Has Ursula von der Leyen seen the light on China?

Spectator

5 hours ago

Coming from an American politician, the accusations would have been unsurprising. Beijing is unwilling to 'live within the constraints of the rules-based international system' and its trade policy is one of 'distortion with intent'. It splashes subsidies with abandon, undercuts intellectual property protections, and as for China's membership of the World Trade Organisation (WTO), that was probably a mistake too.
It is bold of von der Leyen to raise the WTO, and it will be intriguing to see how she is greeted at the EU-China leaders' summit
Yet this tirade came not from an acolyte of Donald Trump, but from Ursula von der Leyen, the president of the European Commission during this week's summit of G7 countries in Kananaskis, Alberta. 'Donald is right,' she said during a roundtable. Could there have been something in that Rocky Mountain water? Or was this all a devilish ploy to curry favour with Trump and thereby secure a favourable trade deal with the US? After all, it will not have gone unnoticed in Brussels that the US-UK trade pact contained security and other provisions clearly aimed at excluding China from sensitive supply chains and cutting edge tech.
But it wasn't only her words. The EU has also scrapped a key economic meeting with Beijing, which was to have been held ahead of an EU-China leaders' summit in the Chinese capital next month, citing a lack of progress on numerous trade disputes. It recently restricted Chinese medical device manufacturers from access to the EU's vast public procurement market, launched an anti-dumping investigation into Chinese tires and wind turbines and refused Beijing's demands to remove tariffs on Chinese electric vehicles.
The truth is that Brussels has lost patience with China, and the famous EU fudge is (at least for now) being jettisoned for a far more robust approach to what EU officials see as China's serial rule-breaking. Beijing's recent restrictions on the export of critical minerals, which threatened to bring the continent's motor industry to its knees, have been a painful reminder of the EU's dangerous dependencies and Beijing's willingness to weaponise its supply chains.
The EU's trade investigations are being carried out under a new Foreign Subsidies Regulation, which unusually for the rather pedestrian EU bureaucracy is fast, focused and – so far – exceedingly effective. If a foreign-owned company bidding for a contract or involved in a takeover is suspected of unfair subsidies, the EU can demand detailed business information. Last year, the Dutch and Polish offices of Nuctech, a Chinese security equipment company, were raided by EU competition regulators, acting under the new powers. A Chinese railway equipment manufacturer pulled out of bidding for a large contract in Bulgaria, preferring not to hand over data that would almost certainly have revealed wads of subsidies.
In spite of these growing tensions, Beijing believed it could use Trump's tariff war to prize away Brussels from Washington – a long-standing goal of Chinese policy. To this end, in late April it announced it was lifting sanctions it had imposed on members of the European Parliament in retaliation for EU sanctions on Chinese entities accused of human rights abuses in Xinjiang. President Xi Jinping also launched a charm offensive, calling for unity in the face of coercion and presenting himself as an upholder of free trade. This has backfired, being seen widely in Brussels as laughable hypocrisy.
Looming large over EU relations with China is Beijing's support for Vladmir Putin, which is felt much more profoundly in European capitals than in Washington. But Brussels has also been willing to call out China on a range of security issues. These include the blacklisting of Huawei lobbyists earlier this year following allegations of bribery linked to the tech company's activities in Brussels. Germany has accused China of being behind a cyberattack on the federal cartography agency for espionage purposes, and the Belgian intelligence agencies have investigated Alibaba for 'possible spying and/or interference activities' at the cargo airport in Liège.
It should not be forgotten that the term 'de-risking' in relation to China was first popularised by von der Leyen. She introduced it in a March 2023 speech to the Berlin-based Mercator Institute for China Studies. She said it meant being clear-eyed about China's growing economic and security ambitions. 'It also means taking a critical look at our own resilience and dependencies,' she said. 'De-risking' was soon adopted in other Western capitals, replacing the more clunky 'decoupling'. De-risking sounded more nuanced – a more orderly form of decoupling. It was vague, slightly murky, and open to interpretation. But therein lay its strength. It could be dialled up or down according to the circumstances, a flexible tool, with which few could disagree. It seemed like plain common-sense, which is probably why it so irked Beijing. 'It is just another word game. It will not change the 'ostrich mentality' of some countries to escape from the real world,' snarled the Global Times, a state-owned tabloid, at the time. When von der Leyen travelled to Beijing with French President Emmanuel Macron a week after her speech, Macron was given the red carpet treatment while the EC president was largely cold-shouldered in what was interpreted as a calculated snub.
During this week's G7 meeting, von der Leyen said: 'We strongly feel that the biggest challenges are not the trade between G7 partners. Rather, the sources of the biggest collective problem we have has its origins in the accession of China to the WTO in 2001'. China's membership of the WTO is widely seen as a high point of western delusion about China. Beijing promised to improve the rule of law, to protect intellectual property rights, cut import tariffs, give greater access to its market, liberalise controls on its exchange rate, scrap trade barriers and much more. Few of these ever happened, or where one barrier was removed, another was erected. China has clung to the privileges of a 'developing' country. It has never provided a level playing field for foreign companies but was able to flood the world with its own cheap exports, while western companies flocked to outsource production and supply chains to Chinese factories, hollowing out manufacturing throughout the West. This led inextricably to the dependencies the West is decades later trying to unwind and has fuelled populist anger in developed economies.
It is bold of von der Leyen to raise the WTO, and it will be intriguing to see how she is greeted at the EU-China leaders' summit, tentatively set for late next month to mark 50 years of bilateral relations. Few will be in celebratory mood, and Xi will probably concentrate on individual European leaders, believing he has greater influence with them than with the European Commission president. His main miscalculation has been to believe he can leverage the distrust of Trump to China's advantage, because while it is true that Trump is haemorrhaging trust, the grim truth for Xi is that Beijing never enjoyed much trust in the first place.