Britain, EU and China: the fault lines show

Uncle Sam and Britannia walk arm-in-arm

In its final weeks, Trump’s administration made a series of moves intended to bind the incoming Biden-led replacement: Cuba was designated a state sponsor of terrorism, Yemen’s Houthis were declared a terrorist organisation and Secretary of State Mike Pompeo announced that Al-Qaeda had set up a ‘new home base’ in Iran. Against China, Trump fired off a salvo of measures. At the same time, after seven years of negotiations, the European Union and China reached an agreement, intended to increase possibilities for trade and investment. However, the British government sided with the US by imposing more bans on British companies trading with China. Inter-imperialist rivalry between the US and EU now embroils China and is forcing the British ruling class to choose which side it is on. TREVOR RAYNE reports.

While the US, European, British and other major economies have shrunk under the impacts of the coronavirus pandemic, China’s economy grew in the fourth quarter of 2020 at a faster rate than before the pandemic struck, 6.5%, with exports increasing by 18% in December compared to the same month in 2019. China’s annual growth rate for 2020 is 2.3%. Ray Dalio, US billionaire founder of the world’s biggest hedge fund, Bridgewater, can see the writing on the wall for the US: ‘China already has the world’s second-largest capital markets and I think they will eventually vie for having the world’s financial centre. Throughout history, the largest trading countries evolved into having the global financial centre and the global reserve currency. When you see the transition from one empire to another, from the Dutch to the British to the American, to me it just looks like that all over again’ (Financial Times 9/10 January 2021). The US National Science Foundation’s biennial review reported that from 2000 to 2017 Chinese research and development spending grew at a rate of 17% per annum, with China overtaking the US in total R&D spending. China’s Made in China 2025 project, launched in 2015, is viewed by the US ruling class as ‘a threat to US technological leadership’ in the world. Trump’s government has tried to thwart this threat, Biden’s will do the same, but it will want European collaboration in the effort. 

The US and UK join forces

Following the 3 November 2020 presidential election, the US government:

  • Ordered dozens of US financial institutions and investors to cut ties with dozens of Chinese businesses it says are linked to the Chinese military. The New York Stock Exchange said it was delisting China’s three largest telecommunication companies to comply with the order. 
  • Issued new rules to block technology imports from Iran, Russia, North Korea, Cuba, Venezuela and China. The aim is to stop Chinese-made technology, of any sort, being used in US infrastructure, telecommunications, data collection apps, drones, surveillance cameras and artificial intelligence. 
  • Added DJI to a list of companies the US government says have been involved in carrying out human rights abuses. This will prevent DJI from buying US-made components. DJI makes 70-80% of world’s commercial drones and over three-quarters of these are sold in the US.
  • The US State Department sanctioned two Chinese Communist Party officials involved in Hong Kong policing, plus a Hong Kong legislator and three Hong Kong police officers. This prohibits US citizens from dealing with the sanctioned individuals. Hong Kong’s chief executive, Carrie Lam, and others are already sanctioned. 
  • On 5 January 2021, Trump told the US Congress that he wanted to ban transactions in the US from using Chinese payment applications, including Alipay, WeChat Pay and Tencent’s QQ Wallet, because they ‘continue to threaten the national security, foreign policy and economy’ of the US.
  • Pompeo announced that the US was formally easing restrictions on US diplomatic visits to Taiwan. The US ambassador to the United Nations then made a visit to Taiwan. China denounced this as a ‘crazy provocation’. Formal diplomatic ties between the US and Taiwan were cut in 1979 when the US recognised the People’s Republic as the government of China.

Demonstrating Britain’s commitment to the US, and the anti-China stance shown by the banning of Huawei from Britain’s 5G network last year, on 12 January 2020 Foreign Secretary Dominic Raab said that British businesses that fail to ensure their supply chains are free of slave labour could be fined. This explicitly targeted China: ‘Our aim, put simply, is that no company that profits from forced labour in Xinjiang can do business in the UK, and no UK business is involved in their supply chains.’ Raab added that the British government will ensure that public procurement rules exclude any suppliers found to have links to human rights violations. This was 12 days after the British government implemented a trade deal with Turkey, a country that has jailed a record 120 plus journalists and arrested or detained about 16,000 Peoples’ Democratic Party members, imprisoning over 5,000 of them, including MPs and mayors. China refutes allegations of abuse of the Uighur population of Xinjiang.

