How Europe Is Navigating a Fraught U.S.-China Relationship

Last weekend, spy chiefs and defense officials from around the world descended on Singapore to attend the Shangri-La Dialogue, Asia’s biggest annual security conference. The U.S. delegation was led by Defense Secretary Lloyd Austin, who asked for a bilateral meeting with China’s new defense minister, Li Shangfu. The request was denied, perhaps in part because Li has been sanctioned by Washington for his role in the purchase of military equipment from Moscow.

Over the course of the three-day summit, which I attended, Li and Austin didn’t speak with each other; they spoke at each other. In dueling speeches, Austin summoned the usual Washington buzzwords—a “free and open Indo-Pacific”—and made the point that talks with China were necessary, not a bargaining chip. When Li’s turn came, he responded with familiar Beijing-speak, criticizing Western hypocrisy and Washington’s growing security partnerships in Asia.

But while China shut the United States out, it welcomed talks with Europe. EU foreign-policy chief Josep Borrell, German Defense Minister Boris Pistorius, and British Defense Secretary Ben Wallace all secured bilateral meetings with China’s Li.

The Singapore summit underscored how the U.S.-China relationship was different from that of Europe’s relationship with China, its biggest trading partner. But what is the substance of those differences, and will Beijing try to exploit them? On the latest edition of FP Live, I spoke to Cindy Yu, an assistant editor at the Spectator and the host of its Chinese Whispers podcast, and James Palmer, the writer of FP’s weekly China Brief newsletter. FP subscribers can watch the full video in the box above. What follows is a condensed and edited transcript.

Ravi Agrawal: Cindy, when Li agreed to meet his European counterparts despite blanking out Austin, how do you think that message was received by European leaders?

Cindy Yu: European leaders are seeing that by not having such a harsh rhetoric toward China, and not going as far with sanctions as the United States has, they’re getting results. There’s also wariness in Europe that China tries to drive wedges between Western unity.

RA: James, the Biden administration seems to have softened its China rhetoric just a little bit, switching from using the word “decoupling” to adopting “de-risking” in framing its approach toward Beijing. What did you make of Austin’s speech in Singapore in that regard?

James Palmer: It didn’t seem to be as strong a thrust toward reconciliation. This points in part to a real divide between the security side of the U.S. system and the trade or diplomacy side. The security and defense concerns are still so acute, and the feelings about China so intense within the establishment at the moment, that that overrides the general push toward outreach, trying to get diplomatic talks back on track.

RA: Cindy, one of the bigger recent points of departure in U.S.-Europe China policy was when French President Emmanuel Macron visited Beijing with dozens of CEOs in tow. Macron has long been talking about a more independent European foreign policy. What did you make of the Macron visit?

CY: Macron was harder in his rhetoric against the United States than he was against China on that visit! He said France mustn’t be a vassal state of U.S. foreign policy.

The question for Europe is very difficult at the moment. The U.K. has left the European Union, and the current prime minister in the United Kingdom is very much aligned with the United States on China. But the idea that the European Union can have a truly united foreign policy might be expecting too much of what the structure was made to do. It was interesting that in the planning for the meeting between the Chinese Premier Li Qiang and German Chancellor Olaf Scholz, Scholz’s team have said no to having any Brussels presence at the meetings. They didn’t want the EU involved in the meeting coming up next week.

Rhetorically, there is a lot of alignment between Europe and the United States. Many Western actors believe that you cannot cut out China completely. You can’t decouple completely. European Commission President Ursula von der Leyen’s phrase of de-risking has now become very popular here and across the Atlantic. But what does that actually mean in practice? Does it mean that you can do technology transfers into China? What are the critical supply chains that you want to wean yourself off? What is the rhetoric surrounding human rights issues? There’s a lot of disagreement on all of it.

The massive thorn in the side for unity on China is the Inflation Reduction Act (IRA). A lot of Europeans are incredibly unhappy about what the Biden administration has done with the IRA. That is just another reminder for Europeans that actually, too often, they are collateral damage when it comes to an “America First” approach, even when it comes to China.

RA: James, how did Washington view Macron’s visit to Beijing, and has the White House ever expressed displeasure?

JP: There’s a certain level of tolerance of the French for being French. The attitude I encountered most often in talking with the administration about it was “well, what do you expect of the French?” If Germany or the U.K. did that, there would be much more genuine hurt and outrage in Washington. Because France has always had this Gaullist, independent approach to foreign policy, the Americans take it a little better.

RA: Cindy, Europeans were using the word “de-risking,” and now the United States seems to have adopted it too. How do Europeans see the difference between that and “decoupling”?

