EU Lagging Behind US on Taiwan Invasion Debate, China Chip Controls, Congress Hears

The European Union needs to better coordinate with its member states on potential export controls against China’s chip industry, said Noah Barkin, a Europe-China relations expert with the Rhodium Group. Barkin, speaking during a Senate Foreign Relations subcommittee hearing this week, said the EU is still grappling with how to best impose dual-use export controls and isn’t yet at a place where it can match U.S. restrictions.

The U.S. in October released a sweeping set of export controls targeted at China’s chip industry (see 2210070049), and although the Biden administration earlier this year convinced the Netherlands (see 2303090032) -- along with Japan (see 2303310031) -- to increase some of its chip restrictions against China, Barkin said the rest of the EU remains far behind. “I don't think anyone in Europe, whether it's a European member state or the European Commission, could have come up with a document like that,” he said of the October controls.

Barkin added that the EU is only “at the beginning of a debate about exports of dual-use” goods and about China’s civil-military fusion practices, saying there is some “resistance” from European capitals about introducing strict controls. “We still have some work to do in Europe in getting our heads around where to draw the line, where the red lines are in the technology relationship with China,” Barkin said. “I think this is all going to play out in the coming months in the EU debate.”

Part of the problem stems from the fact that the EU isn’t a “single entity,” Barkin said, and export control policies are “in the hands of the member states.” Although the Netherlands is hoping to convince other member states to join in on the export restrictions -- and Barkin said Berlin is “thinking about” new controls -- the bloc isn’t close to consensus.

“What Europe really needs is more coordination between its member states, developing a common policy, being able to sit down with Washington and discuss these issues,” he said. He added that the EU needs to better “invest in the resources” to pinpoint what types of technologies are most sensitive “so they can sit down and talk at eye level with the United States on these issues.”

Sen. Chris Van Hollen, D-Md., said the export control agreement the Biden administration secured with Japan and the Netherlands is a “good model,” but “it only works, though, if we can ultimately expand that cooperation to all the other countries that can supply this kind of advanced material.”

That process is proving difficult partly because of efforts by China to push back against new controls, said Andrew Small, a U.S.- and Europe-China relations expert with the German Marshall Fund. “China is exceptionally focused on trying to maintain European openness to the Chinese access to advanced technologies,” he said, adding that EU chips have become “even more important to” Beijing because of the U.S restrictions.

Several witnesses during the hearing also said the EU lags behind the U.S. in its approach to a potential Chinese invasion of Taiwan. U.S. lawmakers have called on the administration to form a plan with the EU and other allies to impose sanctions on Beijing if it invades the island (see 2303300024 and 2212090028), and trade lawyers have warned such a scenario would lead to a sanctions “Armageddon” (see 2305030052). But Janka Oertel, Asia program director at the European Council on Foreign Relations, said the EU hasn’t yet decided that it would impose broad sanctions against Beijing for an invasion.

“They have started to make that case,” Oertel said of EU leaders, “but I think this is a long process, because this is really not an immediate security threat that has been on the agenda of policymakers for a long time.” She said member states are now having “very substantive conversations” about a potential sanctions response, but some countries are concerned any new trade restrictions could significantly impact their respective economies, particularly because of Europe’s reliance on Chinese trade routes and supply chains.

She cited polling data from her think tank, which recently surveyed 11 EU member states and found 62% are in favor of a “neutral stance” toward a Chinese invasion of Taiwan. “European policymakers know that this is not an option and need to communicate this much clearer to their domestic audiences,” Oertel said.

That work has begun, and it’s “moving pretty fast for EU speed, which is not always the fastest,” she said. “The next year is going to be a year of intense discussions around this issue.”

Barkin agreed, saying European discussions about new China sanctions are “at a fairly early stage.” He said there is no “joined-up approach in Europe on Taiwan and possible sanctions,” but warned that the bloc needs to make progress quickly so it isn’t forced to scramble to impose sanctions after a potential invasion.

“Coming up with responses to this in real time is going to be extremely difficult,” Barkin said. “I think the EU is beginning to realize this. I think they're beginning to play through scenarios. But I think it's very important that the EU and the U.S. sit down and talk about this together.”

Part of a potential sanctions response could include outbound investment restrictions. The U.S. has been working on an outbound investment screening tool for months (see 2305310075), and the EU recently said it’s considering a similar mechanism (see 2303310036 and 2304030065), but Oertel said she doesn’t expect to “see an EU-level version happening anytime very soon.”

A more likely scenario, she said, is individual member states deciding to create their own outbound screening measures, similar to the EU’s approach toward foreign direct investment screening. “You could probably see, I would think, more along that direction than a comprehensive EU system,” Oertel said.