III Geo-economic issues and Europe’s welfare

Europe’s economic and technological relationship with the United States and China: a difficult balancing act

Margot Schuller

Introduction

A European Union (EU)-wide survey conducted in September 2019 revealed that 75 percent of interviewees were either concerned or very concerned about the impact of the United States (US)-China trade conflict on Europe; in Germany, more people (81 percent) than in any other of the EU Member States felt such alarm.¹ With both the US and China being the most important trading partners for the EU (see Table 8.1), the US’ protectionist trade policy vis-à-vis China represents a strong threat to European businesses. The fear of a trade war associated with a breakdown of supply chains looms on the horizon: more than two-thirds of world trade occurs through global value chains in which China plays a crucial role as the "factory of the world” (WTO 2019). Against this background, the next section in this contribution analyses how the EU has responded to the many challenges associated with the US-China trade conflict. This requires a careful look at the US administration's trade policy measures introduced since 2018, which aim at redirecting trade policies towards ones favouring the US economy. While China has been singled out by the US government as the number one target for punitive tariffs, the EU too has also been threatened with higher tariffs on a number of its own export products. Therefore, both the EU and China could have coordinated their responses to the current US trade policy in order to put more weight behind their respective policy reactions. The question of whether and how they have cooperated will be discussed in the next part of this contribution as well.

The third section then studies another major battlefield within US-China competition and how Europe is caught in the crossfire. China's transition towards being a new science, technology and innovation superpower and its strong ambitions to become technologically independent and a leading country worldwide in cutting-edge science and technology (S&T) practice are challenging the US’ traditional roles in these fields. While the two countries have cooperated on higher education and S&T for more than four decades now, current US restrictions have nevertheless increased and cover a broad range of areas. They relate to joint research projects in China and the US, visa regulations for Chinese scientists and students and access to US technologies. Recently, the US administration also extended the dispute to third countries' cooperation with Chinese information technology (IT) companies (Gold 2020)? The final section raises the question of the likely nature of the EU's future relationship with the US and China amidst the discussion of partial disengagement or decoupling on the US' part. Related to this, it is asked whether the EU should choose sides in the US-China conflict and furthermore, which strategy it should pursue in order to best balance its own relationship with the two superpowers. The major argument put forth by the chapter is that even though the EU has recently adopted a more critical view on China with regards to its economic model and political assertiveness, Europe is not prepared to take sides in US-China geopolitical rivalry. To balance the US and China, the EU needs, however, to become less dependent on both economies.

The US-China trade conflict: responses from the EU

The US’ trade imbalance with China has been a topic of discussion for policymakers and scholars in both countries for a long time now (Lau 2019; Moosa et al. 2020). After China joined the multilateral regulatory framework of the World Trade Organization (WTO) at the end of 2001, trade disputes between both sides were supposed to be handled through that body's dispute settlement mechanism (Adekola 2019). The shift of bilateral trade controversies to a multilateral institution based on internationally agreed rules and norms of behaviour for fixing trade conflicts was one of the main reasons why China applied for membership of the WTO in the first place. That the US government unilaterally started to impose tariff's on China, which are inconsistent with WTO regulations, and tried to solve the trade conflict outside of the institution is now undermining the reputation and legitimacy of the latter. It prevents the solution of the trade conflict on the basis of a rules-based system that reflects supposedly core US values, such as non-discrimination, transparency and the rule of law, and impedes the application of the WTO's global set of trade rules as a baseline for judging whether China reneges on its related commitments (Meltzer and Shenai 2019, 16-17).

While the EU shares some of the concerns that the US has about China's mixed record on adherence to WTO rules, especially with regards to reciprocity and transparency, it follows a different strategy vis-à-vis China. Although the EU has adopted a more critical stance towards China in recent years, it still sees, however, the country not only as its competitor but also as an important cooperation partner—and the WTO still as the appropriate forum in which to resolve trade conflicts (European Commission 2019). When the US imposed punitive tariff's on the EU’s exports of steel and aluminium to that country, claiming security reasons, in March 2018 and afterwards threatened to extend these tariff's to the export of cars from the EU as well, the political climate worsened between the two sides (Gonzalez and Véron 2019,4). The EU addressed its concerns immediately to the WTO and claimed that the US had adopted safeguard measures that took the form of a tariff increase on these products. The EU argued that: "Notwithstanding the United States' characterisation of these measures as security measures, they are safeguard measures. The United States failed to notify the WTO Committee on

Safeguards under Article 12.1(c) on taking a decision to apply safeguard measures” (WTO 2018).

That the EU regards China as a partner in preserving the WTO and modernising it is reflected in the joint statement given at the EU-China Summit of April 2019:

The EU and China firmly support the rules-based multilateral trading system with the WTO at its core, fight against unilateralism and protectionism, and commit to complying with WTO rules. The two sides reaffirm their joint commitment to co-operate on WTO reform to ensure its continued relevance and allow it to address global trade challenges.

