Stars Align for German Foreign Policy

Just around the time Jupiter and Saturn converged in the night sky in mid-December 2020, it seems the stars also aligned in Berlin’s halls of power. With the end of Germany’s six-month presidency of the Council of the European Union and the sun setting on Chancellor Angela Merkel’s 16-year reign, two major foreign policy moves in the waning days of the year demonstrated shrewd opportunism by Berlin.

Merkel’s push to complete the Comprehensive Agreement on Investment between the EU and China and to nominate a High Representative for Bosnia and Herzegovina conspicuously sidelined Washington on two transatlantic policy areas. While Merkel might argue that acting without consulting the United States is equivalent to asserting Germany's and Europe's strategic autonomy, the investment deal is likely to make any common EU-U.S. China policy more fraught. Similarly, Merkel placing an ally in the oversight role of the High Representative in Bosnia without coordinating with the incoming Biden administration signals a split in transatlantic approaches to the Western Balkans.

Beijing ends 2020 on a high note

After seven years of negotiations, EU leaders and China agreed on the Comprehensive Agreement on Investment (CAI) on December 30th, 2020, due in large part to a concerted effort by Angela Merkel. In the deal, Beijing agreed to loosen restrictions on foreign investment from the EU in exchange for deeper economic ties and a high-visibility diplomatic win after a year of international pressure over the crackdown on the Hong Kong protests, the Uyghur detention and re-education camps, and bans or restrictions on 5G equipment from Chinese telecom giants Huawei and ZTE in EU telecommunications networks.

The deal represents a unique concession by China to the powerful EU economy. For the past three decades, foreign companies trying to access China’s market have faced unfair competition from China’s powerful state-owned enterprises. Still, despite the unlevel playing field, China trails only the U.S. in attracting foreign investment, and with the CAI, foreign direct investment is only expected to grow.

The CAI is further evidence that Angela Merkel, and the EU generally, see China as a partner not a competitor.

Unsurprisingly, given Merkel’s involvement in the deal, German industry in particular would benefit from greater access to the Chinese market. While for years the Chinese acquired large and strategically important German companies like robot manufacturer KUKA in 2016, companies like BMW were long restricted from owning more than 50 percent of their Chinese joint-ventures. With the CAI, those imbalances would level out somewhat.

The CAI is further evidence that Angela Merkel, and the EU generally, see China as a partner not a competitor.

European Parliament response

The European Parliament will likely oppose the deal and has voiced concerns over China’s human rights violations. Green MEP Reinhard Bütikofer, the chair of the Parliament's delegation for relations with China, said that simple commitments on abandoning forced labor were not enough: "It is ridiculous to try selling that as a success." More opposition came from within Merkel’s own party in the European Parliament. European Peoples’ Party member and head of the Parliament’s CDU/CSU group, Daniel Caspary, said of the deal’s justification, “In effect, the phrase 'change through trade' has degenerated into an excuse for a policy that is quite satisfied with 'trade without change.'”

Beyond frustrating her allies in the European Parliament, Merkel may have also wrong-footed the incoming Biden administration.

Beyond frustrating her allies in the European Parliament, Merkel may have also wrong-footed the incoming Biden administration. Squeezing the CAI between the U.S. election and inauguration seems to be a deliberate move to sidestep Washington. Any response from the Trump administration could be ignored, and serious engagement with the office of then president-elect Biden was unlikely to materialize. In this window of opportunity, the CAI wasn’t the only move Merkel made.

First new OHR in over a decade

In a move that seemingly eschewed multilateralism, Berlin also nominated CSU Bundestag member Christian Schmidt to replace the High Representative for Bosnia and Herzegovina. The Office of the High Representative (OHR), currently led by Austrian Valentin Inzko, was created by the 1995 Dayton Peace Agreement that ended the Bosnian War and created the constitution for Bosnia and Herzegovina. The OHR was tasked with overseeing the implementation of the peace agreement and the country’s new constitution, but over time the role shifted to safeguarding the function of the government in Bosnia and Herzegovina and encouraging reforms necessary for EU accession.

Replacing the High Representative with a Merkel ally signals Berlin’s interest in playing a more direct role in the Western Balkan EU hopeful. But the effectiveness of the OHR is dependent on international support, especially within the Peace Implementation Council (PIC) that oversees the OHR. The PIC’s Steering Committee consists of eleven members, including Russia, Germany, the United States, the United Kingdom, and the Presidency of the Council of the EU. The PIC will need to approve the new High Representative, which will be easier said than done considering that several members, including Russia, have considered closing the OHR entirely.

Germany’s past reluctance to take a hard stance against nationalist, separatist elements does not inspire confidence amongst experts in Bosnian politics in Schmidt’s ability to run the OHR effectively.

Germany’s past reluctance to take a hard stance against nationalist, separatist elements does not inspire confidence amongst experts in Bosnian politics in Schmidt’s ability to run the OHR effectively. Political scientist Jasmin Mujanovic remarked in a recent article for Balkan Insight that “Germany, above all, has been zealously devoted to the status quo. It maintains that the European perspective remains a credible possibility for the entire region, but it does little to assist this process.”

Beyond implications for the future of Bosnia and Herzegoinva, Mujanovic writes that the move sidelines the actors that have taken a tougher stance on the nationalist elements in the past. “This leaves us with the troubling possibility that this rare German unilateralism is meant as a small but significant shot across the bow of Biden, and perhaps also of Britain. Berlin does not want to be pushed by two non-EU states to take a more confrontational line in Bosnia or the region,” Mujanovic argues.

For now, the facts remain unclear. Making Schmidt the HR to pull away from the U.S. or UK agenda for Bosnia is one interpretation. Another is sincere German interest in leading a stronger international approach to repairing the Dayton constitution’s dysfunctions, as the former HR and German Bundestag member Christian Schwarz-Schilling argues.

Setting the agenda

The main benefit of Merkel’s CAI and OHR decisions is that Germany, and by extension Europe, has set some urgent transatlantic priorities for 2021. The CAI presents a clear vision of EU-China relations to a new U.S. administration eager to restore a constructive transatlantic dialogue, giving Brussels leverage to define what a transatlantic China policy will be. Likewise, Germany’s sudden interest in the OHR signals its desire to put the EU stamp on the future of Bosnia and Herzegovina and sidelining the U.S. and UK.

But without coordination with the U.S., which has taken a more adversarial view of China and has considerable influence in Bosnia and Herzegovina, these bold moves may only exacerbate transatlantic tension in both situations. At the very least, Chancellor Merkel has laid out the agenda for EU-U.S. relations in early 2021 on her own terms. The Biden administration’s reaction will set the tone of transatlantic relations for the next four years.

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