[Senate Hearing 118-81]
[From the U.S. Government Publishing Office]
S. Hrg. 118-81
ALIGNING TRANSATLANTIC
APPROACHES ON CHINA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON EUROPE AND
REGIONAL SECURITY COOPERATION
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
JUNE 7, 2023
__________
Printed for the use of the Committee on Foreign Relations
[GRAPHC NOT AVAILABLE IN TIFF FORMAT]
Available via http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
53-193 PDF WASHINGTON : 2023
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COMMITTEE ON FOREIGN RELATIONS
ROBERT MENENDEZ, New Jersey, Chairman
BENJAMIN L. CARDIN, Maryland JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware MITT ROMNEY, Utah
CHRISTOPHER MURPHY, Connecticut PETE RICKETTS, Nebraska
TIM KAINE, Virginia RAND PAUL, Kentucky
JEFF MERKLEY, Oregon TODD YOUNG, Indiana
CORY A. BOOKER, New Jersey JOHN BARRASSO, Wyoming
BRIAN SCHATZ, Hawaii TED CRUZ, Texas
CHRIS VAN HOLLEN, Maryland BILL HAGERTY, Tennessee
TAMMY DUCKWORTH, Illinois TIM SCOTT, South Carolina
Damian Murphy, Staff Director
Christopher M. Socha, Republican Staff Director
John Dutton, Chief Clerk
SUBCOMMITTEE ON EUROPE AND
REGIONAL SECURITY COOPERATION
JEANNE SHAHEEN, New Hampshire, Chairman
CHRISTOPHER MURPHY, Connecticut PETE RICKETTS, Nebraska
CHRIS VAN HOLLEN, Maryland RAND PAUL, Kentucky
TAMMY DUCKWORTH, Illinois JOHN BARRASSO, Wyoming
BENJAMIN L. CARDIN, Maryland MARCO RUBIO, Florida
(ii)
C O N T E N T S
----------
Page
Shaheen, Hon. Jeanne, U.S. Senator From New Hampshire............ 1
Ricketts, Hon. Pete, U.S. Senator From Nebraska.................. 3
Barkin, Noah, Senior Advisor, Rhodium Group, Senior Visiting
Fellow,
Indo-Pacific Program, German Marshall Fund of the United
States, Berlin,
Germany........................................................ 5
Prepared Statement........................................... 7
Oertel, Dr. Janka, Asia Program Director, Senior Policy Fellow,
European Council on Foreign Relations, Berlin, Germany......... 9
Prepared Statement........................................... 10
Small, Andrew, Senior Transatlantic Fellow, Indo-Pacific Program,
German Marshall Fund of the United States, Berlin, Germany..... 13
Prepared Statement........................................... 15
(iii)
ALIGNING TRANSATLANTIC
APPROACHES ON CHINA
----------
WEDNESDAY, JUNE 7, 2023
U.S. Senate,
Subcommittee on Europe and Regional
Security Cooperation,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:45 p.m., in
room SD-419, Dirksen Senate Office Building, Hon. Jeanne
Shaheen presiding.
Present: Senators Shaheen [presiding], Murphy, Van Hollen,
Duckworth, and Ricketts.
OPENING STATEMENT OF HON. JEANNE SHAHEEN,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Shaheen. Good afternoon. This meeting of the Senate
Foreign Relations Europe Subcommittee will come to order.
I am pleased to be joined by Ranking Member Ricketts and we
expect other members of not only this subcommittee, but the
Asia Subcommittee to join periodically, given today's topic.
In early 2021, the European Union was on the cusp of
signing the EU-China Comprehensive Agreement on Investment
stemming from a 7-year negotiation process that would have
revolutionized trade between the two trading blocs.
Two years later the European Union has made a significant
policy shift on China crystallized in a speech in March by
European Commission President Ursula von der Leyen, who called
for diplomatic and economic ``de-risking''--her word--and for
Europe to be bolder on China, which has become, and I quote,
``more repressive at home and more assertive abroad.''
This policy shift, which closer aligns EU and U.S. policy
toward China, is a welcome development. Like the European
Union, the United States wants a relationship with the PRC that
upholds the international rules-based order that has
successfully advanced the global economy and human rights
around the world.
However, a series of events over the past few years,
including the PRC's repression of its Uighur population in
Xinjiang, have made it clear that we cannot compartmentalize
our relations with China. We must unite with our allies to
protect our economies and our shared values.
The urgency to align our approach toward China was made
crystal clear when Russia launched an unprovoked and illegal
invasion of Ukraine.
Xi Jinping's decision to stand shoulder-to-shoulder with
Vladimir Putin and declare that theirs is a partnership with no
limits should be of concern to every democracy around the
world.
Russia's invasion highlighted the urgent need to align our
policies closely with our allies, including the EU. China's
concerning and aggressive behavior is not new, but Russia's
brutal invasion created an opening, I believe, to work with
nations in the Indo-Pacific and beyond who recognize that
Taiwan is top of mind for China as it takes notice of our
international response to Ukraine.
This malign behavior, along with the wakeup call resulting
from COVID-19 related supply chain disruptions, has spurred a
growing consensus across the Atlantic, the Pacific, and beyond
that we must decrease our dependence on China and hold the PRC
accountable for its behavior.
Throughout Europe there are numerous examples of efforts
China undertakes to coerce European partners or make strategic
investments that undermine European security.
China has made aggressive economic overtures to secure 5G
contracts for Huawei, threatening to undermine the security
infrastructures of EU and NATO allies and aspirant members.
In Montenegro you can visit a road that was supposed to
connect the north and south of the country, but still has not
been completed almost 10 years since the project was signed.
That is because of China's debt trap diplomacy that has
entrapped Montenegro in its ability to fully fund and complete
the project.
Perhaps one of the most notable examples is from 2021 when
China implemented the equivalent of a trade embargo in response
to Lithuania opening a Taiwan representative office in Vilnius.
I want to emphasize that to fully understand the threats
the United States and the world face from the PRC's increasing
aggression, we need qualified and capable ambassadors on the
ground around the world competing with Chinese interests,
engaging with our allies and partners, and standing up for
America's national security.
The EU and our European partners are critical for our own
nation's ability to address many elements of China's economic
and security agenda.
That is why diplomatic coordinating mechanisms such as
restarting the U.S.-EU dialogue on China and establishing the
U.S.-EU Trade and Technology Council have been instrumental.
In addition to these efforts, the transatlantic alliance is
prepared to address China's acute security, political, and
economic threats.
In 2022, for the first time NATO's Strategic Concept
recognized China as a threat to regional security. This unity
of purpose in countering China is critical to protecting
Europe's key infrastructure including its ports, critical
minerals, and telecommunications.
I welcome the EU and NATO's efforts to broaden its
definition of national security to include critical
infrastructure.
Now, today we have convened this hearing to foster a deeper
understanding of how our European allies and partners view the
China challenge, to assess PRC engagement with and intentions
with respect to Europe and individual EU member states, to
consider vulnerabilities that continue to threaten our
collective security, and to explore additional tools and
opportunities to harmonize the U.S.-EU policy with respect to
the PRC.
I look forward to our discussion today and exploring how
this Congress can best support these continued efforts.
With that, let me turn to the ranking member, Senator
Ricketts.
STATEMENT OF HON. PETE RICKETTS,
U.S. SENATOR FROM NEBRASKA
Senator Ricketts. Thank you very much, Madam Chairman, and
thank you to all of our witnesses for being here today to talk
about this incredibly important topic.
The past 18 months have been some of the most consequential
for Europe in the decades since World War II. When Vladimir
Putin launched his illegal war, he started the largest conflict
on a continent we have seen since World War II.
Europe was, largely, caught off guard and is handicapped by
its dependence on Russian energy. As a result, Europe has been
forced to reckon with and recalibrate its approach toward its
own security.
Through our strategic and coordinated efforts on military
and humanitarian support as well as sanctions, the West has
helped Ukraine resist this brutal aggression and repression by
a despot.
This is demonstrating the power of the transatlantic
cooperation. The war in Ukraine has unsurprisingly resulted in
a deterioration of Russia and European relations.
However, it has also served as an inflection point in
Europe's relationship with the People's Republic of China.
Throughout Moscow's campaign of aggression, Beijing has opted
to consistently provide Putin with economic and diplomatic
cover while turning a blind eye to Russia's atrocities on the
Ukrainian people.
While tensions between Europe and the People's Republic of
China had already been on the rise, this no limits partnership
between Xi Jinping and Putin has finally raised alarms in
Europe on the PRC's malign ambitions after years of focusing
purely on the economic benefits of Chinese engagement.
Encouragingly, leaders like EU Commission President von der
Leyen have shown that some in Europe are waking up to the
threat that the CCP poses.
In March, von der Leyen proposed an ambitious course
correction for Europe's economic approach towards the PRC
focusing on strengthening the EU's inbound investment screening
and export control regulations and a push for a new outbound
investment regime.
Additionally, the EU-China Comprehensive Agreement on
Investment has rightfully been put on ice and that should
remain the case, and the EU, along with the United States, is
far more focused on economic coercion after the People's
Republic of China's restriction of Lithuanian goods as
punishment for allowing Taiwan to open a de facto embassy
there.
Individual countries have also taken matters into their own
hands, from Netherlands restricting its semiconductor
technology to Ireland shutting down a Chinese overseas police
station. These have all been welcome efforts.
However, given the divide in Europe on how to address the
PRC remains to be seen whether it can develop a coherent long-
term strategy that delivers bold policy actions at both the EU
and member state levels.
Over the last 8 months, I have been disappointed to see
European leaders make visits to Beijing with large business
delegations to kiss the ring of Xi Jinping all in the name of
expanding business ties and access to the massive Chinese
market.
Some, and this includes President Biden as well, believe
that rewarding Xi with a more diplomatic engagement and
strengthened economic ties is the necessary policy prescription
to get him to act responsibly as well as play a positive role
in ending the conflict in Ukraine.
This is a grave miscalculation that only serves to
strengthen Xi's hand while showcasing a divide within Europe
and a lack of confidence across the Atlantic.
It is critical that Europe and the U.S. are aligned both on
the risks that the CCP poses to our mutual security and what we
can do together to address it. Forums like the U.S.-EU Trade
and Technology Council, or TTC, can be important for that
alignment, but only to the extent that they produce tangible
results.
I was also glad to see that last year's NATO Strategic
Concept covered the threats that the PRC poses to the alliance.
Now we need to ask whether the words we put into action.
Xi knows that it is our system of alliances and
partnerships that provides us with a distinct advantage over
autocratic and authoritarian regimes and this is fundamental.
The single biggest advantage that we have is our system of
alliances with countries in Europe and around the world. That
is not something that the PRC can replicate. As a result, Xi
will stop at nothing to expand the PRC's malign influence in
the continent and leverage economic vulnerabilities to drive a
wedge between the U.S. and Europe in pursuit of his strategic
goals. We must not allow the PRC to be successful in this
endeavor.
Let us be clear. There can be nuances in our approaches,
but there cannot be an urgency gap between us. Given the PRC's
rapidly expanding military, its ambitions to be the world's
dominating power by the year 2049, and its increasingly hostile
rhetoric and actions towards Taiwan, the time to take serious
action to deter the PRC is now, not in 5-10 years.
The PRC's challenge is too big for either side of the
Atlantic to respond alone. Neither the United States nor Europe
want an international order dictated by the People's Republic
of China, but whether we live in that order is up to us. It
will ultimately come down to the extent of our resolve and our
ability to coordinate to meet this challenge head on together.
I look forward to hearing from our panel of witnesses today
on how we can strengthen the transatlantic cooperation and work
together to combat the CCP's malign influence and aggression.
Thank you, Madam Chairman.
Senator Shaheen. Thank you very much, Senator Ricketts.
Let me welcome all of our witnesses and thank you for
traveling today to get here. We appreciate it. I am going to
introduce you and ask that we hear your testimony in the order
of introduction.
I will begin with you, Mr. Barkin. Our first witness today
is Noah Barkin, who is a senior adviser with Rhodium Group's
China Practice. He is also a visiting Senior Fellow in the
Indo-Pacific program at the German Marshall Fund of the United
States.
His current work focuses on Europe's relations with China,
emerging technologies, and the implications of China's rise for
the transatlantic relationship. On these topics, Mr. Barkin has
written for The Atlantic, The New York Times, Foreign Policy,
and Politico, and he is the creator of a popular newsletter
called Watching China in Europe.
Dr. Janka Oertel is the director of the Asia program at the
European Council on Foreign Relations. She previously worked as
a Senior Fellow in the Asia program at the German Marshall Fund
of the United States Berlin office where she focused on
transatlantic China policy including on emerging technologies,
Chinese foreign policy, and security in East Asia.
She has published widely on topics related to EU-China
relations, U.S.-China relations, security in the Asia Pacific
region, Chinese foreign policy, 5G and emerging technologies,
as well as climate cooperation. Thank you.
Andrew Small is a Senior Transatlantic Fellow with the Asia
program at the German Marshall Fund of the United States. His
research focuses on U.S.-China relations, Europe-China
relations, and broader developments in Chinese foreign and
economic policy.