(EU-China Joint Statement 2019)

Two particular topics have taken priority in the newly established Joint EU-China Working Group on WTO Reform: the international rules for industrial subsidies and the resolving of the crisis in the WTO Appellate Body. The US has continued to block the nomination of new Appellate Body members, with the aim of forcing changes to the dispute settlement system. Since the middle of December 2019, the forum has had only one member left, and is thus unable to form the quorum necessary to hear disputes. As a result, a country that loses its case at the panel level of the dispute will be able to block the decisions by filing an appeal, and the case will languish (Packard 2020).

As announced during his election campaign in 2016, China has become the focus of Trump's “America First” policy. The former was blamed for the loss of millions of jobs in the US and for the increase in social insecurity there. In fact, the impact of China's competitive pressure on US manufacturing industries has been revealed in various studies of local voting patterns. In the states of Michigan, Pennsylvania and Wisconsin, for example, the Democrats would have gained the majority of votes if the growth of import competition from China had been only half as large (Autor et al. 2020; Schüler-Zhou and Schüller 2017). The election of a protectionist presidential candidate cannot, however, be judged a purely economic phenomenon, having also a cultural dimension to it (Noland 2019, 9-10).

In order to redirect trade policies in favour of the US economy, the Trump administration has resorted to a number of measures—including the renegotiation of existing trade agreements with a preference for bilateral rather than multilateral ones. The withdrawal from the Trans-Pacific Partnership agreement was the first policy decision taken by Trump, followed by the renegotiation of the free trade agreement with Mexico and Canada (NAFTA) as well as the one with Korea (KORUS). Understanding foreign trade as a "zero-sum game”, US trade policy associates a negative trade balance with a certain country as proof that the respective trade partner employs unfair policies. Besides China, therefore, the EU and Japan too became targets of US punitive tariff's. Unlike previous administrations, the current one also stresses the need for trade policies serving national security. Following this view, the decision to increase tariff's on EU steel and aluminum exports to the US is in line with Section 232 of the US Trade Law (Mildner 2020).

Most of the tarif!' increases on Chinese products are related to US Trade Law Section 3 01.³ Following an investigation of China's policy on technology transfers, intellectual property rights (IPR) and innovation under Section ЗО 1 in March 2018, the US Trade Representative (USTR) came to the conclusion that tariff increases were justified. Four IPR-related policies were found: "forced technology transfer requirements; cyber-enabled theft of U.S. IP and trade secrets; discriminatory and non-market licensing practices; and state-funded strategic acquisitions of U.S. assets” (CRS Report 2019, 19). Starting in July 2018, the Trump administration imposed 25-percent tariff increase on imports from China, with a total volume of US$250 billion on three tranches of imports up until January 2019. China reacted with increased tariffs on US products of around US$110 billion. With bilateral negotiations not achieving the desired goals, the US government announced an additional 10-percent tariff increase on the remaining imports from China starting 1 September 2019 (CRS Report 2019, 19-21).

The Chinese position on the US government’s trade policy is summarised in a White Paper published by the State Council in June 2019. Although the Chinese government stressed that it was willing to further work with the US to find solutions to contested issues, it pointed at bottom lines for fimire consultations. It argued, for example, that the US side had turned a blind eye to the improvement of IPR protection in China and to the development of the international industrial division of labour. Pointing to the integration of both economies and industrial chains, the Chinese side rejects the US' accusation that it pursues "unfair” and "non-reciprocal” trade policies that create deficits (The State Council Information Office of the People’s Republic of China 2019, 6-8).

Bilateral negotiations continued in the second half of 2019 and resulted in an economic and trade agreement signed into being in January 2020 (USTR 2020a). The so-called Phase One Agreement is described in the USTR fact sheet of the president’s trade agenda as a great success, requiring China to make structural changes that relate to IPR protection, technology transfers, agricultural standards, financial sendees and currency; it maintains leverage, meanwhile, with tariffs on US$370 billion worth of imports from China. Another achievement stressed by the USTR is China's commitment to increase purchases of US exports by around US$200 billion within the next two years; the focus herein is on manufactured goods, agriculture, energy and services (USTR 2020b).

Although the bilateral economic and trade agreement has been presented by the Trump administration as a great success, the global spread of the COVID-19 pandemic and the associated economic depression in many countries including China could leave the deal "dead on arrival” (Alam 2020). Both sides have stated their commitment to it, but China's economic slowdown might call the promised increase of purchases of US products into question. While forecasting how the US-China trade conflict will develop in the near future seems to be difficult, a look back at past years' trade performance shows that not many of the Trump administration’s goals vis-à-vis the “America First” policy have been achieved.

