By Conor Gallagher
European leaders have finally woken up to the fact that Washington is benefitting at their expense with the US/NATO proxy war against Russia in Ukraine. Despite their economies being harmed by Washington, the EU continues to take a much tougher stance against Beijing.
NATO leaders are set to meet Nov. 29-30 in Bucharest and will discuss ways to “reduce dependency” on China. At the same time, EU leaders are debating how to deal with their US “ally” coaxing European industry to American shores.
Ahead of French President Emmanuel Macron’s visit to Washington, Paris is signaling that Europe would be more willing to go along with a more hardline China stance if the US backs down on efforts to poach European industry with its subsidies in the Inflation Reduction Act. Yet, there are reasons to believe that’s a dead end, and some Europeans are already waving the white flag.
While the EU is suddenly in emergency mode over its industry being wiped out by American rivals – something that’s been obvious to many for months – its focus all year has been on Moscow and Beijing. Here’s a brief roundup of the China focus:
The bloc is busy hammering out an Anti-Coercion Instrument, which aims to take countermeasures against outside countries that attempt to pressure bloc states using the member states’ economic dependencies. China, which implemented a de facto trade embargo against Lithuania after it allowed Taiwan to open a liaison office in Vilnius, is widely seen as the primary target of the rule.
European lawmakers are also finalizing new rules to curb acquisitions or bids for public contracts by subsidized foreign companies. Again it is widely believed the rules are aimed primarily at China. It came on the heels of the uproar over Chinese efforts to obtain a controlling stake in a Hamburg port terminal. In the end, Berlin approved a sale of 24.9% of the terminal to Cosco.
American companies could also face scrutiny from the new legislation due to the Inflation Reduction Act, which has subsidies for US-based manufacturers of electric cars, batteries and renewable energy products and consumers who buy such American-made products. But it would only apply to American companies if they try to buy EU companies or in public procurement bids and not in the case of EU companies relocating production or building of future factories.
China’s Global Times argues that Europe should blame the US for its decline in competitiveness but doesn’t believe that will be the case:
Europe has a kind of concern or fear about the rise of China, which is also consistent with the strategy of containing China pursued by the US, Zhao Junjie, a research fellow at the Chinese Academy of Social Sciences’ Institute of European Studies …
He added that this decision by the EU is very unwise, especially when European economic prospects are unclear, as the implementation of trade protectionism and blocking of normal market business behavior will ultimately damage European companies.
And once again, back in September the European Commission unveiled a plan to ban products made with forced labor, which is intended to target China despite claims the rules would be “non-discriminatory.” The proposal doesn’t go as far as hawks wanted as it mostly leaves responsibility for rejecting goods to individual EU countries.
The EU’s largest economies in Germany, France, and Italy are already taking a harder line on Beijing. While there is a definite split in Germany between the “transformation through trade” politicians that favored a reliance on cheap Russian gas imports and exports to its largest trading partner, China, and the Atlanticists who favor marching lockstep with Washington’s hardline policies on Moscow and Beijing. So far, the Atlanticists are winning. The cheap Russian gas imports are gone and the exports are halfway out the door.
Additionally, Germany sent a frigate to East Asia in 2021, and dispatched fighter jets to Japan, South Korea and Australia this year. The moves are part of unprecedented military deployments to East Asia. President Frank-Walter Steinmeier recently said that the country will continue to support security arrangements in the Indo-Pacific region and keep sending its troops to Asia to check the rise of China.
The German Green Party is full of China hawks and holds two key posts in Chancellor Olaf Scholtz’s government. German Economy Minister Robert Habeck is working on a new economic policy to reduce dependence on China.
China is Germany’s second-largest export market and its largest source for imports. Much of Habeck’s concern stems from a hypothetical Chinese attack on Taiwan, as he recently told DW:
“This is something very threatening. And this will have a disastrous effect on the whole world. We have seen that a regional conflict, like the Russian war on Ukraine, has brought the whole world into turbulence,” Habeck said. “That [a Chinese attack on Taiwan] would be far more catastrophic.”
Earlier this month Habeck blocked Chinese investors from buying a German chip plant, saying the country had to protect key industries like telecommunications, energy, chips, semiconductors, airports, hospitals or ports.
Germany’s Foreign Minister Annalena Baerbock has sworn fealty to the US. She’s formulating Germany’s first “China strategy,” which will be released early next year and is expected to argue that Berlin should join the US in its economic war on China.
Part of the China Strategy is reportedly going to be putting up more roadblocks for German companies active there. Reuters reports that part of the draft document includes the following:
We aim to oblige companies particularly exposed to China to specify and summarize relevant China-related developments and figures, for example in the form of a separate notification obligation, on the basis of existing disclosure requirements.
