How to contain an increasingly assertive China?
Tensions in the South China Sea are on the rise. The United States has just pledged to defend Philippine vessels if they are attacked over there, after Beijing and Manila blamed each other after a China Coast Guard ship fired water cannons at a Philippine boat. The incident may well be deliberately provoked by China to test the commitment of the United States in the region.
A few weeks ago, a record-breaking number of Chinese warships were spotted in waters around Taiwan within a 24 hour period. This was followed by the unexplained firing of China’s foreign minister, Qin Gang, a close ally of Chinese President Xi Xinping. In the same week, Taiwan held major military drills that simulated an invasion of the island, centred around defending vital beaches and airports.
This volatile mix of escalation and uncertainty is breeding a sense of anxiety for China’s regional neighbours who are all in tense dispute with China over its legally baseless claim to the entirety of the South China Sea – and all the vast mineral wealth beneath the waves.
ASEAN – the Association of Southeast Asian Nations – could well play a role here. This is a political and economic union of 10 member states in Southeast Asia. With lingering fears of a Chinese invasion of Taiwan within the next five years, ASEAN nations must build stronger ties between themselves to act as a stable and unified counterweight to China. This would not only help to push back against Chinese aggression in their own waters, but also give support to Taiwan in any eventual outbreak of war. Furthermore, it would alleviate the burden on the United States.
If ASEAN partners do not present a united front on territorial disputes in the South China Sea then the door will be left open for China to isolate certain nations and coerce them into giving in to Chinese demands. Given its rather particular interpretation of international boundaries, it is only a matter of time before China engages in legal warfare to challenge international boundaries, to the extent it has not already.
Malaysia already experienced something along these lines, albeit not coming from China. Last year, a French court ordered it to pay $14.9 billion to the heirs of the last sultan of Sulu, a part of Malaysia whose sovereign enjoyed compensation from the British when they ruled over the area, which is resource-rich. The newly formed Malaysian state simply continued to pay the heirs an annual stipend of $5,300, until in 2013, following an armed incursion from the Philippines by a group claiming to be the heirs. The French court decision to rule in the way it has is highly controversial, to say at least. The arbitrator who issued the award in the case, Gonzalo Stampa, has now even been slapped with criminal charges in Spain over his role.
In sum, even internationally well-accepted boundaries do not seem safe from legal challenges. Looking at how China has been treating Lithuania, after it was deemed too friendly towards Taiwan, Asian countries should not exclude that the increasingly assertive Chinese state tries to turn courts into an extension of its foreign policy domain.
It would be foolish to underestimate the chances of war in Asia breaking out. Decades of smaller scale lopsided conflicts have already blindsided us to the possibility of large-scale devastating conflicts and we can’t allow that to happen again.
One only needs to look at how Russia took advantage of western dithering to launch the largest war this century which has killed thousands and displaced millions across the European continent. The war in Ukraine is predictably capturing the much of the West’s attention given the acute geopolitical headache it poses, but this is allowing China to escalate tensions around Taiwan and the South China Sea under the radar.
A potential war between China and Taiwan is likely to draw in The United States and make Russia’s war against Ukraine look almost trivial in comparison – impoverishing billions and bring ruin to the wider region.
Indonesia has been singled out as one of the ASEAN partners unwilling to fully show solidarity in opposition to China’s territorial stances when it comes to the South China Sea, but it is not the only one. ASEAN trading nations should take notice how even Germany, always wary of conflict and probably the most diplomatically minded of Western nations, has decided to send two warships to the Indo-Pacific in 2024, repeating what it has already done in 2021.
Germany’s purpose is to make clear to China that pursuing good trade ties should not mean allowing just anything. According to German Defence Minister Boris Pistorius, the aim of this move is to demonstrate that Germany is “dedicated to the protection of the rules-based international order that we all signed up to and which we all should benefit from – be it in the Mediterranean, in the Bay of Bengal or in the South China Sea.”
Those ASEAN countries that are still on the fence should take note.