CY: The idea of decoupling was always a bit of a straw man. It was never going to be possible to cut China out of the European supply chains. European leaders always realized that, regardless of how hawkish or dovish they were on China. Even the most hawkish prime minister that the United Kingdom had, Liz Truss, said that we had to work with China on certain things.

There’s a pragmatic acceptance that decoupling does not work. If you look at trade between China and the EU, it is still increasing. In the United Kingdom, it’s much more about critical supply chains; the British have basically kicked Huawei out of the British telecommunications network, but the Germans haven’t. There’s a disunity at the moment over semiconductors and batteries for electric cars.

RA: James, tell us how the idea of decoupling began on the U.S. side.

JP: It’s originally a Trump administration notion, this idea that you could sever the economic connections with China, which would then give the United States much more strategic space to act and would also revitalize the U.S. economy through domestic manufacturing.

It’s worth noting that none of that happened. Trade with China increased and has continued to increase. There have been targeted measures at specific parts of the Chinese economy, most notably chips. Overall, trade was hit by the COVID-19 pandemic, but policy does not seem to have had a huge impact on it. We’ve seen a certain amount of people reshoring from China, but U.S. businesses are still in China in a vast scale. Decoupling was always a dream or an ideal for U.S. politicians. That has been very hard to make happen in any way, because U.S. business is a very powerful force and still sees massive advantages in China and is very unlikely to rule China out entirely without some kind of catastrophic event.

RA: Let’s move to de-risking. Cindy, Ursula von der Leyen was one of the early proponents of the term, and it became more popular during the pandemic for other countries, as COVID cut off people’s supply chains and forced companies and countries to think about managing risk. In recent months, de-risking has also been adopted by several other Biden administration officials, the likes of U.S. Trade Representative Katherine Tai on this program, and others.

How do you think Europeans are viewing this shift in tone from the Biden administration?

CY: The Americans starting to talk about de-risking almost doesn’t make much of a difference to policy. The Biden administration has started talking about it in the last several months, but before that, it was the Inflation Reduction Act and the CHIPS Act. All of these things have implications for European companies. So, is any of that going to change? And if not, then how is de-risking different from decoupling? I think a lot of European governments are still waiting to see.

RA: James, do you think this is because the Biden administration hasn’t done a good enough job of signposting the difference between decoupling and de-risking?

JP: They’re trying to thread the needle between their strategic goals and not making U.S. business completely panicked. A lot of this is about appeal to the Europeans. They chose the term de-risking expressly because von der Leyen used it. They wanted to show the Europeans they were listening. I don’t think they have a clear strategic plan, but rather that there are about a dozen people who are influential inside the administration who each have their own strategic vision on China. A certain amount of ambiguity and mess comes out of that. People mean very different things when they use the term de-risking. Some people are using it essentially as cover for decoupling. Some people are referring to very targeted supply chain issues. Some people don’t really want to do anything but want to seem as though they’re doing something.

We shouldn’t expect coherence on China policy when the United States is inherently incoherent on it, and it’s likely to be incoherent for a long time to come because of the nature of the U.S. system. There is a realization from some of the more tuned-in people that the only way you get decoupling or de-risking to work is by getting the Chinese paranoid enough that they start implementing domestic measures that alienate foreign businesses, and we’re already seeing that happening. We’re already seeing Beijing get much more worried about spying, about infiltration, about ideological pressure, and that, to some degree, has really weighed on foreign businesses even more than any U.S. measures have.

RA: It seems that part of the United States’ policy is to contain China. The idea of containment scares the Asians that I spoke to at the Shangri La Dialogue in Singapore, because they want a growing China that lifts up other economies in the region and improves their trade outcomes and the global economy as a whole. How is the idea of containing China seen in Europe?

CY: As James said, no one likes to use the C-word or admit that containment is an approach. When you look at things such as the AUKUS security pact or submarine deal between the United Kingdom, Australia and the United States., it’s hard to think it’s not containment, even if the U.K. foreign-policy establishment won’t admit that. When it comes to continental Europe, which still wants to do much more trade with China, there are similar concerns as those Asian countries. What I’m hearing from embassy representatives is that there’s much more ambivalence there and much more thinking that China’s very important to our economic growth at the moment, so how can we retain that?

The other reason that people don’t like containment is because it seems that you have to choose one or the other. For Southeast Asian countries especially, they benefit from trading with both sides. But if the CHIPS Act or the IRA are a sign of things to come, countries are going to find it very difficult to be nonaligned in the future without taking some kind of economic damage. That’s what we’re finding in Europe and Asia.