Chinese policy will test the German coalition

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Germany’s new coalition government has vowed to pursue a values-based foreign policy emphasizing democracy and human rights and with less emphasis on the country’s commercial interests, the top priority of administrations successive under Angela Merkel. Yet, the day before he took office as Merkel’s successor, Olaf Scholz showed how much it risks a tightrope exercise. Scholz has taken a firm stand on Russian threats to Ukraine, Berlin’s most pressing foreign policy issue.

When it comes to China, the biggest diplomatic challenge, the new chancellor looked a lot like the incumbent. When asked if Germany would follow America’s diplomatic boycott of the Beijing Winter Olympics, Scholz obscured, promising to deliberate carefully and pouring piety into international cooperation. If this was the opportunity to change the tone of relations with the biggest export market for many German companies, Scholz did not seize it.

And yet, the coalition agreement that Scholz’s Social Democrats concluded with the Greens and the Liberals sets a very different tone. Previous German governments viewed China as a strategic partner. The latter treats him as a “systemic rival”, twice using a phrase Merkel has never uttered. It explicitly refers to human rights violations in Xinjiang, the democratic retreat in Hong Kong and Chinese threats to take back Taiwan. Philosophically, this brings Germany closer to the United States. At the same time, the coalition promises to “Europeanize” its bilateral contacts with Beijing and to develop a comprehensive Chinese strategy in line with that of the EU. This European approach is particularly welcome. Beijing is adept at dividing and weakening the EU, and Germany’s stubborn pursuit of its trade interests has often helped.

A crucial element of the EU’s strategy is to put in place defenses against unfair competition and economic intimidation from Beijing. The measures include trade countermeasures, a crackdown on foreign subsidies, reciprocal access to public procurement, due diligence requirements to eliminate the use of forced labor, a carbon border adjustment mechanism and an upcoming anti-coercion policy. . The new coalition should endorse these instruments, provided they are proportionate, instead of dragging its feet as Germany has done in the past, in part to please Beijing. The market opening that Berlin got in return – for example under last year’s aborted EU-China investment deal – has been insufficient.

German businesses, of course, fear that a values-based foreign policy may expose them to retaliatory action or backlash from consumers. Beijing has made such threats before. Like the Chinese government, German business leaders are hoping that it will be Scholz – who won the election by swearing to emulate Merkel’s cautious and deliberative leadership style – who takes the lead in China, and not Annalena Baerbock, the Green Foreign Minister who is more hawkish. A bad result would be an emollient chancellor combined with a provocative foreign minister. This would undermine the credibility of German diplomacy and the cohesion of the coalition. Berlin must find a way to tell the truth to the Chinese power, with a united Europe.

German industry – and, it should be noted, its European suppliers – have benefited enormously from China, not only from its rapid growth but increasingly from its innovation. No one in Europe thinks decoupling is a good idea. But Merkel’s persistent faith in Wandel durch Handel – change through trade – has turned out to be inappropriate. China has changed in the wrong direction. The new German government must adapt its foreign policy accordingly.

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