Merkel finds a natural ally in Beijing

Merkel finds a natural ally in Beijing

Xi Jinping and Angela Merkel agreed on Friday to push ties to the next level after a successful trip by the German chancellor to China. Berlin and Beijing have a vast common agenda and discussions ranged from international trade to the Iran nuclear deal, to which both countries remain committed. 

There are shorter-term tensions over issues such as human rights and cybersecurity, but the countries have a close longer-term economic relationship; in 2017, Germany was China’s top trading partner for a second consecutive year. Moreover, unlike in the White House, Merkel is widely respected in Beijing, and she has visited China more than any Western leader (this was her 11th trip). This personal factor is important, with Merkel’s rational, strategic style more in tune with Xi than Trump is.

Indeed, Merkel has long been seen in Beijing as the most important political leader in Europe, and a reliable Chinese interlocutor with the West. Chinese officials value that Merkel has outlasted three French presidents (Chirac, Sarkozy and Hollande) and three UK prime ministers (Blair, Brown and Cameron), while also breaking Margaret Thatcher’s record as Europe’s longest serving female leader.

During her discussions with her hosts, including Xi and Premier Li Keqiang, Merkel and the business executives with her embedded economic ties. The Germany party not only had meetings in Beijing but also traveled to Shenzhen to tour initiatives where German business has gained a foothold.  

Moreover, the future of the broader multilateral trading system was also a key topic of conversation. Despite last week’s US-China deal in which tit-for-tat sanctions were avoided, for now at least, both Berlin and Beijing are concerned about the mood music on trade coming from Washington since Trump took office. Merkel’s spokesman said they were “in agreement that open markets and rules-based world trade are necessary. That’s the main focus of this trip.” 

Germany and China, both big exporting nations that run significant trade surpluses with the US, have found themselves under Trump’s scrutiny. While an economic spat between Beijing and Washington has been at least temporarily averted, threats of a US-European trade war remain if Trump does not extend a key trade tariff exemption on steel and aluminum imports temporarily granted to EU nations. This issue remains a live one and will be a key topic of discussion at next month’s G7 summit. 

Merkel has long been seen in Beijing as the most important political leader in Europe, and a reliable Chinese interlocutor with the West.

Andrew Hammond

Just like China, Germany has been a target of Trump attacks. Last month he singled out Berlin for being “very bad” because of its significant trade surplus — with exports greater than imports — and he has threatened to impose tariffs on German car imports. 

Other than economic issues, Merkel and Chinese officials will also discuss the Iran nuclear deal, from which Trump has withdrawn despite European opposition. The signs from Europe are that Paris, Berlin and London may go down a similar route to the 1990s, when the EU objected to US sanctions that affected European companies. Then, Brussels approved measures to try to neutralize the effects, asserting that the US should not be able to impose sanctions with such an extra-territorial effect. 

Despite this precedent, however, new US sanctions on Iran could critically undermine EU attempts to preserve the nuclear deal. For instance, it may only be European companies with little or no economic interests in the US that are likely to want to trade with Iran, given the potential risks, including fines from the US Treasury.

Merkel was therefore keen to obtain Xi’s and Li’s views on this topic, especially given the potential of China’s economy for trade with Iran. According to China’s Commerce Ministry, Chinese business investment in Iranian developments already amounted to about $33 billion in June 2017, and could grow significantly.

On Thursday, both sets of leaders defended the deal, with Li saying its collapse would “not just impact Iran, but also have a negative impact on the ability to solve other hot international issues through peaceful negotiations.” While Li did not mention North Korea explicitly, he was referring in part to the negotiations to disarm Pyongyang of its nuclear arsenal, and the on-off (and now possibly on again) June 12 summit between Trump and Kim Jong-Un. 

Overall, Merkel used her trip to double down on economic and political ties. With her relationship with Trump likely to be tense for some significant time to come, she is keen to forge stronger international leadership positions with Beijing on a range of issues where they have common agendas, from international trade to Iran.

  • Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics.
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