How should Biden respond to the EU-China deal?

The United States has been transfixed by President Trump’s efforts since Nov. 3 to overturn the results of the presidential election, but America’s friends and adversaries alike are moving to position themselves for the Biden administration.  

This will constrain the 46th president’s room for maneuver — an example is the agreement in principle between the European Union (EU) and China on a Comprehensive Agreement on Investment (CAI), concluded in the last days of 2020. The successful push to conclude the CAI (largely led by German Chancellor Angela Merkel) took many by surprise, because just a few months earlier it was foundering on concerns about China’s international assertiveness and doubts in Europe about the wisdom of tying the EU’s fate more closely to Beijing. Washington should resist the temptation to try to scupper the deal by exploiting divisions in Europe; instead, it should develop a positive agenda with the EU that focuses on achievable priorities in an effective China approach.

Transatlantic politicians and analysts have been placing increasingly large bets on a comprehensive transatlantic China policy that would rein in Beijing’s coercive ambitions and restore Western solidarity. This bubble of inflated expectations was burst by the CAI/ Then-Deputy National Security Adviser Matthew Pottinger asserted that Washington was “perplexed and stunned that the EU is moving towards a new investment treaty right on the eve of a new U.S. administration.” Is the transatlantic renaissance over before it even got started? 

No. Obituaries for a U.S.-EU China policy that never was are premature. The deal certainly complicates the forging of a collaborative China policy, but it is only a strategic blow against transatlantic cooperation if the Biden administration and Europeans let it become one. 

The apparent flaws of the agreement are many, such as the absence of binding labor commitments that would create a more level playing field — doubly astonishing given the practice of forced labor in Xinjiang among other troubling human rights violations. The greatest long-term problem is that the CAI will accelerate the integration of leading European firms into China’s tightly controlled digital ecosystem. Over time, that dependence will limit Europe’s ability to collaborate with the U.S. on setting international standards in the most innovative parts of the global economy. Germany, for example, will become increasingly vulnerable to pressure on a small number of large, politically influential domestic companies that depend heavily on the Chinese market.   

The U.S. needs collaboration, not spats, with a strong Europe

The first task is to maintain perspective. The Biden administration must deal with a disadvantageous development (incoming National Security Advisor Jake Sullivan signaled to the EU not to rush the deal, a plea that was ignored in Brussels and Berlin). But there is also a bipartisan foundation for stronger partnership with Europe, as the recent report by the Republican majority on the Senate Foreign Relations Committee makes clear. Some Republicans may try to brand Biden’s administration as soft on China, echoing Trump’s campaign rhetoric and generating escalatory pressures to act not only against Beijing, but also to twist the arms of American allies in Europe. This approach has been corrosive and unproductive during the Trump administration and should be resisted. While there is bitter disappointment with the CAI, the dreams of the U.S. and Europe moving in lockstep with China without any need for U.S. flexibility or compromise were unrealistic. There is a benefit in dispelling these illusions at the start of Biden’s term in order to develop pragmatic and sustainable pillars of a shared approach to China.

Second, the United States should not make blocking the EU-China deal a priority. There are divisions in the EU over the CAI, with Italy, Poland, Belgium and Spain unhappy about Merkel’s 11th-hour efforts to gain political endorsement from EU member states. American diplomacy is skilled in exploiting these divisions. But a campaign against the deal would have serious negative consequences, feeding suspicions about American intentions to prevent European unity and eroding the basis for cooperation across the board. Europe may have made a bad decision, but U.S. energies should be dedicated to creating a positive agenda rather than rolling back European sovereignty.

Third, the European Parliament’s ratification process will last several months — and once the final text of the CAI is presented there will be intense analysis, with concern over human rights, China’s goal of technological dominance and the impact on European competitiveness. The Biden administration should engage openly with European audiences to explain U.S. priorities but not make ratification a proxy for the health of the transatlantic relationship. If the CAI is eventually rejected, it must be (and be seen to be) entirely a European decision.

Fourth: Merkel’s tenure as chancellor will end in 2021, and the next chairman of her Christian Democratic Union (CDU) is being chosen this month. The emerging generation of political leaders in Germany in all the mainstream parties — especially the CDU and the Greens, likely participants in the next coalition — takes a much more skeptical view of China’s ambitions for global influence and its use of coercion and they are developing a different understanding of German interests. Similarly, the European Commission has defined its priorities for transatlantic cooperation with the Biden administration.  Most of the ideas on offer address China’s role directly or indirectly and provide a substantial basis for hammering out a shared strategy on trade, technology and standard-setting, along with a focus on the Indo-Pacific. Rather than nursing a grudge on the CAI, the United States should seize these new opportunities with Germany and the EU.  

The EU’s investment agreement with China is a reminder to the United States that its era of unilateral dominance is ending, and Washington must prioritize and build effective policies with the advanced democracies, first and foremost in Europe. This must be defined positively as a partnership on trade, innovation and high standards rather than recriminations with Europe. With the right focus, it is still within the grasp of the transatlantic community to build a coherent approach and shape the international political economy to advance the values of market economies and open societies.

Jeff Rathke is the president of the American Institute for Contemporary German Studies at Johns Hopkins University.