China is one of the most important and pressing foreign policy challenges for the Biden administration, with many analysts pointing Washington to Asia- and Pacific-oriented strategies. The European Union, however, has now emerged as a critical partner for any successful U.S. effort to manage China because of the EU’s new investment deal with Beijing. The deal also strengthens the EU’s position relative to the United Kingdom and Russia.
Various commentators write of a declining European Union. Indeed, entering 2021, the EU’s aggregate GDP was nearly 20 percent lower and its population 13 percent smaller as compared to a year earlier because of the U.K.’s departure under Brexit. The EU has also been facing internal strains from its uneven management of the COVID crisis, including its slow vaccination efforts. Yet, the EU remains one of the world’s top three economic powers.
Late last year, the EU and China announced their accord on a Comprehensive Agreement on Investment, an expansive deal that will join China, the world’s second biggest economy, to the large EU community of countries. The pact, whose definitive terms are still under negotiation, involves 28 nations with a total GDP of over $25 trillion and a population nearing 2 billion. Among other things, the agreement opens up China’s domestic market to EU actors and provides Beijing a diplomatic platform to engage the EU.
For the incoming Biden administration intent on managing China, the CAI raises challenges because it provides Beijing a potential outlet to avoid U.S. economic and diplomatic pressures. The Obama administration had sought to constrain China through a Pacific alliance, but the CAI changes this calculus for the Biden team: pressure from the U.S. through the Pacific or even Asia will have limited impact if China can merely pivot westward to the massive EU economic bloc. Because of the CAI, the US must enlist active EU support in its efforts to manage China.
President Biden has repeatedly stressed the importance of rebuilding the U.S./EU relationship, including last month at the Munich Security Conference, where he listed China as one of the common challenges for the U.S. and the EU. But Biden faces important challenges in engaging the EU on China that were not present when he was vice president.
China’s influence worldwide has increased since 2016 as its economy has grown by over $3 trillion, even as U.S. clout with the EU has diminished following years of attacks on Europe by the Trump administration. In parallel, the Union, led by France and Germany, has started to assert its “strategic autonomy”, while Brexit removed the influential U.S.-friendly voice of the U.K. from EU deliberations. The Biden administration has already begun to reach out to Europe to coordinate policies, for example on Iran. However, the continuing influence of former President Trump over the Republican Party may cause the EU to hesitate at the U.S. reassuming its historical overall leadership role, concerned that Biden’s return to multilateralism may be reversed yet again if a Republican regains the presidency in an election cycle or two.
There are several things the U.S. can do to regain its international influence. The personal engagement by President Biden with the EU’s leaders is a good start, but this effort must be maintained to generate a strong and sustainable reconciliation with the EU. Biden must also use his influence in Congress to deliver domestically and diplomatically, projecting strength that will raise his standing in Europe.
Washington will need to appoint skilled ambassadors to the leading capitals of the EU, namely Paris, Berlin and Brussels (home to the European Commission, the EU’s executive branch). Gone is the time when these ambassadorial postings could go to wealthy donors, because these three capitals are too strategic to Washington’s interests not only in Europe, but also now regarding China.
These diplomatic efforts should be buttressed through other avenues, such as renewed U.S. engagement at NATO, which is important to the EU’s own efforts to manage Russia. Washington should also ensure skilled U.S. representation at the Organization for Economic Cooperation and Development, the influential policy agency relied upon by EU member countries.
An important qualm that has been raised about the CAI is whether EU efforts to prod China to improve its human rights record will be sacrificed in favor of commercial interests. On the contrary, the EU can and should use the relationship created by the CAI to push China on this serious concern, strengthened by coordination with Washington on this priority issue for the Biden administration.
London, in contrast to EU capitals, has lost some importance for the U.S. because, following Brexit, it no longer votes on how the massive EU economic bloc acts on China, Russia and other strategic matters. Moreover, while the UK’s chances for a quick post-Brexit trade deal with the U.S. had already dimmed, the CAI now dampens its prospects for a deal with China. As Beijing embarks on its new relationship with Brussels, it will likely not want to ruffle feathers in EU capitals with favorable treatment of the U.K., especially given the interests of the EU in removing any temptation to other countries to depart the Union. Consequently, the U.K. will likely continue to remain highly dependent on trade with the EU, at least for the near term.
Russia also loses from the CAI as it must now contend with a strategic partnership between its two most powerful neighbors and largest trading partners, the EU and China. Brussels, which already could look forward to receiving more U.S. support on Russia under Biden than Trump, may soon be able to leverage that support in addition to its partnership with Beijing to pressure Moscow on a variety of economic, security and even climate issues. While Russia may have favored Brexit in the expectation of a diminished EU, the CAI should make 2021 much less inviting than Moscow had likely anticipated for its dealings with Brussels.
The EU of 2021 is a smaller bloc than it was at the beginning of 2020, and the departure of the U.K. will inevitably take a toll on the Union economically and otherwise. But with the CAI, the EU’s influence internationally may be larger than before Brexit and it has now become crucial for the new Biden administration to allocate attention to this traditional European ally in its efforts to manage China.
Philippe Benoit has over 25 years of experience working in international affairs, including prior management positions at the World Bank and International Energy Agency. He is currently managing director-Energy and Sustainability at Global Infrastructure Advisory Services 2050.