In Brussels, the Eurocrats are increasingly out of control
Earlier last month, it was announced that the European Commission wants to double the budget of the EU for North African countries to no less than 42 billion euros. It thereby also wants to extend the Erasmus programme for student exchanges to that region. One does not need to be a migration expert to understand that this will only exacerbate the current major migration challenges, and that public opinion may not be fully on board with this, to put it mildly. Things are really going from bad to worse with the European Commission, which is led by Ursula von der Leyen. Despite great unease with green policies and migration policies, and some minor adjustments, her EU Commission is trying to continue with business as usual.
In October, von der Leyen survived two votes in the European Parliament to topple her. Notable was how the French centre-right Les Républicains, which are part of the centrist European People’s Party (EPP), supported the motion of Marine Le Pen’s National Rally’s EP group to oust von der Leyen. Also, there is grumbling among the centre-left. German SPD MEP René Repasi even warned von der Leyen that she has six months to deliver on the promises she made to his centre-left group, or it could put forward its own censure motion.
Then, it would be wrong to expect the European Parliament to really show their teeth. One diplomat confided to Politico nobody needs to worry about an overly powerful European Parliament, stating: “I don’t believe in this new Parliament, sorry. (…) They can threaten, but when a leader picks up the phone, they always fall in line.” One example of that is how the socialist group recently went along with von der Leyen’s omnibus bill, a modest exercise in EU regulatory simplification, after Spanish PM Pedro Sanchez intervened.
A Hungarian scandal?
Developments within the European Commission may affect its stability more than whatever happens in the European Parliament. First, there has been Pfizergate, whereby the European Court of Justice ruled that the European Commission violated transparency rules by failing to grant access to text messages between Ursula von der Leyen and the CEO of pharma giant Pfizer.
Secondly, there are now also allegations that the Hungarian government would have deployed intelligence officers to Brussels to gather information on EU institutions and to recruit an EU official. According to a number of media, Hungarian intelligence officers disguised as diplomats would have attempted to infiltrate EU institutions during the period when the current Hungarian European Commissioner, Olivér Várhelyi, served as Hungary’s ambassador to the EU.
Várhelyi has reportedly told President Ursula von der Leyen he was “not aware” of the alleged spying activities. Her spokesperson told media afterwards that “the president is pleased to have sat down with the Commissioner on this issue and the working group will continue its work on the subject.” In other words: von der Leyen is absolutely not keen to escalate this, and also other European governments will prefer not to engage into a direct diplomatic clash, if everything would be proven.
As I have been writing before, if it is serious about fighting cronyism, the EU should cut its EU transfers for all Member States, given how easy it is to otherwise accuse the EU of “double standards”. Stories about cronyism and executive control of the judiciary have been popping up all across other Central and Eastern European countries, like Poland, the Czech Republic, Romania and Bulgaria. Obviously, similar problems have been evident in the old EU member states as well, not to mention Italy. In 2021, Professor Vince Musacchio, a renowned anti-corruption expert from the Rutgers Institute on Anti-Corruption Studies, has warned that between 2015 and 2020, the EU has allocated around €70bn to Italy in structural & investment funds. Half of these funds ended up in the hands of organised crime.”
Then to see EU Commissioner Olivér Várhelyi stepping down would perhaps not be the saddest of outcomes. He is responsible for health policy but has been telling MEPs that “new tobacco and nicotine products pose health risks comparable to traditional ones.” This is simply unscientific to the core and should disqualify him from this position. Channelling his inner nannycrat, Várhelyi has also been pushing for a taxation system on products high in sugar, fat, and salt to help finance public health during a meeting with the European Parliament’s health committee, thereby arguing some of those receipts should go to the EU budget. So much for the idea of “Orban’s man” standing up against Brussels.
American pressure
While internal European Commission trouble or pressure from the European Parliament may not change much, there is still the matter of US President Donald Trump.
