Could the Australian submarine deal reenergize EU/China relations?

To support its efforts to counter China, the Biden administration announced last month that it would supply Australia with the technology to build nuclear submarines. But this decision may ultimately backfire by re-energizing the languishing relationship between Beijing and the European Union (EU). 

Even as the Biden administration pivots to Asia and the Pacific, it should not underestimate the strategic importance of the EU in any effort to limit China.

The U.S. is increasing its support to Australia, India and Japan to counter China’s growing activism in the Indo-Pacific region. Australia, notably, has faced hostility from Beijing across trade and other fronts. It is in this context that Washington announced it would provide Australia with nuclear submarine technology. 

The deal, however, led Australia to cancel a $60 billion contract with France for non-nuclear submarines. Paris responded forcefully to what it saw as an unacceptable U.S. action undermining its commercial and other interests. Secretary Blinken met last week with French President Macron to attempt to repair the relationship, but as the French press had previously reported, doing so will require “time and actions.”

For many in the U.S. press, the deal exposed a diminished EU. For example, a CNN headline declared that “America’s deal with UK and Australia leaves France bruised and Europe in the Cold on China,” while a New York Times headline proclaimed that “The Sharp U.S. Pivot to Asia Is Throwing Europe Off Balance.” 

But, more importantly for Washington, will the deal help U.S. efforts to counter China? The answer is potentially no. Notwithstanding claims of diminished clout, the EU remains a major economic and diplomatic force that can heavily affect China’s global aspirations, and there are vulnerabilities in the U.S.’s ability to keep the EU aligned with it on China that have now been strained by the submarine deal.

The EU has demonstrated a willingness and ability (albeit limited) to influence Beijing, even separately from Washington. For example, in September 2020, at a time when the Trump administration had largely withdrawn from climate discussions, the EU successfully pressed Beijing to adopt a 2060 carbon neutrality target and to severely curtail its funding for overseas coal power plants.

China’s interest in the EU arguably stems from the Union’s economic heft and potential as a counterweight to the U.S. The union of 27 countries has a massive aggregate economy of over $15 trillion — bigger than China’s. As the European Commission (the EU’s administrative arm) has explained: “China matters to the EU, and the EU also matters to China” in trade and other areas. Last December, Brussels and Beijing announced an agreement in principle on an expansive trade and investment agreement, overriding objections from the incoming Biden administration. As I wrote back in March, U.S. pressure on China through the Pacific or Asia will have limited impact if China can merely turn westward to the massive EU economic bloc.

Germany, the EU’s largest economy, wants strong relations with China, its most important trading partner. Germany’s Foreign Office affirms that it “advocates substantive and reciprocal relations between the EU and China,” even as it cites major concerns about China’s human rights record.

France, for its part, has a long tradition of seeking to be independent from the U.S. in its diplomatic efforts, including specifically in its dealings with the People’s Republic of China, which Paris recognized many years before Washington.  Unsurprisingly, Paris has been pushing for greater EU autonomy from the U.S.

The prospects for the EU to actually implement a path on China separate from the U.S. are also now greater than in previous times, in part because the years of attacks on Europe by the Trump administration led the EU to question U.S. leadership. Led by France and Germany, the EU began to explore a “strategic autonomy” separate from the U.S.

That tendency quieted as the Biden administration assumed the reins of U.S. diplomacy, guiding the country to a more cooperative approach with the EU, including specifically with regard to China. Arguably influenced in part by the renewed U.S. relationship, the EU’s own dealings with China (including specifically on the proposed trade deal) floundered. This was also in large part the result of EU concerns regarding China’s human rights record, which led the EU to freeze further negotiation of the trade agreement.

But the submarine deal, and its disregard for key EU interests, will likely seem more reminiscent for some in Europe of the antagonism of the Trump years than the friendly overtures of the initial months of the Biden administration. Even the visible role accorded the U.K. by the U.S. on what is a Pacific-oriented deal far from London may be received in Brussels, Paris and Berlin as unnecessarily antagonistic: It supports Boris Johnson’s efforts to try to demonstrate that a Britain freed of the EU can be a world leader, and it thereby weakens EU efforts to dissuade other countries from departing the Union.

So, what does this all potentially mean? First, the EU may prove to be a less willing partner for the Biden administration on a variety of fronts, which are difficult to predict. Second, as President Biden looks to demonstrate the power of democracies over autocracies (e.g., by convening his summit on democracy designed to counterbalance China), he may find the EU’s largest liberal democracies less willing to follow a U.S. lead.

Third, and perhaps most importantly, strains with the U.S. could lead to a rapprochement between the EU and Beijing. However, this is only likely if China takes action to address the EU’s “serious concerns about the treatment of ethnic and religious minorities [and] the situation of human rights defenders.”  Just as President Xi’s recent announcement to end China’s overseas coal financing responded to EU concerns on climate, could there be action at some point by Beijing on human rights? Can Beijing succeed in re-activating trade and other discussions with the EU notwithstanding U.S. concerns?

Yes, the pivot to Asia and the Indo-Pacific makes sense, and Australia is an important U.S. ally, but managing China also requires the EU. Following the Australia submarine deal, Washington has much more to do in Europe to protect its efforts on China.  

Philippe Benoit has over 25 years of experience working in international affairs, including at the World Bank in Washington and other roles in Europe. He is currently managing director at Global Infrastructure Advisory Services 2050.