With member states divided, the EU is pursuing a pragmatic approach vis-à-vis China’s Belt and Road Initiative (BRI), also raising some issues of concern, writes Fraser Cameron.
Fraser Cameron is Director of the EU-Asia Centre.
It is a pity that China did not keep the name –Silk Road – something that is immediately recognisable with its mix of history, romance and trade routes spanning several countries and cities between China and Europe. Instead we have the Belt and Road Initiative (BRI) that sounds more like an advert for a road safety campaign.
But the BRI it is and many countries including in Europe are scrambling to jump on board Beijing’s ambitious plan to connect China and Europe. Perhaps plan is also the wrong word as the BRI is an ever-growing list of projects spanning several continents and covering sea as well as land routes.
Ports in Africa, power stations in Pakistan, and roads in South America all fall under the BRI. China even has its sights on the Arctic with the Polar Silk Road and cyberspace with the Digital Silk Road.
At the BRI summit in April, China’s leaders noted the criticism that the initiative suffered in the past two years. Malaysia, Sri Lanka, Cambodia and Pakistan had all incurred huge debt burdens. The new Malaysian government secured a renegotiation of the loan terms. In the case of Sri Lanka it was forced to lease the port of Hambantota back to China for 99 years to cover debt repayments. Other criticism centred on mainly Chinese state owned enterprises winning contracts and Chinese workers being involved in projects.
Under pressure from the IMF and World Bank, President Xi Jinping said action would be taken to deal with potential debt traps and promised that the BRI would now be ‘open, clean and green.’ He said that anyone could join the BRI and argued that the BRI would strengthen the weak states of Central Asia and in parts of Africa and make them more resilient against the threat of Islamic fundamentalism.
Other major players, including the US, India and Japan have all refused to participate in the BRI. Indeed the Trump administration has lobbied strongly against the Chinese plans, even threatening Italy for signing a MOU on the BRI.
Washington argues that the BRI is part of Xi Jinping’s plan for world domination. But Washington is doing little on the ground to counter the BRI. It has largely retreated from Central Asia and Africa and Trump’s withdrawal from the Trans-Pacific Partnership (TPP) has caused concern across all of Asia.
Vice President Maroš Šefčovič, who attended the April summit, said that there were a number of commonalities between the BRI and the EU’s own connectivity strategy, and although there were some disagreements, there were also a wide range of opportunities to explore. Transparency, financial and environmental sustainability were the EU’s major concerns. The problem for the EU is that its principles are not backed up with money, at least in the short term.
Member states are divided on the BRI. France, Germany and the UK, which receive most Chinese trade and investment, have not signed up to the BRI. But Italy and most smaller member states have done so. Macron has been the most critical warning of ‘a new hegemony’ and arguing that the BRI had to be a two-way street.
Although the EU has called China a rival and expressed concern about its alternative models of global governance, both sides agreed at the April summit to establish a working group on rail connectivity. Meanwhile many ports (Hamburg, Piraeus, Zeebrugge) are profiting from the BRI as well as many cities such as Duisburg, the rail hub for train shipments from China.
The EU is thus pursuing a pragmatic approach towards the BRI while continuing to raise concerns about some issues. For example, China emphasises the multilateral nature of the BRI but has established two courts, both in China, to deal with disputes. One court in Shenzhen will deal with maritime disputes while another based in Xi’an will handle cases along the overland route. European operators question whether they will get a fair hearing.
On the positive side, there is talk of running joint pilot projects in Africa where China values the EU’s experience. China has also launched some initiatives to promote new financing mechanisms for the BRI focusing on interbank consortium and interbank credit. Beijing has also reacted positively to EU proposals to enhance non-physical connectivity such as customs facilitation measures. And there have been tentative discussions on cooperation in AI, big data and e commerce. The EU, however, is under huge pressure from the US not to use any Huawei equipment in its roll out of 5G networks. This and concerns about cyber security means the EU is adopting a cautious approach.
Both sides are thus moving slowly ahead with cooperation in BRI an important part of the overall EU-China relationship and linked to progress in other areas including the bilateral investment agreement negotiations and WTO reform. In the digital age it seems strange that there is no great hurry to improve connectivity. What would Marco Polo have made of it?