When the trade balance turned in favour of China for the first time since 1983, the country's share in total US trade in goods was, however, negligible

⁾⁰ ₉₁₉ 1Q4.1 110.5 121.7 123.7 115.9 115.6 130 120.3 ₃

• 0
• 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

• - Export Import Balance
• -600

Figure 8.1 US trade in goods with China, 2000-2019 (in million USS)

Source: US Department of Commerce. Website: www.census.gov/foreign-trade/blance/c5700.html.

Notes: Figures are on a nominal base, not seasonally adjusted. Due to rounding, details may not equal totals.

(0.9 percent). With China’s growing competitiveness—and especially after the country became a member of the WTO—the export surplus became a matter of great concern to the US government. By 2019, China's share in total US trade of goods had increased to 13.5 percent, and the US trade deficit therewith accounted for 40 percent (USS345 million) of the total US trade deficit.

US statistics reveal that despite the restrictive trade policies, the total deficit in trade of goods further went up to US$854 billion in 2019—an increase of 7.8 percent compared to 2017. While the deficit in trade with China declined by 8 percent, that with the EU grew by 18 percent (United States Census Bureau 2020a, 2020b, 2020c). With the Trump administration’s focus on balanced trade, it can be expected that the EU will be the next target of USTR investigation. In the fact sheet about the president’s 2020 Trade Agenda, the USTR already announced the extension of the “America First” trade agenda to the EU:

For many years, U.S. businesses have been at a disadvantage in doing business in the EU. In a fair trade agreement with the European Union, the United States seeks to eliminate EU barriers to its markets and seeks a more balanced trade relationship.

(2020b)

In the EU, there is strong concern about potential national security tariffs imposed on the automotive industry, a sector of great importance in many Member States. Similar to its response to the US’ increased tariffs on aluminum and steel, the EU could again file a WTO case against the country and adopt “rebalancing measures” under the WTO safeguard process (Gonzalez and Véron 2019, 17).

Table 8.1 Extra EU27 merchandise trade with largest trading partners in 2019 (excluding intra-EU trade)

Source: EU Commission. Directorate General for Trade, https://trade.ec.europa.eu/doclib/docs/2006/ septembei7tradoc_122530.pdf.

Against this background, the EU has a keen interest in strengthening the multilateral trading system and in bringing together a broad coalition to implement WTO reforms. Conversely, the US-China economic and trade agreement does not seem to represent a challenge to the EU. On the contrary, the EU has a chance to freeride on topics of key interest to its companies, such as IPR protection and the avoidance of compulsory technology transfers.

The protectionist and aggressive US trade policy has, however, not only been criticised by its partner countries but also increasingly within the US itself. That this policy is working to the disadvantage of domestic companies is stressed by the US Chamber of Commerce (2020). On its website, the Chamber requests its members to send an appeal about the current trade policy to Congress. Under the heading "Trade works. Tariffs don't”, it points to the implications of the global trade war that the government has started:

Trade actions by the Trump administration threaten as many as 2.6 million American jobs and will stymie our economic progress. Tariffs on imported goods are hitting American consumers and businesses—including manufacturers, farmers, ranchers, and technology companies—with higher costs on commonly used products and materials.

(US Chamber of Commerce 2020)

The EU’s position amid US-China competition for global technological leadership

China has clearly benefited from globalisation. The relocation of labour-intensive production there from EU Member States and the US since the 1990s is associated with a transfer of both implicit and explicit knowledge. While foreign companies accepted the transfer of technology in exchange for having access to the huge Chinese market in the beginning, the rapid improvement of Chinese companies’ competitiveness would change their stance with regards to the compulsory request for technology transfers—especially after China's accession to the WTO. Although membership thereof committed the Chinese government to restricting this practice, foreign companies have frequently continued to complain about its occurrence even in recent years.

The rise of Chinese companies in the global value chains of manufactured goods was strongly supported by ambitious industrial and science policies, which usually overlap. While the country would gradually emerge as a leading player in S&T (Suttmeier 2020), the development of high-tech products and processes still lagged behind the level found in the US—on whom China remained dependent for key technical components, such as semiconductors. Against this background, the Chinese political leadership started to steer the country's economic model in a new direction, with the aim of achieving innovation-driven growth and a technological upgrade of its industry. Although the industrial modernisation programme presented by the government in 2015, the "Made in China 2025” (MIC) plan, was basically an extension of already-existing industrial policies (Schuller 2015), it still startled governments and companies worldwide—especially in the US.

In 2017 the US Chamber of Commerce published a report on the MIC plan, analysing its basic goals and instruments—as well as implications for the US. The Chamber interpreted the plan as an industrial policy that aims at transforming China into a global manufacturing leader. With its focus on ten strategic industries, including next-generation IT, aviation, rail, new energy vehicles and agricultural machinery, the Chamber saw the plan as being very ambitious but not compatible with US policies because of its state-led approach, the central role of state planning and guidance and heavy state subsidies for the support of strategic industries: “Plans like MIC and their implementation are putting the two economies on a path of separation rather than integration in critical commercial areas” (US Chamber of Commerce 2017).