On this basis, we will assess whether affected companies should conduct regular stress tests in order to identify China-specific risks at an early stage and take corrective measures.
Italy has also done a u-turn on Chinese investment. Back in 2019, the government led by then-Prime Minister Giuseppe Conte ignored criticism from Brussels and Washington and opened Italy to Beijing’s Belt and Road initiatives and courted Chinese foreign investments to Italy.
Then Mario Draghi was appointed prime minister and killed those efforts. It doesn’t look like they’re going to get resurrected anytime soon – no matter if it might be beneficial for the troubled Italian economy.
New Italian Prime Minister Giorgia Meloni is a leading China hawk. Even before being elected, she was jumping into the middle of the Taiwan issue, giving the Taiwanese media an exclusive interview denouncing Chinese “threats” and calling for the EU to do more. She also said she would promote bilateral contacts between Italy and Taiwan, something of a red line for Beijing.
During the pile on from Washington and across Europe over the Hamburg port issue, Meloni’s new industry minister Adolfo Urso said Italy will not be dependent on Chinese trade or technology and will safeguard any sector deemed as strategic. From Reuters:
We will not put ourselves into the hands of the Chinese. If others intend to move from energy dependency, and therefore from Russian power, to technological or to some extent commercial dependence on China, we will not follow them.
A key question for the EU, and the Netherlands in particular, is whether they block the sale of extreme ultraviolet lithography equipment to China. The Netherlands is home to ASML, which dominates the market for deep ultraviolet lithography machines used in chip making.
The US enacted a series of export controls in October to cut China off from certain types of semiconductor chips made anywhere in the world with US equipment in an effort to strangle advanced parts of China’s technology industry. But the EU, Japan, and South Korea have so far declined to join the effort.
The Dutch foreign trade minister recently advised the US to back off. In an interview with a Netherlands-based newspaper, the minister stressed, “The Netherlands will not copy the American measures one-to-one, We make our assessment — and we do this in consultation with partner countries.”
To accommodate some of these companies, the U.S. Department of Commerce has been granting them temporary waivers, but Washington is still pressuring them to get on board. According to Bloomberg:
While ASML hasn’t sold any of its most advanced extreme ultraviolet lithography machines to China because the Dutch government has refused to grant it a license under US pressure, the company can still sell less sophisticated chipmaking systems to the Asian country. …
Senior US officials – including Alan Estevez, the undersecretary of commerce for industry and security – are traveling to the Netherlands this month to discuss export controls.
Apparently France is pushing a deal that would see the EU get tougher on China in return for the US backing down on measures in the Inflation Reduction Act, which provides $369 billion worth of subsidies and tax breaks at a time European industry is being killed by higher energy prices due to the NATO proxy war against Russia in Ukraine.
Macron will be hosted by Biden this week and a French diplomat told Reuters the French president will argue the following:
The pitch will be: there’s obviously a Chinese challenge and we can help get others in the EU out of their naivete on this. But you can’t ask us to help on China and do an [Inflation Reduction Act] on us.
It’s hard to see how such a proposal goes anywhere. Euractiv explains:
EU diplomats are skeptical about whether this can be achieved since the legislation was passed by the US Congress. In October, US Treasury Secretary Janet Yellen lowered expectations, saying that the law had to be implemented the way it was written.
Additionally, the EU knows it can’t win a subsidy battle, especially as it’s shoveling money at its energy crisis. Again, from Euractiv:
It is unclear how the EU would finance its own subsidy scheme that could rival the US model, considering that there is not much appetite for a large new pot of EU money and that leaving it up to member states might further strain the level playing field within the internal market.
Some in Europe are already backing down, claiming that if they get into a subsidy spat with the US, China will be the ultimate winner. According to Politico, EU trade chief Valdis Dombrovskis urged everyone to look at the bigger picture and warned about “the danger of conflating the Inflation Reduction Act with our broader relationship with the United States.”
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Looks like when Xi Jinping strongly hinted to German Chancellor Scholz to the affect “We don’t trust you we saw what you did to Russia and we see what you’re govt is saying about us” when Scholz travelled to China to promote business, Xi Jinping was 100% correct:
“Germany’s Foreign Minister Annalena Baerbock has sworn fealty to the US. She’s formulating Germany’s first “China strategy,” which will be released early next year and is expected to argue that Berlin should join the US in its economic war on China.”
https://consortiumnews.com/2021/05/03/diana-johnstone-washingtons-green-branches-in-europe/
She studied international law. How special. From where I sit, she appears a starry eyed ideologue utterly lost amid power politics and geopolitical and economic realities. Poor Germany.
