Then why is the standard definition for classical music only that music that was composed by European people?

It refers to a long "tradition" (history) of socially- and commercially-controlled music that originated in European societies.

Rich folks (such as royalty) sponsored starving artists to compose music for them, at their behest, honoring their families and interests in a very inbred society of European people. Art, music-- these were the property (in that time) of the upper class, not the "people."

FOLK music was the music of the people.... CLASSICAL music was the upper-crust's property.

See?

It had nothing to do at that time with color, and everything to do with social class.

There were significant MUSIC differences as well, but as for why "classical" = "European"-- because that's what the Europeans in power at that time decided to call "THEIR" music.

The term stuck.

It refers not to Europeans in general but to Europeans supported by rich Europeans.

~Susan