Editor's Note: On July 8, Klaus Larres, a renowned German scholar, researcher at the Kissinger Institute on China and the U.S. at the Wilson Center in the United States, and professor of history and international affairs at the University of North Carolina at Chapel Hill, visited the Chongyang Institute for Financial Studies at Renmin University of China. He delivered a public speech titled "The EU at a Crossroads: Seeking Strategic Autonomy in the Sino-U.S. Rivalry" at the 17th event of the Chongyang Institute's Regional and Country Studies Forum on "The United States". This was his second lecture at the Chongyang Institute since September 2024. With the authorization of the Chongyang Institute, Observer Net has reprinted the full text of Professor Klaus Larres' speech.
Klaus Larres:
Hello everyone! Thank you for the introduction just now. Today, I mainly want to talk about the current global geopolitical situation, especially the challenges for the United States and Europe; meanwhile, China also plays an important role in this context, so I will focus on the relationship among these three parties. First, let me share some good news: Europe and China, as well as Europe and the United States, are still willing to maintain cooperation.
In 2021 and 2022, Europe wanted to purchase a large number of masks for self-protection, but soon realized that large-scale mask production was mainly concentrated in China, and both Europe and the United States were unable to produce in large quantities. At that time, China was not ready to export all masks to Europe, because there was also a huge demand domestically, and it was not ready to supply globally. Nevertheless, China still tried its best to support other countries. This reality made Europe and the United States realize the major challenges and risks in the global supply chain, which affected their trade thinking and methods.
Mask Production
Therefore, Europe gradually realized that it could no longer be as dependent on China as before, and Europe was worried that if China could not meet its demand for certain goods, it might lead to supply chain disruptions. Of course, this also reflected protectionist factors, although protectionism discussions have been around for a long time, but the pandemic accelerated this trend.
The good news is that all parties still hope for cooperation, but the way of trade has become more cautious, emphasizing the diversification of supply chains, avoiding putting all eggs in one basket. Western countries hope to develop emerging markets such as India, Bangladesh, Vietnam, and South America. This diversification strategy is reasonable and necessary, reducing reliance on a single Chinese supply chain and achieving trade risk dispersion. Similar considerations are not limited to trade, but also apply to cultural exchanges, student exchanges, and immigration.
When communicating with Chinese students, I found that they generally are willing to go to Western countries, experience several years of study or work, although it is uncertain whether they will return to China in the future, but they do have a strong desire to broaden their horizons. A similar mindset also exists among Western students, especially European students. In contrast, American students show more hesitation about studying abroad, especially in China, while European students show more enthusiasm for studying abroad.
We know that many Chinese students choose to study in the United States. At the same time, there is a widespread willingness among Western students to further their education in other countries. What I just told you is the good news, and now comes the bad news.
The bad news is that we are in an extremely uncertain, unpredictable, and continuously changing international landscape. The relationships between China and the United States, and between Europe and the United States, especially the transatlantic alliance, are undergoing profound changes. We are facing unprecedented tensions.
Looking back at history, especially since the end of World War II, Europe has always hoped to avoid the risk of large-scale wars. However, without the support of the United States, this goal would be almost impossible to achieve. The Marshall Plan greatly promoted the reconstruction of the European economy, and the continuous assistance from the United States also provided an important guarantee for the unification of Germany, which was achieved in 1990. It can be said that without the help of the United States, the world order would be completely different.
In fact, the close relationship between Britain and France also cannot be separated from our support. Since the end of World War II, the world has witnessed the Cold War and the formation of the transatlantic alliance. Entering the 1990s, the United States gradually became the most influential country in the world, even seen as a unipolar superpower. Since China joined the WTO in 2001, the international political landscape has undergone profound changes.
These changes are also reflected in the US-EU relations, whether it is the Iran issue, the policy towards Russia, or trade and economic conflicts, bringing many challenges. Particularly noteworthy is that Trump's return to the White House is bringing new challenges in an unprecedented way.