He has testified before the U.S.-China Economic and
Security Review Commission in both the Foreign Affairs
Committee and European Parliament. Andrew is the author of ``No
Limits: The Inside Story of China's War with the West'' and the
``China-Pakistan Axis: Asia's New Geopolitics.''
Thank you all for being here. I will ask you to begin, Mr.
Barkin.
STATEMENT OF NOAH BARKIN, SENIOR ADVISOR, RHODIUM GROUP, SENIOR
VISITING FELLOW, INDO-PACIFIC PROGRAM, GERMAN MARSHALL FUND OF
THE UNITED STATES, BERLIN, GERMANY
Mr. Barkin. Chair Shaheen, Ranking Member Ricketts,
distinguished members of the committee, thank you for the
opportunity to talk to you today about transatlantic
cooperation on China.
Europe's relationship with China has been worsening for
more than half a decade, mirroring the decline in relations
between Washington and Beijing. In past years, European
concerns centered around issues of economic competitiveness and
market access, but they have since broadened to encompass
worries tied to human rights, economic coercion, strategic
dependencies, disinformation, and security.
Europe entered a new phase in its relationship with China
following Russia's invasion of Ukraine in February 2022. The no
limits partnership sealed between Xi Jinping and Vladimir Putin
in the weeks before the war began and China's subsequent
refusal to condemn Russia's aggression are cementing the view
of China as a competitor and systemic rival in Europe.
Importantly, the war has also increased awareness both in
European governments and corporate boardrooms about the risks
of a conflict over Taiwan.
Today, there is an intense debate underway in major
European capitals about reducing economic dependencies on
China. European Commission President Ursula von der Leyen
delivered an important speech on March 30 in which she argued
for a de-risking of Europe's relationship with China. Over the
coming months, Europe will begin the process of defining what
de-risking means in practice.
The hardening of Europe's line can obscure differences that
exist between 27 EU member states and in some cases within
individual European governments.
On the hawkish end of the spectrum are a group of Eastern
European countries led by Lithuania which promote a values-
based foreign policy. At the dovish extreme is a country like
Hungary. The largest EU states, including Germany and France,
fall somewhere in between.
As we saw on President Emmanuel Macron's recent visit to
China, France stands out for its support for European strategic
autonomy, which is code for an independent Europe that is not
overly reliant on China or the United States.
Germany stands out for having what is by far the closest
economic relationship with China of any European country.
According to new figures from Rhodium Group, German firms
accounted for 84 percent of total EU FDI into China last year.
Germany is also the country in Europe where the debate over
relations with China is the most intense. Chancellor Olaf
Scholz's coalition is divided over how far and fast to go in
recalibrating ties with China.
Still, it is fair to say that the win-win economic
narrative that has fueled close ties between Berlin and Beijing
in recent decades is increasingly being eroded by conditions on
the ground in China and competition from Chinese firms in core
German industries like autos.
I would like to conclude with a few observations about
transatlantic cooperation on China.
First, I believe we have seen a great deal of convergence
between the U.S. and Europe over the past 2 years on the
language that is being used to define the challenges posed by
China.
In recent months, we have seen senior officials on both
sides of the Atlantic embrace the term ``de-risking'' and we
have seen officials distance themselves from the idea of a
full-blown economic decoupling from China.
Second, this alignment is more than just rhetorical. There
is a growing transatlantic consensus on the need to reduce
dependencies on China, diversify to other markets, and improve
the resilience of supply chains.
Third, the U.S. and EU have created a series of structured
dialogues on China in recent years. The U.S.-EU Trade and
Technology Council held its fourth ministerial meeting in
Sweden last week. China also features in discussions at NATO
and the G-7.
Fourth, the war in Ukraine has pushed the U.S. and Europe
closer together and focused minds in Europe on the risks of a
conflict in Taiwan.
That said, it is wrong to expect perfect alignment between
the U.S. and Europe on China. The U.S. is an incumbent
superpower. It plays a vital security role in the Indo-Pacific
and it is not a collection of countries with different
interests like the EU is.
As a result, it sees China through a different prism than
Europe does and its response reflects this. There is no
appetite in European capitals for containing or isolating China
and there are concerns in some capitals about what is perceived
as an overly confrontational approach from some corners of
Washington, particularly on the issue of Taiwan.
There is a consensus in Europe that despite the growing
strains, but also because of these strains, one must continue
to engage robustly with Beijing. As a result, we have seen a
flurry of visits by European leaders.
I am convinced that building transatlantic convergence on
China and limiting the risks of divergence depends on robust
engagement between the U.S. and EU on trade technology and
security policies that are at the heart of the challenges
presented by Beijing's policies.
This will include building a positive transatlantic
narrative, including on trade and investment, that is not only
about China. It will require that the U.S. look beyond the
daily noise on China policy that is coming from 27 EU member
states and remembering Europe is not a monolith, and it will
require that the Administration and members of Congress are
active, persistent, patient, and when necessary forceful in
making their policy arguments to European counterparts behind
closed doors.
I believe we are on a similar trajectory on China between
Europe and the U.S. that has been driven by the policy choices
in Beijing. If Europe has a strong partner in Washington, I am
convinced that Washington will have a strong partner in Europe.
Thank you very much.
[The prepared statement of Mr. Barkin follows:]
Prepared Statement of Mr. Noah Barkin
Chair Shaheen, Ranking Member Ricketts, distinguished members of
the Committee. Thank you for the opportunity to talk to you today about
transatlantic cooperation on China.
Europe's relationship with China has been worsening for more than
half a decade, mirroring the decline in relations between Washington
and Beijing.
In past years, European concerns centered around issues of economic
competitiveness and market access. But they have since broadened to
encompass worries tied to human rights, economic coercion, strategic
dependencies, disinformation, and security.
Europe entered a new phase in its relationship with China following
Russia's invasion of Ukraine in February 2022. The ``no limits''
partnership sealed between Xi Jinping and Vladimir Putin in the weeks
before the war began and China's subsequent refusal to condemn Russia's
aggression, are cementing the view of China as a competitor and
systemic rival. Importantly, the war has also increased awareness, both
in European governments and corporate boardrooms, about the risks of a
conflict over Taiwan.
Today, there is an intense debate underway in major European
capitals about reducing economic dependencies on China. European
Commission President Ursula von der Leyen delivered an important speech
on March 30 in which she argued for a ``de-risking'' of the Europe's
relationship with China. Over the coming months, Europe will begin the
process of defining what de-risking means in practice.
The hardening of Europe's line can obscure differences that exist
between the 27 EU member states, and in some cases, within individual
European governments. On the hawkish end of the spectrum are a group of
eastern European countries led by Lithuania, which promote a values-
based foreign policy. At the dovish extreme is a country like Hungary.
The largest EU states, including Germany and France, fall somewhere in
between.
As we saw on President Emmanuel Macron's recent trip to China,
France stands out for its support of European strategic autonomy--code
for an independent Europe that is not overly reliant on China or the
United States. Germany stands out for having what is by far the closest
economic relationship with China of any European country. According to
new figures from Rhodium Group, German firms accounted for 84 percent
of total EU foreign direct investment in China last year.
Germany is also the country in Europe where the debate over
relations with China is the most intense. Chancellor Olaf Scholz's
coalition is divided over how far and fast to go in recalibrating ties
with China. Still, it is fair to say that the ``win-win'' economic
narrative that fueled close ties between Berlin and Beijing in recent
decades is increasingly being eroded by conditions on the ground in
China and competition from Chinese firms in core German industries.
I'd like to conclude with a few observations about transatlantic
cooperation on China.
First, I believe we have seen a great deal of convergence between
the U.S. and Europe over the past 2 years on the language that is being
used to define the challenges posed by China. In recent months, we've
seen senior officials on both sides of the Atlantic embrace the term
de-risking. And we've seen officials distance themselves from the idea
of a full-blown economic decoupling from China.
Second, this alignment is more than just rhetorical. There is a
growing transatlantic consensus on the need to reduce dependencies on
China, diversify to other markets, and improve the resilience of supply
chains.
Third, the U.S. and EU have created a series of structured
dialogues on China-related challenges in recent years. The U.S.-EU
Trade and Technology Council held its fourth ministerial meeting in
Sweden last week. China also features increasingly in discussions
within NATO and the G7.
Fourth, as I mentioned earlier, the war in Ukraine has pushed the
U.S. and Europe closer together and focused minds in Europe on the
risks of a conflict in the Taiwan Strait.
That said, it is wrong to expect perfect alignment between the U.S.
and Europe on China. The U.S. is an incumbent superpower. It plays a
vital security role in the Indo-Pacific. And it is not a collection of
countries with different interests like the EU. As a result, it sees
China through a different prism than Europe does. And its response
reflects this.
There is no appetite in European capitals for containing or
isolating China, and there are concerns in some capitals about what is
perceived as an overly confrontational approach from some politicians
in Washington, particularly on the issue of Taiwan.
There is a consensus in Europe that despite the growing strains--
but also because of these strains--one must continue to engage robustly
with Beijing. As a result, we have seen a flurry of visits by European
leaders since China ended its strict zero-COVID policies at the end of
last year.
While there is a nascent push in Europe to reduce dependencies on
China, the appetite for paying an economic price in the name of
national security is not as developed as it is in the U.S. or in a
country like Japan. The threat perception is evolving in Europe, but
more gradually. As we've seen on Ukraine, however, Europe is capable of
major shifts in policy in times of crisis.
I am convinced that building transatlantic convergence on China,
and limiting the risks of divergence, depends on robust engagement
between the U.S. and EU on the trade, technology and security issues
that are at the heart of the challenges presented by Beijing's
policies.
This will include building a positive transatlantic narrative,
including on trade and investment, that is not only about China. It
will require that the U.S. look beyond the daily noise on China policy
that is coming from 27 EU member states, remembering that Europe is not
a monolith. And it will require that the Administration and members of
Congress are active, persistent, patient and when necessary forceful in
making their policy arguments to European counterparts behind closed
doors.
We are on a similar trajectory on China that has been driven by
policy choices in Beijing. If Europe has a strong partner in
Washington, I am convinced that Washington will have a strong partner
in Europe.
Senator Shaheen. Thank you, Mr. Barkin.
Dr. Oertel.
STATEMENT OF DR. JANKA OERTEL, ASIA PROGRAM DIRECTOR, SENIOR
POLICY FELLOW, EUROPEAN COUNCIL ON FOREIGN RELATIONS, BERLIN,
GERMANY
Dr. Oertel. Thank you.
Chair Shaheen, Ranking Member Ricketts, thank you for the
opportunity to be appear here before you today. It is an honor
and a privilege.
I would like to make four brief points: First, Europeans do
not speak with one voice when it comes to China, but that does
not necessarily translate into disunity in action. The overall
level of attention regarding China as a challenge to European
interest has grown remarkably over the last 5 years.
China policy matters more. Therefore, it makes sense that
it is more fiercely debated. Discussions seem to be all over
the place when looking at the day-to-day reporting, but
stepping back from that kind of daily madness, it is actually
not true when looking at what is happening at the policy level.
Among EU policymakers, positions on key matters are broadly
united and on a linear trajectory of significant hardening and
growing skepticism about the future relationship with Beijing.
The recent visit by French President Macron to China has
not changed this overall trend. The packages and policies
agreed upon at the EU level with a clear eye towards China are
real, impactful, and they are here to stay, and they have
enhanced the EU's ability to respond to the changing
geopolitical environment.
From investment screening to the 5G toolbox or the carbon
border adjustment mechanism they are all rooted in hard changes
in the economic reality. Trade relations between Europe and
China are changing in China's favor. Particularly for small and
medium-sized European enterprises, the Chinese market is thus
moving from being the place to be to being risky business.
The second point would be China's support for the Russian
invasion in Ukraine constitutes an absolute turning point in
Europe-China relations. The war in Ukraine has not put the
question of how to relate to China on the diplomatic and
strategic backburner, which one could have expected.
On the contrary, because of Beijing's support for Moscow it
has brought the idea of China as a challenge to European
strategic interests closer to home. Particularly in Central and
Eastern Europe, the observable shift among many leaders is
significant and will be lasting.
The war has underscored the problem of over dependence on
China as well as overall supply chain risks, but this does not
translate into a desire for full-scale decoupling in Europe.
The costs, the heartbreak, and the relations with Russia has
incurred on European economies are a huge warning sign to many
policymakers.
At the same time, the war has highlighted the potential
implications of other global security risks and has ignited the
discussion about the security situation in Taiwan. Possible
scenarios and assessment of the potential fallout are now hotly
debated in Europe's strategic community and, if I may add, I
have been doing this for 15 years. I have never seen these
debates before.
Thirdly, the Chinese leadership sees Europe as a
battleground for competition with the United States, but the
European public does not quite perceive it that way yet. The
Chinese leadership continues to see an advantage in trying to
undercut alignment, distract EU countries from China's
engagement with Moscow, and obstruct transatlantic unity.
Therefore, China currently appears to be on a repair
mission in the relations with Europe. Special Envoy Li Hui's
visit and a flurry of additional diplomatic activity including
government consultations with the German cabinet this June or
Chinese Premier Li Qiang's presence at Macron's new Global
Financial Pact Summit in Paris 2 days later are signs of that.
Among European leaders this has not fundamentally swayed
positions, but it seems that they have so far failed to convey
the urgency of their changing approach to China and the direct
implications for European security and prosperity convincingly
at home.
