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EU business is gradually waking up from its summer slumber this week. As usual, the foreign ministers will kick things off, with Annalena Baerbock and her colleagues meeting for an informal Council in Brussels on Thursday. As is well known, Foreign Affairs Commissioner Josep Borrell had postponed the Gymnich meeting, which was originally planned for Budapest, out of anger at Viktor Orbán’s high-handed “peace mission”. On Friday, it will be the turn of the defense ministers, with Boris Pistorius being represented by his Parliamentary State Secretary Thomas Hitschler.
Meanwhile, Ursula von der Leyen continues to work on her new Commission. This week, she wants to meet the first candidates from the member states for interviews, with the personnel tableau to be finalized in mid-September. So far, the national governments have largely ignored the Commission President’s request to put forward one male and one female name – and so there is a clear surplus of men.
The head of the SPD MEPs, René Repasi, criticizes this as “disrespectful” and threatens to make life difficult for weaker Commissioner candidates in the hearings in Parliament. However, the European Parliament itself does not have a clean slate when it comes to gender equality.
Von der Leyen does not want to give in so easily: If women are already underrepresented in the new Commission in terms of numbers, then particularly influential areas of responsibility should go to female commissioners. You can read more about this in this issue.
I wish you a good start to the new week!
China is the only country that has introduced specific tech export controls. How does it enforce these controls?
In fact, it is the only country we could find that not only controls dual-use goods, but also explicitly maintains a list of controlled technologies. Beijing has significantly expanded its existing instruments, such as investment screening. This gives it a much more detailed overview of technology flows than European governments have.
Why can this become a problem?
These measures are particularly relevant for us regarding Chinese investments in electric car factories, for instance. The Chinese government carefully decides which of its companies build factories for which products and where in Europe.
That is a considerable asymmetry. The Europeans invested in China for decades and handed over their technologies without governments knowing what was going on.
Indeed, in most cases, Europe lacks detailed recording and monitoring of technology transfers. Although international agreements such as the Wassenaar Arrangement for dual-use technologies exist, many products lack comprehensive data on when they were transferred and in what quantities. Even within Europe, cooperation and the exchange of information between countries such as Germany and France is still fragmented.
Recently, the idea was raised in Germany that the EU could establish a solar industry in partnership with China. However, your research shows that this would not be in China’s interest.
The Chinese government has been discussing including solar technologies in its control list since late 2022. However, this technology was not included as Chinese solar manufacturers expressed concerns. They feared that export restrictions could lead to a loss of market share in Southeast Asia and that European countries would try to organize their supply chains independently of China.
Where could China exert pressure on the EU in the future?
Industrial raw materials such as gallium and germanium are already subject to Chinese export controls. But it is also about things like the license for using the technology to manufacture wind turbine magnets. Or algorithms, such as TikTok’s. All of these fall under China’s tech export controls. Drones and materials for bulletproof vests are also affected by export controls, many of which are manufactured by German SMEs.
What scenario do you foresee in the event of a conflict?
China could simply stop supplying certain materials. In addition, Chinese companies could no longer set up production facilities for technologies such as wind turbines in Germany.
Given China’s use of technology in trade disputes, what should Europe do now?
The first step is to gather information on China’s progress in various technologies and on Europe’s own activities and capabilities. It is important to do this at a European level in order to get a complete picture. Moreover, we need more technology and industry experts in the ministries, as there are currently mostly only lawyers or long-standing bureaucrats. New expertise needs to be built up in the technology field.
Brussels is currently particularly upset about China’s policy of sharing militarily relevant goods with Russia without officially supplying weapons or even dual-use goods to its allied neighbor. How does this balancing act work?
China knows exactly which controls it can officially enforce without hindering its own companies or harming Russia, while still looking good internationally. The implementation of these controls is often designed in such a way that they do not affect Chinese companies. Moreover, if Europe sanctions one company, the next often simply steps in. This company can then continue to do business until it, in turn, is sanctioned by the EU. Moreover, Chinese export controls, for example, for drones, were designed to ensure that commercial Chinese drones were not affected. However, these have significant uses on the battlefield.
How is Europe responding to these challenges?
So far, Europe has been too passive and has tried to discuss with China instead of consistently imposing sanctions that would prohibit European companies from trading with Chinese companies on the sanctions list.
Is the core problem the fact that China, a systemic rival, produces so much important technology at such a high level?
The problem is not so much the quality of the technology as the fact that Chinese production is cheaper. For a long time, the doctrine was that cheaper is better, without recognizing how strategically China has built up this market power. China’s government and companies are prepared to accept short-term financial disadvantages in favor of building up long-term dependencies and reshaping the trade chains around China in its interests.