The current international environment is quite different from the transatlantic alliance of ten or twenty years ago, facing more tensions and challenges. Take NATO as an example, the United States continues to push European countries to increase defense spending. In recent years, many European countries have been asked to raise defense spending to 2% of GDP. But after the full-scale outbreak of the Ukraine conflict in 2022, President Trump also hoped that NATO would further increase defense spending to 5% of GDP. This request has intensified the differences between the US and Europe and made the goals of NATO more difficult to achieve.
President Trump repeatedly emphasized the United States' commitment to European security, and NATO relies on Article Five to pursue collective defense. However, the military reserves of many European countries, whether missiles or tanks, are insufficient. If strictly following the provisions of Article Five, any member state suffering an invasion should receive assistance from other member states. For example, if Russia invades a NATO member state, other member states must provide support. However, the actual situation of the armies of various countries poses higher challenges to transatlantic relations, especially the recent agreements reached by NATO.
Currently, we continue to exert pressure on all sides to ensure the practical implementation of the fifth article. However, how the future situation will evolve, especially what decisions Trump will make, remains uncertain. This new uncertainty in transatlantic security relations adds another layer of risk to the international situation. At the recent NATO summit, Europeans generally felt a lack of security and certainty, and conditions for substantial improvement of transatlantic relations and NATO capabilities have not yet been met.
Europe is highly dependent on trade with the United States. Over 30% of EU exports go overseas, with the US market being particularly important, especially for large economies like Germany. This dependence makes the recent measures taken by the United States to increase tariffs, especially the series of tariff policies proposed and implemented by former President Trump, a serious challenge for the EU. Many European countries have expressed concerns, as exports, especially to the US, are an important pillar of their economic growth. An increase in tariffs will undoubtedly have a negative impact on the EU's trade and economic development.
Currently, trade negotiations between the EU and the United States are proceeding intensively. The deadline set by Trump for the tariffs is July 9, and he later stated that it may be postponed to August 1. Despite this, no clear agreement has been reached yet. At present, the tariff level on European goods by the United States is mainly around 10%, while some specific industries and products may have higher tariffs.
Before August 1, negotiations are expected to achieve phased results and reach an agreement, but even so, the profitability of European trade with the US may decrease, which will exacerbate the tension in EU-US relations. In other words, even if the volume of transactions remains unchanged, the existence of tariffs will still weaken the economic interests of Europe, thus affecting the atmosphere of cooperation between the two sides.
Trump's Tariff War
Another point to note is that, in addition to the challenges in security and transatlantic trade, Trump's own position is also an important factor. As a far-right politician, Trump has no affection for Europe and does not want to deal with the large international organization with 27 member states. This complex organizational structure does not suit his preferences, so he is unwilling to communicate with the EU, the President of the European Commission, Ursula von der Leyen, or the leaders of the EU countries. This approach not only confuses him personally, but also makes it difficult for the Chinese side to understand.
Trump prefers to speak directly with individual national leaders such as the German Chancellor, the British Prime Minister, and the French President. He believes that direct communication with a single country can gain greater influence, compared to negotiating with the EU as a whole, which is more convenient. However, the EU of 27 countries has formed a powerful economic community, and how to reach an agreement with the EU as a whole has become a challenge for Trump at present.
Additionally, Europe has internal issues such as migration, which may affect the traditional transatlantic relationship between Europe and the United States. We assume that the current relationship between Europe and the United States is at its most difficult point, if this is the case, it is beneficial for China. Because Europe and the United States dislike each other, I don't play with you anymore, nor do I trade with you, and Europeans will turn to China, saying, "Hey, let's play together, let's conduct trade, and get closer."
Theoretically, this is indeed the case, and we do see a bit of such signs now, but in reality, it is not the case.
Because the relationship between Europe and China is not perfect either, especially in the aspects I mentioned earlier, such as the exchange of students and scholars, and economic trade, there are still many tensions and frictions between China and the EU, Europe, but it is not that bad yet. Why is this the case? And how can we solve these difficulties?
In the coming weeks, the China-EU Summit and Forum celebrating the 50th anniversary of diplomatic relations will be held in Beijing. We hold dialogues every year in Brussels or Beijing, using this opportunity to deepen the discussion of topics and further celebrate the friendly relations between China and European countries.
