Tuesday, October 19

Europe’s Leaders Struggle to Reset China Ties, With Eyes on US


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(Bloomberg) — European leaders will try their best to avoid talking about China in public when they gather in Slovenia this week, but sharp disagreements over how to handle Beijing will plague the closed-door dinner Tuesday night.

The dinner, which kicks off a two-day summit at a wooded estate outside Ljubljana, is when European Union leaders plan to discuss the thorniest challenges — the chaotic pullout from Afghanistan, a new US-led defense pact that angered France and uneasy ties with China.

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The EU’s landmark investment deal with China, currently frozen because of sanctions imposed on European lawmakers, will be high on the agenda, along with a debate on whether to move ahead with stalled plans for a summit with China, according to EU officials and diplomats who declined to be named discussing confidential preparations.

But with Europe facing a sudden energy crisis, China served up another awkward reminder of its position as a strategic competitor. In September, China became the world’s top importer of scarce liquefied natural gas, with deliveries up 20% from a year earlier, ship- tracking data compiled by Bloomberg show. Western European shipments, by contrast, slipped from the previous year, even as the continent’s natural gas inventories are at the lowest seasonal level in more than a decade.

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In EU debates over how to approach China, France and Germany have traditionally resisted efforts to treat the government with more suspicion and distance, while other members states, like the Baltic nations, have pushed to treat Beijing as more of an adversary.

EU leaders, who were encouraged by European Council President Charles Michel to make the bloc “more assertive and effective,” are juggling how to pursue engagement with China while marking their independence from the US, which has long pressed for a more aggressive stance.

The tension played out last week, when the US and EU held the first meeting of a new trade and technology council in Pittsburgh. As several diplomats noted, the participants made virtually no mention of China, even though many aspects of the council are linked directly to Beijing, from screening foreign investments to securing supply chains for semiconductors.

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‘Constant Struggle’

No specific decisions on China are expected out of Tuesday’s dinner. The investment agreement is likely to remain in limbo, despite heavy pressure from Beijing, because the ball on that issue is in the Chinese camp, said an EU official.

“China for the EU is three things at the same time — a partner, a competitor and a systemic rival – and one or the other of these aspects gets more emphasis depending on which EU leader is strongest politically,” said Guntram Wolff, who directs the Bruegel think tank in Brussels. “It’s a constant struggle.”

Recent events have only further complicated the EU’s effort to balance its approach. China recalled its ambassador to Lithuania this summer after it allowed Taiwan to open a de-facto embassy in what an EU official said was an attempt by China to drive a wedge between EU member states. Yet Lithuania didn’t consult or provide advance warning to most EU members, a diplomat from a western EU government said.

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Member states remain too divided over foreign policy and defense issues to forge a coherent strategy, another EU diplomat said, even as the US pullout from Afghanistan and elsewhere leaves a vacuum for China to fill. Hungarian Prime Minister Viktor Orban has repeatedly vetoed joint statements critical of China.

Post-Merkel Approach

It’s unclear how the departure of German Chancellor Angela Merkel will affect the EU’s debates over China.

“I think the new German government will consider how much we want to move away from China and reduce commercial relations,” Wolff said. “But I expect only a little movement because Germany is much more intertwined economically with China than France.”

The dinner will be French President Emmanuel Macron’s first chance to vent to all his EU counterparts at once about losing a massive submarine deal to the US last month — and outline where he believes EU defense should go from here.

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The summit will also likely see leaders tackle spiking energy prices, as European Commission President Ursula von der Leyen works on a package of proposals to submit to governments. China is beating its European rivals in the fight for a shrinking amount of available liquefied natural gas.

Divisions are likely to keep in limbo the attempts by western Balkan states to join the EU, the topic for the summit on Wednesday. Several member states sank an attempt by the Slovenian presidency to set a time limit of “by 2030 at the latest” for the western Balkan states to join the bloc, according to a proposed amendment to the draft conclusions.

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