Europe Pressed Between China-US Trade Spat
27 May, 2019  |  Source:Global Times   |  Hits:1123

Editor's Note:

As Huawei is pinned in the eye of the China-US trade war, French President Emmanuel Macron claimed Europe won't capitulate to US pressure to block the Chinese tech company. What is Europe's attitude toward US demands? What impact has the trade conflict caused for Europe? Thorsten Jelinek(Jelinek), the European Director of the Taihe Institute and former associate director at the World Economic Forum, shared his insights in an exclusive interview with Global Times(GT)reporters Li Aixin and Bai Yunyi. 

GT: Does Macron represent the European mainstream stance in welcoming Huawei's 5G technology? 


Jelinek:When we talk about Europe, it's like measuring the average body temperature of patients in hospital. Each patient has a different illness and body temperature. So, the average doesn't mean anything. But in general, if you compare it to the US, I think Europe is much more open.


There are differences within Europe. The EU has 28 member states. Each country can voice whatever it wants, but each tries to find a solution for Europe. Germany might say that the EU would not block a single company from any country. Usually if something is blocked, it is technology or products. Legally, this could be justified, but not for a whole company. It's not lawful from a European perspective.

There is a long-term relationship between Huawei and European countries and carriers in the field of 4G, for example. A lot of Huawei equipment is already here. There's trust in the relationship. Carriers in Europe such as Deutsche Telekom, Vodafone, Telefónica are supportive and open to go with Huawei in the 5G environment.

Huawei also works with local agencies on security issues by allowing its equipment to be tested and certified. As you know, from Germany, nothing has been found.

Technology changes quickly, so today nothing is there. What about tomorrow? That's the concern of US intelligence services and in parts of Europe. I think the whole discussion extends beyond Huawei for two reasons.

One, 5G is a more secure network technology compared with 4G and previous generations. But with 5G, because of the connectivity, general security risks increase exponentially.

Second, the real problem is the clash between the US and China and maybe between Europe and China. China has stepped up in terms of economic strength which has caused panic. Let's not blame anyone, but when someone else becomes strong, which actually was anticipated so no one should be surprised, but China functions differently with a different government and culture. Huawei is at the center of this new technology which makes it an unfortunate target for such tension. 

GT: Now Huawei is at the center, do you think similar conflicts between China and the US over 5G development will soon occur in other fields, like AI?


Jelinek:It's interesting that a couple of years back, telecommunication infrastructure was just a commodity. However, now it has become a strategic infrastructure. Now it's back on the radar. It has become government-owned.

When it comes to AI, I think there is already a battle. Any other advanced technology might become the center of that, especially AI, because of the impacts it has on the economy, labor, society, security, etc. It's inevitable that AI becomes the next battlefield.

However, the world is globalized already. It is interconnected. Seventy percent of products Huawei purchases are non-Huawei products. So, there's a lot of globalization going on. This has created growth and wealth. So, I believe, if reason prevails, we can have more of a step-by-step resolution, or compromise.

For now, I am a little bit pessimistic that there will be a quick resolution. Probably Trump will be reelected. So, he will have a little more time to negotiate. He can move it to his next term. But actually, it's devastating to wait that long.  

GT: If China and the US cannot reach an agreement any time soon, what impact will it cause, for example on production chain and supply chain?


Jelinek:For the US, it is very difficult to find a new supplier worth of hundreds of billions and it is very difficult for China to find markets for products worth hundreds of billions of dollars. But the buyer has always had the upper hand. 

But maybe it's just an illusion of having the upper hand, because the US will need to buy things elsewhere. Where should it do it? 

What is happening is a decoupling between the Chinese and US economies. This can have a ripple effect by hitting other economies which are not that strong.

The China-proposed Belt and Road Initiative is a backup strategy because 90 percent of trade with China goes by sea, through the Strait of Malacca, but there should also be road transport.To be very realistic, you need to do both. You need to have this mitigation approach and you need to still try the best to sort out the trade dispute.  

GT: What is your perspective on the trade ties between China and Europe? 


Jelinek:For Europe, I think it's important tocontinue dialogue and communication. But words must then be followed by action. This is how China can build trust. Both sides have a responsibility to rebuild the trust.

Europe's complaint in general is that China's government does not take Europe as seriously as its bilateral ties with individual European countries.

I understand the Chinese side, which thinks it's a fantasy to consider Europe as only one voice. Each country is a sovereign country. But I think it would be smarter for China to channel that communication through the EU Commission and maybe not so much bilaterally.

Having said that, Germany is one that does most bilateral trade with China, so it's a really tricky situation.

GT:What is the most pressing problem that China and Europe need to address in their economic and trade ties? 

Jelinek:I think the most pressing problem is the US-China conflict because European investment decisions will depend on that. For example, if Huawei is hit by sanctions, it will also affect European markets because Huawei cannot use stuff from Europe or cannot use equipment because of US pressure on Europe.

This will also complicate the relationship between Europe and China because in the end, Europe is an ally of the US and Europe does a lot of trade with the US. You cannot isolate Europe from the China-US trade conflict.

In the meantime, I think Europe should make up its mind on how it wants to treat the relationship with China. Unfortunately, China is also regarded as a strategic competitor. It has a very strong foreign policy and this is how it is perceived. So, I think maybe there must be a little bit of a rebalancing to make its foreign policy look more positive. The US' unilateral approach toward China is also an opportunity for Europe to sort out its own problems on security and military issues, NATO, and economics to create a single digital market in Europe, and maybe to be more competitive with the US and China, and to have a clear strategy toward China.