Today, my colleagues at the European Council on Foreign
Relations have published polling data from 11 EU member states.
With regard to a Taiwan contingency, the majority of
respondents, 62 on average--62 percent would be in favor of a
neutral stance.
European policymakers know that this is not an option and
need to communicate this much clearer to their domestic
audiences because once a direct connection to Europe's own
security is more palpable, numbers do change.
A staggering 41 percent of respondents on average across
member states would thus be in favor of sanctions against China
if it were to deliver ammunition or weapons to Russia, even if
this meant, and I quote, ``serious economic harm to Western
economies.''
This brings me to my fourth and final point. Among
policymakers, transatlantic convergence on the analysis of the
challenges posed by China is real, but de-risk and diversify
needs to move beyond the slogan.
The discussions at the G-7 level have reached a new
consensus since the Hiroshima Summit, with a joint commitment
to economic resilience and economic security. The negotiations
and the framework of the TTC are enhancing trust and making
real progress possible from green technologies, particularly
also to standard setting, and the various bilateral exchanges
on the issue, including ahead of meetings with Chinese
counterparts, have generated a much higher degree of
coordination.
To guarantee that this trend is sustainable beyond this
U.S. Administration and to bring the European and American
public along what is needed is concrete, joint, or parallel
action that benefits both sides of the Atlantic and shares
risks and costs.
Thank you very much.
[The prepared statement of Dr. Oertel follows:]
Prepared Statement of Dr. Janka Oertel
Dear Chairwoman Shaheen, Ranking Member Ricketts, and distinguished
members of the subcommittee, thank you for the opportunity to appear
before you today. It is an honor and privilege to address you.
I would like to make four points:
1. Europeans do not speak with one voice when it comes to China
policy, but that does not necessarily translate into disunity
in action.
2. China's support for the Russian invasion in Ukraine constitutes a
turning point in Europe-China relations.
3. The Chinese leadership sees Europe as a battleground for
competition with the Unites States, but the European public
does not perceive it that way--yet.
4. The EU's China policy objectives are converging with those of the
United States, while full alignment in policy and rhetoric
remains unlikely. De-risking is a useful framework for a
transatlantic approach, but it needs to move beyond the slogan.
Let me elaborate on each of them briefly.
attention is up, unity holds
The overall level of attention regarding China as a challenge to
European interests has grown remarkably over the last 5 years.
Precisely because of the heightened importance that the relationship
with China now plays for EU governments the messaging is more complex,
with a stronger focus on the domestic audience.
While the daily ups and downs of the media reporting on European
positions can leave observers confused, when stepping back European
positions are actually relatively united and on a linear trajectory of
significant hardening and growing skepticism about the future of the
relationship. The recent visit by French president Macron and the
subsequent comments in the media have not changed this broader trend.
The packages and policies agreed upon with a clear eye towards
China (although formally ``country-agnostic'') are quite impressive:
the inbound investment screening mechanism, the anti-coercion tool, the
foreign subsidies regulation, the 5G toolbox, new due diligence
directives, the Critical Raw Materials Act, outbound investment
screening plans, as well as the Carbon Border Adjustment Mechanism,
which has generated significant concern in Beijing--all of this is
real, impactful and here to stay and has enhanced the EU's ability to
respond to the changing geopolitical and geo-economic environment the
Union and the member states are facing.
The changes are driven by hard economic and political realities,
not by ideology or moral considerations. The EU's trade deficit with
China is growing. From 2020 to 2022 alone it has more than doubled.\1\
Germany holds the largest share of trade with China among EU countries
and the same trajectory applies: foreign direct investment into China
from Germany is up, imports from China have increased, while sales of
German companies in the Chinese market in key industries, particularly
the automotive sector, are slowing. German exports to China are down in
relative terms and have only grown marginally in absolute terms over
the last year. In 2022, China was only Germany's fourth largest export
market, significantly behind the United States, France, and the
Netherlands.
---------------------------------------------------------------------------
\1\ In 2020 the trade deficit of the EU vis-a-vis China amounted to
182.3 billion Euro compared to 396 billion billion Euro in 2022, see:
https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-
region/countries-and-regions/china_en.
---------------------------------------------------------------------------
This is changing the narrative. Particularly for small and medium
size European enterprises, the Chinese market is moving from being the
place to be to being risky business.
ukraine is a pivotal moment--also for china policy
For policy makers in Europe, the issue of highest strategic
salience remains the Russian invasion of Ukraine, but the war has not
put the question of how to relate to China on the diplomatic and
strategic backburner. Quite the opposite: because of Beijing's support
for Moscow, it has brought the idea of China as a challenge to European
strategic interests closer to home.
It has ignited a debate about the security situation in the Taiwan
Strait. Media reporting regarding Taiwan--particularly in Germany has
increased significantly and the number of conversations in the
strategic, policy, and business community about possible scenarios and
assessments of the potential fallout has increased markedly across
Europe and particularly in Brussels.
Additionally, there is a specific regional impact of China's `no
limits' bond with Moscow: In Central and Eastern Europe China's failure
to condemn the Russian invasion has led to another re-evaluation of the
relationship with China. While the cooling of the relations over the
past few years in what once was the 17+1 format (and is now down to
14+1, slowly drifting into irrelevance) was mainly due to China's
assertive policies at home, the pandemic response, and disappointed
business interests, the shift that is observable among many of the
political leaders in the region now is likely to be more significant
and lasting. It cuts to the heart of their own strategic priorities in
terms of safeguarding sovereignty and territorial integrity and is
fueled by a deep-rooted fear of Russian intentions.
While Chinese support to Moscow has highlighted the problem of
single points of failure regarding overdependence on individual goods
and products from China as well as overall supply chain risks, this
does not translate into a desire for full-scale decoupling in Europe.
On the contrary, the costs that the hard break in the relations
with Russia has incurred on European economies are a huge warning sign
to many. The longer the war continues and the deeper the overall
challenges to the global economy become, the harder it will be to
maintain European unity as those EU countries that are more dependent
on China, such as Germany, may be inclined to slow the de-risking
process in favor of short-term economic relief.
beijing's charm offensive falls flat--so far
The Chinese leadership continues to see an advantage in trying to
undercut alignment, distract EU countries from China's engagement with
Moscow, and obstruct transatlantic unity and has thus currently put a
particular emphasis on its outreach to EU countries.
So far, however, Beijing's attempt to improve ties has not swayed
most European leaders who see no new offers by the Chinese leadership
on the table and are unimpressed by Special Envoy of the Chinese
Government for Eurasian Affairs Li Hui's latest visit, the cold and
low-level reception by the Polish Foreign Ministry being a case in
point. \2\
---------------------------------------------------------------------------
\2\ For the readout of the Polish Foreign Ministry, please see:
https://www.gov.pl/web/diplomacy/deputy-minister-wojciech-gerwel-met-
the-special-envoy-of-the-chinese-government-for-eurasian-affairs.
---------------------------------------------------------------------------
The visits in Kiev, Warsaw, Berlin, Paris, and Brussels of the
special envoy and a flurry of additional diplomatic activity including
the upcoming government consultations with the German cabinet on 20
June 2023 and Chinese Premier Li Qiang's planned presence at Macron's
flagship ``Summit for a New Global Financial Pact'' are an indicator
that Beijing is focusing on select member states it regards as
particularly relevant.
There is reason to be concerned that some of these tactics can be
successful as European public perceptions of the relationship with
China in many member states are not as clear as the existing unity in
broadly rallying behind the toughening of the EU line may indicate.
With regard to a potential Taiwan contingency, for example, the
latest poll that my colleagues at the European Council on Foreign
Relations have conducted in 11 EU member states \3\ concludes that a
majority of European respondents (62 percent on average) polled would
be in favor of a neutral stance rather than supporting the United
States, which only 23 percent would on average be advocating for.
---------------------------------------------------------------------------
\3\ The representative poll is part of ECFR's ``Unlock Europe's
Majority'' project. Polling was conducted in April 2023 in Austria,
Bulgaria, Denmark, France, Germany, Hungary, Italy, the Netherlands,
Poland, Spain, and Sweden. See: https://ecfr.eu/publication/keeping-
america-close-russia-down-and-china-far-away-how-europeans-navigate-a-
competitive-world/.
---------------------------------------------------------------------------
It is on European and U.S. policymakers to jointly convey the
impossibility of neutrality in such a scenario and devise a clear
strategy for advocating deterrence and de-escalation to avoid a
military confrontation that takes public perceptions into account by
clearly conveying that neutral by-standing will not be an option for
Europe.
Because once the direct connection to the reality of European
citizens becomes clearer the numbers change: a staggering 41 percent of
respondents (on average across member states) would thus be in favor of
sanctions against China if it were to deliver ammunition or weapons to
Russia, even if this meant ``serious economic harm to Western
economies.''
The picture is more nuanced when looking at the individual country
polling. In Sweden 56 percent of respondents were in favor, 51 percent
in the Netherlands, whereas only 37 percent of the respondents in
Germany would be inclined to do so, with 38 percent arguing that it
would be more important to protect the Western economies than to
sanction China.
All countries polled show an exceptionally high number of undecided
respondents (20 percent to almost 40 percent) to this question, which
indicates that there is a lot of unease among the European public and
the need for clear communication of political objectives and risk
calculations of European leaders becomes even more important.
Risk is currently priced against the imaginary costlessness of
upholding the status quo. Weighing the costs of inaction against the
cost of more decisive European action to defend European interests vis-
a-vis China is a key task for policy makers in Europe and beyond.
transatlantic convergence is real, but de-risk and
diversify needs to move beyond the slogan
This brings me to my fourth and final point. Transatlantic
convergence on the analysis of the challenges posed by China is real
among policy makers, the discussions in the G7, the EU-U.S. Trade and
Technology Council and the various bilateral exchanges on the issue,
the close coordination ahead of meetings with Chinese counterparts and
regarding measures to be taken is a clear indicator of that.
``De-risk and diversify'' seems to be terminology around which
transatlantic partners can rally.
But discomfort in European capitals regarding full alignment with
the United States remains high, and public opinion and domestic
politics is important on both sides of the Atlantic.
Therefore, the exact contours of a ``de-risk and diversify'' agenda
need to become real very quickly in Europe with a clear roadmap for
bringing the public on board for this overhaul of the way the global
economy and the multilateral framework has been functioning. It also
needs to move beyond the rhetoric of tools and instruments, insinuating
that mere little tweaks to the existing order will suffice to safeguard
European security and prosperity in an age of system competition.
A de-risk and diversify slogan with no concrete policies attached
could otherwise quickly become a banner to hide behind for continued
complacency, reactiveness, and inaction in tackling the challenges
head-on.
Senator Shaheen. Thank you, Dr. Oertel.
Mr. Small.
STATEMENT OF ANDREW SMALL, SENIOR TRANSATLANTIC FELLOW, INDO-
PACIFIC PROGRAM, GERMAN MARSHALL FUND OF THE UNITED STATES,
BERLIN, GERMANY
Mr. Small. Chair Shaheen, Ranking Member Ricketts, it is an
honor to have the opportunity to speak before you today on this
important topic.
As both of you and as my fellow witnesses have laid out,
Russia's invasion of Ukraine has been a watershed moment for
European-China policy and for the transatlantic agenda on
China.
The United States and Europe already agreed on the
challenges that the PRC posed. We agreed also that they were
systemic, that security, human rights, economic factors,
technology could not exist in separate lanes anymore, that they
were intertwined, and we agreed on many of the measures that we
needed to take in response, but there was, as Ranking Member
Ricketts noted, an urgency gap between the two sides. There is
no question that we have gone through a transformation in how
China is being dealt with in the transatlantic relationship,
from a time when Europe was still apprehensive about open
cooperation with the U.S. on China to a situation where that
coordination is now embedded at every level of the relationship
from NATO to the TTC.
It has been clear at the same time that the U.S. was moving
further and faster in overhauling its China policies and that
the European side was often in reactive and sometimes slightly
reluctant mode, recognizing the issues at stake, heading in the
right direction, but often lacking the momentum to make some of
the more difficult choices required.
Following the Russian invasion, that urgency gap has been
closing. First, the political common sense in Europe when it
comes to economic risk with China has now changed. The combined
shock of the pandemic and the invasion on top of all the
existing concerns about the PRC's trajectory under Xi Jinping
have made it much harder to argue that the status quo is the
low-risk, cost-free option.
There is certainly a spectrum of views in Europe on how to
define economic security and de-risking as the business
delegations that you noted show, but this is a mindset shift in
Europe, and in each practical area from export controls to
outbound investment screening it is making coordination across
the Atlantic easier.
Second, broader perceptions of China have shifted as a
result of the support that Beijing has extended to Moscow. The
PRC is now seen by many Europeans as an enabler of Russia's
war, a direct contributor to security threats in Europe in a
way that is far more tangible than cyber intrusions or
influence operations ever were.
European policymakers certainly still want to keep areas of
cooperation alive, but there is a consensus that rivalry and
competition now define the relationship, and European leaders
have delivered a consistent message to Beijing in recent
months. The provision of military support to Russia would
amount to an even graver rupture in the Sino-European
relationship.