Certainly, there are some tense issues in China-EU relations at present, and these tensions mainly stem from the trade deficit. Europe has a large trade deficit with China, as the goods exported from China to Europe far exceed those exported from Europe to China, making it difficult for Europe to accept. They hope to further open up the market to allow European companies to better enter the Chinese market. For reasons of national security and other considerations, Europe hopes to achieve this market opening and development.
In the coming years, although European companies complain continuously, as long as the profits in the Chinese market continue to grow, they are willing to gradually accept this reality. However, the profits in the Chinese market have not only failed to grow, but have actually declined. At the same time, many Chinese companies have begun to independently develop products, reducing their reliance on European market products.
After similar situations occurred in the past, the demand for Chinese products in the European market decreased significantly, leading to weak consumption. Consumers became more cautious when purchasing, preferring savings over consumption. Taking Mercedes-Benz and BMW as examples, sales have dropped significantly in recent years, reflecting the situation where companies try to reduce employment to cope with various challenges and tensions.
We always need financial support. The weak consumer demand in China has raised deep concerns among the government and trading partners. We hope that residents will increase consumption and improve the productivity and efficiency of the economy.
For European importers, weak consumer demand brings many challenges, such as trade deficits and difficulty in ensuring profits. If domestic sales are insufficient, Chinese enterprises must develop overseas markets. Taking new energy vehicles as an example, there are about 120 brands in the market, obviously not all brands can sell in China, so they need to export and expand overseas markets. Whether in the United States or Europe, overcapacity often occurs.
Furthermore, the United States has increased tariffs to prevent Chinese new energy vehicles from entering its market, intending to keep them out and seek other markets.
Chinese new energy vehicle companies have achieved significant achievements in the European market. Europe, as a wealthy and unified large market, is of great strategic importance for Chinese new energy vehicle companies to enter the European market, and it also helps promote trade cooperation between China and Europe. Currently, the dialogue of the China-EU Forum is ongoing, and cooperation and exchanges in the field of new energy vehicles are constantly deepening. Of course, European countries hope to maintain their competitiveness in the new energy vehicle market, hoping to reduce their dependence on imported vehicles from China and also promote the production and export of local new energy vehicles to expand their market share.
Overall, the automotive industry, whether traditional fuel vehicles or new energy electric vehicles, is of great significance to the European economy. Currently, the European Commission points out that many European consumers find the price of electric vehicles difficult to afford. Therefore, the European side is negotiating with the Chinese side to seek a joint solution to the sales issues of electric vehicles. This topic is of great concern to both sides.
Chinese New Energy Vehicle Companies Participating in the 2024 Paris Motor Show
Other important issues in other industries are also being faced. For example, the export of medical equipment and its market access in the other country are of great importance to both sides.
Another key area is rare earth resources. As is well known, rare earths have a wide range of uses, and China is almost in a monopolistic position in this field, which is also the reason why China has been continuously increasing investment in rare earths for many years. Currently, Europe is highly dependent on Chinese rare earth supplies in multiple fields such as military equipment, magnetic materials, weapons manufacturing, and electric vehicles. Therefore, Europe hopes to maintain smooth trade with China, striving to not impose restrictions on the export of rare earths. Additionally, regarding chip technology and artificial intelligence technology, both sides expect further openness and cooperation.
All such negotiations are extremely difficult, because both sides consider the relevant resources, products, and industries crucial to their respective economies, related to the lifeline of the country and the well-being of the people, and even affect the basic living standards. At present, countries, the EU, and China are still continuing consultations.
The China-EU Economic Summit scheduled for July 24 is less than three weeks away, and we look forward to reaching a certain degree of consensus. However, achieving a comprehensive agreement is difficult, and holding a meeting does not guarantee that all problems will be clarified immediately, and the implementation of the resolutions will not be completed in a short period of time. Despite this, I am still looking forward to this summit.
Currently, there are many discussions about the "new international order," but it is not easy to define this concept. What is meant by a new international order, is it a multi-polar system dominated by five to ten major powers, or a system with only two or three superpowers? There is no consensus on this.