Baerbock – “I stand with Ukraine. No matter what german voters think.” So much for democracy in Germany.
https://www.youtube.com/watch?v=C9NiKUO99Cc
This article is interesting, but I’m not seeing anyone else beyond Breitbart covering it:
https://www.breitbart.com/europe/2022/11/27/watch-antifa-brawl-with-police-after-attack-on-russia-sanctions-protest/
It appears that the German Green Party and the Antifa are useful idiots of the American Empire or astroturfed arms of NED. Looking forward to bro pics with the German Antifa and the Azov volks.
Leipzig demo (“Ami Go Home”) was called by hard-core German Nazi figures and organisations. Left/anarchist counter-demo was against street presence of Nazis. German Antifa does not map to US “Antifa”. Parliamentary “left” here is gung-ho on Ukraine. Hard left (and party of Left Party) much clearer on opposing arms supplies and involvement. But also much smaller of course.
> German Antifa does not map to US “Antifa”.
Quite right.
I regret to say that for the rest of the world, that the EU will become an object lesson on what happens when you turn both your economic policies as well as your foreign policies over to Washington. Rather than trying to help them to be strong allies for the US, they are being strip-mined and impoverished by policies of the EU but which originated in DC. It was not enough to order them to cut off the cheap energy that underpinned their financial prosperity but now they are being ordered to cut themselves off from the one large market that might help them out – China. In the years to come it may be that Europe will just become an irrelevant peninsular off the Eurasian mainland. So when the Global South watches this unfold in real time, I am sure that when Washington orders them to cut off all trade links with China and tie their fortunes to the Collective West, they will think about it for a minute and say yeah, nah!
That comment underestimates the level of bungling stupidity and pettiness that operates in many countries of the global south. Arnaud Bertrand reviewed today some insider conversations at the Trilateral Commission:
https://twitter.com/RnaudBertrand/status/1596854891443429377?ref_src=twsrc%5Etfw
Besides revealing the unwillingness of US’s Asia “partners” (vassals?), to commit seppuuku, in the relentless pursuit saving American enterprise, he also points out India’s rabid Sinophobia, which unfortunately runs across the political spectrum. The trouble is that Indian elite (which includes the bureaucracy, and businesses – in-turn an amorphous mixture of industry and and a gigantic rentier class) sees little incentive in bringing its own population out of perpetual poverty; why should it? They get to trade its huge demographic advantage and natural resources to service the political interests of whoever happens to be the big guy around. That saves a lot of pain and effort in forging its own political outlook and taking risks. If one thing typifies Indian culture, its risk aversiveness.
I only wonder to what extent this same approach guides the policies of many other countries. US experiments in hegemony maintenance will answer those questions going forward.
Indeed, if you juxtapose the Marshall Plan to the current EU/Sanctions, the current mess starts to get a whole Treaty of Versailles unintended consequences vibe going. I cannot help but try to inform the citizens of Europe that they need to work much harder to protect how good they have it, and cannot help but feel that this is being done in part, to ensure that the EU’s in general good standard of living, work/life balance, good education system is destroyed. I watched this happen over my life time in America, and once gone, it’s dang hard to resurrect it.
It does seem at times as if the oligarchic elites have defaulted to The Four Horseman as their management approach to solving the many ignored for thirty years, and now upon us, world crises.
When shareholder value and C-suite enrichment are the lodestars of your universe, does it matter who or what is plowed under? We live in a world of oligarchs dreaming of being ennobled in the feudal society of their dreams.
They would be as gods, living forever and hopping from one planet to the next.
The irony is that the billionaire oligarchs aspire to colonizing Mars, immortality via cyberspace, free energy via fusion power, etc. Yet the creation of an economy to make billionaires destroyed the society which was best able to achive those goals.
Eh, Europe was in ruins before… I do trust the ability of Europeans to get on the streets and start burning cars and smashing windows…
if the core problem for Germany- was / is – low cost materials especially energy related to stay competitive for downstream manufacturing which is very hi-tec and robotized at a higher level than USA – focused on reducing and /or eliminating high cost labor, yet they bring in the third world labor, ostensibly for low wages.
so the fundamental building blocks of upstream manufacturing operations – require BASF or the equivalent which doesnt have low cost energy anymore – so they move out of Germany and go elsewhere, the German downstream manufacturing and government are left with illegal aliens to service with limited opportunities for job growth.
what is the strategy of the politicians ?
Dear david,
None, they have no strategy. Policy is being made on-the-fly and driven by “events dear boy, events”. German CEO’s are no less criminal than US CEO’s, just more constrained by law, the unions and societal mores. The ever increasig input prices will give them a perfect excuse to move manufacturing offshore as they always wanted to but could not for fear of the backlash. This will happen very quickly, say over 2 or 3 years resulting in huge layoffs in the chemical and car industries, at which point the govt. will go full-bore “austerity” and start to dismantle what is left of the social welfare system….unless the people get off their arses and revolt (hope springs eternal).
