Brussels’ Strategic Choice: Forge a Western Alliance to Prevail Over China, or Triangulate and Lose

During Gordon Brown's administration, I was invited to 10 Downing Street to speak at a meeting on what the UK needed to do to spur innovation and become more globally competitive. My message was simple: Develop a robust national innovation and competitiveness strategy and join with allies, especially the United States, to push back against Chinese innovation mercantilism. Focusing on the former while neglecting the latter would be a recipe for failure.

Sadly, the UK has done neither. But putting that aside, the response to my second point was less than positive. I was called a racist by one smug Eurocrat, and an Oxford don said the EU (which the UK was still part of at the time) saw America as its main techno-economic challenger-so, if they could knock us Yanks off our perch, then Europe would become number one.

I heard a similar view again last year when I met with a high-level EU official involved in preparing the Draghi report on EU competitiveness. The official said the EU needed to de-risk supply chains by reducing dependence on both China and the United States. WTH?

This chip on Europe's shoulder when it comes to America is not new. In his 1968 book The American Challenge, Jean Jacques Servan-Schrieber argued that Europe faced a threat from U.S. firms like IBM entering and gaining market share. "The American challenge is not ruthless like so many Europe has known in her history," he wrote, "but it may be more dramatic, for it embraces everything." The EU today carries on that same tradition of viewing America as its key economic competitor. European Commission President Ursula von der Leyen gave voice to it when she claimed in her campaign agenda, "it is not too late to achieve technological sovereignty" vis-à-vis the United States.

This EU vs. U.S. view is beyond bizarre, for it should be clear to all in Europe that, unless Western, democratic, market-based economies start working together instead of against each other, China will dominate. In fact, China is already winning, and it is worrying to say the least that this is not abundantly clear to more policy experts and elected officials.

Of course, President Trump is throwing fuel on the fire with his indiscriminate protectionism that treats Europe the same as China because they both run trade surpluses with America. The fact that Trump could actually say "the European Union is, in many ways, nastier than China" reflects his disregard of the need to build a Western "coalition of the willing" to address the Chinese techno-economic challenge.

Even so, the EU should be cleareyed in assessing the threat China poses instead of misreading its own self-interest by rushing to cut a deal with Beijing.

The old model was that the EU and United States were security allies but economic competitors. Trump appears to not want either relationship, and Europe appears to be following his lead. But in fact, America and Europe need to strengthen the transatlantic security alliance and build a stronger techno-economic alliance.

Unfortunately, in part because of Trump's aggressive trade and tariff negotiations, compounded by the EU's long antipathy and jealousy towards America, the emerging view is that Europe should, at best, choose equidistance between China and the United States.

The Pew Research Institute finds that young people in the EU are critical of both the United States and China. And less than one-third of adults in the EU see the United States as "an ally that shares our interests." (Meanwhile, over 50 percent of Americans support NATO.)

At worst, in the wake of the Trump administration's actions, EU leaders are looking for even closer relations with Beijing than they have with the United States. One reason is that Europe is still 27 separate countries each happy to sell out the EU as a whole if they can get a few more euros worth of sales to China. And China knows that; it is happy to play each country against the others. It is also more than willing to threaten significant retaliation against those who resist. But another reason goes back to the EU's belief that it can be the global leader-nay, it should be-with its green, values-based capitalism standing as a "third way" between the U.S. and Chinese models.

There are at least two things wrong with this reactionary view toward America. The first is that the EU will not become a third pole in a global balance of power, regardless of how much it might want to be. It simply lacks the political will to do what would be required, especially when it comes to significantly boosting defense and R&D spending and abandoning the precautionary principle that guides its approach to regulation in favor of the innovation principle that is required to have a dynamic economy. Moreover, it has shown it will not use its power in the politically unpopular ways that are sometimes required to defend global freedom. Europe has always behaved like the resentful little brother who wants the glory of being first-born without the hard work and sacrifice that comes with it.

But the second and much more important failure in the EU's thinking is that it fails to recognize that unless the West unites, China will win. End of story. To go back to the Oxford professor's view, if American loses its lead (which it already has), then it won't be Europe that becomes number one; it will be China, by a long shot. If the EU resents American global leadership, imagine its reaction to Beijing's. Trump will have been a pussycat compared to whoever leads the CCP.

During the Obama administration, I was the U.S. head of the White House U.S.-China innovation experts group, and I had lunch in that capacity with a high-level CCP official in Beijing. I asked him if he was worried that the United States might become more aggressive in response to China's unfair trade practices. He said calmly that, no, they are not worried about that. If it is a competition between the United States and China, he believed they could hold their own and even win. Nor did they worry about the G20, because its 19 other nations won't agree. What they really worried about was the G2. I asked him what he meant. He said they worried about the EU and the United States joining forces, because they believed that would put China at a significant disadvantage.

Fast forward to this summer. After the recent China-EU summit in Beijing, the EU issued the following synopsis :

The EU underlined the importance it continues to attach to this relationship and reiterated its commitment to deepen engagement with China, and enhance cooperation to address joint global challenges such as climate change. The EU stressed that deepened engagement must lead to concrete progress on issues of joint interest and more productive work towards a balanced and mutually beneficial economic relationship, built on fairness and reciprocity.

It also highlighted how "The EU and China are major trading partners."

Two things:

1. No, you are not partners. You are adversaries. Just because BMW and Daimler will sell a few more cars in China for a few more years does not make you partners.
2. You can't seriously believe that China will work toward a trading relationship built on "fairness and reciprocity." How many years do you have to beg them to start being fair before you realize they never will be?

It was good to see conflict in the summit when Xi scolded the Europeans for not adequately kowtowing to the emperor. But here's a suggestion: no more meetings in Beijing. If U.S. or EU leaders want to meet with Chinese officials, either do it in the United States or Europe, or at least in a neutral location.

I understand that the EU is ticked off at Trump. But the best way to respond would be to take the lead in calling for a Western alliance against China. The CCP won't like it and might punish you. On the other hand, if you are unwilling to step up to defend the West, then the inevitable outcome will be continued EU decline and ultimately techno-economic hegemony for China.