ERC STG

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

Since 2018, I have been preparing for the Starting Grant of the European Research Council with a project entitled, ‘Europe’s Challenges and Responses: Between Faustian Bargains with China and U.S. Pressures since Brexit’ (EUCHRECUS). The conflict between the U.S. and China is exacerbated in all areas of geopolitics and geoeconomics – notably in high-tech. Europe is not alone in having to come up with an answer. As a political economist studying country responses to pressures, I thought it would be worthwhile to move the stage to Europe, compare the institutional variances in the policymaking vis-a-vis the U.S. and China, and compare them in a cross-regional perspective with East Asia’s high-tech exporters – South Korea, Japan and Taiwan. In high-tech, while The UK and French governments have decided on a Huawei phase-out by 2027 and 2028, respectively, Italy has opened doors to China’s BRI and Germany remains undecided. The EU has not completely shut out Huawei from its continent.

This project is intended to be a multi-year investigation combining data collection and visualization, and fieldwork in the countries of study. The main contribution of this project would be closing the gap in the IPE literature on Europe and Asia, which are very much separated and detached in terms of area based on region. Comparative aspects of country responses to the U.S.-China conflict in the areas of trade, tech, and energy. The application for ERC funding will occur in early 2022 with a project timeline of 2023-2028, but the data collection has begun already as the Biden administration in the U.S. begins to take shape. The data being collected are on the following components of trade, tech and energy conflicts:

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 Privacy: 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:

  • European Research Council (ERC) Starting Grant (for application in April 2022) under Horizon Europe: The Next EU Research & Innovation Program (2023-2028). Social Science and Humanities – Panel SH2: Institutions, Governance and Legal Systems (Political science, international relations, law).

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