was clear: the deindustrialization of advanced Western countries and outsourcing of production and transfer of technology to China had created a massive overdependency. While the EU and the rest of the world faced a major global recession not experienced since the end of World War II, the Chinese economy was the only one to achieve positive growth rates in 2020 and 2021, with Chinese exports reaching the unprecedented level of $3.4 trillion, or 18 percent of global exports. 

In 2021, the Chinese economy surpassed the EU economy in size. In response, the EU is now focusing on its economic security related to strengthening its competitiveness with de-risking as part of the formula and ensuring resilience across itssupply chains. 

4. The China-Russia Relationship: Russia’s invasion of Ukraine has shaken the foundations of the European security architecture and has challenged the business model of relying on security and defense guarantees from the United States, cheap energy from Russia, and cheap products from China. The European “Zeitenwende consists of real efforts to bolster collective defense, increase defense spending, and develop sustainable capabilities, but also recognizes the dangers of energy dependence on Russia. The role of China as a strategic partner of Russia, its failure to condemn the invasion of Ukraine, and its clandestine support for Russia, has led to further distrust of Beijing in European circles. 

5. The United States’ Bipartisan Agreement on China: The bipartisan consensus in the U.S. on the fact that China poses a challenge across multiple domains is a strong foundation for sound and sustainable policies. Around 82 percent of Americans hold an unfavorable view of China, and these negative perceptions continue to grow.  The main issues remain China’s unfair business practices, human rights abuses, and overassertive actions in Asia, leading to a perceived need to decrease reliance on Chinese products and technologies, even while the United States is seeking cooperation on climate change and other global challenges. 

The Biden administration’s approach to China is for the relationship to be competitive when it should be, collaborative when it can be, and adversarial when it must be,” while coordinating policies with allies. U.S. policies and mechanisms now review investment that may threaten national security, such as the Treasury Department’s Committee on Foreign Investment in the United States’ screening mechanism for foreign direct investment (FDI), and the new screening mechanism on U.S. outbound investment in semiconductors and microelectronics, quantum information technologies, and artificial intelligence. The 2022 CHIPS and Science Act focuses on making investments in U.S. manufacturing and supply chains, while increasing investment in science and new technologies. 

The EU is following the lead of the United States in many of these areas, starting with the EU FDI Screening Mechanism, export controls, and anti-coercion instruments from third countries. 

6. Overcoming EU-U.S. Differences: To achieve a transatlantic joint approach on China it is important to look at areas of convergence and divergence between the partners, and to attempt to mitigate differences and bring the U.S. and the EU closer. The two partners enjoy strong security links through NATO and a deep economic interlinkage with more than $6.2 trillion in mutual investment and $1.3 trillion of annual trade, dwarfing by far any other partnership. When it comes to China policy, Washington and Brussels have significant common ground on concerns dealing with human rights, China’s coercive diplomatic and unfair economic practices, and global competition over the global commons. 

When it comes to the digital and technological domain, however, there are significant transatlantic differences, as many of the European countries had registered benefits from their technological ties with China. The handling of the Huawei 5G rollout is only one example. On trade more broadly, the non-collaborative work on creating trade and investment agreements with China (the Trump administration’s “Phase One” trade deal in 2020 and the EU-China Comprehensive Agreement on Investment in 2021) has created tensions on both sides of the Atlantic and complicated efforts to develop a joint perspective on China. The establishment of the EU-U.S. Trade and Technology Council is seen as way to bring them closer. 

Considering these six defining trends, the EU and the U.S. should be working together more closely than ever in developing a joint transatlantic strategy on China. Clearly, that is easier said than done as internal divisions within the EU somehow run even deeper than transatlantic differences. The European approaches depend on the intensity of relations that single countries have with China, the extent and value of economic and technological dependencies, leadership and public attitudes toward China, and tensions between the public and the private sector. On top of everything, only 31 percent of Europeans see China as a competitor, and only around 20 percent view it as a rival. 

How the U.S. and the EU chose to go forward will be a defining moment with long term consequences for the future prosperity of people on both sides of the Atlantic.