EU Policy Readjustment and China-EU Relations in Context of Brexit

Zhang Jian

Director and Researcher， the Institute of European Studies，

China Institutes of Contemporary International Relations

With the Brexit coming into effect in January 2020， in-depth analysis and research need to be made on what course the EU would follow， how it would readjust its internal and external policies and what implications this readjustment will exert to the future development of China-EU relations.

Brexit Will Profoundly

Change EU

After Brexit， the EUs international vision may gradually narrow and its openness will gradually decline. The EU will inevitably undergo significant changes in the post-Brexit era.

First， protectionism has intensified. As a regional economic and trade group， the EU was born with characteristics of protectionism， since wider opening among countries within the union will inevitably result in seeking protectionism when dealing with outside world. As an economy composed of small-and-medium-sized countries， the EU is highly dependent on other countries. In particular those with more influence， stronger economic competitiveness and deeper involvement in global industrial chain all advocate opening to outside， such as the UK （before Brexit）， the Nordic countries and Germany. Therefore， the protectionist characteristics of the EU have been suppressed for a long time. Once called a “dogmatic free trader” by European think tanks， the UK together with the Nordic countries constitutes the bastion of “liberals” within the EU. In the future when the British voice disappears， the Nordic countries that are already being marginalized in the EU will find it difficult to resist the protectionist pressure from within the EU， especially Sweden and Denmark， which are still non-Eurozone countries. Under the influence of France， Germany may get closer to “protectionists”. Southern European countries represented by France and the majority of Central and Eastern European countries represented by Poland tend to be protectionists. Along with increasing voting weight in the European Council， their influence on EU policy making will also increase. Traditionally， the executive body of the EU， namely the European Commission， has generally preferred free trade. However， it will also be more protectionist when the British voice disappears.

Second， introversion is on the rise. The UK as a permanent member of the UN Security Council pays much attention to and is influential in global affairs. Brexit will gradually change the role of the EU in international community. The EU may focus more on economic affairs and less on international affairs. It will also put more geopolitical focus on its surrounding areas， such as Africa， the Middle East and Eastern Europe. France， Germany and the UK were once three powers in the EU. After Brexit， the power structure is no more stable. The policy differences existed between Germany and France may be enlarged and more difficult to reconcile. Brexit will reduce the EU budget， to which the UK were the second largest net contributor. In this case， how to change the distribution ratio will intensify the dispute within the EU. In short， the EU will be forced to focus on solving its internal problems， which will inevitably affect its willingness and ability to participate in global affairs.

Third， the self-confidence has declined. Brexit has highlighted the various difficulties faced by the EU at the time. The first one is the worrying economic outlook. Since the beginning of the 21st century， the EU economy has been sluggish， especially the Eurozone has been lagging behind both the UK and the US in terms of the economic growth rate for a long time. In recent years， the EU is obviously lagging behind in the field of digital economy， coupled with some constraints of the Eurozone mechanism （such as long-term fiscal tightening） and the rapid aging of the population， its economic development prospects are frustrating. The second one is the unsolvable refugee problem. Africa and the Middle East around the EU are not yet stable， and some countries even suffer from continuous wars and chaos， which serve as fertile soil for illegal immigrants and refugees， who gave birth to anti-immigration and anti-EU extreme right populism in European countries， which aggravated the conflicts between the front-line countries （such as Greece， Italy， etc.） and the main refugee receiving countries （i.e. relatively rich Germany， Sweden， etc.）， as well as between the refugee receiving countries and the Central and Eastern European countries that are unwilling to accept refugees. The third one is the conflict between the European sovereignty and that of the member states. One of the Brexit slogans is to “taking back control”. It is apparent that Brexit has reflected some deep-seated and structural problems with the EU， about which the EU can do nothing. Therefore， Brexit is undoubtedly a heavy blow to the EU and the European integration， and has caused a psychological trauma that will be difficult to recover for a long time.

New Trend of Development of

EU Policies in Post-Brexit Era

The EU has already realized the seriousness of the problem， that is， the European integration must move forward， or it will retreat. Against this backdrop， the new European Commission has shown obvious enterprising spirit， and some new trends have in fact appeared in its internal and external policies.