Following Segal (2018), China’s intention via MIC is not so much to join the ranks of high-tech economies but rather to replace them altogether, as the plan strives to achieve self-sufficiency through technology substitution and to support the rise of China as a manufacturing superpower that dominates global markets. When the Trump administration imposed increased tariffs of US$60 billion based on the Section 301 investigation of 2018, the MIC plan was cited as a proof that China pursues unfair trade practices and that tariffs were thus justified. That the plan represents a great challenge to the US economy and requires an appropriate policy response is the message of the report titled "Made in China 2025 and the Future of American Industry”. Presented in September 2019 by the chairman of the Senate Committee on Small Business and Entrepreneurship, Senator Marco Rubio, it invites the Senate to understand the MIC plan as a wake-up call for American political economy and demands the increase of high-value, high-labour production in the US (Rubio 2019).

In sum, such competition over technological leadership seems to be even more important than the US-China trade conflict. In order to contain China's technological rise, perceived as a threat to its national economy and security, the US government employs four different approaches (Segal 2019a). First, a 25 percent tariff increase is imposed on those Chinese products supported by the MIC policy; the focus is on 1,300 industrial technological, transport and medical ones. Second, Chinese investment in US technology sectors is restricted by revised export control laws. The new Export Control Reform Act (ECRA) was introduced in 2018 to prevent China from obtaining technologies suspected of being later used for military purposes (Lazarou and Lokker 2019). From the list of 14 emerging technologies, the initial focus will be on artificial intelligence (Al), quantum computing and 3D printing (Barkin 2020). Another control mechanism is the Entity List, an export blacklist. Moreover, reviews of the investment application procedure conducted by the Committee on Foreign Investment in the US (CFIUS) have become stricter; such investment now has to follow additional security criteria, too. Third, the US government is imposing restrictions on Chinese information technology (IT) companies, especially Huawei, ZTE and China Mobile, regarding doing business in the US; these companies are excluded from selling network equipment or telecommunication services to federal agencies, for example. US government officials have also put pressure on countries outside the US not to use Huawei for 5G infrastructure, including ones in the EU. Fourth, tightening the prosecution of Chinese companies for intellectual property theft. Taking these restrictions on access to US technology together, from the Chinese perspective, even more emphasis now has to be put on indigenous innovation in key technologies in order to become technologically independent from the US (Sun 2019, 201-204).

During the year 2019, the "tech Cold War” between the US and China further unfolded—with the Trump administration placing Huawei and 68 of its affiliates on a blacklist of companies to which US firms are not allowed to sell technologies without official approval, especially advanced semiconductors and software. Some large US companies such as Google and Micron have reacted to these restrictions and consequently suspended their business dealings with Huawei. In October 2019, an additional 28 Chinese companies—this time from the Al sector—were added to the blacklist, among them SenseTime, Megvii, Yitu and iFlytek. China’s response to the latest restrictions keeping its IT companies out of government networks in the US is very similar to the latter's policy: namely, all government offices and public institutions in China being required to remove foreign computer equipment and software within three years (Segal 2019b).

Although policies that restrict China's access to US technology might demonstrate some success in the short term, there are doubts about whether they can hold back the country’s technological progress in the long run. Suttmeier, for example, expects that "pressures from the United States could stimulate renewed efforts in China to build more independent systems for research and innovation” (2020, 59). With regards to the rapid development of S&T over the last few decades, he is, however, quite optimistic that China will be able to manage should a prolonged technology war ensue: “US policies can impose costs on China in the short run.

but the trajectory of Chinese development over the past several decades strongly suggests that China has the financial, human, and institutional resources to manage the costs over the longer run” (ibid., 63).

Europe's strong S&T ties with both the US and China see its companies and scholars caught in the crossfire of this tech Cold War. The overall policy climate with regards to S&T cooperation with China has not, however, changed in the EU to the same extent as it has in the US. In view of China's increased weight in the international economy and the associated impact on the system of global governance, the European Commission (EC) has nevertheless adapted its policy towards China in recent years. The communication of the EC to the Council in March 2019, “EU-China—A Strategic Outlook”, reflects this change, stressing that “there is a growing appreciation in Europe that the balance of challenges and opportunities presented by China has shifted” (EC 2019). It continued by remarking that the EU needs to take a fair, balanced and mutually beneficial course moving forwards.

