Chinese President Xi Jinping is accompanied by French President Emmanuel Macron and German Chancellor Angela Merkel after their meeting at the Élysée Presidential Palace on March 26, 2019 in Paris, France. (Getty Images)

Despite optimistic predictions that the Biden administration would herald a new era of transatlantic cooperation, the fault lines between U.S. and European interests have been widening. The recent finalization of the Comprehensive Agreement on Investment (CAI) between the European Union and China signals that Europe has put hard-nosed commercial realism ahead of American concerns about China's campaign to upend international norms and exercise malign influence on a global scale.

In a new report, Europe's China Chimera, Peter Rough examines Europe's efforts—led by German Chancellor Angela Merkel—to strengthen Sino-European trade ties. Peter argues that any short term gains brought about by CAI will come at the expense of the transatlantic alliance and could have long-lasting consequences for the EU-U.S. relationship. Check out key takeaways from Europe's China Chimera ​below.

Also be sure to read Walter Russell Mead's latest WSJ column, which argues that Europe's pro-China commercial orientation is here to stay.

Key Takeaways

Key quotes from Peter Rough's new report, Europe's China Chimera.

1. China is interested in Europe as a means toward self-sufficiency, not interdependence:

The Comprehensive Agreement on Investment may strengthen Germany in the short run, but in the long run, it poses a real danger to its health. Over 35 rounds of negotiations, Europe sought to level the playing field on issues ranging from subsidies and state-owned enterprises to market access, intellectual property rights, and labor rights.

The CAI does not address China’s underlying transgressions because it undercuts the transatlantic approach, which is the only way Europe can marshal the strength to enforce any agreements’ commitments. The truth is that the CCP will never be able to satisfactorily fulfill the EU’s demands because its economic model is inherently predatory. China is interested in Europe as a means toward self-sufficiency, not interdependence.

2. China has become Germany's top trading partner and supplier:

In late 2019, China’s ambassador to Germany, Wu Ken, warned of “consequences” for Germany if it were to disqualify Huawei as a vendor. This is where European resistance, as it exists, begins to disintegrate. Unlike Britain and, to a certain extent, France, China’s threats to Germany have proved potent. 

Germany’s political class has cultivated China for years; Angela Merkel herself has visited the country a dozen times during her 15 years as chancellor, often with high-profile business delegations in tow. Not only is China now Germany’s top supplier, but it is also Germany’s top trading partner. In 2019, Germany accounted for over half of the EU’s exports to China, the fourth year in a row in which China has supplanted the United States atop Germany’s trade rankings. 

3. Germany’s trade ties to China weaken pushback against China’s human rights abuses:

On sensitive matters like Tibet and Taiwan, some of Germany’s greatest companies, from BASF to Siemens to VW, defer to Chinese political demands for fear of losing markets. Some have even established operations in Xinjiang, giving China cover in a region where it is committing what the United States considers to be genocide.

Germany's situation demonstrates how China can outmaneuver the U.S. in politically influential industries. The Chinese market accounts for such a significant share of Germany’s recent export growth, especially in high-value products like chemicals, machinery, and automobiles, that it is widely seen as the key to Germany’s post-pandemic economic rebound.

4. Huawei is seeking a European foothold through Germany:

The German government has finalized a decision, to be ratified by the Bundestag, that would avoid banning Huawei. Instead, key German agencies and ministries are to be granted technical and political oversight of the company, including veto powers, while allowing it to operate within the country. This is quintessentially Merkel: to keep Germany’s options open for as long as possible. The problem is that Germany’s telecom operators are not waiting. On the ground, they have already begun partnering with Huawei to install 5G infrastructure, essentially daring Berlin to exercise its veto. The upshot of such an intervention, the operators claim, would be higher costs and delays for consumers. The message is clear: its better to accommodate Huawei.

5. The transatlantic alliance carries unparalleled advantages:

Because of its democratic character, great wealth, trading importance, and military alliance with the United States, Europe still poses a real obstacle to Beijing’s designs on Eurasia—if it wishes. Trade across the North Atlantic outstrips all other international commercial relationships by hundreds of billions of dollars annually. To protect this relationship, the U.S. and Europe maintain a military alliance commonly regarded as the world’s most formidable. Moreover, rare is the U.S. foreign policy initiative that does not include consultations, if not outright coordination, with Europe’s major capitals.

Quotes have been edited for length and clarity.

Go Deeper: Europe's Turn to China