China generally believes that the United States is not in a continuous upward phase, but is in relative decline, and may no longer be the sole global superpower in the future. At the same time, the West points out that China faces many challenges, such as economic and demographic structure, and the rapid economic growth has entered a plateau. As to who is right, I cannot say. However, it is certain that in the foreseeable future of ten to twenty years, China and the United States will still play key roles in global affairs, and they are interdependent. This pattern, even within fifty years, is expected not to change fundamentally.
Future, the world may still have three to four important superpowers, such as China, the United States, and Russia. Although Russia, due to war and military issues, its strength may not be as strong as before, but its emerging high-tech industry is developing, so from an overall perspective, Russia is still an important superpower that cannot be ignored in the future.
Next, let's talk about the EU. Although from a military perspective, the EU is not particularly strong, as a unified and powerful trade market globally, its influence cannot be ignored. The EU consists of 27 member states, and when the member states speak together, they have significant international influence. Although some member states, such as Hungary, have internal differences and challenges, overall, the EU is still a major economic power globally.
I believe that the three parties of China, the United States, and the EU will still maintain the basis and tone of cooperation in the future, and each country will focus on solving its own domestic issues. The key is that all parties can make substantive concessions. From the European perspective, there is a common impression of China: although China makes commitments, there are still high trade deficits, insufficient market openness, and difficulties in product entry in actual trade. This impression is not based on the remarks of a leader, but on long-term economic and trade experiences. European companies and officials feel this disappointment when communicating with officials from China and the United States.
In the trade process, especially in areas involving industrial control and subsidies, there are major difficulties between the two sides, which are not positive signals for future cooperation. We should face and improve these issues. The relationships between the EU and the United States, and between the EU and China, require responsibility from all parties, rather than unilateral compromise.
I am not entirely optimistic, but I look forward to seeing the direction of trade relations among all parties at the upcoming summit. Overall, although the road ahead is full of challenges, we must do our utmost to avoid further global division and promote world unity and cooperation, moving forward together.
Thank you all!
Q&A Session
Q1: Your speech hardly mentioned the role of Russia, but it is well known that Russia is a very important factor in Sino-European relations. Whether China supports Russia has been widely concerned, and China also hopes to maintain good relations with Europe. How does Europe view this issue? How should we deal with the challenges to Sino-European relations caused by this?
Klaus Larres: I think this is a good question. You are right, I did not discuss Russia in detail, because this topic is sensitive. In fact, Russia is an important factor influencing Sino-European relations, more importantly, China's support for Russia. We are not sure about the extent of China's actual support for Russia, but politically, this support is very strong.
China needs Russia as a geopolitical partner or ally, and similarly, Russia cannot do without China. President Trump tried to improve relations with Putin, but took a tough stance against China, I think these two things are actually contradictory. Putin's attitude towards China and towards Trump is completely different, he wants to handle relations with both China and the United States. If the Sino-Russian relationship is not as close as it is now, it would certainly be beneficial for the development of Sino-European relations.
Q2: Thank you very much, Professor Larres. I am a student from the University of Washington. My question is, in Sino-American cultural exchanges, many Chinese students want to study in the United States, and many have exchange experiences. However, in the United States, for example, at Johns Hopkins University, George Washington University, etc., many American students are reluctant to study or travel to China. How do you view bilateral student exchanges and mutual understanding? How can we promote more American students to understand China?
Klaus Larres: Thank you! Your question is meaningful, and I also agree with your point of view. Indeed, many American students are not willing to come to China, mainly because some politicians have made negative statements, describing China as a "very dangerous country," making tourists feel unsafe to come to China. These statements are shocking, and we should not support them. We need to strengthen cultural exchanges, especially in student exchanges, encouraging more American scholars and students to come to China for study, internships, or short-term work projects. I believe that such exchanges can help enhance mutual understanding and friendship between the two peoples.
Speaking of personal experience, when we interact with people from different countries or cities, we often have different views and attitudes. When hearing some politicians make negative statements, I sometimes can understand their thoughts. If more people learn Chinese, I believe this will help promote better cultural exchanges.
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Q3: Good afternoon, Professor Larres. I'm Victor Jia, from CMA Information Center. Your speech and your conversation with Professor Liu have inspired me a lot. The complexity of governance issues, especially under the Trump administration and the governments of various European countries, is evident. I would like to ask, does the EU have concerns about its current governance system? Do they have the willingness to re-design or restructure the governance system to better address the current confusion and challenges? Furthermore, how should other countries respond to the rapidly changing world?