So far, he has already forced the EU to abandon its plans for a digital tax, while the US has also obtained concessions regarding the EU’s planned climate tariff, CBAM, prompting countries such as South Africa to demand equal treatment. The new tariff is likely to deal a severe blow to African economies. South Africa’s Presidential Climate Commission estimates that CBAM would reduce African exports to the EU by 30-35% by 2030, representing a value of €1.7 to €2.1 billion.
Despite the trade agreement reached between the EU and the US this summer, Trump has threatened new tariffs on the EU in response to the €2.95 billion fine imposed on Google. He warned: “We cannot let this happen to brilliant and unprecedented American Ingenuity and, if it does, I will be forced to start a Section 301 proceeding to nullify the unfair penalties being charged to these Taxpaying American Companies.”
The Trump administration also continues to challenge the EU’s new digital rules – the Digital Services Act and the Digital Markets Act – which it calls ‘Orwellian’. In doing so, it accuses the EU of censorship. Apparently, the US is even considering sanctions in the form of visa restrictions against EU officials in connection with the DSA.
Equally strong is the Trump administration’s opposition to the EU’s green regulations adopted during Von der Leyen’s first term, the era of the ‘green deal’. It has for example been objecting to the upcoming EU anti-deforestation directive, which was in fact already challenged by the Biden administration. These new EU rules ban the import of goods if producers fail to prove that no forests were felled in their production. In September, the European Commission proposed to delay the implementation of the directive a second time, until 2027 instead of 2026, blaming an IT system issue. Not long after, it once again changed the timing of the delay, adding confusion for everyone.
According to one member state source, the Commission’s concessions may be due to US pressure, and unrelated to the closure of the EU-Indonesia trade deal, as others have alleged. Trading partners like Indonesia and Malaysia are large exporters of palm oil and thereby heavily affected by the new bureaucratic burdens that EUDR would impose. Malaysia considers it unfair that its imports are classified as “standard risk”, as opposed to the US classification of “low risk”, given that deforestation there has improved significantly, with NGOs recognising a reduction of 13 per cent last year. Just as South Africa complaints about US privileges in the context of CBAM, also here, the new two-tier system for trading partners is under fire. In this way, Trump does not only affect EU regulation, but also the EU’s trade relationship with the rest of the world.
Not only did the Trump administration manage to get a de facto opt-out from the EU’s bureaucratic new deforestation rules, it is pushing for more. With Qatar, the U.S. has been urged the European Union to scale back the EU’s corporate sustainability directive CSDDD – the EU tends to love Communist-sounding acronyms. Thereby, both have threatened that the rules risked disrupting liquefied natural gas trade with Europe.
Suicidal energy policies
Despite the ongoing developments, the EU Commission’s 2026 work programme for 2026 appears to offer “business as usual”, without major changes to EU policy, apart from a “simplification” exercise that leaves major EU measure that burden competitiveness, like its ETS climate taxation, most “green deal” regulations, the AI Act or GDPR untouched. The centre-right EPP is likely to get some concessions on the new 2040 climate target the EU Commission has been pushing forward, but the question in the first place is whether there should be yet another climate target at all.
Simplification is good, but it is not enough. The EU’s climate taxation scheme ETS should be abolished, so to drastically cut the price of energy for European industry. At the moment, this tax is almost twice as high as the total US natural gas price, which in itself is only about one fifth of the natural gas price in Europe. Major chemical company INEOS is now advocating scrapping carbon taxation, but it remains a political taboo, despite the fact that the US, which does not have such a tax system, has managed to reduce CO2 emissions per capita relatively more than the EU since 2005.
The situation is urgent. Europe’s chemical industry, which is the bedrock of all other industry, has been scrapping lots of investment and jobs this year.
On the contrary, the European Commission is however pushing hard to simply continue with its plans to expand the EU’s ETS climate tax. This “ETS2” scheme is estimated to cost families up to 650 euros extra per year in terms of extra costs for fuel and heating. The institution seems completely tone-deaf to reality.
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