Consequently, is it worth producing goods at higher prices in Europe to become more crisis-resilient?
It is important to strategically analyze which products to keep in stock, even if this means higher costs. In some cases, tariffs can be useful to prevent Chinese products from undercutting prices. However, it would be counterproductive if Europe, the USA, Japan and South Korea all produced the same products at a higher price than in China, thereby creating overcapacity. Instead, Western countries should coordinate their production and utilize existing advantages, such as Europe’s position in the production of power semiconductors.
Are subsidies a practical means of achieving better technological security?
It is also possible to subsidize industries temporarily to make them competitive in the long term, as China has done with electric cars. However, subsidizing every industry is not realistic. That is why it must be decided which industries are important enough to justify subsidies. This could be the chip industry, for example, whose products are essential for many other sectors, or 5G, where Germany and Europe need their own providers for the sake of technological security. We are already subsidizing agriculture because food is essential.
Who in Europe should decide which economic sectors are important enough for financial support?
Only politics can set these priorities and decide how much this may cost.
Antonia Hmaidi is a Senior Analyst at the Berlin-based think tank Merics, the Mercator Institute for China Studies. This interview follows the publication of a new report that Hmaidi co-authored with Rebecca Arcesati and François Chimits: “Keeping value chains at home – How China controls foreign access to technology and what it means for Europe.”
Ukraine is not only a theater of war and a frontline state against an imperial Russia, but also one of the most resource-rich countries in Europe. The country’s known but as yet little-explored raw material potential includes numerous mineral and metallic raw materials that the EU has classified as critical and strategic.
If Ukraine’s metal ore deposits could be successfully developed, four strategic goals could be achieved that are in the common interest of Ukraine and the EU. Firstly, the income from the extraction of raw materials could improve Ukraine’s precarious financial situation and make a sustainable contribution to the country’s reconstruction.
Secondly, a whole range of metal raw materials form the basis for modern weapons systems that the Ukrainian army uses successfully in the fight against Russia and which have now become indispensable, such as drones, ammunition and tank alloys. By developing a Ukrainian arms industry that uses its own raw materials, the country could be enabled to produce some of the required armaments itself in the future.
Thirdly, Ukraine is a suitable partner for reducing the EU’s high import dependencies, particularly on China. And fourthly, increased cooperation in the raw materials sector can accelerate Ukraine’s gradual integration into the European single market.
Even in Soviet times, Ukraine was a core region for raw materials and heavy industry. Iron ore and hard coal were the most important natural resources for a long time. But the country has much more to offer: The country has significant deposits of what the EU considers to be strategic raw materials, particularly various titanium compounds, manganese, magnesium metal and natural graphite. Titanium and manganese are essential in vehicle construction and aerospace technology.
Furthermore, the raw materials lithium, rare earths, cobalt, chromium and other industrial raw materials that are essential for the green energy transition are being explored. The known raw material deposits are located both in the comparatively safe western Ukraine and in the occupied and contested east. Further exploration is necessary in order to map and evaluate the entire raw material potential more precisely.
To ensure that Ukraine benefits from its natural resources as comprehensively and sustainably as possible and that they do not fall under Russian control, it is critical to success that EU member states and European companies pool investments and establish supply chains even in times of war. This can only succeed if politics and business work together to make a long-term commitment. As the EU has already signed a Memorandum of Understanding for a strategic raw materials partnership with Ukraine in 2021, existing political agreements and goals (EU Critical Raw Materials Act) can be built on.
The practical fields of cooperation include, for example, increased cooperation between the geological services of the member states and the Ukrainian Geological Survey. The key areas are the potential further processing of Ukrainian raw materials into intermediate and end products in smelting and smelting plants, i.e. from refining to armaments. This requires political and financial support from European donors, either through German Hermes cover, company-based direct investment (as recently provided by Rheinmetall) or through the classification of promising raw materials projects as IPCEI (Important Projects of Common European Interest).
Despite the enormous risks and problems in the country (rocket fire, power supply, corruption), it is strategically advisable not to wait until after the war, but to initiate substantial support measures now. After all, the potential extraction of raw materials and the development of Ukraine as a European armaments factory go hand in hand. These joint objectives can have a positive developmental impact on both war-torn Ukraine and the EU, which is dependent on raw materials.
The authors are members of the Young Foreign Policy Working Group of the Konrad Adenauer Foundation. Jakob Kullik is a research associate at the Chair of International Politics at Chemnitz University of Technology. Juliana Süß is a Research Fellow for Space Security at the Royal United Services Institute (RUSI). Yilmaz Akkoyun is an advisor at the German Federal Ministry for Economic Cooperation and Development (BMZ).