Klaus Larres: I have two responses to this. First, looking at the history of the EU, after World War II, we established the European Union, an integrated economic system, with the initial purpose of preventing conflicts between Germany and France, traditional enemies with a long history of war, from occurring again, and avoiding a third world war. The core of the EU is to build friendship among European countries, allowing traditional enemies like Germany and France to recognize that unity is the prerequisite for optimal economic development. Their understanding of the EU began with building friendship. During the process, problems were identified, cooperation mechanisms were established, and meetings or committees were used to resolve them, with other countries like Italy joining later.
The original establishment of the EU was mainly due to the contradictions between Germany and France. This is still important today. Although the EU is now very successful, it is hard to imagine the brutal situation of Germany invading France a hundred years ago. Now, such wars in Europe have become unimaginable. It was precisely to avoid the repetition of history that the EU was created, becoming the most successful single market in the world.
In this single market, all member states are regarded as a whole in global trade. For example, a Belgian company can easily sell computers to Spain, Germany, or Poland without additional certification or approval, and can sell them anywhere in the EU. This is crucial for economic trade, otherwise companies would need to obtain certification from 27 member states separately, which is a complicated and costly process.
Our current single market has greatly reduced transaction costs and promoted trade development. The unification of the EU currency once rapidly drove economic development. However, within the EU, there are many competing institutions and countries, involving national governments, making the overall structure very complex. It is understandable that it is difficult for 27 countries to cooperate harmoniously. Similarly, even with central government coordination, Chinese provinces find it difficult to achieve seamless collaboration, because the system itself is very complex.
I think the EU is essentially a very complex institution. Its economic achievements in the past cannot be ignored, and it has achieved significant development. Looking globally, including China, all countries face challenges in governance.
Regarding foreign policy, it is currently mainly led by major countries such as Germany, France, and Poland, not truly a unified EU foreign policy. Each member state has veto power. These major countries encounter resistance when promoting their own foreign policies, which has been the case for many years. I think they will also seek ways to improve in the future.
As for the future, whether the member states of the EU have the authority to cooperate and trade with countries outside the EU as a whole is still a problem to be solved. For example, if the German Chancellor wants to directly negotiate with the President of the United States, according to the current regulations, he must obtain the consent of the President of the European Commission, Ursula von der Leyen, and the European Commission. Therefore, the German Chancellor cannot decide on the policy towards the United States or cooperation with China alone, because the complex EU mechanism imposes limitations. After all, the 27 member states of the EU collectively form the world's largest single market, and their overall strength is still very strong.
I think everyone knows that the EU is currently facing many complex issues, but from a historical perspective, they have generally been successful, especially in Europe. Although Russia's recent war against Ukraine is not included, the 27 EU countries have achieved relatively peaceful development, and Europe has become one of the strongest economies in the world. Regarding international trade, besides the United States and China, the EU is also significant. No country can match the EU, especially from the 1950s to the 1970s and 80s, the EU's economic boom was particularly notable.
On July 10, the European Parliament rejected a vote of no confidence against the President of the European Commission, Ursula von der Leyen. The day before, on the 9th, Hungary's Prime Minister Orbán shared a picture of von der Leyen on "X", saying "It's time to leave."
Q4: Welcome to China, I am a reporter from the People's Daily. My question is about Sino-European trade and economic relations. You mentioned the trade deficit between China and the EU, and I would like to add the issue of investment deficit. I am from Shenyang, where there are many large BMW factories, and the local government also strongly supports the development of these enterprises. However, Chinese enterprises face many difficulties when investing in Europe. What do you think we should do to solve these problems? There is mistrust of Chinese enterprises and investments in Europe, how should we eliminate these misunderstandings?
The second question is about the relationship between China and Hungary. In fact, the two countries have always maintained good relations, but currently, Hungary is in a marginal position within the EU. What do you think China should do to further promote relations with the EU?