Third has been to make more tangible the possibility of a
major security crisis in East Asia, particularly over Taiwan,
and the risks of complacency about the intentions of
revisionist authoritarian powers.
There is deeper understanding now among European
policymakers of how interconnected security issues in the
Atlantic and Indo-Pacific theatres are of the seismic shock
that a cross-strait crisis would have for Europe and that
Europe is a player when it comes to deterring China.
Eighteen months ago when China looked at Europe as a
sanctions actor, they thought Crimea--in other words, modest
measures that they could live with, that they could swallow.
Now when they look at Europe they see SWIFT cutoffs,
central bank asset freezes, and sweeping export controls. Even
if Europe and the U.S. cannot agree on preemptive signaling to
China, the PRC now still has to take the possibility of a
European economic squeeze into account before taking any
fateful decisions.
Beijing sees all of these developments with concern and is
trying to undercut or at least slow them down. The PRC wants to
make cooperation with the U.S. for Europe as costly as possible
and incentivize European acts of distancing.
It wants to ensure that there is no red lines crossed when
it comes to European cooperation with Taiwan, and right now
China is exceptionally focused on trying to maintain European
openness for Chinese access to advanced technologies where
Europe has become even more important to the PRC since the U.S.
semiconductor export controls from last October, and, of
course, what Beijing thinks is coming next.
Ultimately, though, the PRC has decided to accept some
level of collateral damage to its relationships in Europe as
the price for deepening ties with Moscow. In the wider struggle
that the PRC understands itself to be engaged in with the
United States, Xi sees the partnership with Russia, even a
weakened Russia, offering greater strategic benefits than any
other relationship and China is realistic about where it sees
the Europeans landing in this geopolitical landscape.
The Chinese Communist Party's internal documents have long
referenced Western hegemony, Western values, and Western
hostile forces as the focus of its animosity, but Xi spoke
openly in March about Western countries that have implemented
all around containment, encirclement, and suppression.
The PRC will do what it can to limit the damage to its
position in Europe as Beijing's caution about the Russian
request for lethal aid indicate, but it is simultaneously
steeling itself for a contest with the West, not the United
States alone.
The coalition that the United States needs to build to
address the shared challenges posed by China span multiple
domains and geographies. We still have a long way to go on the
transatlantic agenda.
We have reached a far deeper level of coordination on China
than looked plausible a few years ago and I think that will
continue to be the trajectory in the years ahead.
Thank you for your time.
[The prepared statement of Mr. Small follows:]
Prepared Statement of Mr. Andrew Small
Chairperson Shaheen, Ranking Member Ricketts, and distinguished
members of the subcommittee, it is an honor to have the opportunity to
testify before you today.
Over the last few years, Europe and the United States have engaged
in the most significant overhaul of their policies towards the People's
Republic of China (PRC) since the opening of diplomatic relations.
While the United States has moved further and faster in this process
than Europe, the nature of the two sides' economic, political and
strategic concerns about the PRC, and the analysis of how best to
respond, has been highly convergent.
This is reflected in the quality of transatlantic exchanges on
China. Where it was once contentious even to address China-related
concerns openly between Europe and the United States, collective
efforts to do so are now embedded across all dimensions of the
transatlantic relationship, from summits to working-level coordination,
NATO to the EU-U.S. Trade and Technology Council (TTC). The urgency gap
that existed between the two sides is starting to close. The Russian
invasion of Ukraine, and the PRC's decision to extend significant
political and economic backing to Moscow, has had a catalytic effect on
European thinking. While Beijing has so far held back from providing
lethal aid, the forms of support it already provides have positioned
China as one of the chief enablers of the war. European leaders are now
far clearer that while areas of cooperation with the PRC still exist,
and effective political channels with Beijing need to be preserved,
competition and rivalry are now the defining features of the
relationship.
The Russian invasion also acted as an acute warning of the risks of
excessive dependencies on powerful authoritarian states, and has forced
European leaders to start taking the prospects of a conflict in Asia--
particularly a cross-Strait contingency--more seriously. Coming on top
of the supply chain vulnerabilities exposed during the COVID-19
pandemic, and the worsening climate for European business in China, it
has transformed the notion of ``de-risking'' the economic relationship
from a radical position in the European debate to a matter of political
common sense.
While there are still differences over how expansively to define
the concept, some of the basic principles are generally agreed:
strengthened technology controls in fields with potential military
applications; diversification away from areas of near-exclusive
reliance on China; more robust means to address outright economic
coercion; and tight coordination with like-minded partners to put these
measures into effect. European capitals are now converging on a new set
of policy objectives with China for the first time since 2019, when the
EU's framework of treating China as a ``partner, competitor and
systemic rival'' was first laid out. European Commission President Von
der Leyen's March 2023 speech on how Europe should deal with a China
that is ``more repressive at home and more assertive abroad'' was an
indication of the direction of flow. EU member states have again given
the Commission space to be bolder and clearer than some of them are
willing to be themselves.
china's pushback
The PRC views these developments with concern. Beijing aims to
restrict and complicate European involvement in a common front with the
United States; maintain a high degree of European openness for Chinese
commercial and technological access; and limit any European moves on
issues of high sensitivity, especially human rights, Xinjiang, Hong
Kong, and Taiwan. The PRC has long understood Europe's importance in a
geo-strategic landscape where competition cuts across the economic,
technological, information, and ideological domains rather than hard
military power alone. Yet Europe's salience to Chinese interests is now
even greater in a context where U.S. restrictions on its means of
acquiring technologies, tools, and know-how are tightening. In addition
to the barrage of criticism of the United States to which European
officials and leaders are now routinely subjected by their Chinese
counterparts, there is a forensic focus on ensuring that Europe does
not close down interactions with China in areas that will affect the
development of its advanced capabilities. As a result, Europe is the
subject of more intense diplomatic outreach from China than it has
experienced in many years.
At the same time, Beijing has essentially decided to accept some
level of collateral damage to its standing in Europe as the price for
deepening and elevating its ties with Moscow at a time of war. In a
previous phase of Chinese foreign policy, Xi would neither have agreed
to the ``no limits'' joint statement with Putin in the crucial weeks
before the Russian invasion nor embarked on a full-scale state visit to
Moscow at such a contentious juncture a year later. But in the wider
struggle that the PRC understands itself to be engaged in with the
United States, Xi sees the partnership with Russia--even a weakened
Russia--offering greater strategic benefits than any other
relationship.
By contrast, Beijing is realistic about where it sees Europe
landing. The Chinese Communist Party's internal documents have long
referenced ``western hegemony,'' ``western values,'' and ``western
hostile forces'' as the focus of its ideological animus. Chinese
assessments have also long seen European strategic decision-making as
necessarily conditioned by its alliance with the United States, and
view Russia's invasion of Ukraine as a factor considerably tightening
that alliance, a dynamic that will outlast the war. Xi's public remarks
at the March 2023 ''Two Sessions'' notably spoke of ``western
countries--led by the U.S.,'' that have ``implemented all-round
containment, encirclement and suppression against us.'' The PRC is
steeling itself more openly for a broader contest with the West, not
the United States alone.
Nonetheless, the PRC certainly wants to limit the extent of the
damage to its relationships in Europe. This is one of the principal
reasons giving Beijing pause in responding to Moscow's requests for
lethal aid, and its willingness at least to go through the diplomatic
motions of a peace initiative for Ukraine. Europe's leaders have
delivered a consistent message to Beijing in recent months that the
provision of systemic military support to Russia would amount to a real
rupture in the Sino-European relationship. The Chinese Government has
taken those warnings seriously.
ukraine
European messaging has been less consistent when it comes to
China's diplomatic role on Ukraine. Some European policymakers see
reason to try to incentivize a more constructive Chinese approach; some
see value in pushing Beijing on specific aspects of its 12-point
position paper; some have attributed excessive significance to boiler-
plate Chinese statements on nuclear weapons; and others have been
wholly skeptical about Beijing playing an even marginally helpful role.
Xi's Moscow trip and the recent European visit from China's special
representative for Eurasian affairs, Li Hui, certainly poured cold
water on some of the more delusional hopes. The center of gravity at
present is for Europeans to simulate belief in China's simulated
efforts and at least give themselves the opportunity to call Beijing's
bluff if nothing results. Europe is also looking to exert pressure on
Chinese sanctions-busting, and considering measures to go after a list
of Chinese entities engaged in dual-use transfers. But there is
undoubtedly a constituency in Europe that sees the risk of an even
darker trajectory for Xi's handling of the war--which could see
significant military supplies to Russia--as good reason to tread
carefully in dealings with the PRC.
taiwan
Where the Sino-Russian relationship and the de-risking question are
at the top of Europe's China debates, the Taiwan question occupies a
more delicate and complicated role. There is now clearer awareness of
the risks and the stakes for Europe, with the economic shock alone of
any cross-Strait conflict dwarfing that of Russia's invasion. The
breadth of the sanctions imposed on Moscow has also turned Europe into
a part-player in Taiwan-related deterrence efforts that it was not 18
months ago. China is well aware that the sanctions-coalition is one
that could be replicated for Taiwan contingencies, and saw Europe going
far further with Russia than it had anticipated, with Chinese officials
scrambling--for instance--to figure out the implications of the central
banking asset freeze.
Yet while there is now European willingness to warn China about the
need for stability; to make clear that Europe also has a stake in
cross-Strait security; and to find creative ways to expand relations
with Taiwan--consistent with a One China policy--there is still caution
about detailed transatlantic contingency planning for any sanctions
measures. This is not just out of neuralgic anxiety about antagonizing
Beijing: there is also a concern among European policymakers that any
preemptively agreed lowest-common-denominator measures may do more to
underwhelm than deter. For now, the PRC has to take into account
Europe's demonstrated capacity to surprise on the upside with
sanctions. And Beijing is well aware that while Europeans may be
cautious about advance signaling, and may not be willing to act
decisively for the sake of Taiwan alone, the U.S. frontline position in
any conflict scenario will ensure that Europe feels obliged to do so
regardless.
the transatlantic action agenda--progress and prospects
As the recent G7 summit in Hiroshima highlighted, United States and
Europe, and their wider network of partners and allies in the Indo-
Pacific, are now more closely aligned in substance. Where prior summits
still saw differentiating language on China from European leaders,
reflecting their concerns about ``bloc politics'' and
``confrontation,'' this looked closest to a real consensus rather than
a paper one. The issues at stake have high stakes for the future
international security order and major economic interests at home, and
will be subjected to fierce intra-European and transatlantic debate.
But depicting this as ``division'' obviates the fact that agreements on
consequential areas of policy continue to be reached nonetheless. It is
not an analytical mistake that Beijing tends to make.
For now, the fastest-moving areas of cooperation have been on the
defensive side. Europe's progress on agreeing an economic security
strategy offers the prospect that it will move out of reactive mode on
issues ranging from export controls to outbound investment screening.
But even if the United States remains the pace-setter, there is now a
suite of different areas in which the two sides are in synch, and can
be expected to line up their approaches in the coming years. Despite
this, it will remain important for the United States to be vigilant
across areas of security where gaps and deficiencies are already
appearing, such as the lagging of certain European countries on rollout
of secure 5G networks, and the expansive openings for Chinese actors in
other areas of Europe's digital infrastructure.
There is also much further to go on building mutual capacities
among the allies. There are areas where the TTC has unquestionably made
helpful progress, from global standard setting to information sharing
on subsidies. But on some of the most important parts of the respective
domestic economic agendas, such as green industrial policy or data
flows, we are still mostly dealing with transatlantic deconfliction
rather than trying to build collective scale, and typically working to
make advances on individual silos rather than ambitious joint packages
to bolster allied competitiveness.
The offer to the rest of the world needs strengthening too. There
is no effective diversification strategy from China that fails to lay
out a compelling picture to partners across the developing world. While
there have been areas of tentative progress under the auspices of the
Partnership for Global Infrastructure and Investment, and initiatives
with potential--such as the Critical Raw Materials Club--there is still
a sense that the political momentum behind them has lagged behind the
scale of the required task. With the Belt and Road Initiative facing
the most difficult phase since its inception, as China fails to make
adequate progress on addressing the major need for debt restructuring
among distressed lenders, the opportunity for Europe and the United
States is clear. But there are still fears across much of the
developing world that the West is in ``pulling up the ladder'' mode
rather than seeing the diversification drive translating into new
opportunities for them in a less China-centric model of globalization.
conclusion
The United States and Europe have reached a far deeper level of
coordination on China than looked plausible a few years earlier.
Russia's invasion of Ukraine might have been expected to consume the
two sides' political focus; it has instead led to an even greater
awareness of how closely the Atlantic and Indo-Pacific theaters are now
interconnected. The coalition that the United States needs to build to
address the shared challenges posed by China spans multiple domains and
geographies. Europe will remain a vital part of it in the years to
come.
Senator Shaheen. Thank you all very much.
We will begin a round of questions, 5 minutes for each of
us, and we will go in order of anyone else who comes in after
Senator Ricketts and I begin.
[Map is shown.]
Senator Shaheen. I want to start with this map of
Montenegro because all of your testimony spoke to movement in
Europe, and I think one of the reasons for some of that
movement is not just the war in Ukraine and a recognition of
what is going on in China, but it is also a reflection of
China's behavior in some of our European allies and this map
shows one of those examples that I talked about in my opening
statement.