In its new approach on China, the EU not only views the country as an important cooperation partner but at the same time also as "an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance” (EC 2019). Three objectives regarding the relationship with China were proposed: first, closer engagement in order to foster common interests at the international level (including support for multilateralism, sustainable development and climate change mitigation); second, more balanced and reciprocal conditions within the two sides’ economic relationship; and, third, changes within the EU itself so as to make the Union more globally competitive (Schuller 2020). On the level of individual European countries, reactions to the US-China trade conflict have varied markedly (Esteban et al. 2020)—as has their reactions regarding S&T cooperation with China. The largest countries, though—especially France, Germany and the United Kingdom (UK)—closely cooperate with China both on higher education and S&T (Kroll et al. 2020).

The situation for European companies doing business with China is becoming increasingly difficult with the unfolding of the US-China trade conflict and tech war. European business associations such as the European Chamber of Commerce have already closely studied the negative impact of this trade conflict on European companies. They are also very concerned about the collateral damage caused by a potential tech war. In October of last year, the Chamber (2019) conducted a survey among its member companies working in China. It showed that about one in four respondents who import goods from the US were affected by the tariff's and associated changes in prices. Out of this group, 44 percent changed suppliers and others redirected their global production away from the US-China "border”. Among the companies exporting goods to the US, meanwhile, about 25 percent were hit by the punitive tariff's. With a US-China tech war looming on the horizon, the president of the European Chamber of Commerce, Jorg Wuttke, has stressed the impending challenges for European companies doing business with China. Taking the new controls imposed on Huawei as an example. Wuttke believes that all global chipmakers that supply the company are under threat, as they all depend on US tools equipment.

The future of the EU’s Relations with the US and China

China’s emergence as a global power is challenging US supremacy in many ways, especially because of its different political system and the central role of the state in the economy. While their bilateral trade and investment relationship has seen its ups and downs over the years, it is under the Trump administration that the US' relations with China have shifted from engagement to confrontation (European Parliament 2020). Other countries are increasingly being drawn into this competition, with the US government putting pressure on allies to choose sides. Some recently published contributions by the “Taskforce on Transforming the Economic Dimension of the U.S. China Strategy” reflect the ongoing discussion about partial disengagement from China as a new approach for increasing economic competitiveness with that country.

The final report for this taskforce from Boustany and Friedberg (2019) reveals the extent to which economic nationalism and political goals overlap. The authors reiterate their suggestion to cooperate more closely with like-minded nations “to develop a common negotiating position towards China”. Under the heading of “Self-strengthening”, they suggest intensifying "defensive measures to protect against Chinese penetration and exploitation of the U.S. economy and the economies of other advanced industrial democracies”. Four scenarios for the development of bilateral relations between the US and China are discussed by the authors. There are two extreme ones, namely the “free trade” and the “Cold War/Contain-ment” scenarios: 1 ) China liberalises its economy, resulting in a convergence of interests between the US and China. Although the "free trade” scenario is the preferred outcome, the authors doubt whether it can be achieved with the Chinese Communist Party in power. Alternatively: 2) disengagement, with trade and investment flows restricted. The other two more moderate scenarios are: 3) “status quo”, characterised by the openness of the US economy and China being partially closed, and 4) "partial disengagement”—with both countries' economy partially closed.

The idea of disengagement or decoupling from China has so far not received much support in Europe. In contrast, EC High Representative/Vice-President Josep Borrell underlined the importance of China and cooperation with this country at the press conference following the EU-China High Level Strategic Dialogue: "China is without doubt one of the key global players. This is a fact, and China will increase its global role. We have to engage with China to achieve our global objectives, based on our interests and values” (Borrell 2020). That Europe needs an independent strategy towards China is one of the key messages in the research report "EU-China Trade and Investment Relations in Challenging Times”, a study requested by the European Parliament (2020). With reference to the EC communication of March 2019 in which the Commission defined China as a systemic rival, the study emphasises that “the EU needs to reassess its

Europe ’s economic/technological relationship 133 longer-term strategy of engagement with China. Systemic rivalry is, of course, one option but cannot be the only one. China is too big a partner for the EU, and systemic rivalry as a starting point can easily lead to deteriorating relations and even outright confrontation. As China’s importance is likely to grow, the EU will need to define a nuanced approach to China, setting out conditions for a fruitful co-existence with China while also strengthening instruments to defend EU interests and EU values” (European Parliament 2020, 69).

In their own study on strategic rivalry between the US and China, Lippert and Perthes (2020) note that rivalry has become a dominant paradigm in international relations again over the past two years. This new outlook determines not only strategic debates but also real-world political, military and economic dynamics. The authors also see Sino-American global competition over power and status as being shaped by growing threat perceptions and an increasingly important politi-cal/ideological component on both sides. Lippert and Perthes strongly recommend that “Europe needs to escape the bipolar logic that demands it choose between the American and Chinese economic/technological spheres” (2020, 2). For the EU, it will be important to design its own China policy.