Klaus Larres: I think, from a business perspective, the only thing that can make everyone feel safe is money. The Chinese regulations are somewhat vague, which increases the sense of insecurity among Europeans, making it difficult for them to determine which actions may violate the rules. Although China has introduced many policy statements, the complex bureaucratic wording can easily lead to misunderstandings, making European companies worry about breaking the law. Therefore, the primary task is to eliminate the misunderstanding of European insecurity towards China.
From the perspective of investment, investing in emerging industries usually means a broad market space and great profit potential. However, some countries worry that foreign enterprises being too strong may affect the interests of domestic enterprises, so they take protective measures, making Europe seem uncertain in the eyes of Chinese investors. At the same time, other countries have more attractive policies, regulatory frameworks, incentives, and tax benefits, making them more competitive as investment destinations, so investors tend to choose these countries with better policy environments.
We are not particularly concerned about the economic ties between China and Hungary, we are more interested in the democratic connections between China and Europe, and the future cooperation model between China and Europe. From a democratic perspective, there are still some misunderstandings between China and the Western world. You mentioned that other European countries also believe that Hungary has problems in democracy and holds considerable doubts about it. Therefore, Hungary's trade relations, its stance on the Ukraine issue, and its political status within the EU all face challenges, which will affect its position within the EU.
Q5: Thank you very much, Professor. I am a student majoring in International Relations. In your speech, you mentioned that European countries aim to enhance trade security through supply chain diversification, which made me think of military security. After World War II, European countries allied with the United States, but there were still frictions during the alliance process. Please tell me, from the perspective of Europe, especially Germany, what are the key factors in maintaining the transatlantic military alliance relationship? Will Europe still tend to rely on the transatlantic partnership for its own security in the future? Also, how does Europe view its future relationship with Russia?
Klaus Larres: I think Russia is not a necessary partner for Europe to achieve sustained healthy development, because it is still aggressive overall. In fact, the security relationship between France, Germany, and the United States has always been complex. After World War II, the economies of the United States and Germany gradually recovered, especially during the unification of Germany in the 1990s, Germany accumulated many experiences of cooperation with the United States, thus tending to reach agreements with the United States. France, on the other hand, believes that Europe should not be dominated by external countries. At the same time, the United States hopes to have a voice in Europe, viewing Europe as its protected object. This leads to two attitudes within the EU: pro-American and anti-American. France, on the other hand, hopes to achieve European strategic autonomy, aiming to ensure Europe's security independently of the United States.
Sometimes, when Trump makes some absurd moves, France emphasizes, "You see, I was right, Europe should achieve strategic autonomy and should not continue to listen to the United States." While Germany is relatively pro-American, believing that Europe needs its own backup plan to ensure security, but completely opposing the United States would lose protection. Therefore, Europe needs to enhance its own strength while also needing the protection of the United States.
Overall, the current situation is complex. In recent years, the military power of the United States is still far superior to other countries, and China may be second, but there is still a significant gap compared to the United States.
How do Europeans view the gap between China and the United States? Europeans generally believe that there is a noticeable gap between China and the United States. Although China is investing a lot of resources to catch up, it is clear that China cannot achieve this goal in the short term. Therefore, Europe tends to continue relying on the protection of the United States in the near future, otherwise its security would be difficult to ensure, and there is no other country to rely on. In the current situation, Europe still hopes to receive support and protection from the United States.
We see that the nuclear weapons of the UK and France are minimal compared to the United States, unable to resist the military power of the United States. If the United States decides to cut off the protection for Europe, the intelligence and satellite information provided to Europe will be significantly reduced, and Europe would not be able to bear such consequences. This is also one of the reasons why the EU countries have different attitudes towards the United States.
The EU needs to continue cooperating with the United States, because they depend on the United States. They also need to achieve more independence, but this requires a long time and may cost a lot. As is well known, Europeans are not particularly focused on investing in the military, possibly paying more attention to health systems, social security, welfare systems, infrastructure, pensions, and education.
Host Wu Qichong: Thank you very much for your excellent answers to the audience's questions. It is already 14:50 now, and our lecture is about to end. I sincerely thank Professor Klaus Larres for participating in the Renmin University of China's Chongyang Institute for Financial Studies lecture series, and also thank all the participants!
Klaus Larres: This is indeed a very serious Chinese rule. Thank you very much!
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