It is a road in Montenegro that was supported through
China's Belt and Road Initiative with funding from the Export-
Import Bank of China. It was supposed to connect the north and
south of the country, begun back in 2014, and Montenegro signed
a nearly $1 billion deal to do that.
Now, in red you can see where the project is completed, but
the blue parts show the still incomplete sections of the
project, and it not only highlights the challenges that
Montenegro has had because of their need for capital and
infrastructure investment, but it also shows the challenges
that China has had in trying to do what it promises to
countries like Montenegro who have signed up for the Belt and
Road Initiative.
I have to say it is a little baffling to me that in March,
Montenegro signed up for yet another infrastructure project
deal with China for a road, but, again, I think it reveals some
of the vulnerabilities that China has.
We also have a map on the other side that shows the
European countries that have signed on to China's Belt and Road
Initiative and, again, the darkest ones signed up earliest and
we are still seeing the gray sections where we are not sure
where they are at this point.
Certainly, the movement that we are seeing in Europe is
going to affect those countries as they think about their
futures.
I would ask you all, within Montenegro and the EU, what are
some of the lessons that have been learned by the EU from this
kind of a project so that they avoid becoming targets of
Chinese disinformation, of debt trap diplomacy? I do not know
who would like to begin.
Dr. Oertel. Maybe let me start a little bit broader because
you want to talk about the lessons of this and I think the
Western Balkans is one of the reasons why we have a sincere
discussion about China's role also with regard to the future
rebuilding of Ukraine, for example, which I think is closely
connected to that and where our conversation should start
transatlantically immediately and how to set kind of guardrails
for that in the future just as a footnote because I think it is
really important.
I do think that a lot of the lessons have been learned at
the EU level, but these are member state decisions, member
state decisions that are often very much driven by national
domestic interests where there is always changes in government
where new decisions can be taken and where a kind of linear and
linearity of--or the lessons learned will not necessarily be
taken forward, but because these are based on domestic
political appeal.
For the--kind of the future, it is more important that
within the EU there are decisions on critical infrastructure
taken, as you have laid out initially, because I think,
honestly, it is more surprising to me that in 2023 a decision
can be taken by the German train, Deutsche Bahn, to have their
entire IT infrastructure built by Huawei than it is surprising
to me that a debt-ridden country is willing to take on a loan
from China to build an important infrastructure project.
This is where I would like to kind of put the emphasis on
in the conversation because I think we focus too much on
projects in the Western Balkans or in other regions where they
are kind of limited financial scope that need to be dealt with
and that can be dealt with at the EU level. We actually need to
look closer into the heart of the EU.
Senator Shaheen. Well, so before we go on to address that,
so answer that question about Germany and why Germany is
willing to make that kind of----
Dr. Oertel. Because there is still no understanding of the
fact that there is a real risk attached and moving the heads of
people into the zone that there are real strategic concerns.
This deal did not have to even be flagged to any
authorities because it was not considered critical
infrastructure. I think there is a mindset shift at a top level
that we have seen, but it has not trickled down across the
entirety of the system and we still are in a situation where
there is a lot of worry, particularly in Germany, about making
China mad, making them uncomfortable. There is a lot of
interest in just connecting and having good business relations
going.
I think there is a bigger problem there sometimes than we
see and it is easy to finger point at the 16+1, 14+1 that they
are now. We like to do that in Berlin as well, but actually it
needs to start closer to home.
Senator Shaheen. Thank you.
Mr. Small, you were going to add to that?
Mr. Small. Yes, thank you. Just to add a couple of points
to this.
When one looks at that map that you laid out of the Belt
and Road countries, one also thinks back to an era of the
Eurozone crisis and the biggest phase of Chinese investment in
European infrastructure, and I think that has been a lesson
that has been taken on board very seriously, particularly
through the pandemic, the number of policymakers who said we
must not repeat the mistakes of Piraeus--we must not repeat the
mistakes that we made of squeezing a number of these countries
in terms of their fiscal space and putting them in a position
where they either feel they have to take Chinese investment or
they feel they want to play the China card with Brussels, with
Berlin, with whoever else.
I think that is something that we have seen much less of in
the last period of time. One of those countries, of course,
Italy, is currently considering withdrawing from its Belt and
Road MOU, which I think is reflective as well of how the tide
has turned for much of Europe.
I think there is, of course, a very different question when
we are talking about the Western Balkans, when we are talking
about countries on Europe's periphery, where I think some of
these issues have not yet been successfully resolved.
Of course, there is all the funds on the EU side, which
still dwarf any of the money that comes in from China. This is
not a kind of competitiveness space in terms of the resources
that are put on offer. It is just--and this is going to be an
endemic problem--there are going to be countries want to do
some of the problematic political deals that are involved.
I think some of this when it comes to EU accession
negotiations, for instance, means putting these issues up
front. This is, as Janka mentioned, something that when it
comes to Ukraine is going to be important potentially in the
future.
I think there is also an understanding, particularly now,
which I think is the hardest moment that the Belt and Road has
faced since it started--I think there is an understanding of
the level of crisis that it can put countries in, the toxicity
of the debt that makes it harder to negotiate with other
creditors, and the Montenegro case, of course, has all of the
secrecy clauses. We still do not even know all of the details
yet of some of the contracts.
I think there has been a big shift in understanding,
particularly since going back to the point at which some of
these early contracts were agreed, but we still have a lot
further to go even in some of the core spaces in Europe and on
digital infrastructure and on many of these other areas.
Senator Shaheen. Well, thank you. I would like to explore
that--some of those points some more, but I will turn it over
to Senator Ricketts next.
Senator Ricketts. Thank you, Madam Chairman.
One of the things that we saw that I touched upon in my
opening remarks was how Europe has had to react to the Russian
invasion of Ukraine with regard to their energy.
My understanding is in the years prior to this invasion
that U.S. officials had been warning Europe about their over
reliance on Russian energy and what that could mean if there
was a crisis, and by and large were dismissed as--almost being
laughed out of the room, but just saying that is not going to
be a problem. It is never going to happen.
Then, of course, we have seen that it has happened and, as
I mentioned earlier, caught them off guard and they have had to
scramble to be able to realign their energy mix and where it is
coming from.
This just kind of demonstrates kind of the foot dragging
that has been going on in Europe also with regards to the
People's Republic of China. Obviously, Ursula von der Leyen's
speech was very good. It looked to start getting away from this
methodology of calling the PRC partner, competitor, or rival
and talked about de-risking, and at the TTC Summit, Swedish
Prime Minister Kristersson said, ``I think the U.S. has been a
few years ahead of Europe, but I think very many countries now
realize this is not the time for naivety.''
I think that there is movement there, but the question gets
back to the matter of timing. The PRC has been increasingly
hostile and aggressive in its rhetoric toward Taiwan. We just
saw this past week where a PRC destroyer had a very close call
with an American ship, obviously on purpose, being very
aggressive in its maneuvers.
My question is how fast is this moving? If this is a 5-,
10-, 15-year thing with regard to the European Union and how we
deter the PRC? My fear is that will be too late, that the PRC
will move faster than that to get to Taiwan.
Dr. Oertel, maybe I will start with you. How do European
leaders see this? I mean, do you think this is something with
regards specifically about deterring the PRC in Taiwan? Is this
something that they are talking about?
Actually, maybe I will ask you to comment a little bit
because you said you had not seen these types of debates
before. Was that specifically with regard to the PRC? Or just
broadly that you had not seen this kind of debate before?
How do European leaders see that? Is this something where
they think, yes, we have got to take steps right now or are
they still thinking this is a years down the road problem?
Dr. Oertel. Taiwan has become an issue that has moved on
the agenda and I was referring specifically to Taiwan as a
topic--as a discussion that I have not seen in that like--in
that way before in the last 15 years because it has moved so
fast.
The problem was so far away for European leaders for such a
long time, but particularly the reliance on semiconductors,
particularly the reliance on trade routes, particularly the
integration of supply chains, has led European leaders to
understand and I think Noah's colleagues at Rhodium Group have
added to that with a fantastic report that has put some numbers
to this. When you give European politicians the cost--the
actual cost of a crisis it does change the logic a little bit.
We are having now very substantive conversations at all
levels in the member states, but there is a capacity gap in
some member states because it is just really difficult to be on
top of all of these different matters.
There is an urgency gap in some member states, but there is
certainly a conversation at the EU level that is very
interesting at the moment and I think where a lot of the action
will be happening in the future.
Real action, it is very unlikely to see some, like
something committed to see before something really happens. I
think it is more interesting now to sound out the gray lines--
the gray zones, to sound out policy responses to kind of more
limited incursions, questions of more--what would certain
scenarios mean in terms of cost to the European economy and
then to drive this message home, at home because I think the
data that I have presented in terms of our public opinion
reviews, I would say, if you have 62 percent that want to stay
neutral in a scenario when neutrality is not an option as a
politician, you have a job to do of explaining why neutrality
is not an option and then explaining how you will manage the
issue and what the expectation level of the regional countries
will be.
Senator Ricketts. Dr. Oertel, it sounds like what you are
telling me about European leaders, generally speaking, is they
are starting to move, but they are not to the point where they
can even make the case then to their respective populations
about trying to deter the PRC in Taiwan right now because they
are still not quite there themselves. Is that fair?
Dr. Oertel. I think they have started to make that case,
but I think this is a long process because this is really not
an immediate security threat that has been on the agenda of
policymakers for a long time.
I would say it is moving pretty fast for EU's speed, which
is not always the fastest. I do not think it is a 5- or 10-year
framework that we are looking at, but more like the next year
is going to be a year of intense discussions around this issue.
Senator Ricketts. Okay. Great. Let me just follow up with
regard to the respective public opinion on this because you
gave some stats on that.
How quickly did that move after the invasion of Ukraine and
what is it--what role can the United States play in helping
bring those populations along to be able to understand the
threat, for example, if there was a conflict in the Taiwan
Straits?
That is 30 percent of the world's trade. That is going to
impact Europe. I am guessing a lot of Europeans do not
necessarily know that. I am sure a lot of Americans do not know
it.
What--how fast did it move in Ukraine and what can we as
the United States do to help with that?
Dr. Oertel. It moved immediately after Ukraine and I think
what we have also seen is that some things that take forever
normally do not take very long then under circumstances like
that. I remind you of the LNG terminals in Germany which
everyone told us was going to take 8 years and it took 8 months
to build them.
Things can move very quickly in a situation of crisis and I
think this is what the EU has demonstrated and European
countries have demonstrated that they are able to swing around
when the crisis is real.
Now, I think what a lot of people in the expert circles are
advocating for is that the cost of this swing is a lot lower
when you start a little bit earlier. I think this is the zone
that we are in right now to ask the question between how
imminent is the problem and how likely is it to come, and I
think this is where the debates are heading at the moment
because, of course, if you regard a problem as very imminent
then you will take different policy options as if you think it
will not happen in the next 5 years, so we will do certain
other things first if you are in a situation of crisis, which
you always have to remind everyone of. Europe is in a crisis
situation at the moment like it has not been, as you said,
basically, since World War II.
There are priority questions right now, prioritization
questions at the moment going on and this is one of them, so I
think movement is possible pretty fast and I think the United
States can help by making the case and providing data on what
the cost, for example, would be.
I think this is really important to underscore and
underline how important--how kind of we can come to good--yes,
good trade data to good figures on what this would mean.
Senator Ricketts. Yes. I think one of the things that
European leaders would be wise to do is read what Xi Jinping is
saying because they have made very clear that bringing Taiwan
back into the PRC's fold is an existential threat to the
Chinese Communist Party, which means they have said there is no
room for compromise on this.
The timing, obviously, it is still up in the air, but the
imminency of it, the fact or the--rather, the certainty of it
is something that the PRC has no doubt about, that they are
going to do this at some point, whether it is peaceful or
through armies, they believe they will do this.
Dr. Oertel. Let us say there is a real reckoning going on
about what authoritarian leaders say and what they actually
mean and that we should take that very seriously, which I think
is a lesson that was learned the hard way over the last 18
months in Europe.
Senator Ricketts. Thank you.
Senator Shaheen. Thank you, Senator Ricketts.
Senator Van Hollen.
Senator Van Hollen. Thank you, Madam Chair, and thank you
for holding the hearing on this topic. I thank all of you for
being here today and let me just pick up where Senator Ricketts
left off.
In your answer, you indicated there is a major debate and
dialogue going on within Europe as to the direction we need to
take and I think here in the United States we see it sort of
set forth in the dichotomy distinction between the remarks
President von der Leyen made before she went to China and the
remarks of President Macron.
As we look at this, I think there is broad agreement
between the Biden administration and our European partners that
we do not want to decouple, but we do want to de-risk. I think
we have kind of settled on that formulation.
Of course, the devil is always in the details and, really,
that is what I want to dig into a little more because people
can perceive what de-risking means, obviously, in very
different ways.
If I could start with the issue of critical minerals and,
Dr. Oertel, I think you mentioned in your testimony the EU
Critical Raw Minerals Act. Of course, we passed here the
Inflation Reduction Act with all the incentives for clean
energy and, obviously, we have got a big back and forth going
on between the United States and Europe to try to get to a
place where we can coordinate so that we are not reliant on the
PRC for critical minerals in a growing EV industry.
