Amid titanic US-China clash, Europe must make its own plans quickly
- While the US and China settle in for a drawn-out economic war, Europe and its industries are unlikely to be able to afford the luxury of toughing it out
- Simply put, China makes the goods and America makes the dollars – where does that leave Europe?
Last month, Admiral John Aquilino, the outgoing commander of US forces in the Indo-Pacific, told the House Armed Services Committee that China was part of a group of countries that he warned was a nascent “axis of evil”.
Yellen, a long-time advocate of free and open trade, has changed her mind about Chinese exports, according to a Wall Street Journal article published on the same day she arrived in Guangzhou to kick off her China visit.
She is quoted as saying she “grew up with the view: If people send you cheap goods, you should send a thank-you note” and “that’s what standard economics basically says”. But now, she says, “I would never ever again say, ‘Send a thank-you note’”.
Such disagreements, in themselves, should not be a big deal. This kind of economic warfare is now a matter of course in the US-China relationship and new narratives will continue to emerge, given Washington’s “compete, confront, cooperate” dictum regarding China and Beijing’s reciprocal tactics.
But while the US and China are settled in and braced for economic warfare that is likely to be long and drawn out, the situation is different for Europe.
Europe finds its welfare at stake but does not necessarily have the luxury of toughing it out like the US or China. The US-China economic warfare has grave ramifications for the future of European industry.
EU has reason to keep things sweet with China despite protectionist rules
I recall my experience of a 2019 seminar in Brussels organised by Bruegel, a European economic think-tank, which discussed the European Union’s strategy in a challenging world. My takeaway was that the EU elite had on their minds, chiefly, three perceived external challenges: the United States, China and the internet juggernauts that largely originated from these two countries.
And this was when the EU could still take for granted the energy supply from Russia as well as the Russian market.
Unless the EU is resigned to being America’s follower, pitting itself against China at all costs, and at its own cost, the Europeans need to act quickly to put Europe back in one piece. The EU needs to start by ending the bloodletting in Ukraine, and not only find a way to return to the days of Russian gas-and-oil-based manufacturing prosperity but also take significant steps to integrate itself back into the Russian consumer and talent market.
This is OK – as said earlier, the battle over Chinese overcapacity is merely the latest round in a drawn-out wrestling match between two economic giants that are well provided for. Europe, however, can hardly afford not to act with haste. Simply put, China makes the goods and America makes the dollars – where does that leave Europe?
Terry Su is president of Lulu Derivation Data Ltd, a Hong Kong-based online publishing house and think tank specialising in geopolitics