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| Stuck in a 'triangular relationship' with the US-China, how can the European locomotive escape? (Source: politico.eu) |
Did the recently concluded G7 summit in Hiroshima, Japan achieve its goal of creating a stronger alliance than ever to counter China?
But in fact, Germany has always felt pressured by this “triangular” relationship. The world’s fourth largest economy and also the locomotive of Europe, is still trying to find its own way in the economic conflict between two giants, one side is the world’s number 1 economy - China and the other side is the number 1 economy - the US.
Europe is "stuck", Germany is in a difficult position
For US President Joe Biden, demarcating the border with China is the focus of the G7 Summit and he has high expectations for this from allies, especially Germany and the European Union (EU).
According to a senior US government official, before President Joe Biden leaves for Japan, his goal is for the G7 to "agree on principles in relations with China".
According to Inu Manak, a trade expert at the Washington-based Council on Foreign Relations, the US government is very clear about its direction in dealing with China. The task of the head of the White House now is to attract the participation of international partners.
Meanwhile, on the German side, in Hiroshima, German Chancellor Olaf Scholz said that "decoupling" from China was not a vision pursued by the countries attending the summit. The G7 only wants to organize global trade relations in a way that members do not become too dependent on one or a few individual countries.
Therefore, the keyword "risk mitigation" plays a very important role in ensuring economic security, especially related to supply chains, investment relationships and technological security.
In Germany, there are growing concerns that Europe’s “engine” economy will be caught in the crossfire between the world’s two superpowers. In the run-up to the summit, German government representatives stressed that, in no case should the conference create the impression of an “anti-China alliance.”
Brussels is preparing to deal with the rising tensions with Beijing, but EU countries have yet to agree on a common strategy. French President Emmanuel Macron recently called for the EU to reduce its dependence on the US, a call that has drawn criticism from EU countries.
At the G7 Foreign Ministers’ meeting before the Summit, the parties quickly agreed that China is a “threat” to security in the Indo-Pacific region. This meeting of G7 leaders in Hiroshima focused on discussing the foundations of global trade relations, economic interdependence and the question of how to reduce dependence on China without causing damage to the G7 countries themselves.
Berlin, for its part, is being cautious in its approach. The German government does not want to join the US export ban on chemicals used in chipmaking. According to the German Ministry of Economic Affairs and Climate Protection, for the sake of workers, it is necessary to avoid hasty and thoughtless severing of trade relations with China, because after all, China remains Germany's most important trading partner.
Germany and some EU members also expressed reservations about the European Commission's (EC) new sanctions plan targeting a number of Chinese companies suspected of supplying dual-use products to Russia.
"Border demarcation" - Germany's obsession
The US has taken the lead in taking a hard line against China and has been constantly pressuring its allies on this.
Last fall, Washington announced its most sweeping and comprehensive set of controls on high-tech exports to China to date, based on concerns that China would use advanced US chips for military purposes, such as weapons manufacturing and military logistics.
Japan and the Netherlands have joined in the curbs. The US government is also said to have asked South Korea to ask its major chipmakers to limit exports to the Chinese market.
A new phase of “demarcation” has begun since the G7 Summit, as the flow of investment capital between the world’s two largest economies will no longer be as smooth as before. The White House plans to soon announce measures to control foreign investment, also known as foreign investment screening regulations.
Once again, Berlin is “in a difficult position”. During the preparation for the G7 Summit, Washington representatives are said to have made it very clear to the German Chancellor that this topic is “of great importance” to President Biden.
To convince Germany, US Treasury Secretary Janet Yellen said that the planned US controls would be limited to a number of areas that directly affect US national security, such as chips, artificial intelligence or quantum technology. She affirmed that such a mechanism would only be effective if allies and partners participated.
Faced with this persuasion, trade expert Inu Manak said that German and European businesses will certainly have to prepare for far-reaching consequences. It is likely that any company could be affected by Washington's new regulations. Above all, European companies that have invested heavily in the US will certainly be subject to a "screening mechanism" if they invest in China.
EC President Ursula von der Leyen has expressed support for such a mechanism. However, its implementation in Europe has been met with many obstacles and controversies. Even within Germany, where the federal government has expressed skepticism, recently the Minister of Economics and Climate Protection Robert Habeck has unexpectedly voiced support for this measure.
German diplomats have always felt pressured by the special relationship. One of them said that the US side brought up China in every discussion with the German side; it was “almost an obsession”. It also met with great skepticism from German businesses.
A German business representative has warned that any sanctions by Washington against Beijing would have a potential impact on German companies operating in China.
If Beijing reacts violently, it could hurt not only American businesses but also other Western investors. China recently sanctioned two American arms manufacturers, Lockheed Martin and Raytheon, and opened an investigation into American chipmaker Micron.
The German government is also concerned about a "diplomatic ice age", with the lack of communication between the US and China only exacerbating the problem.
In Washington, faced with similar concerns, the Biden administration has had to take steps to calm public opinion. Accordingly, Washington said the goal of the US's China policy is to "reduce risks" from China, not to completely "decouple" from the country economically.
Observers have also commented that EC President von der Leyen and German Chancellor Scholz are increasingly using this term - simply "risk reduction" - more frequently.
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