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Why are the core economies of Europe – Germany, France and the UK – in dissonance on encountering China?

Under Trumpism, are they on the same page on their relationship with the U.S. or do they differ? If they do not, how do they vary in their alignment with the U.S. (UK>Germany>France)? How do their behaviors influence the livelihood of European citizens and the integrity of the European Union, amidst several factors that are shaking the foundations of the EU (i.e., refugee crisis, religious extremism, populism)? What kind of impact may potential reckless decisions by different European states on the US and China – inflict on the values of democracy and the rule of law, the core values upon which the European Union was established? And finally – what can be done about it?

Beyond the obvious reason that the three countries are the major economies of Europe, additional reasons account for the selection of these three countries. The three countries have worked together across several different policy issues and have acted in unison on foreign policy in strategic and economic contexts, i.e., during the Ukraine Crisis in 2014, which entailed Russian annexation of Crimea, and the signing of the Joint Comprehensive Plan of Action (JCPOA) with Iran in 2015. The variation of policy responses by the three European states would be worth observing at a time when there is a variation of behavior on issues of alignment with the U.S. (UK>Germany>France), Europe’s longtime ally, of political integration in Europe in the name of pro-‘European Strategic Autonomy’ (UK<Germany<France).

As a political economist who has witnessed China’s realization of its foreign policy aspirations via economic means for the past decade, I feel a sense of duty to raise awareness to European scholars and policymakers through my project. While conducting research on my first project, I experienced difficulty voicing such concerns to academics and policymakers who simply did not want to rule out China for economic reasons. Such debates are now heighted by disappointing behavior by the U.S. on several issues that it had been cooperating on with Europe (i.e., Russia, NATO, JCPOA, climate change, etc). At such critical juncture, European leaders – particularly those in Germany, which plays a central role in the EU – seem unable to reach an inner consensus on the assessment of potential security risks that would be embraced by the region by embracing China. Europe may benefit from witnessing what backlash East Asian neighbors have experienced in their interactions with China in the previous decade (i.e., export restrictions on rare earths, THAAD retaliation on South Korea, Hambantota Port deal in Sri Lanka, etc).

Complexities arise in the region due to the UK-EU Brexit negotiations until the end of 2020, and potential U.S. bilateral negotiations with the UK, while the U.S. negotiations with the EU on the Transatlantic Trade and Investment Partnership (TTIP) negotiations came to a standstill in 2016. What lies ahead of us – especially in the case the Trump administration manages to stay in power beyond 2020 – is continued unrest in international trade albeit the Phase One Deal reached by the U.S. and China, tech competition between the U.S. and China, as well as the jostling for power by the U.S., Russia and China in the global energy market.

On Trade – Power in Global Markets 

  • Trade Remedies (EU TBR), Tariffs and FTAs: The EU has thus far exercised its trade remedies (trade barrier restrictions or TBR, i.e., antidumping, countervailing duty and safeguards) in defensive rather than offensive mode in terms of retaliation against a trading partner. As EU-U.S. trade frictions mount into the coming years, it remains to be seen whether the preexisting competition in the areas of civil aircraft (Boeing vs. Airbus), agricultural goods, or intellectual property may lead to dissonance between them, and the UK-U.S. trade negotiations would serve as a good litmus test on how the UK would approach its future bilateral trade negotiation with China. In unravelling each of these cases, identifying the core dominant player(s) and the policy preferences from each country’s political system would be key.
  • WTO Reform and Dispute Initiation: The U.S. has deviated from the existing WTO Dispute Settlement System by not appointing the Appellate Body judges and calling out its behavior as overreach in dispute settlement. The EU and China are trying to salvage the system.
  • Maintenance of the Euro after Brexit: In the aftermath of the Eurozone crisis and the internal economic divide in Europe, the post-Brexit values of the positions of the British Pound, the Euro, and the U.S. dollar remain to be seen in the global financial system. How the renminbi is valued vis-à-vis these key currencies would be very critical. The introduction of a digital currency by the People’s Bank of China may also divide currency transactions.

On Tech – Digital Politics 

  • Data Protection: There is a significant degree of difference in the levels of digital privacy laws in the U.S. and Europe. The enforcement of the General Data Protection Regulation (GDPR)  manifests the European intent to guard personal information in all economic transactions and activities in cyberspace. There is a big possibility that in the event of a U.S.-EU trade negation, the U.S. would require a digital services agreement as it has signed with Japan. It remains to be seen whether the EU and the UK would be able to resist such pressures. Under such cases U.S. IT companies would requires further access to EU and/or UK data of its citizens to provide digital services.
  • U.S. Campaign against Chinese IT technology: The UK, France and Belgium have in turn announced a phase-out of Huawei equipment in their 5G network infrastructure in the near future (UK-by 2027, France-by 2028, Belgium-2021). While NOKIA and Ericsson would be poised to become the European champion in the 5G roll-out in the European region, it remains to be seen whether Germany and the European Union would strictly ban Huawei.
  • Digital Taxation: The demand by French president Macron for digital taxation on the big four U.S. IT companies was met with the Trump administration’s intent to retaliate with tariffs on agricultural goods (i.e., wine) from France. This debate has been delayed temporarily but would be ultimately resumed.

On Energy – Sustainable Markets

  • Climate Change: Achieving the target goals for CO2 emissions through various means of low carbonization or decarbonization has been fairly important for Germany and France. The lesser use of fossil fuel, the banning the use of plastics and further inclusion of renewables signal to this drive for change, but France and Germany are energy scarce and such moves may not be enough. The partial return to nuclear energy use by France and potentially Germany may entail further business interactions with nuclear power plant (NPP) hardware and fuel cycling service providing states – U.S., Russia, China.
  • Nuclear Power Plant Bidding: Russia, China, U.S., France and South Korea are currently in the running for the Saudi Arabia nuclear power plant bidding process. The latest information on the tender is that Rosatom’s bid is quite flexible and entails offers other than nuclear energy (i.e., gas), the Saudis want to enrich uranium and do not want to sign the Section 123 of the U.S. Atomic Energy Act (meaning they would likely not follow the classic Gold Standard as the UAE has with the South Korean bid), and China has acquired a huge reserve of uranium in Tal Asfar, Iraq. Depending on how Russia, China, U.S. and France vying for NPP bids).
  • Natural Gas Procurement: Shale fracking companies have begun to go bankrupt due to the relatively low price levels of natural gas after the shale gas revolution. The U.S. natural gas industry is eyeing Asian markets and the Trump administration has pressured China, Japan, and South Korea for long-term contracts. But in Europe, and it remains to be seen how Europe would respond as a traditional customer of Russian gas, as this would create a direct competition between the U.S. and Russia in Europe, in addition to the tension involving the control over Arctic shipping lanes for LNG shipment.

Current Fellowship for the project:

Upcoming Funding Applications for this project:

Social Science and Humanities – Panel SH2: Institutions, Governance and Legal Systems (Political science, international relations, law).

Potential Host Institution for Partnership in the EU for the ERC Starting Grant:

  • WZB Berlin Social Science Center (Wissenschaftszentrum Berlin für Sozialforschung)