That European policymakers and companies do not fully share the US approach to China is also highlighted in the discussion about export controls and the inclusion of Chinese 5G technologies. In his study on export controls and the US-China tech war, Barkin notices what he calls a "healthy scepticism in European capitals about Washington’s use of offensive economic tools, such as export controls, to counter China” (2020, 5). Critics of the US approach see export controls as an inadequate policy in a world of global supply chains and assume that the US' motivation in employing such measures is predominantly based on the idea of containing China's technology development.

To summarise, many European policymakers and business associations understand that the US-China trade conflict is first of all a political one over power and spheres of influence, including the field of technology. The EU has become more critical towards China's economic model, including with regards to the lack of reciprocity for European investors and its “divide-and-rule approach” in the Belt and Road Initiative vis-à-vis the Central and Eastern European countries. In contrast to the current US administration, however, China is not only seen as a competitor but as a cooperation partner. With the EU being dependent on global rules-based institutions, and especially on the WTO, the inclusion of China in the process of reforming it is of the utmost importance.

What are the policy implications for Europe amidst the US-China conflict? Starting from a position of strength as one of the world’s largest markets, the EU should rely more on its counterbalancing power within multilateral organisations— especially the WTO. The overall goal should be reform of the WTO together with like-minded countries, focusing for example on the dispute settlement system, the role of state-owned enterprises, industrial subsidies and digital trade. Due to its dependence on trade with both the US and China, the EU cannot and should not choose sides, but rather intensify collaboration on reform issues with other important trading nations such as Japan.

Being one of the most important locations for research and innovation, and due to the inclusion of many countries in its huge research programmes such as Horizon 2020, the EU should use its role as a "rule-maker” to influence global governance regarding S&T. In this context, the most important goal for the EU should be preserving the openness of the international research and innovation system. Without China, global challenges such as climate change, health or the depletion of natural resources cannot be tackled.

While the digital transformation of industry and society in European countries is ongoing and will be supported by the EU’s long-term budget 2021-2027, shortterm answers to the positioning of Europe amidst the US-China tech war still need to be found. Depending on global information and communications technology (ICT) supply chains, the EU needs to design an overall regulatory framework of how to assess that suppliers do indeed guarantee data privacy and overall network security (Riihlig et al. 2019).

In sum, Europe should not take sides in the US-China geopolitical rivalry. By overcoming its own economic, technological and political weaknesses, the EU should start to act as a global power in its own right.

Notes

• 1 Conducted by the Bertelsmann Stiftung (2020), this survey included 12,263 people from 28 EU Member States.
• 2 See the decision of the United Kingdom (UK) government to ban Huawei from involvement in the country's 5G networks (Gold 2020).
• 3 Schneider-Petsinger et al. (2019, 6) point to four primary concerns laid down in the USTR's Section 301 report: foreign ownership restrictions; regime of technology regulations; cyber theft; and outbound investments.

References

Adekola, Tolulope Anthony. 2019. “US—China Trade War and the WTO Dispute Settlement Mechanism.” Journal of International Trade Law and Policy 18 (3): 125-135.

Alam, Mayaz. 2020. “Where the US-China Trade War Should Go from Here: More Tariffs Cannot Be the Answer Amid the Pandemic.” The Diplomat, July 6. https://thediplomat. com/2020/07/where-the-us-china-trade-war-should-go-from-here/.

Autor, David H., David Dorny, Gordon H. Hanson, and Kaveh Majlesi. 2020. “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure.” May 2020. www.ddorn.net/papers ADHM-PoliticalPolarization.pdf.

Barkin, Noah. 2020. “Export Controls and the US-China Tech War: Policy Challenges for Europe.” Meries China Monitor, March 18. https://rnerics.org/de/studie/ exportkontrollen-und-der-us-chinesische-technologiekrieg.

Bertelsmann Stiftung. 2020. “Survey: Europe’s View of China and the US-China Conflict.” January 2020. www.bertelsmann-stiftung.de/fileadmin/files/BStZPublikationen/ GrauePublikationen'eupinions_China_DA_EN.pdf.

Borrell, Josep. 2020. “EU-China Strategic Dialogue: Remarks by High Representative/ Vice-President Josep Borrell at the Press Conference.” European External Action, June 9. https://eeas.europa.eu/headquarters/headquarters-homepage/80639/eu-china-strategic-dialogue-remarks-high-representativevice-president-josep-borrell-press_en.

Boustany. Charles W., and Aaron L. Friedberg. 2019. “Partial Disengagement. A New U.S. Strategy for Economie Competition with China.’’ The National Bureau of Asian Research, BNR Special Report 82, November 4. www.nbr.org/publication/ partial-disengagement-a-new-u-s-strategy-for-economic-competition-with-cliina/.

CRS (Congressional Research Service). 2019. “U.S.—China Relations.” CRS Report. September 3. https://crsreports.congress.gov/product/pdfR/R45898.