EU business is gradually waking up from its summer slumber this week. As usual, the foreign ministers will kick things off, with Annalena Baerbock and her colleagues meeting for an informal Council in Brussels on Thursday. As is well known, Foreign Affairs Commissioner Josep Borrell had postponed the Gymnich meeting, which was originally planned for Budapest, out of anger at Viktor Orbán’s high-handed “peace mission”. On Friday, it will be the turn of the defense ministers, with Boris Pistorius being represented by his Parliamentary State Secretary Thomas Hitschler.
Meanwhile, Ursula von der Leyen continues to work on her new Commission. This week, she wants to meet the first candidates from the member states for interviews, with the personnel tableau to be finalized in mid-September. So far, the national governments have largely ignored the Commission President’s request to put forward one male and one female name – and so there is a clear surplus of men.
The head of the SPD MEPs, René Repasi, criticizes this as “disrespectful” and threatens to make life difficult for weaker Commissioner candidates in the hearings in Parliament. However, the European Parliament itself does not have a clean slate when it comes to gender equality.
Von der Leyen does not want to give in so easily: If women are already underrepresented in the new Commission in terms of numbers, then particularly influential areas of responsibility should go to female commissioners. You can read more about this in this issue.
I wish you a good start to the new week!
China is the only country that has introduced specific tech export controls. How does it enforce these controls?
In fact, it is the only country we could find that not only controls dual-use goods, but also explicitly maintains a list of controlled technologies. Beijing has significantly expanded its existing instruments, such as investment screening. This gives it a much more detailed overview of technology flows than European governments have.
Why can this become a problem?
These measures are particularly relevant for us regarding Chinese investments in electric car factories, for instance. The Chinese government carefully decides which of its companies build factories for which products and where in Europe.
That is a considerable asymmetry. The Europeans invested in China for decades and handed over their technologies without governments knowing what was going on.
Indeed, in most cases, Europe lacks detailed recording and monitoring of technology transfers. Although international agreements such as the Wassenaar Arrangement for dual-use technologies exist, many products lack comprehensive data on when they were transferred and in what quantities. Even within Europe, cooperation and the exchange of information between countries such as Germany and France is still fragmented.
Recently, the idea was raised in Germany that the EU could establish a solar industry in partnership with China. However, your research shows that this would not be in China’s interest.
The Chinese government has been discussing including solar technologies in its control list since late 2022. However, this technology was not included as Chinese solar manufacturers expressed concerns. They feared that export restrictions could lead to a loss of market share in Southeast Asia and that European countries would try to organize their supply chains independently of China.
Where could China exert pressure on the EU in the future?
Industrial raw materials such as gallium and germanium are already subject to Chinese export controls. But it is also about things like the license for using the technology to manufacture wind turbine magnets. Or algorithms, such as TikTok’s. All of these fall under China’s tech export controls. Drones and materials for bulletproof vests are also affected by export controls, many of which are manufactured by German SMEs.
What scenario do you foresee in the event of a conflict?
China could simply stop supplying certain materials. In addition, Chinese companies could no longer set up production facilities for technologies such as wind turbines in Germany.
Given China’s use of technology in trade disputes, what should Europe do now?
The first step is to gather information on China’s progress in various technologies and on Europe’s own activities and capabilities. It is important to do this at a European level in order to get a complete picture. Moreover, we need more technology and industry experts in the ministries, as there are currently mostly only lawyers or long-standing bureaucrats. New expertise needs to be built up in the technology field.
Brussels is currently particularly upset about China’s policy of sharing militarily relevant goods with Russia without officially supplying weapons or even dual-use goods to its allied neighbor. How does this balancing act work?
China knows exactly which controls it can officially enforce without hindering its own companies or harming Russia, while still looking good internationally. The implementation of these controls is often designed in such a way that they do not affect Chinese companies. Moreover, if Europe sanctions one company, the next often simply steps in. This company can then continue to do business until it, in turn, is sanctioned by the EU. Moreover, Chinese export controls, for example, for drones, were designed to ensure that commercial Chinese drones were not affected. However, these have significant uses on the battlefield.
How is Europe responding to these challenges?
So far, Europe has been too passive and has tried to discuss with China instead of consistently imposing sanctions that would prohibit European companies from trading with Chinese companies on the sanctions list.
Is the core problem the fact that China, a systemic rival, produces so much important technology at such a high level?
The problem is not so much the quality of the technology as the fact that Chinese production is cheaper. For a long time, the doctrine was that cheaper is better, without recognizing how strategically China has built up this market power. China’s government and companies are prepared to accept short-term financial disadvantages in favor of building up long-term dependencies and reshaping the trade chains around China in its interests.
