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BERLIN — The Wagnerian spectacle of German foreign policy is shifting east.
Spoiler alert: it’s even worse than the original.
For months, Berlin has frustrated (read enraged) many allies with its one step forward, two steps back approach to confronting Russia over Ukraine. Yet this tortured episode looks like little more than an overture to what’s to come in Asia, as tensions over Taiwan force Berlin to weigh how it would react if Beijing tried to take over the island nation, let China considers a separatist region.
If that happened, the United States and other Western allies would push for tough sanctions against China. Germany is unlikely to be among them, which could protect its export-driven economy, but damage both its own international credibility and that of Europe.
Asked on Thursday whether Germany could afford to support sanctions in the event of a Chinese invasion, Chancellor Olaf Scholz dodged the question, while chastising German industry for ignoring the maxim “not putting all your eggs in in the same basket”.
“The issue of our country’s dependence in crucial areas regarding supply chains, raw materials and other things is a necessary part of our national security strategy, which we are working on at the moment,” he said. he added, without mentioning China by name.
Others were more direct. German industry’s reliance on exports has “created a dependency that leaves us powerless”, Norbert Röttgen, a prominent center-right MP, told German television earlier this week.
Could Germany support sanctions against China?
“At the moment, not really,” said Röttgen, a former minister and longtime chairman of the German parliament’s foreign policy committee.
While the debate is in many ways a redux of Germany’s manic fuss over whether and how to confront Russia over Ukraine, this time even more is at stake.
Germany’s great concern over the antagonism from Moscow was losing access to cheap energy. With Beijing, it is about losing the foundations of its economic prosperity. In recent years, China has overtaken the United States to become Germany’s top trading partner, accounting for nearly 10% of the country’s 2.6 trillion euros in foreign trade last year. Moreover, China, which has propelled the German economy for decades, remains a key growth driver.
This is why reducing German industry’s dependence on the country is easier said than done.
“The extent to which our prosperity is financed by China is hugely underestimated in this country,” Volkswagen Chief Executive Herbert Diess said in a recent interview. “Germany would be very different if we were to decouple.”
Indeed, no German industry is more dependent on China than that of Diess. Every third car produced by German automakers is sold in China. German automakers also operate a large network of factories in China itself, producing 4.3 million cars there in 2021 alone.
“The German auto industry, like the rest of the world, is watching the tensions between China and Taiwan with concern,” said a spokeswoman for the industry’s lobbying arm, known as the VDA.
“Panic” might be a better word.
VW’s Diess, who is due to step down as head of Europe’s biggest automaker later this month, said China was “indispensable” for the company’s future.
The situation is similar in other key German export sectors, from chemicals to machinery. About 1.1 million German jobs, or 2.4% of the total, depend directly on Chinese consumption, according to a June study by the Cologne-based German Economic Institute.
Although Germany and the rest of the EU are also crucial markets for China, the study notes that the Chinese are reducing their dependence on the region, while European exposure to China is increasing.
In an urgent appeal, study author Jürgen Matthes said it was “high time” for Europe and Germany to step back and reduce their economic dependence on China.
“It is not about decoupling, but rather about limiting dependencies, in particular through more diversification,” he writes.
Yet, just as it took decades for German industry to establish itself in China, the rollback will not happen overnight, especially since few regions in the world offer the kind of reliable growth that China offers.
Hence Germany’s dilemma.
“In the event of a Chinese invasion of Taiwan followed by massive Western sanctions, the decline in exports and income as well as the suspension of deliveries outside China would lead to considerable economic losses in the EU and in particular in Germany,” Matthes concluded. .
Given this outlook, German support for substantial Western sanctions is dubious. Although Berlin backed tough measures against Moscow after February’s full-scale invasion of Ukraine, the potential economic fallout for Germany has been limited and largely for show.
Even as Scholz suspended the controversial Nord Stream 2 gas pipeline project with Russia, for example, he also tried to protect Germany’s core energy interests by rejecting calls for a full gas embargo.
This strategy did not work as he had hoped, but only because the Russians themselves reduced the flow of natural gas to Europe. The ongoing gas shortage in Germany, which threatens to hamper key industrial sectors, will inevitably influence how the government responds to a potential Chinese invasion of Taiwan. With inflation high and energy prices showing no signs of falling, Germany can ill afford another blow to its faltering economy.
Berlin officials privately acknowledge that Germany would not be able to approve anything other than token sanctions against China. That doesn’t mean there won’t be dramatic debates in Berlin over Germany’s latest moral dilemma. Political talk shows will devote hours to the issue and newspaper columnists will spill barrels of ink as they unravel every angle. But basically, the Germans will offer the usual: niches (nothing).
As they will be the first to testify, any other course would shake the country’s economic situation. Götterdammerung.
Laurenz Gehrke contributed reporting.