Esteban, Mario, Miguel Otero-Iglesias, Una Aleksandra Berzina-Cerenkova, Alice Ekman, Lucrezia Poggetti, Bjôrn Jerdén, John Seaman, Tim Summers, and Justyna Szc-zudlik, eds. 2020. “Europe in the Face of US-China Rivalry.” European Think-Tank Network on China Report, January, www.ifri.org/en/publications/pubhcations-ifri/ europe-face-us-china-rivalry.

EU-China Summit Joint Statement. 2019. Brussels, April 9. www.consilium.europa.eu/ media/39020/euchina-joint-statement-9april2019.pdf.

European Chamber of Commerce. 2019. “European Chamber Survey on the US-China Trade War Finds More Companies Making Difficult Strategic Changes to Adapt to the Indefinite Nature of the Tensions.” https://static.europeanchamber.com.cn/upload/ medianews/attachments/September_Trade_War_Survey_Results_and_Findings_ Final_l.l[24].pdf.

European Commission. 2019. “EU-China—A Strategic Outlook.” European Commission and HR VP Contribution to the European Council, March 12. https://ec.europa.eu/com-mission/sites/beta-political/files/communication-eu-china-a-strategic-outlook.pdf.

European Commission Directorate General for Trade. 2020. “Client and Supplier Countries of the EU 27 in Merchandise Trade (Value %), 2019, Excluding Intra-EU Trade.’’https:// trade.ec.europa.eu/doclib/docs/2006/september/tradoc_122530.pdf.

European Parliament. 2020. “EU-China Trade and Investment Relations in Challenging Times.” Policy Department for External Relations Directorate General for External Policies of the Union. Study requested by the INTA Committee, May. www.europarl.europa. eu/RegData/etudes/STUD/2020/603492 EXPO_STU(2020)603492_EN.pdf.

Gold, Hadas. 2020. “UK Bans Huawei from Its 5G Network in Rapid About-face.” CNN Business, July 14. https://edition.cnn.com/2020/07/14/teclvhuawei-uk-ban index.html.

González, Anabel, and Nicolas Véron. 2019. “EU Trade Policy Amid the China-US Clash: Caught in the Cross-Fire?” Bruegel Working Paper 7, September 16. www.bruegel.org/ wp-content/uploads/2019/09/WP-2019-07.pdf.

Kroll. Henning. Markus Conlé, Julia Hillmann, Peter Neuhausler, Margot Schiiller, and Iris Wieczorek. 2020. “Monitoring des Asiatisch-Pazifischen Forschungsraums (APRA).” Kooperation International, https://www.kooperation-international.de/fileadminuser_ upload/apra_2020.pdf.

Lau, Lawrence J. 2019. The China-U.S. Trade War and Future Economic Relations. Hong Kong: Chinese University Press.

Lazarou, Elena, and Nicholas Lokker. 2019. “United States: Export Control Reform Act (ECRA): European Parliamentary Research Service.” www.europarl.europa.eu/ RegData/etudes/BRIE/2019/644187/EPRS_BRI(2019)644187_EN.pdf.

Lippert, Barbara, and Volker Perthes, eds. 2020. “Strategic Rivalry Between United States and China: Causes, Trajectories, and Implications for Europe.” SWP Research Paper, April. https://doi.org/10.18449/2020RP04.

Meltzer, Joshua P., and Neena Shenai. 2019. “The US-China Economic Relationship: ACom-prehensive Approach.” Global Economy and Development at Brookings American Enterprise Institute, February, www.brookings.edu/wp-content/uploads/2019/02/us_ cliina_economic_relationship.pdf.

Mildner, Stormy-Annika. 2020. ‘“America First’—U.S. Trade Policy Under President Donald Trump.” BDI: The Voice of Gennan Industry, March 11. https://english.bdi.eu/ article/news/america-first-u-s-trade-policy-under-president-donald-trump/.

Moosa, Nisreen, Vikash Ramiah, Huy Pham, and Alastair Watson. 2020. “The Origin of the US-China Trade War.” Applied Economics 52 (35): 3842-3857.

Noland, Marcus. 2019. Protectionism under Trump: The China Shock, Intolerance, and the 'First White President’. Washington, DC: Peterson Institute for International Economics, Working Paper, June, www.piie.com/publications/working-papers/ protectionism-under-trump-china-shock-intolerance-and-first-white.

Packard, Clark. 2020. “Trump’s Real Trade War Is Being Waged on the WTO.” Foreign Policy’, January 9. https://foreignpolicy.com/2020/ 01/09/trumps-real-trade-war-is-b.

Rubio, Marco. 2019. "Made in China 2025 and the Future of American Industry.” Medium, September 17. https://mediuni.com/@SenatorMarcoRubio/made-in-china-2025-and-the-future-of-american-industry-c7532c35168c.

