Where Crisis Meets Chaos: Analysis Of A Post-Brexit EU

In 2015, the U.K. announced the beginning of the golden era in Sino-British IR. At the beginning of 2021, even the word collaboration seems to have disappeared from Downing Street’s vocabulary. Examples of this are the exclusion of Huawei from the 5G system, the Queen Elizabeth aircraft carrier sent by the British navy in the South China Sea, and the military spending of the country skyrocketed to more than 16 billion pounds per year.

In addition to interference into China’s internal affairs, Johnson’s government has also criticized Beijing’s handling of the pandemic, its persecution of Muslim Uighurs, and its anti-Taiwan military imperialism. Stating that Britain has a “moral duty” to defend democracy, London has announced new export controls and has urged the UN to conduct a thorough investigation into allegations of forced labour in China. Johnson has even dared to invite India, South Korea, and Australia – China’s archenemies – to the G7 of this summer in Cornwall.

If it is true that the British government’s position has become anti-Chinese, it is also true that it has become so formal. The jumble of compromises underlying domestic politics has shown the unsustainability of the Tories’ claims and the adaptable vacuity of Johnson’s programme. It would be difficult to explain to large British companies the geopolitical reasons behind the destruction of their interests in China, with bilateral trade between the U.K. and China yielding around £ 80 billion in 2019 alone.

Similarly, a U.K. citizen might be surprised that the same conservative administration that promoted Brexit on the need to curb incoming migration flows, is precisely the same one that now wants to grant a residence permit to more than three million foreign citizens. According to estimates by the British Home Office, these people would have 2,3 million family members eligible for visas, so they would end up accounting for 5 million immigrants in total. Of course, this type of immigration is not the same demonized by the Tories but a rather economically fruitful one, made of highly skilled professionals accounting for about 70% of the population of a mega-commercial hub.

Therefore, it is clear that British migration policies work on a system of 2 weights and two measures, a system of obvious preferences that marketize human capital. Despite criticism, the U.K. has carefully evaluated its moves, considering the rapid influx of people from Hong Kong as an advantage in both the short and long term. According to estimates from the Bank of America, such migration would trigger capital outflows linked to property sales and pension fund withdrawals totalling about 26 billion pounds in this year alone, and more than 75 billion in five years.

On the one hand, this low blow would be a source of great embarrassment for China, which sees international criticism as a cause of possible internal rebellion and loss of political appeal, as exemplified by the overreaction to allegations of poor transparency in the so-called blame game. On the other hand, the U.K. is concerned about Chinese vindictiveness, with China having proved not to be hesitant when it comes to punishing geopolitical transgressions, even the most trivial ones, with appropriate countermeasures. As an example, earlier this year fees on imports in China were raised on all products coming from Australia in retaliation for Canberra sponsoring an investigation into the origins of the pandemic.

For the moment being, it is safe to say that China and the Uk are at a stalemate: Beijing has little interest in pushing the U.K. even more towards harsh, US-style positions, especially in its political economy strategy, as London is argued to be the most attractive place for Chinese companies and related stocks after Brexit. If repression in Hong Kong really ends up completely undermining the financial autonomy of the former colony, its role as a gateway to China’s finance could find an ideal replacement in London.

By concentrating American investment, European fluidity, and large capitals from Hong Kong, London would easily adapt to function as the most important financial hub for world trade across Eurasia. London, which already now has the highest number of transactions in renminbi outside of China, would therefore remain crucial both for the process of internationalization and devaluation of the currency. These results are linked to the pandemic recession, with IMF forecasts for the period until 2025 outlining an economy dominated by Chinese exports, representing 31% of World Economic Growth.

In this context, it is important to consider the timing of Beijing’s moves: it seems that the regime has taken advantage of the health crisis to accelerate on confrontation with the EU to test the latter’s ability to act in the name of the values on which it is founded. At the same time, the EU’s already flawed credibility has been caught dead in a downward spiral, undermined in its flexibility because of conflict between strategic dependency on the U.S. and the economic competitiveness of China.

Indeed, the caution in the measures taken against China reflects the move from the “wait-and-see” approach of the pre-Covid chancelleries to the “see, condemn from afar and wait eternally” of post-Covid Europeans. The reticence of the EU in pursuing its commitment to condemn China, as set out in the June White Paper, shows market interdependence in an area in which the Chinese regime is used to playing dirty: bilateral relations.

By creating a double track in China-EU relations as already done in Central Asia, the Chinese, just like the Russians before them, have favoured the construction of ad hoc formats with each European country at a time. With initiatives such as the BRI and the Asian Infrastructure Investment Bank (AIIB), the Chinese authorities are using commercial relations as a simple bargaining chip: you close the eyes on Hong Kong and I’ll save your economies is the Chinese proposal. And it works. This practice is encouraged by the fact that Europe has not given a coordinated response, but has preferred to leave its members free in choosing the U.S. or China. And for now, at least, a balance has been more or less maintained, although being pulled in different directions from internal and external forces.

However, forced to choose between the defense of European morality and the competitive advantage of entering into 1-to-1 agreements with China, the Member States usually choose the latter. That is why the measures taken on 28 July by Europeans in retaliation for the brutal and unilateral end of the “one country, two systems” principle in Hong Kong are characterized by a lack of cohesion, no firmness, and a vague strategy doctrine. On the contrary, the British moralistic campaign, for how clearly nothing to do with the selfless protection of people from Hong Kong, has worked because London has already chosen a side, deciding to become more subordinate than ever to U.S. interests in the hope of mitigating the effects of Brexit. Here, tension with Beijing is then demonized in a typically Washingtonian approach, seen as a conflict between opposing civilizations and their way of living.

To ensure their support for a possible mobilization under the US flag, not only is the U.K. reinforcing the artificial dichotomy between the West as a bulwark of democracy, and China, Russia, and the Middle East as enemies of the world, but also its distance from the confusing entanglement of communitarian and domestic policies scaring international investors. However, Johnson’s narrative fails to hide the reality of things, with London having to subscribe to everything Washington has decided to distract its population from the Brexit drubbing.

Luca Giulini

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