Is there any hope Europe can learn the Art of the Deal against China?

The horror with which foreign ministries across Europe greeted President Trump’s desire to acquire Greenland shows us how far European diplomats are from understanding, much less coping with, the American leader. In the carnivorous world of New York property development, a good negotiator knows that an initial hyperbolic claim can result in a compromise close to his actual goal. European diplomats prefer quiet backroom talks where raw power is submerged by a polite fiction of equality; unsurprising, given the grotesque imbalance between US and European military power. The initial hyperbolic demand for all of Greenland resulted in a major American win: US sovereignty over its military bases there, forward basing for US missile defences, and the exclusion of non-NATO countries from mineral rights on the territory. President Trump’s deal moved a powerful piece forward on the Arctic chessboard, to the detriment of Chinese and Russian designs. In return, Denmark will retain Europe’s last colonial possession and the social welfare burden of 75,000 indigenous Kalaallits. 

This latest bruising encounter with Realpolitik bolstered European calls for strategic autonomy which (to the evident satisfaction of the White House) means Europe may at last develop the resources to defend itself without massive annual subventions from the Pentagon budget.  The quest for greater autonomy has also seen European delegations scampering around the world in search of diplomatic hedges against American power.  French President Macron, UK PM Starmer, Irish PM Micheál Martin along with honorary European Mark Carney have beaten a path to Beijing in search of improved relations.  Spanish PM Sanchez and Chancellor Merz are soon to follow. 

What exactly does this stampede to Beijing hope to accomplish? The market share for European industrial products is already in secular decline in China. Chinese manufacturers have learned all they need to know from European companies, and are now flooding Europe with products always cheaper and often superior to European makes. Airbus aircraft are the last European product China cannot yet match, yet Beijing is now compelling sales of the Comac C-919 to domestic carriers, who were until recently reliable Airbus customers.  China plans to break the Airbus-Boeing duopoly with sales to countries indebted to China’s Belt and Road initiative or simply annoyed by Western anti-bribery laws. Macron’s diplomatic charms will not save Airbus markets in Asia and Africa once China masters aviation technology.

That President Xi is the biggest external supporter of Russia’s war machine, and the only person outside the Kremlin capable of driving Vladimir Putin to the negotiating table, is apparently less important than peddling luxury automobiles and fine cheeses to Chinese consumers. European leaders may believe they can segregate trade relations from military matters, but to a devout Marxist like Xi, they are only different manifestations of power. China will accept no European demand that threatens the growth of Chinese might. None of these high-level European visitors have budged President Xi’s support for Putin, or his plans to keep building coal fired power plants. At least EU leaders avoided the fate of UK PM Kier Starmer, who was left wandering the Forbidden City like a clueless tourist. It was a calculated insult designed to show how little Great Britain matters to the Middle Kingdom, and perhaps that the Opium Wars and the sack of the Emperor’s Summer Palace are not forgotten in the Dongcheng district. Other European leaders will be encouraged to contemplate Starmer’s fate when deciding how hard to push Xi. From China’s perspective, Europe has little to offer other than a place to dump its excess industrial production. As Donald Trump might say, Europe doesn’t have the cards, meaning the leverage needed to extract concessions from Beijing on its support for Putin’s war, its carbon emissions, or its dire record on human rights. 

One might think that EU leaders would learn from China that negotiations without leverage are destined to end in humiliation, but Germany’s recent mission to the Gulf states suggests not. Chancellor Merz toured Saudi Arabia, Qatar and the United Arab Emirates, boasting of the “warm and affectionate” reception he enjoyed. Apparently the murder of Jamal Khashoggi and the invasion of Yemen with German armoured vehicles are now forgotten: Rheinmetall needs export sales and Saudi Arabia has the fifth largest defence budget in the world. Crown Prince Salman’s plans to diversify his economy will require engineering and construction equipment. What’s not to love if you are a German industrialist? And then there is gas.  Germany desperately needs natural gas if it is to wean itself of Russian LNG without complete dependence on American frackers. German industry has yet to recover from the loss of Russian fossil fuels and needs reliable sources of gas if it is to regain its export prowess. The complete absence of once pro-forma lectures on human rights and environmentalism by the German delegation shows the Gulf states how little leverage an economically enfeebled Europe has.  

Is there any way Europe can gain leverage in its negotiations with China and the Gulf states? Neither are willing to make concessions to supplicants, but may do so when faced with actual competition. Yet Europe cannot compete without abandoning many of its dearest, “post-material” achievements. The EU’s Green Deal and its Net Zero delusions cripple industry with ruinous costs and compliance burdens. EU competition policy prevents the formation of European industrial champions with the scale needed to compete with China and the US. The Digital Services and Markets Acts stifle the development of critical productivity tools and AI applications already emerging outside Europe. The Carbon Border Adjustment Mechanism imposes costs Qatar is unwilling to assume, and raises energy costs across the continent. Anti-fracking laws prevent Europe from exploiting its considerable gas reserves with extraction techniques practiced safely in Pennsylvania. A Europe with pricing power over Gulf gas and the ability to compete globally with Chinese goods is a Europe with negotiating power.

Unfortunately, most of these policies are embedded in European law that is nearly impervious to reform. The EU in its imperial majesty has foisted policies on its member states that remove the economic leverage needed to compete in a world quickly resolving into regional blocs. China and the Gulf States will happily feast on European demand for their exports as long as Europe remains competitively supine. The regulatory superpower hasn’t elevated the EU; it has crippled the continent.