“The EU expresses its grave concern at the steps taken by China on 28 May, which are not in conformity with its international commitments,” EU foreign policy chief Josep Borrell said on Friday 29 May after chairing a video conference of EU foreign ministers. The EU top diplomat was referring to China’s decision to impose a strict new national security law on Hong Kong, which critics say will severely curtail the city’s civil rights and undermine its attractiveness as a global financial center. So, what exactly do Borrell’s words mean in practice for future EU-China relations?

China’s Gamble

On 28 May, China’s National People’s Congress, the country’s annual gathering of lawmakers in Beijing, approved the plan to impose national security laws over Hong Kong with 2,878 votes for, one against, and six abstentions. The vote approves the standing committee to draft a law to “prevent, stop and punish any act occurring in the HKSAR [Hong Kong Special Administrative Region] to split the country, subvert state power, organize and carry out terrorist activities and other behaviors that seriously endanger national security”. Details of the law are to be worked out in June and, if ratified, it would be the first time that Beijing had introduced a law that establishes criminal penalties into Hong Kong’s legal code. This would bypass the city’s legislature and limit its autonomy as granted by the “one country, two systems” framework adopted after the handover from British to Chinese rule in 1997. For days now, protesters have been going out into the streets to resume the pro-democracy mobilization of last year, which was interrupted by the outbreak of Covid-19.

Beijing’s move was not fully unexpected. For years, tensions with Hong Kong were a significant source of distress for central authorities; it represents a challenge to the Communist Party, and attracted unwelcome international attention, thus making the central government appear weak in the face of popular pressure. China’s new law therefore serves as a timely response to mounting dissent. Yet, Hong Kong’s loss of special privileges in international trade, which is bound to the city maintaining a high degree of autonomy from Beijing, will inevitably also affect Chinese businesses and elites. At least for the moment, it seems that China has judged the short-term drawbacks to be worth the long-term benefits.

US-China Increasing Tensions and the Role of the International Community

In an attempt to reverse China’s decision, US Secretary of State Mike Pompeo formally certified to Congress on May 27 that the Trump administration no longer recognizes Hong Kong as an autonomous region of China, consequently putting into question the city’s continued preferential trading status under US law. In line with Pompeo’s statements, President Trump threatened to impose trade sanctions against Beijing, which would further deteriorate the already fragile relations between the two superpowers. Signs of such risk immediately manifested, as China floated the idea of adopting countermeasures against the US. Nonetheless, other countries and policy makers have stood up in support for Hong Kong. In a joint statement released on 28 May, Canada, Australia and Britain united with the US in condemning Beijing’s step, acclaiming Hong Kong as a “bastion of freedom,” and the UK contemplated the option of increasing Hong Kong visa rights if China presses ahead. Similarly, a cross-party international coalition of 739 parliamentarians and policymakers from 37 countries recently issued a statement criticizing Beijing’s “unilateral introduction of national security legislation in Hong Kong,” and asking sympathetic governments to unite against this “flagrant breach of the Sino-British Joint Declaration”.

EU’s Timid Response

The European Union has also expressed worries over China’s recent move, but has excluded the possibility of imposing sanctions on Beijing, claiming that this would compromise the block’s (economic) relationship with China and at the same time not solve problems. Indeed, in recent years, the EU has struggled to take a unified position on China and has refrained from drawing red lines when confronted with Beijing’s increasingly assertive posture. Some countries, particularly in Eastern Europe, simply benefit too much from China’s investments stemming from its huge Belt and Road infrastructure project to risk jeopardizing their relations with Beijing. Similarly, adopting strong measures now would imperil the EU-China investment agreement that Germany, under its forthcoming Council Presidency, hopes to conclude at a summit scheduled for September in Leipzig.

Space for Action

The unlikeliness of EU sanctions notwithstanding, it is worth asking whether imposing economic penalties is desirable in the first place, or whether there are more cost-effective measures, which the block can and should take. As some analysts point out, foreign investors will probably be discouraged from doing business in Hong Kong even without sanctions, because the city’s attractiveness to them rests on the rule of law, which will be profoundly undermined by the new legislation. This will in turn penalize China’s mainland business too. Indeed, Hong Kong’s openness has always enticed European investors. In 2017, the city was the third most popular destination for foreign direct investments from the European Union, much of which is then funneled to China. In other words, not only Brussels, but Beijing too has an economic interest in keeping Hong Kong open for trade. Hence, the EU’s economic leverage might come in handy in the present circumstances. A possible way forward would thus be to emphasize that China’s obedience to its international obligations will be the benchmark to evaluate its reliability as an international trade partner. That is, as Hong Kong continues to be a party to the International Covenant on Civil and Political Rights, European governments will carefully monitor if the new national security legislation violates the civil liberties and the right to fair trial granted by the treaty and will be prepared to grant asylum to Hong Kong’s citizens if this is the case.

Tensions in Hong Kong have once more brought to light that age-old debate on values versus interests and have called into question the EU’s purpose and ambitions. It remains to be seen how deep Europe’s concerns are. Yet, one thing is certain: by the time it sits at the negotiation table in September, the block must have a clear view of where it stands. Ideally, it would draw red lines with China and push for the preservation of Hong Kong and for all it represents. Indeed, Europe now has the momentum to impose itself as the geopolitical actor it praises to be.