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12 August 2020

Britain has taken sides in the Sino-American rivalry. For Europe the decision will be much harder

While the EU is fixated on avoiding economic retaliation during the Hong Kong crisis, the UK is joining the US in decoupling from China.     

By Helen Thompson

The Hong Kong crisis has become a watershed in Britain’s post-Brexit geopolitical orientation. While Boris Johnson has kept close to the EU on Iran through the pandemic, with Hong Kong he has led Britain into a position as potentially confrontational as Washington’s. It is not only a matter of offering Hong Kong citizens with British overseas passports a pathway to citizenship, or deciding to exclude Huawei from Britain’s 5G networks. Rather, it demonstrates that commercial interests will be subordinated to ethical concerns about China’s actions. This was reflected in the Foreign Secretary Dominic Raab’s insistence that Hong Kong citizens’ rights must come before bankers’ bonuses. While the EU is still fixated on avoiding economic retaliation, Britain is joining the US in decoupling from China. With the Chinese leadership threatening “a forceful counter attack”, this move will have a self-perpetuating logic.

In part, this divergence comes from Britain’s singular position on Hong Kong. As Britain’s EU membership began to crack, the Cameron-led coalition government remained aligned with the EU’s embrace of Chinese investment. But there was always a crucial difference between the Sino-German and the Sino-British economic relationship. Well before China’s Eurasian turn, big German corporations, not least the car manufacturers, were exporting to China and locating production and supply chains there.

Over the past decade, China has become Germany’s single largest trading partner. By contrast, for David Cameron and George Osborne, Britain’s comparative advantage lay in the City of London and the Hong Kong London nexus, allowing London to serve as the primary centre outside Hong Kong for renminbi trading.

Now that China’s action and the American counter-reaction are dismantling Hong Kong’s ability to serve as a financial portal between China and the rest of the world, London’s financial connection to the city-state loses its value.

But Britain’s separation from the EU over China is also a culmination of Brexit.  Theresa May wanted to keep Britain firmly aligned geopolitically with the EU. She also spent considerable political capital on maintaining a strong bilateral security relationship with France, especially in agreeing Britain would join Emmanuel Macron’s European Intervention Initiative, designed to bolster France’s seven-year-old war in the Sahel in Africa.

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Johnson began by trying to preserve his government’s discretion to move geopolitically. In his first days as Prime Minister last summer, he broke ranks with the French and Germans on Iran by sending British ships into a US-led naval operation in the Strait of Hormuz. In insisting he did not wish to pursue a formal security framework as part of the future relationship negotiations, he also established a further marker. But until China announced in May that it was effectively ending the 1984 Joint Declaration on Hong Kong’s special status with its new security law, he and his ministers also appeared wary of privileging the Atlantic relationship over affiliating with the EU. Early this year, he risked Trump’s fury in deciding to allow Huawei’s involvement in Britain’s 5G networks (he has since reversed the decision), and joined Macron and Angela Merkel in calling for restraint after the US assassinated the Iranian general Qasem Soleimani in January.

If Britain had still been in the EU, the bloc’s response to China imposing national security legislation on Hong Kong would have been much more fiercely contested. Since Macron, intrinsically perhaps the EU leader most sympathetic to the UK on the matter, desperately needed to retain Merkel’s support over the EU pandemic recovery fund, Britain would almost certainly have ended up isolated.

Seen from the future, Hong Kong’s fate might have only speeded up a choice that eventually the EU will have to make too. In fearing China’s technological ambitions, Macron is almost certainly closer to the British than the German position.

Late last year in his provocative Economist interview, Macron complained that “sovereign decisions and choices were de facto delegated to telecoms operators”. It is hard to see this as anything other than a fierce shot at the lengths to which Merkel has been willing to go to protect the strategic collaboration between Deutsche Telekom (the largest telecommunications group in Europe) and Huawei.

The Hong Kong crisis, allied to China incarcerating Uighur Muslims in Xinjiang, has led to sharp criticism of Merkel’s commercial preoccupations from within her own party. But geopolitical reconvergence between Britain and the EU will take some considerable time to happen.

Macron still appears to believe that the remedy for Europe in a world dominated by Sino-American rivalry is more European sovereignty. What that means specifically is far from clear. Even if Merkel already thinks that Germany can only choose which of Washington or Beijing is the most troubling, the answer to that question does not appear self-evident to her. Germany decoupling from China would so seriously disrupt the country’s high value-added manufacturing sector that any German chancellor will face an acute incentive to hedge for as long as possible. This is the Merkel position.

In the interim, Britain has taken its side. British-EU geopolitical cooperation over Iran will now be put to a severe test, ­starting with what Johnson decides to do about Trump’s demand that the UN arms ­embargo on Iran, which expires in October, be extended.