Where do those talks stand, in your view, and how important
is it to our collective success that we reach agreement?
Dr. Oertel. Let me start with the last question first. It
is essential for our success to work together on this issue. I
think this is fairly widely understood among all European
leaders.
It is also clear that this is not--even the transatlantic
alliance--that is enough for this. We will need to partner very
closely with Indo-Pacific partners and allies because otherwise
we will not stem this massive problem that we are facing in
this regard and the massive reliance over a short time.
This is one of the issue areas in which I would say the
movement is already the fastest. This is a pretty tangible
policy issue. It is a pretty tangible policy problem. I mean,
again, the figures matter.
When you can start saying things like reliance to 98
percent, reliance to 85 percent, reliance to 99 percent, and
then you can also address that to domestic industries and say
your cars will not be produced any more because this will be
missing, this is a choke point, well, that actually generates
action relatively quickly.
The Critical Raw Materials Act and the--kind of the
policies that we are seeing, particularly also Berlin and the
discussions that we are seeing happening at the European level,
are quite substantial and are areas in which it is also kind of
possible to move because you can then start exploring. You can
start working together. You can start looking where are things
possible, what is the red tape that needs to be cut, what are
the deposits that we have in Europe from northern Sweden to
Serbia, what are the deposits that can be exploited quicker,
what are the more difficult areas.
I think this is one of the areas in which I think we see
the collaboration between the U.S. and Europe working, but also
we see the Europeans actually kind of grasping the problem and
actually moving and starting to put this into practice. This
will not be easy, but I think this is one of the few areas in
which also the discussion has been going on for a long time
now.
Senator Van Hollen. Yes. No, I appreciate that and as you
indicated, we obviously have to have coordination between the
United States and our EU partners, but also critical partners
around the world, both Japan, South Korea, where we have
already got agreement, but also much of the ASEAN countries
where we have the JETP proposal. We have really got--and we
have to work collectively to make this work.
Let me just ask a follow-on question regarding advanced
semiconductors, really, for all of you. It is another sort of
aspect of this whole discussion, of course, and as you know we
had cooperation between the United States, Japan, and the
Netherlands when it came to restricting the export of advanced
manufacturing equipment for the highest-end chips, which is a
good model.
It only works, though, if we can ultimately expand that
cooperation to all the other countries that can supply this
kind of advanced material. When it comes to export controls on
advanced semiconductors, where do you think we are in terms of
our ability to coordinate with our European partners and others
around the world who could also supply that very advanced
technology?
I will just take each of you, if I can.
Mr. Barkin. This is, Senator Van Hollen, a very important
question.
When I look at the issue of de-risking, I think you can
break it down into several parts. There is supply chain
resilience, there is protecting critical infrastructure, and
then there is technology transfer to China.
I think on the issue of export controls, it is going to be
difficult with Europe because Europe is not a single entity.
Export controls policy is in the hands of the member states--
the 27 member states. It was the Dutch that decided to go along
with Japan and the United States in preventing one of its
biggest companies from sending semiconductor manufacturing
equipment to China.
I know that officials in Berlin are thinking about this
right now--what Europe really needs is more coordination
between its member states, developing a common policy, being
able to sit down with Washington and discuss these issues.
Something that Janka mentioned earlier, I think, which is a
real issue is a lack of investment in the people who are doing
the research to find out the details of the technologies, et
cetera.
I think we have here in Washington a whole-of-government
approach, everyone pulling behind this. I think the October 7
export controls that were announced--I do not think anyone in
Europe, whether it is a European member state or the European
Commission, could have come up with a document like that.
They need to invest in the resources. They need to
coordinate better so they can sit down and talk at eye level
with the United States on these issues.
Senator Van Hollen. Thank you. I appreciate it.
Senator Shaheen. Thank you, Senator Van Hollen.
Senator Duckworth.
Senator Van Hollen. I guess the time is up. I will follow
up with you. Follow up.
Senator Duckworth. Thank you, Madam Chair. I would like to
thank all the witnesses for appearing here today.
It was not long ago that many European countries viewed
their engagement with Russia in primarily economic terms and it
took this largest conference in Europe since World War II to
convince them that security matters had to be given equal or
greater weight in their policy deliberations.
Similarly, there is, as you have all described today,
continued division within Europe on how much to emphasize
cooperation, particularly economic cooperation, by strategic
competition in European relations with the PRC.
At last week's U.S.-EU Trade and Technology Council,
ministerial EU officials described the pending draft of an
economic security strategy that includes an anti-coercion
instrument as well as language on export controls and outbound
investment screening, suggesting that the EU is starting to
move in the right direction.
Dr. Oertel, this question is initially for you although,
gentlemen, I welcome your input as well. What do you think is
the most effective way to push Europe to reckon with the
security challenges posed by the PRC? For example, is it
continued pressure from the United States?
Is it internal reckoning driven by a collective within
Europe? Or is it going to be more models like the AUKUS
agreement--the Australia, U.K., U.S. agreement--that will draw
individual European allies further into the Pacific?
What more should we be doing to find the right balance here
and lend our weight in the right direction between those
different ways that we could get Europe to get more involved?
Dr. Oertel. What we have seen, and maybe I will take a
historical example here, which is already historical is the 5G
debate where we have seen a lot of influence from the American
side--from the U.S. side--a lot of push from the European
side--from the American side. Then there was a real reaction in
some parts of Europe, particularly in Eastern Europe,
immediately to take on the security challenge and to
immediately think about it and in other parts there was greater
reluctance, and there was a big discussion about does U.S.
pressure help more or hurt more in this regard.
I would say at this stage we are at the moment, it would be
good if there would be a continued upkeep of pressure in terms
of securing critical infrastructure because I do think once the
eyes are off the ball things do not necessarily move in the
direction any further.
They sometimes just stall because the political tension is
moving away. I would say: a) that is really worthwhile to
continue to do that and to continue to move in that direction.
The second thing that I would say is invest in capacity
building. I think there is still an overestimation in other
parts of the world of what most European member states are
capable of providing in terms of analysis of the problems that
they are facing.
I do think that providing data, providing information,
working together on providing kind of good, substantive
examples of what the actual challenges are is really important.
I see a huge role for collaboration also between
parliaments because I do think that parliamentarians across
Europe have woken up to the challenge, but are not necessarily
sure how to respond, and I do think that there is a lot of
capacity building that can be done and that can actually help
that internal process that you were talking about because, in
the end, that is what it takes.
This will not be inflicted upon Europeans. They will need
to come to their own conclusions on this, but I do see the
process moving and a little nudge from the U.S. side, at least
on 5G, has certainly not hurt.
Senator Duckworth. Is there a utility in bringing in
individual European nations in sort of a partnership--regional
partnerships like AUKUS did with Australia, U.K., and the
United States?
I am sort of thinking--we have already had a discussion on
critical minerals and in reports of a pending EU bill on
critical minerals suggests that they share our concern about
the need to diversify supplies away from the PRC and among
other potential partners.
I was in Indonesia earlier this year. They stand out as a
country with both significant deposits of key minerals, as well
as a strong investment interest from the PRC and the launch of
the Just Energy Transition Partnership at the Bali G-20 Summit
in 2022 suggests that there is room for U.S.-EU collaboration
in this space.
Perhaps this is more, Mr. Small, your area here. I know you
touched on the critical minerals issue already.
Do you support opportunities for the U.S. and Europe or
U.S.--individual European nations in a partnership set up to
collaborate more in developing initiatives that strengthen
Western engagement, especially in a place like Indonesia?
Mr. Small. Thank you.
I think Indonesia is supposed to be one of the early
forerunner examples of what we should be able to do
collectively in terms of the offer that we can put out the Just
Energy Transition and to a certain extent with the Partnership
for Global Infrastructure in general on this.
I think it is the area where we have lagged in general. I
know there is a considerable level of focus on this and, again,
particularly when it comes to critical raw materials.
I think when you look at a number of the developing
countries right now who are assessing the landscape, what is
going on on the U.S. and EU at the moment in all of these
areas.
Are we now going through a deglobalization phase? Is there
a pulling up of the ladder or pulling up of the drawbridge or
is this going to bring new opportunities for us?
As we discussed earlier, at a moment where the Belt and
Road is at a very, very difficult point, it is actually a
juncture in which the opportunity to step out with improved
packages for countries where I think Indonesia is an excellent
example--South Africa is, of course, the other matching
example, Chile.
We are looking at a number of kind of priority early cases
that tie in to the other elements of our agenda on critical raw
materials and supply chains.
I think the battle on opinion in the developing world on
this is still very much to be won. I think we have lagged
behind still somewhat when it comes to really mobilizing the
resources for infrastructure finance, rethinking development
aid, all of these efforts that we have kept talking about.
If I talk to the developing world policymakers who are
trying to look at, okay, where is the alternative coming from,
I think there is still--the jury is still out there as to
whether we have got there yet.
I think we have made a lot of progress on the defensive
agenda on the kind of restrictions on export controls and all
of these things. I think that is heading in the right
direction.
I think the big question mark is whether we have our
collective packages together between the U.S., EU, Japan, and
some of the other big partners to be able to really offer a
full package alternative to some of these countries.
Senator Duckworth. Thank you, Madam Chair.
Senator Shaheen. Thank you, Senator Duckworth. I think
there is an interest in a second round of questions from some
of us, so I will begin with that.
China in recent weeks has tried to position itself as a
potential mediator in the war in Ukraine. Can you speak to how
that positioning is being viewed in Europe and whether there is
any--I mean, and how Ukraine sees it and also whether there is
any real belief that this is a possibility? I do not know.
Maybe you would like to begin, Mr. Barkin.
Mr. Barkin. Sure. Very good question.
I think we have had a number of senior European officials,
including French President Emmanuel Macron and the EU's top
diplomat, Josep Borrell, talking about the fact that or
advocating for the fact that China play a mediating role.
The way I understand these comments is that there is a
realization that China--if any country has influence over
Russia, it is China. I think in Europe, leaders are going out
of their way to go to Beijing, sit down with Xi Jinping, and
encourage him to put pressure on Putin.
The jury is still out on whether this will happen. I think
there is a healthy dose of skepticism about whether it will.
We just had a Chinese envoy coming through Europe. He
passed through Kyiv, passed through a number of other European
capitals, and my understanding is he was just reading out
talking points. There was no real substantive discussion or
effort to bring about or come up with new solutions for a peace
deal.
I think we will continue to see the Europeans go out of
their way to pressure China, to encourage China, to play a role
because they realize that China is the only country that really
may have any influence over Russia, but I do not think that
expectations are very high that it is going to happen.
Senator Shaheen. Mr. Small.
Mr. Small. I would just add to this, I think we went
through a slight--almost like a delusion and desperation phase
on this, people looking for any avenue possible and China is an
avenue and maybe they can use their influence.
I think we have had a dose of realism, particularly after
Xi Jinping's visit to Moscow. Chinese diplomats were briefing
that this was going to be a peace mission and things like that,
and Xi Jinping did not even want to pretend that it was a peace
mission. It was just a deepening of relationships trip again.
I think we are rather moving into a slight--almost a call
China's bluff exercise as well with this. They have laid out a
peace plan. Do we reject it out of hand? Not a peace plan, a
12-point proposal. It is not really a peace plan, but do we
pick and mix a few of these? Prod China harder?
That was what we saw in the document--the joint document
during the Macron visit. I think also a concern as the other--I
do not know if your question hinted at--not to be out of line
with where Zelensky is on this where I think he at least wanted
to play along with this exercise on China's part.
I do not think anyone thinks it is going to lead anywhere,
but I think also no one wants to at the moment give China the
out of saying, we came up with proposals and they were all
rejected.
I think there is very little faith in this amounting to
anything. There is a question of China being brought in at a
later stage of the process, perhaps in the summer, whether the
Russians may want to pull the Chinese in at this stage. That
means that there is still some value in exchanges and talking
to the Chinese about that. The French are doing that in
particular at the moment.
I do think most of the illusions about the role that China
might play on this, we saw a little bit of distancing when Xi
Jinping met Putin at the Samarkand Summit.
I think statements on nuclear weapons use--every time China
makes a statement on nuclear weapons being stationed abroad you
then see what happens the next day in--with Belarus. I think
people understand what this amounts to now, but I think they
still think it is worth going through the process.
Senator Shaheen. Do you agree with that, Dr. Oertel?
Dr. Oertel. I think it is really important to understand
that this is the one issue where the Europeans are also really
concerned that China will go a step further and where the
message consistency of the visit of Sanchez, Macron, Olaf
Scholz, Annalena Baerbock, and von der Leyen. It was all the
same message of saying it is a red line for Europeans if China
were to deliver ammunitions or arms to Russia, and I think this
is really important because I think that shows also in the
polling data that we have seen once European leaders are
consistent in their message, are clear on what they want from
China, there is also public support for these positions among
the European public.
I think this is something where we can define that pretty
clearly and that is the key point on Ukraine at the moment,
avoid that from happening and signaling that very clearly that
Europeans are willing to bear costs for that to--for deterring
that to--from happening.
Senator Shaheen. I think all of those points make a lot of
sense and they are really important. What do you think the view
is of China's engagement in a post-war Ukraine?