First， focus on the future and enhance the EUs economic competitiveness. Economy is the foundation. Only when the economy is of vitality can the society make progress and the people feel safe. The current difficulties facing the EU are mostly a result of its economic problems. Moreover， the EU also means to compete with the UK after Brexit. When the EU encountered economic recession in the past， it could be explained with the different economic models of the EU from the US or China. However， with the similar economic system to the UK， the EU will be at an unfavorable position if the UKs economic development is better than that of the EU for a long run after Brexit， which will result in a declining confidence of more member states and their people. Therefore， it will be more urgent for the EU to develop its economy in the post-Brexit era. It can be seen from the current situation that the EU hopes to make progress in green economy， digital economy and industrial policies at the same time. On the development of green economy， the European Commission issued the European Green Deal on November 12， 2019， which aims to make the EU the worlds first carbon neutral economy by 2050. The purpose of the European Green Deal is not so much to deal with climate change， but to use this moral high ground to promote Europes energy transformation and make full use of new technologies， so as to make the EU a leader in global green economy. The EU at the same time began to increase investment in the development of digital economy for catching up. In terms of industrial policy， the European Commission issued a new industrial strategy， which covered increasing government support for emerging industries such as electric vehicles， enhancing labor market flexibility， guiding the private capital to increase R&D input and safeguarding technological sovereignty， etc.

Second， build a so-called Europe under protection. There are multiple meanings with this concept， such as strengthening the EU border security， protecting the EU from the impact of illegal immigrants and refugees， etc. However， it mainly refers to economic protectionism， which means to protect the EU from the so-called unfair competition by non-market economy actors. The EU believes that it was too “na?ve” in the past， more open than any other country， and was thus taken advantage of by other countries in the process， so it must make more efforts to protect its own market. The first one is to directly resort to anti-dumping and anti-subsidy against protectionism. The second one is to protect the investment. In April 2019， the new EU investment review regulations came into effect， aiming to protect strategic enterprises and assets within the EU. The third one is subtle and disguised protectionism. For example， the EU takes advantage of the large-scale single market to export environmental， labor and social standards. The EUs climate policy is of protective nature to a large extent， such as the proposed carbon tariff. In December 2019， Executive Vice-President of the European Commission Frans Timmermans said， “As an economic giant， we have a huge influence on trade， and if other countries do not take the right action on climate issues， the EU will impose carbon tariffs.”

Third， enhance strategic autonomy and build a “sovereign Europe”. The new European Commission claims to be a “geopolitical Commission”， largely to enhance Europes ability to compete with emerging global powers. Specifically， this capacity-building is reflected in three major areas. The first one is to build a defense alliance. In recent years， as a result of the ossification and estrangement of Europe-US relations and the Brexit， the building of a common defense system has been put on the agenda. A new Defense Industry and Space Department was established within the European Commission to coordinate the development of defense industry in member states. The EU budget for 2021-2027 will include the defense fund budget for the first time. A “permanent structural cooperation” mechanism in the field of defense industry was launched. Forty-seven military projects were approved， which were all focused on advanced military technology and core industries. An integrated and competitive defense industry system independent from the US has gradually taken shape. The second one is to safeguard the EUs financial sovereignty， get rid of the sanction threat from the US dollar hegemony and enhance the international circulation of the Euro. The third one is to safeguard the technological sovereignty. For example， the EU has launched an ambitious AI strategy and coordinated the 5G policies of its member states.

Fourth， focus on the stability and peace of the surrounding areas. The new European Commission issued a new strategy for Africa right after it took office. Leaders of the EU institutions as well as leaders of countries including France and Germany visited Africa one after another， seeking the expansion of cooperation between Europe and Africa with a new posture and in new ways， and strive to promote the sustainable development of Africa. In the Middle East， the EU has made great efforts in mediating among Russia， Turkey， the US and other countries over the issues of Syria， Iran and peace between Palestine and Israel， so as to promote regional stability. In terms of its relations with Russia， the EU emphasizes strengthening communication and cooperation， continuing to promote the North Stream 2 natural gas pipeline project， and promoting the “Normandy model” talks among Germany， France， Russia and Ukraine to solve the “Ukrainian problem”.

At present， with COVID-19 seriously affecting its member states， the EU economic recession is inevitable and may lead to a series of economic， social and political problems. However， the internal and external challenges faced by the EU will still remain， and the EUs long-term policy trend is unlikely to be changed.

