Are Europeans doomed to spend the 21st century being pushed around by outside powers? In Brussels, they like to assert that the collective power of the EU is the only way to save the old continent from this ignominious fate. Although no European country can compete with America or China, the EU collectively ranks among the three largest economies in the world.
But the idea that the EU’s economic clout can easily be converted into geopolitical power is in for a stark reality check. The Ukrainian crisis has sidelined the EU. Meanwhile, China has imposed unofficial economic sanctions on EU member Lithuania – and Brussels is struggling to come up with an appropriate response.
If things go wrong for the EU in the weeks and months to come, talk of a “geopolitical” Europe will seem increasingly ridiculous. But it is also possible that the current crises – in particular the Lithuanian challenge – will lead to a leap forward in the EU’s ability to defend its interests on the world stage.
The Ukraine crisis is a matter of war and peace on the European continent, so some EU officials feel humiliated that they did not participate directly in recent negotiations. Still, it shouldn’t come as a huge surprise that Brussels was sidelined. The EU is not a military power and may never be. And Ukraine is not a member of the EU.
Lithuania, on the other hand, is part of the EU27. It is also embroiled in a trade dispute – and trade is one of the few areas where the EU is already a global heavyweight. Europeans therefore have both the possibility and the obligation to pull themselves together.
The Lithuanian government has been punished by China for improving relations with Taiwan, a self-governing democratic island that Beijing says is a rebel province. Lithuania had previously withdrawn from 17+1, a talk shop set up by Beijing.
In response, Beijing applied methods that Gabrielius Landsbergis, the Lithuanian foreign minister, compares to “the Spanish Inquisition”. (In a possible Monty Python homage, Lansbergis adds that “no one expected” the Spanish Inquisition.)
China does not just block all trade with Lithuania. It also blocks all products containing components made in Lithuania, causing a huge headache for foreign investors in the country.
Beijing has chosen a shrewd tactic. German investors in Lithuania are believed to be urging the government to back down, while polls suggest Lithuanian public opinion has turned against Taiwan’s gamble.
But China’s policy also carries risks that Beijing may not have fully considered. By targeting the EU supply chain, the Chinese are targeting the integrity of the European single market, which is at the heart of the EU’s economy and strategic aspirations. As Janka Oertel of the European Council on Foreign Relations puts it: “By Europeanising the problem, China has made it a test for the whole EU”.
This is not just a theoretical question. Some Europeans fear that the next country in China’s sights will be the Czech Republic, whose government and politicians have also been pro-Taiwan. Czech factories play a central role in the EU supply chain, so targeting Czech-made components could wreak havoc within the single market.
Some European politicians are privately angered that the Lithuanians acted without consulting the rest of the EU. But the Lithuanians have not broken with the EU’s “one China” policy. And supporting democracy and protecting small nations are supposed to be core European values.
EU officials pledged their support and solidarity with Lithuania. A lawsuit will likely be filed against China at the World Trade Organization, but could take years to materialize. Instead, the French, who currently hold the EU presidency, are seeking to fast-track the passage of anti-coercion legislation. This would allow the EU to retaliate against coercive trade measures, from China or any other country, with a range of measures that could include blockages on investment and tariffs.
The beauty of these instruments, as far as Brussels is concerned, is that they are trade measures. Unlike matters of pure foreign policy, which require unanimity, trade decisions can be taken by majority vote. This would mean that China’s friends in the EU – notably Hungary and Greece – would not be able to prevent anti-coercion legislation from being passed or rolled out.
Reinhard Bütikofer, an influential member of the European Parliament who has been personally sanctioned by China, believes that the Lithuanian crisis could therefore lead to a quantum leap in Europe’s ability to project power. As he puts it: “The interconnection between trade and foreign policy suddenly allows us to use trade policy for a more effective pursuit of foreign policy.”
But EU legislative processes are tortuous, making it unlikely that anti-coercion instruments can be agreed before the summer. By then, Lithuania might have been forced to back down.
In their own interest, Europeans must prevent this from happening. If China succeeds in intimidating Lithuania while the EU watches helplessly from behind the scenes, this lesson will be noted – not only in Beijing, but also in Moscow and Washington.
Written by FT trade expert Alan Beattie and delivered to your inbox on Mondays, Trade Secrets is the FT’s must-read briefing on developments in international trade and globalisation. register here