How China Is Outmaneuvering Trump on Trade

As
Chinese President Xi Jinping concludes his first foreign trip of 2019, he can
congratulate himself on at least one thing: masterfully making use of the
daylight between Brussels and Washington when it comes to China policy. While
the Trump administration pursues its ongoing trade war, it has failed to
convince European countries to banish Huawei’s equipment from their 5G
infrastructures, or to resist China’s international infrastructure development
strategy known as the Belt and Road Initiative (BRI), designed to build
pathways for trade but which also, critics say, expands Chinese influence and
entraps countries in Chinese debt.

Xi’s trip took him to Italy, Monaco, and
France, a clever itinerary that allowed him to maximize cooperative
opportunities, painting China as a willing economic and global governance
partner for the EU, and allaying Chinese citizens’ fears about being
blackballed by the West.

The Italian portion of the visit focused on the
BRI, Rome’s endorsement being Xi’s greatest win so far in 2019. Italy, a
founding member of the EU, is the first G7 country to formally sign on to China’s
grand infrastructure project, breathing new life into the much-maligned initiative.
Over the past year, Malaysia, Myanmar, Pakistan, and Bangladesh, among others, canceled or cut back BRI projects. The seizure of the
Sri Lankan port of Hambantota and fears of so-called “debt-trap diplomacy” further
eroded faith in the project, with many countries questioning Beijing’s promises
of “win-win” cooperation. But Italy is the wealthiest country to join the BRI,
and Xi will be able to signal to his constituents that the project is still
held in high international regard despite the aforementioned setbacks.

Though many EU countries, particularly Germany
and France, have been highly skeptical of the BRI, the Five Star Movement wing
of Italy’s populist coalition government has observed the success of Greece’s
Piraeus Port, a majority share of which is held by COSCO, a Chinese state-owned
enterprise. Prime Minister Giuseppe Conte hopes to make Italy’s own ports,
notably those in Trieste and Genoa, similar entry points for Chinese trade with
Europe. And while another group in the governing coalition—the far-right League—takes
a dim view of engagement with China, during Xi’s visit, Rome signed 29
deals worth $2.8 billion, wagering on
Chinese investments to help pull it out of a grinding recession. Among other things, the deal is a reminder that the EU has not
been able to offer its members attractive
alternatives to Chinese investment.

Xi’s visit to Monaco had much do with the
country’s endorsement of Huawei, the telecommunications and electronics giant
which the U.S. has accused of enabling Chinese state surveillance. On February
27, Monaco Telecom and Huawei signed a
memorandum of understanding to develop and deploy “smart city” technology for
the principality. Last week, this victory for Xi was followed by EU countries
rejecting the Trump administration’s calls to ban Huawei from European 5G
infrastructure. New Zealand and Australia have followed the United States’
lead, but Europe has fallen far behind China and the United States in 5G: The
decision reflects, at least in part, the recognition that it cannot afford to
ban Huawei from its networks.

France, the current chair of the G7 and a
strong U.S. ally, was supposed to be Xi’s toughest stop on his Mediterranean
swing. In a bid to emphasize European unity, French President Emmanuel Macron
invited German Chancellor Angela Merkel and European Commission President
Jean-Claude Juncker to join his meeting with Xi on Tuesday. Macron, who has
been supportive of the BRI in the past, has recently coarsened his rhetoric,
noting that the initiative should not be “one-way.”  He has been invited to the
upcoming BRI forum in April but is unlikely to attend.

While in France, however, Xi cemented a new phase of economic
cooperation with Europe, signing an almost $34
billion deal with Airbus for 300 airplanes. China has historically been one of
U.S.-based Boeing’s best customers, accounting for almost 20 percent of the
company’s sales as of 2017. But
given Boeing’s recent disasters and the contentious U.S.-China relationship, Xi
has deftly shifted the trajectory of China’s aviation sector, simultaneously
shoring up economic ties with the EU and dealing a blow to Washington.

The Airbus deal is pragmatic for Macron,
demonstrating that he believes China and France, as well as China and the EU,
can engage in concurrent cooperation and competition. Xi, for his part, seems to be hoping Beijing can collaborate with Paris, Berlin, and Brussels on multilateral
initiatives such as the Paris Agreement on climate change and what’s left of
the Iran nuclear agreement, as well as the need to protect the international
trade and economic order from Trumpian protectionism.

The broader international community will
probably remain suspicious of China and its motives. But the point of these
visits was for Xi to demonstrate that he’s willing to work with the EU, and
equally willing approach member states one by one with specially tailored
bilateral deals. 

Speaking last Friday after a meeting of 27 EU
countries in Brussels, Macron proclaimed an end
to the “time of European naïveté” or “uncoordinated” approaches to
Beijing. But as much as Macron and the EU would like to believe that Europe has
an actionable bloc-wide China strategy, it still seems like wishful thinking.
Though Brussels’ EU-Asia Connectivity Strategy offers some kind of alternative
to the BRI, many EU countries have shunned it in favor of Chinese investments.
Thirteen central and eastern European countries have signed on to the
BRI, and that does not count Portugal, and now Italy. The continued importance
of the 16+1 grouping, through which China engages with Central and Eastern
European countries outside of EU diplomatic mechanisms, further complicates
achieving a coordinated EU approach to Beijing.

Though China has said it does not want to split
the EU, its intent is secondary. Beijing is offering deals countries want. And
while China will undoubtedly still have difficulties with both the EU and the
United States, on this trip, at least, Xi seems to have thoroughly
outmaneuvered those set against him in Washington.