Consequently, is it worth producing goods at higher prices in Europe to become more crisis-resilient?
It is important to strategically analyze which products to keep in stock, even if this means higher costs. In some cases, tariffs can be useful to prevent Chinese products from undercutting prices. However, it would be counterproductive if Europe, the USA, Japan and South Korea all produced the same products at a higher price than in China, thereby creating overcapacity. Instead, Western countries should coordinate their production and utilize existing advantages, such as Europe’s position in the production of power semiconductors.
Are subsidies a practical means of achieving better technological security?
It is also possible to subsidize industries temporarily to make them competitive in the long term, as China has done with electric cars. However, subsidizing every industry is not realistic. That is why it must be decided which industries are important enough to justify subsidies. This could be the chip industry, for example, whose products are essential for many other sectors, or 5G, where Germany and Europe need their own providers for the sake of technological security. We are already subsidizing agriculture because food is essential.
Who in Europe should decide which economic sectors are important enough for financial support?
Only politics can set these priorities and decide how much this may cost.
Antonia Hmaidi is a Senior Analyst at the Berlin-based think tank Merics, the Mercator Institute for China Studies. This interview follows the publication of a new report that Hmaidi co-authored with Rebecca Arcesati and François Chimits: “Keeping value chains at home – How China controls foreign access to technology and what it means for Europe.”
Ukraine is not only a theater of war and a frontline state against an imperial Russia, but also one of the most resource-rich countries in Europe. The country’s known but as yet little-explored raw material potential includes numerous mineral and metallic raw materials that the EU has classified as critical and strategic.
If Ukraine’s metal ore deposits could be successfully developed, four strategic goals could be achieved that are in the common interest of Ukraine and the EU. Firstly, the income from the extraction of raw materials could improve Ukraine’s precarious financial situation and make a sustainable contribution to the country’s reconstruction.
Secondly, a whole range of metal raw materials form the basis for modern weapons systems that the Ukrainian army uses successfully in the fight against Russia and which have now become indispensable, such as drones, ammunition and tank alloys. By developing a Ukrainian arms industry that uses its own raw materials, the country could be enabled to produce some of the required armaments itself in the future.
Thirdly, Ukraine is a suitable partner for reducing the EU’s high import dependencies, particularly on China. And fourthly, increased cooperation in the raw materials sector can accelerate Ukraine’s gradual integration into the European single market.
Even in Soviet times, Ukraine was a core region for raw materials and heavy industry. Iron ore and hard coal were the most important natural resources for a long time. But the country has much more to offer: The country has significant deposits of what the EU considers to be strategic raw materials, particularly various titanium compounds, manganese, magnesium metal and natural graphite. Titanium and manganese are essential in vehicle construction and aerospace technology.
Furthermore, the raw materials lithium, rare earths, cobalt, chromium and other industrial raw materials that are essential for the green energy transition are being explored. The known raw material deposits are located both in the comparatively safe western Ukraine and in the occupied and contested east. Further exploration is necessary in order to map and evaluate the entire raw material potential more precisely.
To ensure that Ukraine benefits from its natural resources as comprehensively and sustainably as possible and that they do not fall under Russian control, it is critical to success that EU member states and European companies pool investments and establish supply chains even in times of war. This can only succeed if politics and business work together to make a long-term commitment. As the EU has already signed a Memorandum of Understanding for a strategic raw materials partnership with Ukraine in 2021, existing political agreements and goals (EU Critical Raw Materials Act) can be built on.
The practical fields of cooperation include, for example, increased cooperation between the geological services of the member states and the Ukrainian Geological Survey. The key areas are the potential further processing of Ukrainian raw materials into intermediate and end products in smelting and smelting plants, i.e. from refining to armaments. This requires political and financial support from European donors, either through German Hermes cover, company-based direct investment (as recently provided by Rheinmetall) or through the classification of promising raw materials projects as IPCEI (Important Projects of Common European Interest).
Despite the enormous risks and problems in the country (rocket fire, power supply, corruption), it is strategically advisable not to wait until after the war, but to initiate substantial support measures now. After all, the potential extraction of raw materials and the development of Ukraine as a European armaments factory go hand in hand. These joint objectives can have a positive developmental impact on both war-torn Ukraine and the EU, which is dependent on raw materials.
The authors are members of the Young Foreign Policy Working Group of the Konrad Adenauer Foundation. Jakob Kullik is a research associate at the Chair of International Politics at Chemnitz University of Technology. Juliana Süß is a Research Fellow for Space Security at the Royal United Services Institute (RUSI). Yilmaz Akkoyun is an advisor at the German Federal Ministry for Economic Cooperation and Development (BMZ).