Riihlig, Tim, John Seaman, and Daniel Voelsen. 2019. “5G and the US-China Tech Rivalry—A Test for Europe’s Future in the Digital Age: How Can Europe Shift from Back Foot to Front Foot? SWP Comment.” June 29. www.swp-berlin.org/fileadmin/ contents products comments 2019C29J ob_EtAl.pdf.

Schneider-Petsinger, Marianne. Jue Wang, Yu Jie, and James Crabtree. 2019. “US-China Strategic Competition: The Quest for Global Technological Leadership.” Chathamhouse Research Paper, November, wivw.chathamliouse.org/sites/default/files/publications/ researchCHHJ7480-US-Cliina-Conipetition-RP-WEB.pdf.

Schüler-Zhou, Yun, and Margot Schüller. 2017. “Trumps Shadow Over US-China Economic Relations.” GIGA Focus Asia 4, June, www.giga-hamburg.de/en publication/ trumps-shadow-over-us-china-economic-relations.

Schüller, Margot. 2015. “Chinas Industriepolitik: auf dem Weg zu einem neuen Erfolgsmodell?” WSI-Mitteilungen 7: 542-549. www.wsi.de/data/wsimit_2015_07_schueller.pdf.

Schüller, Margot. 2020. “The Belt and Road Initiative’s (BRI) Impact on the Economic Policy of the European Union: A Preliminary Assessment.” Forthcoming. https://www. tandfonline.coni'doi/fulL'TO. 1080/16081625.2020.1686841.

Segal, Adam. 2018. “Made in China 2025: Why Does Everyone Hate It?” Global Trade, August 6. www.globaltrademag.com/niade-in-china-2025-why-does-everyone-hate-it/.

Segal, Adam. 2019a. “Seizing Core Technologies: China Responds to U.S. Technology Competition.” China Leadership Monitor. https://3c8314d6-0996-4a21-9f8a-a63a59b09269. filesusr.eom/ugd/10535f_4b07cc3458014c47a03b3f23cae5fdel.pdf.

Segal, Adam. 2019b. Year in Review 2019: The U.S.-China Tech Cold War Deepens and Expands. Londres: European Council on Foreign Relations, Blog Post, December 18. www.cfr.org'blog/year-review-2019-us-china-tech-cold-war-deepens-and-expands.

The State Council Information Office of the People’s Republic of China. 2019. “China’s Position on the China-US Economic and Trade Consultation.” http://images.mofcom. gov.cn/Q2/201906/2019060611402995 7.pdf.

Sun, Haiyong. 2019. “U.S.-China Tech War. Impactsand Prospects.” China Quarterly of International Strategic Studies 5 (2): 197-212. www.worldscientific.com/doi/pdf/10.1142/ S237774001950012X.

Suttmeier, Richard P. 2020. "Chinese Science Policy at a Crossroads.” Issues in Science and Technology! ■>■. 58-62, Winter.

United States Census Bureau. 2020a. “Trade in Goods with the European Union.” www. census.gov/foreign-trade/balance/c0003.html.

United States Census Bureau. 2020b. "Trade in Goods with China.” www.census.gov/ foreign-trade/balance/c5700.html.

United States Census Bureau. 2020c. "Trade in Goods with World. Seasonally Adjusted.” www.census.gov/foreign-trade/balance/c0004.html.

United States Trade Representative (USTR). 2020a. “Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China.” https://ustr.gov/sites/default/files/files/agreements/ phase%20one%20agreement/Economic_And_Trade_Agreement_Between_The_ United_States_And_China_Text.pdf.

United States Trade Representative (USTR). 2020b. “Fact Sheet: The President’s 2020 Trade Agenda and Annual Report.” https://ustr.gov/about-us/policy-ofiices/press-ofiice/ fact-sheets/2020/february/fact-sheet-presidents-2020-trade-agenda-and-annual-report.

US Chamber of Commerce. 2017. “Made in China 2025: Global Ambitions Built on Local Protections.” www.uscliamber.eom/report/made-china-2025-global-ambitions-built-local-protections-O.

US Chamber of Commerce. 2020. "Trade Works. Tariffs Don’t.” https://www.uschamber. com tariffs.

World Trade Organization (WTO). 2019. “Technological Innovation. Supply Chain Trade, and Workers in a Globalized World.” Global Value Chain Development Report 2019. www.wto.org/english/res_e/booksp_e/gvc_dev_report_2019_e.pdf.

WTO Council for Trade in Goods. Committee on Safeguards. 2018. “Immediate Notification Under Article 12.5 of the Agreement on Safeguards. . . .” https://docs. wto.org/dol2fe/Pages/FE_Search/FE_S_S006. aspx?DataSource=Cat&query=@ Symbol=%22G/L/1240%22%200R%20@Symbol=%22G/L/1240/*⁰/o22&Language= English&Context=ScriptedSearches&languageUIChanged=true.