Germany still hopes that China will “change through trade.” It will not

“Wandel durch Handel” must make way for a new strategy. But what kind?

July 28, 2020
Bernd von Jutrczenka/DPA/PA Images
Bernd von Jutrczenka/DPA/PA Images

In a recent interview Peter Altmaier, the German Minister for Economic Affairs, was asked whether China's imposition of a draconian national security law on Hong Kong or its treatment of the Uighurs would have consequences for Sino-German trade. His response was an unequivocal no. Germany, like all other western countries, had, he said, always maintained commercial relations with countries with poor human rights records, China was an important trade partner and nothing useful would be achieved by introducing sanctions or boycotts.

Indeed he went even further. Trade was the means by which over time western countries could hope to influence repressive regimes to moderate their policies. Wandel durch Handel, “change through trade,” is now, it seems, the leitmotiv of German policy towards China.

China is Germany's most important export market. In 2019 Germany sent goods worth around €100bn there, more than to the United States. For German manufacturers, particularly car manufacturers, China is of existential importance. They would lobby vigorously against any suggestion that it might be subject to commercial restrictions like those imposed by Donald Trump.

German ministers too have always treated China with respect. Since the time of Helmut Kohl German chancellors have been regular visitors to Beijing. In her 15 years of office Angela Merkel has been there almost every year. When she goes she is usually accompanied by a selection of CEOs from the major German companies. This is partly to introduce them to the Chinese political leadership; partly also to emphasise Germany's unique strengths in the field of manufacturing. Being the country of Bosch, BMW, Mercedes, Siemens and Volkswagen is what gives Germany its global power.

Germany is not purely mercantilist in its foreign policy. The government has been surprisingly robust in endorsing sanctions on Russia following its annexation of Crimea and occupation of eastern Ukraine. Last week the German Foreign Minister, Heiko Maas, reiterated opposition to the suggestion from the United States that Russia might be readmitted to the G7. But the sanctions to which Germany has agreed do not impinge on its core commercial interests. German imports of natural gas from Russia continue unaffected; and opposition from Poland and elsewhere has not prevented the construction of the Nordstream gas pipeline between Vyborg and Greifswald.

And even in relation to China the concept of Wandel durch Handel has a veneer of conceptual underpinning. In the days of the Cold War Germany was in a unique position among NATO allies in that 30m Germans lived in an artificial satellite state under Communist control. This not only affected Germany's attitude on politico-military issues (for example reluctance to endorse prolonged exchanges of tactical nuclear weapons on German territory); but also the country’s view of the underlying rationale for the policy of detente.

This was characterised by the phrase Wandel durch Annaeherung, “change through proximity.” This was the term used by Willy Brandt and his adviser Egon Bahr to explain their doctrine of Ostpolitik. The theory behind it was that closer and more frequent contact with the Soviet Union and its allies in the economic, cultural and political fields would cause a softening of those regimes' internal and external policies. It was not just a doctrine motivated by the wish to ease the living conditions of East Germans. It was a genuinely held belief that the more the peoples and governments of eastern Europe were exposed to the western way of life, including its commercial products, the more they would wish to emulate it.

Many Germans today would argue that the eventual collapse of communism showed the merits of this approach. They tend to gloss over the reality that it was President Reagan's determination to outspend the Soviet Union on defence, and the arrival on the scene of the uniquely far-sighted figure of Mikhail Gorbachev, that were the real drivers of change.

No German politician or scholar has so far convincingly explained why the application of a similar approach to China might be expected to work. As trade between China and Germany—indeed between China and the wider world more generally—has increased, so too has the nationalist and belligerent character of the Chinese regime. There is no sign that the Chinese leadership are questioning the viability of their unique form of authoritarian market capitalism; indeed as they look at development in countries like Turkey, Brazil, and even Poland and Hungary, they probably reckon that it is they, and not the liberal democracies, that are winning the ideological argument. And far from there being any Chinese Gorbachev hovering in the wings, President Xi seems disposed to maintain his authority for ever.

The risk for Germany is that the continuation of Chinese adventurism abroad and repression at home will increase demands among its allies for some form of retaliation. The video footage of shaven-headed Uighurs queuing to be transported by train to concentration camps and the reports of enforced sterilisation of Uighur women have eerie echoes for the German public.

An early test will come in the decision on whether to allow Huawei to participate in Germany's procurement programme for its 5G network. Had the British government maintained its previous position of allowing some limited access, Germany would probably have done so as well. But the United Kingdom's U-turn has made the decision much more problematic.

For all her commitment to Germany's export industries, Merkel has, perhaps because of her own religious upbringing in a totalitarian state, sometimes seen a moral dimension to big foreign policy decisions. She showed this in her reaction to the migration crisis of 2015. Merkel was also, in 2007, the first German chancellor to receive the Dalai Lama.

Whatever the decision on Huawei, Wandel durch Handel is unlikely to survive as a slogan. There is no sign so far of anything to replace it. Neither Germany nor the EU have any strategy for dealing with China. But then, of course, nor does anyone else.