Impact of EU Policy Readjustment on China-EU Relations

Every coin has two sides. The EU is faced with more difficulties against the overall background of Brexit. In addition to the impact of COVID-19， the current situation and policy orientation are both pros and cons for China.

The first negative effect is that economic disputes between China and the EU may increase. The EUs declining self-confidence has resulted in a stronger defensive nature of its foreign economic policy， trying to safeguard its own interests by building a “Europe under protection”. On March 12， 2019， the EU released the latest version of its China strategy document EU-China Strategic Outlook， which holds that China has become the EUs “economic competitor” and requires “building a more balanced and mutually beneficial trade and investment relationship” with China. The unprecedented tough language marks a major change in the EUs perception of China on economic and trade issues. In fact， contents against China can be found more or less in a series of economic and trade policies issued by the EU in recent years. For example， the EUs new foreign investment protection mechanism， to a large extent， is to cope with the growth of China's investment in Europe. There is also consideration of countering the so-called competition from China in the EUs new industrial strategy. The EU has also continued to blame China for having not opened its market， demanding that China increase its market opening and putting forward a series of unreasonable demands. That is also an important reason why China and EU fail in negotiations for the investment agreement.

Moreover， the stimulation of Brexit， the rise of far-right populism， the fragmentation of politics and the difficulty of European integration have deepened the anxiety of the EU on the so-called “EU way of life” and on its own political and economic systems. This anxiety reflected in the relations between China and the EU is embodied by the groundless suspicion and distrust， and even public claim that China is the EUs “institutional competitor for implementing a new model of state governance”.

There are of course some new favorable conditions for China-EU relations against the background of “Brexit”. In the economic and trade field， China and the EU maintain close ties. Both sides are highly complementary， and enjoy broad prospects for cooperation in green economy， digital economy and artificial intelligence. The Chinese market is increasingly important to EU exports and investment. Strengthening economic cooperation with China and expanding the Chinese market still remain the major goal of the EUs economic and trade policy towards China as well as an important means to enhance its economic competitiveness. Although the EU also sees competition， it sees more opportunities in the Chinese market. Therefore， it is seeking to strengthen cooperation instead of “decoupling”. In addition， after Brexit， the economic competition between the UK and the EU will be inevitable. Of course， the UK and the EU will also compete in economic and trade cooperation with other countries， such as China. The EU is not happy to see a closer China-UK economic relationship compared with the China-EU one. As a result， the EU will feel more urgent to strengthen its economic and trade cooperation with China in the future.

The EU and China also enjoy a bigger room for cooperation in international affairs. Whether it is to boost the economy or enhance strategic autonomy， the EU must have a stable and predictable international environment if it wants to achieve its own policy objectives and development goals， which is the same as Chinas demands. In fact， the EU and China share more in common， and both sides need a rational partner in dealing with the peace in the Middle East， African development， Iran's nuclear issue， climate change， and stability of the international trade order. Therefore， both China and the EU have greater momentum for cooperation in maintaining the global multilateral order.

Generally speaking， although there will be problems and conflicts in future China-EU relations， cooperation will still remain the mainstream because it is in the common interests of both sides. Some issues in China-EU relations， such as economic competition and ideological conflicts， are not fundamental strategic conflicts. Unlike the US， China and the EU have no hegemonic intentions， and there are no conflicts of major interest between the two sides， which is conducive to strengthening bilateral cooperation， especially while the world is undergoing profound changes unseen in a century. China put first peace， sincerity and righteousness when dealing with foreign affairs， and advocates building new-type international relations and a community with a shared future for humanity. China has been supporting the European integration and the strategic autonomy of the EU from the very beginning.

The year 2020 will witness quite a number of high-level exchanges and major meetings between China and the EU. However， both China and the EU have been hit hard by the ravaging pandemic， with their economic and social development affected seriously. China received the help from the EU and many European countries at the beginning of COVID-19， and provided help to the European side within the best of its capacity when Chinas situation improved. COVID-19 is a disaster， yet also serves as an important opportunity for China and the EU to deepen mutual understanding and strengthen cooperation. The China-EU relations will surely enter a better future after COVID-19.