Gotta love this narrative, where after the EU dropped the ball on subsidies and infrastructure for 2 decades, and the US finally stopped dropping the ball after the Dems convinced a senator from West Virginia to dish out some money, it’s really a big para-military strategic play of the US betraying EU for world hegemony or something.
Like what’s the benefit of this weird fifth column pox on both your houses, when the obvious explanation of decades of government incompetence and gridlock is way more plausible and visible?
What’s even the big problem with EU politicians becoming aware that now is not the time for austerity, and if the US wants to dosh out on infrastructure and energy independence, maybe the EU can do it to?
In the counter factual that US doesn’t spend, and EU doesn’t spend, we’re further doomed against the forces of CO2 and autocracy. In the counter factual, that only EU spends and US doesn’t, we’re still pretty effed, and perhaps the betrayal narrative happens in the other direction. In the counter factual, they both spend on energy infrastructure, at least we have a small chance at not depending on chinese coal plants and oil from sandy principalities. Or even in the case, maybe EU and US did the spending together, but also in collaboration, can you imagine the headlines about conspiracy or technocratic elites or whatever.
This is a no-win premise, and I don’t see the value in demonizing one of the better outcomes, without being able to prescribe a better course of action.
with friends like the US who needs enemies?
It’s not only about the cheaper energy. The USA has a prison-industrial slave labor complex and tolerates child labor.
My thought exactly.
the European Commission unveiled a plan to ban products made with forced labor, which is intended to target China
Does anyone have a handy list of US corporations that use prison labour? Asking for a friend.
Nope. But anyone who has one should pass it on to the European Commission ASAP.
This report from the ACLU has at least a partial list: https://www.aclu.org/sites/default/files/field_document/2022-06-15-captivelaborresearchreport.pdf
Some of the major corporations are 3M Company, Allstate Insurance Company, American Apparel, American Express, Apple Inc., AT&T Mobility, Costco, Enterprise Rent- a-Car, FedEx, Frito Lay Inc., Fujifilm North America, Hertz Corporation, Hewlett-Packard, Hickory Farms, Infiniti Motor Company, Little Caesars Enterprises, Lowe’s, KFC, OfficeMax, Pepsi-Co, Procter & Gamble, Sara Lee Corporation, T-Mobile, Verizon, and Xerox Corporation.
Has there been any reaction by these European leaders to the recent election in Taiwan, which was won by the KMT, which stands for a relaxation of relations with the Chinese People’s Republic?
“The EU’s largest economies in Germany, France, and Italy are already taking a harder line on Beijing.”
Isn’t there some dispute on the hardness of this line? Ex: Germany’s last big meeting in China produced diverging analysis about the potential outcome.
Gotta love this narrative, where after the EU dropped the ball on subsidies and infrastructure for 2 decades, and the US finally stopped dropping the ball after the Dems convinced a senator from West Virginia to dish out some money, it’s really a big para-military strategic play of the US betraying EU for world hegemony or something.
Like what’s the benefit of this weird fifth column pox on both your houses, when the obvious explanation of decades of government incompetence and gridlock is way more plausible and visible?
What’s even the big problem with EU politicians becoming aware that now is not the time for austerity, and if the US wants to dosh out on infrastructure and energy independence, maybe the EU can do it to?
In the counter factual that US doesn’t spend, and EU doesn’t spend, we’re further doomed against the forces of CO2 and autocracy. In the counter factual, that only EU spends and US doesn’t, we’re still pretty effed, and perhaps the betrayal narrative happens in the other direction. In the counter factual, they both spend on energy infrastructure, at least we have a small chance at not depending on chinese coal plants and oil from sandy principalities. Or even in the case, maybe EU and US did the spending together, but also in collaboration, can you imagine the headlines about conspiracy or technocratic elites or whatever.
This is a no-win premise, and I don’t see the value in demonizing one of the better outcomes, without being able to prescribe a better course of action.
China is realistic and pragmatic. Meet it on that ground. The fever dreams of hegemony, the ginning up of military threats, and the inflamed rhetoric of bemused ideologues in the West (USA) are leading Europe by the nose to its destruction.
Michael Hudson says that when their mad schemes fail, western financiers always settle for the next best deal they can make. Here their plan to strip Russia of it’s assets has failed, so they are stripping Europe of it’s assets instead. This will support the dollar even as the world stops buying treasuries. And then – think of the foreclosures! The second villas. The mistresses! Aaahh, to be seventy again.