Why Europe’s China deal will poison transatlantic relations

Joe Biden’s election as president of the United States triggered a burst of enthusiasm in Europe for a new dawn in transatlantic relations. Too bad China has put a damper on the party.

In the wake of the Capitol Hill riots, as EU industry chief Thierry Breton called for a transatlantic alliance to regulate the digital realm, U.S. officials and European diplomats warned that the EU’s signing of an investment deal with Beijing has clouded prospects for a profound reset of transatlantic ties.

As Biden prepares to take office, Europeans have been hoping he can deliver solutions to an ongoing dispute on digital tax, address their concerns about privacy and surveillance and come up with common ways to regulate social media. They have floated a new “Transatlantic Trade and Technology Council” as the forum in which a new transatlantic compact can be forged after years of clashes over everything from 5G to spying and subsidies for the airplane sector.

But while the Europeans see such issues as being distinct from their deal with China, U.S. officials argue that they cannot be separated. Biden’s team has insisted that it will work with allies to develop common standards on technology and human rights — but only insofar as they fit into a broader strategy of countering what they see as China’s unfair market practices and human rights abuses.

Europe’s signing of a China investment deal shortly before the new year, some officials fear, will limit Brussels’ ability to wield leverage against Beijing, as it puts economic imperatives above other policy goals.

“U.S. policymakers must ask themselves what weight the EU attaches to its priorities of strategy autonomy, bilateral engagement with China and allied cooperation,” said Jeremie Waterman, vice president for China at the U.S. Chamber of Commerce. “Regrettably, [the EU-China Comprehensive Agreement on Investment] does not appear to be neutral regarding allied cooperation vis-à-vis China.”

The division comes down to what each side wants and expects from any transatlantic partnership.

For years, the EU has insisted that Washington needs to take substantial steps to safeguard Europeans’ data, roll back spying powers, define standards for artificial intelligence, work on fairer taxation of digital giants and address market distortions caused by the size and power of Big Tech — in addition to rejoining the Paris climate accord.

On many of these issues, there is hope for improvement. Biden has said he would re-enter the Paris accord, and the U.S. has withheld imposing tariffs in retaliation against France’s digital tax. There are also hints his administration could re-engage with negotiations on corporate taxation at the Organization for Economic Cooperation and Development.

Meanwhile, major antitrust lawsuits targeting Big Tech are moving ahead in multiple states, and Biden has voiced interest in improving privacy protections in the United States. It helps too that the new president has nominated a Europe-friendly secretary of state in Antony Blinken, who spent much of his childhood in Paris.

And yet the EU’s decision to rush through the deal with Beijing has raised doubts in Washington as to whether the White House will ever be able to see eye-to-eye with Brussels — and indeed Berlin — on China’s role.

Biden has made clear that, while he won’t pursue Trump’s policy toward Beijing, the country will remain a crucial focus of his foreign policy agenda. He aims to rein in the Chinese Communist Party via a multilateral approach in which the EU, as a primary ally to the United States, would presumably play a key role.

Given those objectives, which Biden’s incoming National Security Advisor Jake Sullivan hinted at shortly before the deal was signed, the China deal is damaging transatlantic relations at a time when repair work is badly needed.

Does it have to be this way?

The concerns are all the more troubling since they coincide with an upsurge of optimism from Brussels and some EU capitals toward the U.S.

Soon after Biden’s win, the EU’s top trade negotiator Sabine Weyand pitched a new “Trade and Technology Council,” in which Washington and Brussels could hash out differences on matters ranging from the digital tax to privacy and online regulation.

And on Sunday, EU industry chief Breton doubled down, calling in an op-ed for Europe and the Biden administration to “join forces, as allies of the free world, to start a constructive dialogue leading to globally coherent principles” for regulating the web.

Meanwhile, a European Commission official said that members of the Biden transition team are already in touch with counterparts in Brussels to get the ball rolling on enhanced cooperation.

It’s not hard to see why Europeans are sounding so warm and fuzzy about the Biden team. In addition to Blinken’s Europeanism, Sullivan, the national security pick, has been hammering the message that the White House will cultivate allies instead of beating on them.

On the tech front, many Europeans are rooting for Anthony Gardner, Obama’s ex-ambassador to the EU, to get the nod to head up any transatlantic task force — in what would amount to a dream team of Europe-friendly U.S. diplomats.

Already, Washington’s decision to delay tariffs in retaliation over France’s digital tax was a sign of new tone — a hint of warmer times to come.

“Their view of the world is very similar to ours,” said German conservative Norbert Röttgen, who is a candidate to succeed Chancellor Angela Merkel after the election in September, referring to the incoming Biden team. They can “bring a new energy into the transatlantic relationship,” he told a group of German newspapers in December.

Europeans hate it too

But as the new U.S. administration prepares to take office, the yawning disconnect over China has injected a chill into the expected coziness.

EU champions of the China deal, whose contents have not been made public, argue that it has nothing to do with transatlantic relations, but that’s likely to be a hard sell to a Biden administration that has placed allied efforts on China at the top of its foreign policy playbook.

To the incoming presidential team, the deal appears problematic in two ways: First, the optics suggest that the deal was wrapped up to take advantage of waning pressure over Huawei from a departing Trump administration. Second, it contains no credible leverage over Beijing on issues like forced labor, and no real mechanism to enforce what commitments have been made.

Washington can take heart in the knowledge that the China deal also has plenty of opponents in Europe — not just in the European Parliament, which could knock it dead, but also in countries like France.

“Through this deal, the EU has not only betrayed its values,” wrote Le Monde’s editor-in-chief Jérome Fenoglio in an editorial this week, “it will have done so to obtain nothing in exchange.”

In the Parliament, MEPs like Guy Verhofstadt and Raphaël Glucksmann, on the center and left of the spectrum, have vowed to block ratification of the deal over concerns about the ongoing crackdown against pro-democracy activists in Hong Kong and the treatment of the Uighur minority in Xinjiang.

“HK democracy dies before our eyes. And the priority of our dear European leaders is to sell us their investment deal with Beijing … How can [they] be so out of touch with the time?” tweeted Glucksmann, a French MEP from the Socialists & Democrats group.

But even if the deal does get torpedoed by Parliament, Biden is likely to struggle to get Europe fully behind him when it comes to Beijing. Europe is divided over China — with Merkel hard set on maintaining market access there for German cars and advanced manufactured goods.

The only thing that would change the dynamic is new leadership in Germany after the September election. But regardless of who succeeds Merkel, access to Chinese markets is set to remain a priority in Berlin. The question is — at what price.