Because, obviously, there are going to be significant costs
to rebuilding Ukraine and how do you think the Europeans view
China's role in that or do they see that China has a role?
Dr. Oertel. I think there continues to be a mismatch here
as well then in terms of expectations. I think there is the
thought that China will be willing to engage in the
reconstruction process and I think China will be willing to
engage in a reconstruction process, but on Chinese terms and
not necessarily on the terms that the Europeans would like to
see.
I do think that this is where I meant we need to be very
clear early on, despite the fact that we are actually not
talking about rebuilding Ukraine at this moment because at the
moment it is still being destroyed as we are seeing today.
It is still important to talk about what the guardrails
would look like and what the Ukrainian positions on this would
be because fundamentally this will also be up to the Ukrainian
Government to decide.
Senator Shaheen. Yes, Mr. Small.
Mr. Small. I would just add briefly, of course we know that
China does not really do serious development aid. If China was
coming to the table with vast sums of money that were grants, I
think there would be a different debate on this.
We are going to be talking about other forms of financing
on the Chinese side. That is one issue that is there even in
some of the discussions. We have to go to all of the debt-
related problems that we have already talked about on this.
The second thing is I do think there is going to be a
question, a sort of clever, clever game that is played of, if
China invests this will prevent Russia from taking future
action.
We have seen this from certain governments in the past that
they think there will be a sort of play and I think this is a
misplaced assessment.
I think we have seen what has gone on with Chinese
infrastructure and other investments. It will not be a matter
of priority, but I think we are going to go into a debate phase
on this. We are already in it. It is quite nascent at this
point.
I think it is going to be very important to shape it and I
think the U.S. will have a very important role in shaping the
understanding of that in Europe because I think it is easy to
slide into some quite problematic positions on that area while
these discussions are taking place, I think, quite intensely
about what the future shape of Ukrainian reconstruction looks
like.
Senator Shaheen. Thank you.
Senator Ricketts.
Senator Ricketts. Great. Thank you, Madam Chairman.
I wanted to talk a bit more about the TTC. This was
something that was created by the European Commission and the
Biden administration in 2021 to create a nonbinding forum that
would put the European Commission in the driver's seat versus,
say, member states or the European parliament and, obviously,
it is just that.
My question, and maybe, Mr. Barkin, I will direct this to
you, is there any meaningful action that you think will come
out of the TTC, and given the fact that it is a nonbinding
organization, are there changes to it that we could do
something to see nonbinding or is it just really going to be a
place where the U.S. and the EU can get together and have
conversations, but that is really going to be the end of it?
What is kind of your thought on that?
Mr. Barkin. I think the TTC is hugely important. I think we
need to adjust our expectations. There is a ministerial meeting
every 6 months. We cannot expect big deliverables at every
meeting. I think we need to view this as a process.
We also have to set priorities. I think we have 10 working
groups at the moment. I think a lot of resources are being
poured into this. We need to focus on those areas where we feel
we can make real progress. This is green tech, avoiding a
subsidy race in green technologies, thinking ahead to 6G
standards, developing common standards.
If the U.S. and Europe are not doing that together and then
broadening that out, working with our other allies, then China
is going to impose its own standards, especially in the Global
South.
I think the TTC serves a purpose. For the TTC to survive
and persist in future administrations, I think it is very
important for Congress to get involved, to support it and,
otherwise, I think we need to think about other dialogue
formats as well.
We do have an EU-U.S. dialogue on China. That is also
something which is valuable. They are talking about Taiwan
there, but we need to keep these dialogues going and think
about them long-term, not expect deliverables every few months.
Senator Ricketts. More around--I would say what you are
describing, it is going to be more kind of the background,
maybe, foundational stuff to be able to prepare to de-risk as
far as the PRC, but not something that is going to come out and
say, hey, here is the things we are going to do specifically to
deter the PRC. Is that fair?
Mr. Barkin. Well, I think with the TTC, we have a bit of a
divergence because the U.S. sees the TTC as mainly a discussion
about China and I think Europe would like to keep China out of
it for the most part and talk about trade and technology
cooperation, positive cooperation without that focus on China.
I think in the last TTC ministerial in Sweden, China did
come up quite a bit. There is obviously a pushback against
China's non-market policies. Coercion is also an issue in the
TTC.
I think the two sides need to not litigate past problems.
They need to think about the future. What do we want to do with
6G looking out 5-10 years ahead? I think it is something that
the EU and U.S., they need to take a long-term view on. They
cannot be thinking we are going to deliver something every few
months.
Senator Ricketts. All right. Great. Thanks.
Mr. Small, I would like to talk a little bit about NATO. In
June of 2022, NATO came out with their Strategic Concept
document that listed the PRC as one of the strategic priorities
in a systematic challenge to the Euro-Atlantic security for the
first time.
Obviously, the PRC took issue with that and made
threatening statements and so forth. Tell me a little bit about
what you see about how that can work out and especially with
regard to some of the Asia Pacific countries like South Korea,
Japan, Australia, and New Zealand that attended the NATO Summit
and how do we--because we have mentioned about bringing in
those Indo-Pacific partners in.
How can NATO work with that to bring that together and how
do you think that works with the--what kind of response will we
see from the PRC?
Mr. Small. Thanks very much. I think you have got these two
almost distinct tracks--the AP4, even though the countries do
not like being called the AP4 track, and how we can kind of
deepen and integrate security between the Indo-Pacific and the
Atlantic theatres and more.
I think we will see some more progress at the Vilnius
summit. I think there has been a lot of prep in the last period
to try to think through what is the next phase of these
partnerships.
I mean, some of these were initially structured around
almost arrangements that had been put in place around
Afghanistan further back in time with some of these countries
and I think it has only really been in the last couple of years
that we have moved into this new phase of and we may yet see
the office in Tokyo. I think there is a few other steps that
are being envisaged there on the AP4.
I think actually the more important piece of it has been
integrating China thinking into NATO in general. I think it has
been really lagging behind as an institution until this was
pushed by the U.S. a few years back to suggest that the
institution needs to take this up more seriously.
A lot of the benefits of doing it are actually invisible. I
think a lot of what is being achieved at the moment in terms of
being able to have a series of sensitive discussions, sharing
information, sharing intelligence on some significant strategic
developments with China that really acculturate of the European
defense ministries, defense officials, defense ministers, to a
different mode of thinking and understanding about the nature
of the challenge they face.
We are getting very tentative discussions on Taiwan where
NATO, in the end, has not, of course, talked through some of
what these contingencies would mean in these scenarios in much
more nascent stages on that.
I think there are as well, for instance, the information
sharing on China's overseas military bases. There are a number
of these things that are taking place relatively discreetly at
the moment and where a number of NATO members are still
nervous. They are still nervous, your question related to
China's reaction to this.
We are, of course, at a juncture in which China has spoken
much more openly about NATO, much more critically about NATO,
and in the no limits joint statement with Russia explicitly
supported the two Russian treaty proposals that would have
called, essentially, for a roll back to the stationing of
alliance troops that essentially predates the end of the Cold
War.
I think there is a nervousness about--from some countries
about how visibly NATO is assuming this role. I think it was
very impressive that we were able to get this language through,
but to get the institution to think seriously as well about the
conjoined threat of China and Russia, to integrate the thinking
across the institution, to think through, for instance, on
infrastructure issues, military infrastructure, and some of the
challenges that we have had on the digital side there, I think
it has been a really useful exercise, but a large portion of
this agenda that is going to be taking place in a non-NATO
context as well.
I think there are still a number of NATO members that will
still want to see pieces of the security agenda dealt with
seriously vis-a-vis China, dealt with seriously in Asia, but
not necessarily just through NATO auspices.
I also think we need to kind of draw a ring around what we
can expect to achieve through the NATO platform even though it
has been extremely valuable.
Senator Ricketts. Thank you. Madam Chairwoman.
Senator Shaheen. Thank you.
Senator Van Hollen.
Senator Van Hollen. Thank you, Senator Shaheen, and this is
a great topic for a hearing. We could spend a lot of time on
this and I think a lot of us are very interested in how all
this will play out, going forward, in terms of collaboration
and coordination between the United States and Europe as well
as others around the world.
Mr. Small, I share your concerns with respect to the issue
of the Partnership for Global Infrastructure in terms of over
promising and under delivering and I do think collectively we
have got to figure out a strategy there because we do not have
the same instruments--policy instruments, financial
instruments--that China lays down which also come to great
costs for many of the countries where they do those deals.
We have made a collective commitment--I think $800 billion
over the next couple of years--and I think we have got to find
a way to deliver on that or, as you say, other countries,
Indonesia, others, are going to say great talking points, but
no--where is the beef.
I am going to throw out a couple questions and maybe you
can divvy them up based on your particular expertise.
One relates to the issue of laying down early markers in
terms of what kind of economic sanctions China could expect to
be imposed if, for example, he crossed the red line and
provided lethal assistance to Russia or if it took very
aggressive action against Taiwan.
There is a major debate. A lot of us believe that sanctions
are less useful to punish people after the fact and can play a
more important role in terms of signaling in advance what the
costs will be, but that, of course, requires putting sanctions
out so that China, for example, in this case would see the real
costs and there are, obviously, issues there.
My one question is do you think that Europe and the United
States could come to see eye-to-eye when it comes to laying out
that kind of sanctions regime? As you know, Europe has been--
not liked some of our secondary sanction regimes we put in
place.
One question. Two quick things that came up at the G-7 with
respect to a collective strategy to respond to economic
coercion by China. We saw a number of years ago they punished
South Korea when South Korea deployed some important anti-air
defense systems. Australia has been the victim of coercion with
Lithuania. Micron Technologies right now has been hit by China.
If we are going to, collectively--in my view, we need a
collective strategy for how we are going to respond because
otherwise one country takes the burden of the punishment by
itself.
Finally, the G-7 also talked in very broad terms about an
outbound CFIUS, which a lot of people have been talking about
limiting investment, especially in those high-end technologies
that China could use to advance its military.
Again, if you could each sort of take a stab at that. I
realize we have limited time so we will do the best we can.
Mr. Barkin. I am happy to start. Maybe on the Taiwan issue.
Rhodium Group and the Atlantic Council are coming out in a
couple weeks with a study on this very issue looking at the
potential for transatlantic cooperation on sanctions in a
Taiwan scenario.
It is absolutely important for the EU and the U.S. to talk
about this. I think Janka mentioned earlier that the discussion
in Europe is at a fairly early stage.
I think individual member states have been thinking about
scenarios. In Brussels, the European Commission has been
thinking about this, but there is not a joined-up approach in
Europe on Taiwan and possible sanctions and I think there is
also a reluctance to talk about it openly.
There is a great deal of sensitivity around that and there
is a reluctance to, perhaps, provoke a crisis by talking about
sanctions.
The reason why the EU needs to get its head around this,
why it needs to sit down with the United States and other
allies to talk about it, is that we are not talking about
necessarily a black and white scenario, an invasion or not an
invasion.
We are talking about an escalation ladder and it could be
hybrid attacks on critical infrastructure in Taiwan. It could
be the seizure of an island. It could be a blockade, and coming
up with responses to this in real time is going to be extremely
difficult.
The EU is beginning to realize this. I think they are
beginning to play through scenarios, but I think it is very
important that the EU and the U.S. sit down and talk about this
together.
Dr. Oertel. Maybe I can add a little bit here in terms of
the sanctions.
I think what Andrew has laid out is the European Union has
with its Russia sanctions regime--and we will see the 11
sanctions package coming up--laid out the menu. This is what we
can do. This is the toolbox.
I think Beijing has taken note that this is now the menu
that is available and that is a menu that is quite striking and
very potentially damaging to the Chinese economy. I do not
think that it is taken lightly in any kind of way.
On the second question regarding the kind of collective
strategy to respond to economic coercion, I think we have to be
very careful about what we are going to see in the future
because also from Beijing's side there is a smartening up about
the approach to take and, obviously, the backlash that was
created in the EU in the Lithuania case was not one that was
particularly useful for China.
We have to be on the lookout on new strategies and avenues
that are being taken, particularly pressuring individual
companies, because that has been coercion that will be very
hard to see even for states because companies might swallow it
up, might change their behavior without actually even informing
governments about this.
I would just like to caution against focusing on only one
avenue of economic coercion. China's toolbox is very large in
that regard and there a lot of opportunities that it will use
to be below the radar there.
The last point on outbound investment screening, I would
say, it is a real conversation in Europe. In all of the
capitals that I have spoken to, this is an ongoing
conversation.
I do not see an EU-level version happening anytime very
soon, but we have seen on the investment--inbound investment
screening that the EU has basically provided a framework and
then we have individual member states' solutions that put this
in their own legislative context in the way where it makes
sense with their own national legislation because these are
then trade tools or other tools that are being used that have
to fit to the respective legislative background that each
member state has.
You could probably see, I would think, more along that
direction than a kind of comprehensive EU system to be
developing anytime very soon.
Mr. Small. I would add on sanctions, I think the concern
even for those who want to get the EU in the right place on
Taiwan sanctions is the risk that we end up being precise and
underwhelming, that the sanctions agreed in advance through a
process like this are less convincing to the Chinese side than
a gray zone of uncertainty that I actually think the sanctions
that we have put in place on Russia have now created.
