The international geopolitical landscape is reshaping

    Tuesday, 06 August 2019

    From the trade war to the Huawei incident, many believe that the US-China relationship has become the main axis of today’s world economic and technological competition.

    Now, there are more signs that the rift between the United States and Europe is expanding in many areas. These increasing signs of friction between the United States and Europe work to prove the previous judgement of Anbound’s research team that the U.S.-European competition is in fact the main axis of the global competition.

    The increase in friction between the United States and Europe is manifested in many areas. According to Anbound’s senior researcher He Jun, this mainly includes the following aspects:

    First, in the field of military cooperation, the United States criticized the protectionism of the EU. The European Commission said that it will invest €13 billion to support the European Defense Fund. Recently, the U.S. Ambassador to the EU Gordon Sondland warned that if the EU promotes plans to restrict U.S. companies from participating in pan-European military projects, it may be subject to retaliation from Washington.

    Sondland said that if the EU member states are “stubborn or protectionist” on huge projects and continue to keep companies outside the EU at a certain distance, the United States will consider adopting various kinds of measures that may not be “positive for either side”. Sondland warned that the proposed EU joint defense project’s funding rules, especially in the area of the development of new infantry fighting vehicles and missile systems, could curb the participation of U.S. companies and countries outside the EU.

    Second, in the internet sector, the EU imposed restrictions on American tech giants. In March 2018, the European Commission announced a proposal to impose a 3% temporary tax on large Internet companies. This will target U.S. companies such as Google, Facebook and Amazon. U.S. officials have urged the EU to abandon the plan because it will create a major trade barrier and it targets U.S. companies.

    In addition, Google was fined EUR 50 million for violating the EU’s new privacy regulations. At the same time, the U.S. is also taking measures on European companies, mainly aiming to impose huge sums of fines on the European banking industry.

    In September 2018, the fines imposed on the Société Générale by the U.S. authorities on disputes over international sanctions are expected to be close to €1.2 billion (about US$1.4 billion). As of early 2016, Deutsche Bank said that it had reached a settlement with the U.S. Department of Justice in principle, and agreed to pay a fine of US$ 7.2 billion to settle the investigation on its violations in financial activities before the 2008 financial crisis.

    Third, the United States has not given up the possibility of suppressing Europe through tariffs. Car tariffs are a typical example of this. The U.S. Department of Commerce issued an investigation report on February 17 this year, which gave three policy recommendations for imported automobile products, namely a 10% tariff, which is the same as the current EU import tariffs. This is only imposing the tariffs on high-tech vehicles, such as electric vehicles. The further imposition of 25% tariffs is still on the discussion table.

    The U.S. President Donald Trump may use the car tariff to threaten the EU to cooperate in other areas. If Trump really announced a high tariff on vehicle products, the global economy, which has begun to slow down, will be further impacted. Bloomberg previously reported that the European Commission’s Director of Trade Jean-Luc Demarty said that if Trump imposes high tariffs on imported cars, the EU will also impose retaliatory tariffs on US$22.7 billion worth of imports from the United States.

    Fourth, Europe and the United States are gradually showing differences in their values. The difference between U.S. President Donald Trump and German Chancellor Angela Merkel for instance, is becoming commonplace knowledge. Long before Trump took office as the U.S. president, he publicly criticized Merkel. In an interview with the media, Trump claimed that Merkel’s refugee policy was a catastrophic mistake and he believed that the EU has become a tool for Germany.

    After the event, Merkel issued a tough response, saying that the fate of Europeans should be in their own hands. Germany’s ex-Vice Chancellor Sigmar Gabriel once said that German Deputy Prime Minister Gabriel said that in the relationship between Germany and the United States, Germany is not in the inferior position and therefore should show more confidence. Ex-French President François Hollande’s reaction was more intense, claiming that EU affairs needed no outsiders to guide. Elmar Brok, chairman of the European Parliament’s Foreign Affairs Committee, said bluntly that Trump is unpredictable and dangerous.

    Fifth, the United States wants to increase its external security cost. In June 2018, Trump sent a stern letter to some leaders of NATO national governments asking them to increase their defense spending. Trump wrote that the United States is losing patience with these allies, as they failed to fulfill their capital contribution obligations with NATO, and that the American citizens can no longer tolerate this.

    Trump repeatedly criticized NATO during his election campaign and even questioned the future capabilities of NATO. Trump criticized many NATO countries, citing their failure to meet their commitment of 2% of their GDP on defense spending.

    Sixth, the European Schengen countries set preconditions for the free entry of American citizens. The European Union announced last year that it is in the process of establishing a European Travel Information and Authorization System (ETIAS), which will require pre-trip inspections of passenger safety and immigration risks, nullifying visa-free entry into the Schengen area.

    The Schengen area is a region of 26 European countries with no internal boundaries and people are free to move between them, including Spain, France, Greece, Germany, Italy and Poland. Currently, U.S. citizens can travel to Europe for up to 90 days without any travel authorization. However, the establishment of ETIAS will change this. From 2021 onwards, US citizens visiting parts of Europe need to be authorized by the EU to arrive. This means that visa-free travelers, including U.S. citizens, need to apply for ETIAS before visiting the Schengen area.

    Lastly, some EU countries have obvious differences with the United States on the Huawei issue. Since last year, the United States has stepped up its efforts to persuade its allies to ban Huawei from participating in the construction of telecommunications networks on the grounds that the Chinese supplier may help the Chinese government engage in espionage or network destructions. But several European countries, including the U.K. and Germany, have not been persuaded to impose a ban.

    The U.K. government has concluded that it can mitigate the risk of using Huawei devices in 5G networks. This conclusion has dealt a heavy blow to the United States’ efforts to persuade its allies to keep Huawei out of the high-speed telecommunications system. In addition, German media revealed that Germany is seeking to sign an inter-governmental “no-spying pact” with China as a condition for Huawei to enter the German 5G market. This seems to indicate that if the Chinese authorities make additional guarantees on data security issues, Germany may formally allow Huawei to participate in the construction of 5G networks.

    In the past, Anbound’s Chief Researcher Chen Gong pointed out that in the global economic and technological competition, the contention between the United States and Europe makes up the main axis, and not the one between China and the United States. Now there are more proof to support this judgment.

    There are still signs that the rift in U.S.-European relations is expanding and there are signs of the rift extending beyond economics and technology. According to this development trend, the global geopolitical and geo-economic landscape may be reshaped to some extent. It should be pointed out that the main focus of China’s diplomacy is now the U.S.-China trade negotiations. Despite this, China should not ignore the reshaping of China-EU relations in the new context, and the reshaping of China-EU relations should be reconsidered from a strategic perspective. Anbound has previously analyzed the possibility of a “1+3” pattern in the world, and such a pattern is looking quite possible now.

    Final analysis conclusion: As the rift in the relations between U.S. and European expand, the global geopolitical and geo-economic landscape may be reshaped to some extent. China should consider reshaping China-EU relations from a strategic perspective, notwithstanding the global “1+3” pattern, which is still likely to happen.

    Chen Gong