Germany's growing unilateralism is bad news for Europe
by Francesco Guarascio
The flexing of German muscles within the EU over the eurozone crisis is spreading into other policy areas, as Berlin is increasingly pursuing unilateral policies in key sectors such as trade, industry and energy
Tomorrow, Chancellor Angela Merkel and a coterie of German ministers will attend a joint cabinet meeting with their Chinese counterparts in Beijing. The meeting follows a similar gathering last June in Berlin, which was attended by the Chinese Prime Minister Wen Jiabao and 13 Chinese ministers. China is unfamiliar with such close proximity to foreign authorities. These exclusive high-level meetings are "the most powerful expression of the emerging 'special relationship' between the countries," argues a comprehensive paper produced by the European Council on Foreign Relations think-tank. "Germany is the only country in the world with which China holds regular inter-government consultations of this scope and kind." As a confirmation of this privileged relation, Merkel's trip to Beijing is already the second this year.
In principle, there is nothing wrong with such a close relationship. Germany is China's main trading partner in the European Union - half of all EU exports to China come from Germany. The Chinese also export heavily into Germany, although they are mainly interested in importing German technology. As a consequence of this, the Munich-based IFO Institute estimates that in 2012 Germany will have a trade surplus with China for the first time since the late 1980s. It is the only European nation able to make such a boast with the top exporter in the world. For a country like Germany, whose economy relies heavily on exports, the relationship with China is obviously of paramount importance.
The problem is that Germany seems to be willing to protect this relationship with or without the backing of Brussels - and sometimes even against the interests of its European partners. It is actually becoming normal for the country to take unilateral action to pursue its objectives when it deems it necessary. The last German-Chinese cabinet meeting in June brought about a number of bilateral trade deals which will improve Berlin's privileged relationship with Beijing, but are not necessarily in line with the overall EU trade policy towards China.
In certain sectors such as automobiles, machinery or renewables - the Germans are increasingly playing a solitary game. German carmakers, for instance, seem keener to develop common standards on electric cars with Chinese rather than European authorities. Berlin's interests go far beyond trade, as China is also a vital source of raw materials for its industrial machine. Beijing is one of the main producers of the so-called rare earths; minerals which are economically exploitable and are crucial for many industries but only exist in a few areas of the world. As the name implies, the supply of rare earths is limited.
The EU is trying to address the issue with a comprehensive approach aimed at making the European position stronger at the negotiating table. "If we agree on a common list of priority rare earths, we can better manage to meet the interests of all European countries," explains a European Commission official who works in the sector. Despite this official line, Germany has often played this delicate game alone and not only when it comes to China. When Beijing reduced the export of rare earths in 2010, Germany turned to other countries. To date, Berlin has sealed bilateral agreements with Mongolia and Kazakhstan enabling privileged access to their precious resources. "These deals are certainly not in line with the EU approach," says the official. Instead of having comprehensive European deals, Germany negotiated alone.
In some cases, the country went as far as clashing with European partners to protect its new strategic friends. For example, Berlin is exerting significant pressure to ensure that Kazakhstan avoids an anti-dumping procedure for its export of white phosphorus, a material of great importance for the defence industry. The only European producer of white phosphorus, the Dutch group Thermphos International, filed a complaint to the European Commission against Kazakhstan last year. "But the European institutions have been blocked by a German veto so far," explains a diplomatic source familiar with the dossier.
This is not the first time that Germany has pursued national interests with little regard for European partners. Perhaps the most appalling case concerns the building of the Nord Stream pipeline, which has delivered Russian gas directly to Germany through the Baltic Sea since 2011. Despite being more expensive - the maritime route was explicitly chosen to cut off transit countries such as Poland, Latvia or Lithuania. These nations happen to be European partners of Germany. The project was widely criticised for being environmentally risky, but Germany preferred to let down both partners and environmentalists to secure direct access to the Russian gas.
The German chancellor who gave the initial green light to the controversial project, Gerhard Schröder, was given a key position in the consortium leading the project soon after stepping down from his government post in 2005.
Unfortunately, Germany's attitude is not an isolated one, as most EU countries tend to prefer national targets to a common European approach - when their strategic interests are at stake. However, for a country like Germany, which has been de facto ruling the EU over the last few years and is crucially imposing its diktats on the monetary policy of the eurozone, it is legitimate to expect more restraint. A leader should be a model for others, not simply the one best able to exploit common resources.