Without the UK, the EU will find it harder to come up with convincing answers to the strategic challenges posed by Beijing. Germany and France will have to drive the necessary repositioning of European China policy – and seek close coordination with Britain in the G7.

Chinese and EU flag

There is no business as usual at today’s EU-China Summit in Beijing. The meeting is overshadowed by Beijing’s refusal to recognize the ruling of the international tribunal in The Hague that China does not have historic rights to justify its expansive claims to the South China Sea. The other elephant in the room is the UK’s vote to exit the EU. China’s leaders view the outcome of the British referendum as a sign of the EU’s dysfunction. At the same time, they also worry about losing Britain as advocate for China’s economic interests in Europe.

The EU has even more to lose, as the continent urgently needs to come up with convincing answers to the economic and security challenges posed by China. However, without the UK, EU leaders will be in a worse position to formulate a balanced trade and investment agenda vis-à-vis China, let alone to assume a more active role in shaping security matters in the Asia-Pacific. Britain’s projected withdrawal from the 28-member Union will hamper European policy-making on China in three critical ways.

First, the post-Brexit institutional chaos will greatly reduce the room for strategic debates. For months, if not for years to come, the EU will be preoccupied with sorting out its own problems, rather than focusing on its external relations, including those with China

EU will lose precious resources on China

Should Britain follow through on Brexit, the EU institutions and member states will also lose precious diplomatic resources. In the future, the EU will no longer be able to draw on the accumulated China knowledge of UK civil servants. Ironically, the two lead authors of the EU’s new China strategy were both UK nationals.

Secondly, the EU will lack Britain’s input when it comes to striking the right balance between hedging against risk and seizing opportunities in trade and investment relations with China. Without the UK’s free-trade preference, EU member states are likely to pursue a more protectionist trade regime. The EU’s imminent decision to grant market economy status to China will be accompanied by far-reaching steps to ratchet up the EU’s trade defense mechanisms – a step the UK has always opposed. While there was never strong appetite within the EU to conclude a free trade agreement with China, this option is now effectively off the table for a long time to come.

Toughening up on trade defense is an important building block in dealing with a China that refuses to play by market economy rules. But Brexit could turn out to create a fragmentation of Europe’s trade relations with China that will be costly both politically and economically. In contrast to ensuing dynamics within the EU, London has already indicated that it intends to do whatever it takes to intensify post-Brexit trade relations with China. Significantly, the British Prime Minister David Cameron was the first European leader to publicly push for the conclusion of a free trade deal between Beijing and the EU.

Uncertain future for EU trade and investment strategy

China’s outbound global investment strategy aimed at technological leapfrogging has rightly caused concern among top-level officials in Germany and France. Without the UK, which has been a strong proponent and main recipient of Chinese investment in Europe, coming up with an effective and much needed EU strategy to counter China’s state-driven efforts to buy up technologically leading European companies might turn out to be easier. However, in the absence of London’s voice on the Brussels scene, the EU could also end up creating additional and ultimately undesirable hurdles for legitimate and urgently needed Chinese investments in European businesses and infrastructure.

Lastly, Britain’s withdrawal will have profound consequences on the EU’s already weak security posture. Japan reportedly worries that a Brexit could shift the balance within the EU in favor of those who want to lift the EU’s weapons embargo against China – a step the UK vehemently opposes. The UK will also no longer play a lead role within the EU on security-related initiatives vis-à-vis China. For example, the UK was the first country to sign a cyber agreement with China and to proactively respond to China’s growing military footprint by organizing joint UK-China meetings on crisis management and rescue missions.

In recent months, EU member states have started to take a stronger stance on tensions in the South China Sea, which pit China against its regional neighbors as well as the United States. However, in the absence of Britain’s voice on security issues and its military capabilities, the EU will be much less able or willing to effectively shape security matters in the Asia-Pacific.

The future effectiveness and relevance of European China policy will depend on whether Germany and France, Europe’s biggest economic power and its last remaining member of the P5 in the UN Security Council, are prepared to fill the strategic vacuum and to drive Europe’s economic and political repositioning vis-à-vis China. They may need help from Poland as the anchor of China’s relations with Eastern Europe. They will also have to seek close coordination with Britain on critical security challenges, such as China’s growing assertiveness in the South China Sea, in the G7 – even if this means that European China policy will be made outside the EU institutions.