In January 2020, a group of Tory MPs set up the China Research Group, in the fashion of the pro-Brexit European Research Group. It wants sanctions on British financial institutions operating in Hong Kong that may benefit the Chinese Communist Party, a ban on Chinese state-owned enterprises investing in British infrastructure and a ban on British firms exporting goods and services that are used to abuse human rights in China. These proposals are viewed with dismay by two of Britain’s biggest banks, HSBC and Standard Chartered, dependent on Hong Kong and China for a lot of their profits.

From 31 January 2021, Hong Kong residents can apply for visas to stay in the UK for up to five years and then apply for permanent residence. The Home Office estimates up to 322,000 people arriving by 2026; Hong Kong sources reckon there could be half a million applications in 2021. 

The EU takes a different side

In contrast to the US and British government’s hostility to China, on 30 December 2020 the EU and China announced the Comprehensive Agreement on Investment (CAI). The EU trade commissioner said the deal contained the ‘most ambitious outcomes that China has ever agreed with a third country’ in terms of market access, fair competition and sustainable development. The agreement, if ratified, will remove barriers to investment, such as the requirement that European firms form partnerships with Chinese businesses in joint ventures if they want to operate in China. Significantly, Chinese President Xi Jinping called German Chancellor Merkel and French President Macron towards the close of the negotiations. Xi said relations between China and the EU were ‘gaining more global and strategic significance under the new circumstances’. China will have been keen to secure the deal before Biden took office and so present the new US administration with a fait accompli

The German and French ruling classes have no interest in harming themselves for the benefit of their US counterparts. China is Germany’s biggest trading partner. Daimler recently announced that it had sold more Mercedes passenger vehicles in China between January and November 2020 than in 2019. It also produced over 600,000 Mercedes in China, up from 560,000 in 2019. China’s online sales of luxury goods more than doubled in the first ten months of 2020. French-owned Gucci reported that mainland China was ‘again the bright spot’ for the brand, with sales down 47% in Western Europe. 

Trump’s deputy national security adviser, Matt Pottinger, condemned the CAI deal and the EU’s ‘haste to partner with Beijing despite its grotesque human rights abuses’, citing ‘factories for forced labour in Xinjiang’. Biden’s national security adviser, Jake Sullivan, asked the EU to delay signing the agreement. It has still to be ratified and the new US government will try to get the EU to adopt a joint approach with the US towards China. The agreement establishes that the EU can act independently of the US in its relations with China and this will be opposed by the US state. EU officials say that they are only getting rights for European firms that the Trump administration got for US firms in China. 

European company executives and diplomats accuse the US of using sanctions to shut them out of China, while offering exemptions for US firms. One executive said that their company had been stopped from selling to Chinese buyers because of suspicions that the products could be used by China’s military, but then US firms stepped in and supplied components through middlemen. Dutch firm ASML is the world’s biggest chipmaking equipment group, but it uses US-made technology and has consequently been blocked from selling its newest machines to SMIC, China’s biggest chipmaker. China makes up about a quarter of ASML’s sales. The EU intends to end dependence on US technology: €145bn of the European Recovery and Resilience Facility of €675.5bn is designated for ‘digital transition’ projects over the next two to three years. This Facility is intended to reduce the social and economic impacts of the pandemic and is the centrepiece of the Next Generation EU (see ‘Covid-19 and the eurozone’s financial quagmire’ FRFI 279 December 2020/January 2021). 

Alongside the manoeuvres over China and IT there are increasing tensions between the US and EU over the US tech giants Apple, Amazon, Microsoft, Google (Alphabet) and Facebook, with the EU threatening to fine them and break their operations up in Europe. The rift between the US and EU over China is symptomatic of the relative decline of US imperialism and heralds an era of intensifying inter-imperialist rivalry, with the attendant destruction that history has shown us.

Fight Racism! Fight Imperialism! 280 February/March 2021