Europe choosing China over America
In the 20 June issue of Courcy’s Intelligence Brief we returned to the question of Europe’s relations with China. In our 28 March issue we had reported on a research paper from an EU-sponsored think tank recommending that because China poses no military threat to the European Union, the EU can leave concerns about the ‘China threat’ to the US and that this is “something that promises to benefit the EU in its engagement with China”. It talked about putting collaboration in science and technology “at the heart of bilateral cooperation”, and it even suggested that difficulties over human rights should be put to one side, arguing that change should be left to come from within.
In our 20 June issue, we reported on a new report from another EU institution - the European Institute for Security Studies (EUISS) – which was only marginally less direct in recommending that the EU develop its involvement in the Asia-Pacific on the basis of avoiding engagement in controversial issues. The EUISS has now had more to say on this subject in an analysis entitled For China, the euro is a safer bet than the dollar, published on 19 June.
The European Union Institute for Security Studies (EUISS) is an agency of the European Union operating under the Union's Common Foreign and Security Policy (CFSP). In its capacity as an EU agency, it offers analyses and forecasting to the High Representative for Foreign Affairs and Security Policy, and as such its output needs to be taken seriously.
In its 19 June analysis, the EUISS notes that “overall, China seems to put more trust in Europe’s economy – in particular Germany and its surrounding area – than in the US”. It then goes on to argue that EU policymakers should consider closer Sino-European ties and engage in further discussion of China’s role in solving the debt crisis and “the use of part of China’s huge foreign reserves to shield the eurozone from international speculation coming mainly from Wall Street”.
Most strikingly, the report recommends that China’s responses to the debt crisis and the decision by Beijing to disinvest away from dollar-denominated assets and into the euro “indicate that the time may have come for the EU to consider a political and economic grand bargain with China for the next 5-10 years”.
The report fully recognizes that China’s support for the euro is as much for geopolitical reasons as for economic ones, noting that “the US pivot to the Asia-Pacific and the new defence strategic guidance clearly aimed at Beijing are pushing Chinese leaders into multiplying the diversification of its economic and political interests – and connections – to hedge against an eventual US-led encirclement strategy”.
It also acknowledges that China’s support for the eurozone and growing investments in Europe “allow Beijing to obtain valuable technology, knowhow and brands, to be used to further the country’s economic modernisation and development”. And it acknowledges that the “differentiated approach toward the US and the eurozone’s debt crisis appears in line with the Chinese traditional concept of shi – to exploit the propensity of things in order to achieve the desired goal”.
Yet the fact that China is using the economic crisis to drive a wedge between the US and Europe appears to be of no concern to the EUISS. It says: “While the traditional ally across the Atlantic is not in a position to effectively help the EU, China’s financial clout could well contribute to shielding the eurozone from international speculation coming mainly from Wall Street...” And its principal recommendation is that now is the time “to consider closer Sino-European ties” and to strike “a political and economic grand bargain”.
In any future confrontations with China, it would appear that the US is unlikely to get much support from the European Union. On the contrary, if the 28 March report from the Europe-China Research and Advice Network (Ecran) and the more recent output from EUISS is any indicator, the EU seems to be prepared to exploit any such difficulties by siding with China at the expense of the US.
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