When you saw Chinese central banking officials scrambling
to figure out what the implications would be in the couple of
months after the measures were put in place in Russia, I think
we have had some of our effects on the collective transatlantic
side with the measures that we have put in place.
I think it would be a problem if we ended up agreeing
something that looked like a lukewarm package that got pulled
apart by certain of the reluctant states when in reality if we
go into these scenarios we will go hard and comprehensive on
sanctions.
I think there is a challenge in how we calibrate that at
the moment and I know it is an important sign of the
discussions at the moment, but there are ways in which we could
kind of calibrate that in the wrong way if we push too hard to
get a minimalist package agreed in advance and signaled poorly
in the end.
On the--just briefly on the other points, on outbound
investment screening and some of the anti-coercion work I think
we sometimes have had a bit of a sort of stable door problem
where we regulate and come up with solutions after the fact and
the Chinese side moves into another channel and another
direction.
I think the helpful thing about the exercise that is being
undertaken at the moment on the economic security planning is
trying to look at this in the round on the European side,
trying to look at how you close the gaps across the board,
trying to look at the channels across the board. Outbound
investment screening is certainly a part of that.
Exactly on this issue on coercion, as you mentioned with
Micron and some of the other cases, we are seeing China
adapting its tactics already in anticipation of some of these
things coming through.
We are seeing the squeezes on companies that are being
given both inducements and pressures privately, including the
government lobby in Europe at the moment in ways that are
putting more pressure on some of these firms than I think we
have seen in the preceding years.
We need to be extremely nimble to adapt to the fact that
China is going to adjust around these measures and try and have
instruments in place.
I think the anti-coercion instrument itself is quite a good
early example of that, but we are going to face this running
tactical set of adjustments on the Chinese side on these areas
and we need to be careful not to be drawn into a multiyear
negotiation process on coming up with these instruments and
then the Chinese at the flip of a coin have moved on and are
getting the same effect through other means.
Senator Van Hollen. Thank you so much, and thank you, Madam
Chair, for your indulgence.
Senator Shaheen. Thank you. I actually still have a few
questions. If you all have another round, feel free to stay for
that.
We have talked about the economic means by which China
influences countries in Europe--the Belt and Road Initiative,
the diplomatic efforts, the coercion--but we have not really
talked about the information space and one of the areas where I
think we have seen China in certain places be able to influence
outcomes is through disinformation and manipulation of
information.
How much is--are we seeing that in Europe and how much of a
concern is that for EU and the European countries?
Mr. Small. I mean, I think COVID was a bit of a wakeup call
for the Europeans on disinformation activities and information
activities across the board from the Chinese side.
The structures that have been put in place to address this,
particularly at an EU level, were primarily focused on Russia.
China had a different set of tactics. It was more about wooing
countries than hostile information activities of a certain
sort.
We saw that shift at that juncture in ways that reflected
some tactics that were distinct and were more mirroring some of
the Russian tactics that we had seen in the past.
I think we saw that particularly in the early stages of the
COVID-19 pandemic. We saw it with attempts to blame Italy,
increase tensions between certain member states and the EU.
These were the sorts of qualitative activities that were
not just about China promotion activities, which we can kind of
talk about in a separate category, and were more the kind of
hostile activities of a different sort that we had seen.
I think there has been an adjustment to deal with that. It
is still of a different nature, I think, from the Russian
activities. I think there are points in which the waking up to
it in Europe, I think, has taken place. I think we are still
concerned that the most successful information activities are
taking place across the developing world.
There are still a lot of things that we are teasing out
with now the Defense of Democracy package that is kind of in
motion on the EU side where we have seen program content that
has been produced by CRI and it is not labeled that people are
not seeing.
I think there is an attempt to detect and get under this
and try and put some measures in place, but this is also moving
quite rapidly, particularly the question of things like joint
activities between China and Russia.
At the moment, we are getting a lot of mirroring and mutual
promotion. We are not yet seeing kind of full joint activities
and joint information operations being conducted.
Obviously, the concern is, given the nature of how the
relationship is involving, that that is another step that we
will see, but I think others may have more to add on the
information side.
Dr. Oertel. I was hesitating for one moment because this is
a very specific field at the moment because it requires very
specific knowledge of the respective member states' individual
policies and I know that other colleagues, for example, even
Ivana Karaskova in the Czech Republic, has done fantastic work
on this where they are really trying to map the influence,
where they are trying to figure out where this is, and I think
this is--what we are seeing very nascently in the states that I
know more about is an influence on the far right, and I think
that is a concerning development that we are seeing--the far
right and the far left--where we are seeing potentially greater
ability of China to influence individual politicians.
This is particularly concerning at a time where the far
right in many European member states is hitting record numbers
because of the way the economy is going because of the war, et
cetera.
I am currently monitoring this more in, for example,
Eastern Germany, looking at what does local influence look
like, but this is incredibly complex because of the federal
structures of our systems. It is incredibly complex to actually
detect what is going on.
I think it is not a good--I do not think I can give a good
answer. It is a very wide sweeping one, but I think one needs
to particularly look into the specifics here and provide, and I
think this is an area where I would call on European
governments to provide funding also for this specific research
because this has been significantly under-developed and I think
this is an area where Europe itself should spend some money on
finding out what is going on.
Senator Shaheen. How much concern is there in Europe that
United States policy on China is going to change if there is a
new Administration?
Mr. Barkin.
Mr. Barkin. I do not think it is so much concern about
U.S.-China policy. I think there is a realization that--there
is quite a bit of consistency, I would say, between the Trump
administration and the Biden administration on certain tools
that are being used.
I think the outreach to allies has shifted and, of course,
we have had a legislative push--the CHIPS and Science Act, the
IRA here at home.
I think there is more concern about--in Europe about future
administrations, perhaps, deprioritizing Europe. There is
certainly concern about that. If we are talking about the
commitment to NATO there is a debate in Washington about is
Ukraine a distraction, should the U.S. be focusing fully on the
Indo-Pacific?
These debates certainly concern people in Europe and I
think it is important to--it is important for the
Administration--well, for the U.S. and the EU to sort of
administration-proof their relationship.
It is important for Europe to get assurances from the U.S.
that the U.S. will be there even as it presses Europe to take
more responsibility for its own defense. We have not really
talked about,--we have not mentioned the term ``strategic
autonomy.''
I think strategic autonomy is a term that arose during the
Trump administration because Europe felt it was being pushed
into policy decisions that were not in its interests.
Now it has become the favorite term of Chinese officials
because it implies distance to the U.S., but when it comes to
Europe doing more for itself, I think that is in U.S.
interests. It is in European interests.
I think Ukraine has kind of opened a lot of eyes in that
respect, and where we all live, in Berlin, we have had some
major changes in terms of investment in the military, et
cetera.
This is a debate that is moving. It is moving slowly and I
think the U.S. needs to certainly encourage Europe to do more
and not worry about labels like strategic autonomy. This all
needs to happen. Greater investment in Europe's own defense
needs to happen in coordination with the U.S. and allies, of
course.
Senator Shaheen. Well, I certainly think there is a great
deal of bipartisan interest in seeing all of the NATO countries
meet their 2 percent of GDP and that that is reinforced on a
regular basis by not just members of the Administration, but by
members of Congress. I would agree with that.
I just have a final question, and I do not know that we
know the answer to this yet, but I would think that as
Europeans are watching the war in Ukraine that the blowing up
of the dam and the subsequent flooding, the environmental
impact, the potential of that to affect the Zaporizhzhia power
plant, the implications for a broader Europe have to give
people pause and put more pressure on concern about the
relationship between China and Russia.
Is it too early to know what the impact of that is going to
be or are we already hearing a reaction to that?
Dr. Oertel. I think it is too early and I do think that the
Chinese Government has managed relatively carefully in the last
few months to kind of put enough distance or enough doubt or
enough smoke bombs around the relationship to have not a very
clear connection to any of these activities.
The Chinese Government put out or the Chinese newspapers
put out a statement about kind of the same old great concern
about the environmental impact, about the impact of the dam
breaking, clearly not pointing fingers at whose responsibility
it was. We saw the Global Times with that this morning.
I think there is a clever play as well at hand there. I
just wanted to, coming back to the last question, just really
briefly give you the figure that we have from today, which was
that the question that we polled in the 11 countries whether
Europe can rely on the future of the U.S. being there to defend
and whether it needs its own defense capabilities in comparison
to 2020 where 66 percent of respondents said that. We are now
at 75 percent--74 percent of Europeans saying Europe needs its
own defenses and needs to spend more.
If that is not a public mandate also, I think, for
governments to actually act then I do not know what kind of
majority governments would want. I just wanted to add that
because I do think it is important to see that this is not
something that is--would be much against European public
opinion in that regard.
Senator Shaheen. Thank you.
Senator Ricketts.
Senator Ricketts. Great. Thank you, Madam Chairman.
In April, Airbus agreed to build a second assembly line for
the A-320 in the People's Republic of China and was given the
green light by Beijing to move forward with a previously
announced 160-plane order.
This agreement was made by Airbus, the Airbus CEO, who was
a part of the economic delegation that went with President
Macron to Beijing, and soon after the visit, Airbus also agreed
to sell 50 H-160 Airbus helicopters to the Chinese firm GDAT.
Like airplanes, helicopters are inherently dual-use in
their nature and there is already a history of French civilian
helicopters and derivatives thereof ending up in the PLA's
modern-day attack helicopter equipment.
I guess my--and then I got another. According to a report
from the Horizon Advisory, Airbus-China engagement entails
significant ties to China's military and military-civil fusion
apparatus including in the form of supply dependencies,
technology sharing, and research and development cooperation
and, of course, we know that in the People's Republic of China
there is no secrets. They are taking every bit of intellectual
property they have.
Mr. Barkin, how do you square the circle on this, that we
are talking about de-risking and yet Airbus goes forward with a
deal like this? What are we supposed to think about this in the
United States?
Mr. Barkin. Yes. I mean, it is a good question. I have
written about this. I think the decision to sell the
helicopters raised some eyebrows, even in the French
establishment.
I think Europe is at the beginning of a debate about
exports of dual-use goods, of military-civil fusion practices
in China. This is going to be part of the de-risking debate and
I think it is probably going to be the most difficult part
because I think there will be some resistance in certain
European capitals. This is about export controls. This is about
outbound investment screening.
I would say that--without commenting on that individual
deal--I would say we still have some work to do in Europe in
getting our heads around where to draw the line, where the red
lines are in the technology relationship with China and I think
that is explicitly what von der Leyen said in her speech. We
need to develop our own approach to this. We need to be able to
sit down with the U.S. and discuss common approaches.
I think this is all going to play out in the coming months
in the EU debate, but I would agree that there have been deals
in the past that have raised some eyebrows.
Senator Ricketts. Dr. Oertel, you were talking earlier
about how when European leaders get together and say, hey, this
is what we want, like, PRC, do not sell weapons to Russia, that
it moves public opinion.
Does this deal not do just the opposite? When you see a big
European--this is a flagship European company and it is being
endorsed by President Macron, does this not send in the
opposite direction?
I mean, does this not make it harder to move public opinion
and help the public understand the risks associated with the
PRC when we see big European companies make this deal?
Dr. Oertel. Yes. Clearly, the Airbus case, from the German
perspective at least, is not seen in the area of military
enabling. It is seen as purely commercial deals. It is sold as
such. It is communicated as such.
I do not know if you followed the news reporting over the
last few days, but I do think there is some digging going on on
many areas around the relationships also in the German media.
We had seven German air force pilots that were identified
as after retirement training PLA officers in actually acquiring
capabilities of also strategic capabilities of not only flying
an aircraft, but also using it for its purposes.
This has created quite some backlash in the debates here. I
would also trust on European media to dig up these cases and
understand more clearly that there is always a relationship,
also to the military aspects of this and in a nascent state of
growing security concerns, and we are in the nascent state of
growing security concerns in Europe about the role that China
plays.
This can actually make a huge difference, but we are not in
the zone yet where this is seen as clearly we cannot do that.
Obviously, no commercial aircraft could be sold, and then
the question would obviously also be and does Boeing not sell
any aircraft to China anymore--where is the kind of--where is
the competition aspect here, where does this leave us.
This is a very--I think I would be very careful in making
cases around that because this is not clearly not seen in that
area yet on the European side.
Senator Ricketts. I am sorry--so I guess by your answer I
am not quite clear. Do you think it makes it easier to talk to
European populations about the risks that PRC poses in deals or
are you saying it does not make a difference right now because
they do not see this as being military?
Dr. Oertel. At the moment this does not make a difference
because this is clearly seen as a commercial activity in
enabling Chinese commercial aircraft and kind of this is seen
in the--clearly, in the realm of nonproblematic engagement.
Senator Ricketts. Thank you.
Senator Shaheen. Well, thank you very much, Senator
Ricketts.
I want to, again, thank our panel for traveling all the way
from Berlin to join us and for your excellent testimony.
We are going to keep the record of this hearing open until
close of business Friday, June 9. Again, thank you to Senator
Ricketts.
At this time the subcommittee hearing on Europe will come
to a close.
[Whereupon, at 4:25 a.m., the hearing was adjourned.]
[all]