MondayFounder

In a rapidly evolving global landscape, Europe finds itself in a fascinating and advantageous position as the United States contemplates disengaging from China. President Joe Biden’s administration has consistently adopted a tough stance on China, branding it as America’s most formidable competitor. Tensions escalated earlier this year when Washington accused Beijing of using a spy balloon to gather intelligence from US military sites. However, while the US takes a more confrontational approach, European officials have opted for a softer stance, recognizing China’s significance to the European economy.

Anna Rosenberg, head of geopolitics at the Amundi Institute, explains that the US’s hawkish policy towards China places pressure on Beijing to enhance relations with Europe to mitigate the impact of export controls. Consequently, China has a strong incentive to earnestly improve its ties with the European Union (EU). Europe’s statistical data reveals that China was the third-largest purchaser of European goods in 2021, underscoring its economic importance to the region.

Jacob Kirkegaard, a nonresident senior fellow at the Peterson Institute for International Economics, highlights the contrasting approaches of the US and the EU, affirming that the EU is pursuing a policy of policy-led engagement with China. From China’s perspective, the EU represents the most important high-income market with largely unrestricted access. This diminishes the likelihood of China actively attempting to restrict trade with the EU, as it stands to lose significantly from a trade war.

European Commission President Ursula von der Leyen has recently advocated for de-risking from Beijing by reducing dependency on the country in critical sectors like raw materials and semiconductors. However, European officials are far from endorsing a complete severing of economic and diplomatic ties. Kirkegaard points out that the EU’s political need to de-risk its relationship with China is distinct from US-China relations. In a world marked by rivalry between the US and China, the EU is an essential economic partner for both, affording it significant political advantages vis-à-vis Beijing and Washington.

The EU’s single market, fostering the free movement of goods and services across borders, comprises 23 million companies and over 450 million consumers, according to the European Council’s data. EU officials assert that they do not wish to fuel the US-China rivalry but instead seek to calm tensions without naiveté. These sentiments align with President Biden’s recent shift in rhetoric following the G7 leaders’ meeting, where he expressed openness to the idea of de-risking rather than completely severing the world’s two largest economies.

China, no doubt, would have been apprehensive about the G7 leaders uniting to criticize its policies. In response, China implemented a ban on its companies purchasing from American chipmaker Micron. Alicia García-Herrero, a senior fellow at the European think tank Bruegel, acknowledges that Europe may not find itself in an enviable position amidst the escalating US-China tensions. However, she doubts that both Washington and Beijing will turn to Europe solely for economic ties, given China’s retaliatory actions against Europe. García-Herrero emphasizes Europe’s increasing dependence on China, particularly in strategic sectors like green energy, where China possesses significant leverage as Europe strives to build a more sustainable economy.

A study conducted by the European Commission highlights China’s position as the largest supplier of critical raw materials worldwide, which are essential components in products like electric vehicles. Europe must navigate this intricate web of interdependence and leverage its unique standing to forge a balanced and mutually beneficial relationship with both the US and China, ensuring its own economic stability and strategic goals.