Is the EU corridor an alternative to China's Belt and Road Inititiative?

In recent years, there has been renewed global interest in the ‘rising continent’ of Asia which suffers from a massive infrastructure deficit even though it represents the world’s largest market with the highest middle-class spending pattern.

China has taken the lead in capitalising on these massive trade opportunities through its Belt and Road Initiative (BRI) which envisions an interlinked Eurasia through a synchronised train, road and maritime routes. Initially, the European Union (EU) expressed interest in this attractive project but it later opted to stay away from the widely attended Belt and Road Forum held in Beijing in 2017.  

Even the European Commission President Jean Claude Juncker’s Juncker Commission had been researching similar ventures to boost economic growth in the EU.  The EU then came forward in October 2018 with a holistic, multi-dimensional Global Strategy of its own, visualising a vibrant and ‘connected Asia’. Benefiting all stake-holders, the mega-project would not only bring the backward region on par with the developed world it would also create fresh opportunities for European companies like the Trans-European transport network.

However, to implement the plan the EU would have to make a yearly investment of 1.3 trillion euros, with more funding required from the private sector. Considering that the BRI is already underway and has offered similar solutions, the EU could have simply pitched in and achieved its economic objectives.

Most of all, this can benefit Germany and Eastern Europe the most as Frankfurt exports goods worth nearly $600 billion US dollars to China every year (at the rate of 1 million USD per minute) while there are sizable Chinese investments in eastern European countries. 

Both China and the EU had successfully upgraded economic cooperation with each other over the past few years, with the EU joining the Asian Infrastructure Investment Bank (AIIB) while China became part of European Bank for Reconstruction and Development (EBRD).

With no significant disputes between China and the EU a sustainable, long-term geo-economic alliance could have been achieved under the BRI umbrella, however, Europe has preferred to work independently.

The EU foreign affairs representative Federica Mogherini said, “Our approach is the European Union’s way to establish stronger networks and strengthen partnerships for sustainable connectivity.”

Termed 'The European Way to Connectivity', from the beginning, the ‘EU Corridor’ project made it apparent that Brussels has proposed a competitive alternative to China’s BRI. Considering the overlapping goals of both geo-economic projects in mostly the same region, it seems like several factors may have prevented Brussels from becoming an active participant in the BRI.

For starters, elevated Chinese economic engagement in the Central and Eastern European countries has become an unsettling factor. Actively engaged in the production and transport network in this developing region, China’s leverage was bound to grow in Europe and some eastern European countries, especially those with some history of communism.

Searching for strategies to contain this new influence, France and Germany finally suggested the adoption of a common investment screening policy to streamline China’s spending. However, this move immediately started protests from eastern European states in the bloc.

Second, the current trade war frictions between the US and China have hit European companies working in China. The eurozone was emerging as “the big loser” in this economic tussle as it failed to define a single policy for dealing with both China and the US.

In the midst of all this, pitching in its lot with the BRI would most certainly bring Europe into the Chinese zone of influence, and it is more likely that Brussels does not want to give that impression.

Another factor could have been the legal standing of all issues pertaining to the Belt and Road Initiative. Special BRI courts were to operate in Xian, Shenzhen and Beijing along with three international commercial courts under the auspices of the Supreme People’s Court to settle all disputes and carry out arbitration under the Chinese legal system. This may be because most of the BRI projects are implemented by Chinese organisations, but as far as the EU was concerned, it would prefer to follow international legal norms.

Finally, there always were some minor grey areas in this relationship, the EU had often expressed concern over human rights protection and fundamental rights issues in China. Questioning China’s foreign investment practices, at times the EU had conveyed that it would appreciate more reciprocity and transparency.

Mulling over a bilateral investment treaty to reduce trade barriers, the EU has kept China’s ‘market economy’ status on hold. Significantly, the EU’s disapproval of BRI became obvious when 27 out of 28 EU ambassadors to China became signatories of a negative document about the BRI last year.

Meanwhile, the Chinese stance has been that “the leaders of China and the EU have reached consensus on seeking synergy between the Belt and Road Initiative and the EU’s connectivity plan.”

Predictably, trade can be the decisive factor here in determining the future of both these mega-projects as Beijing remains Brussels’s biggest trade partner while the EU is China’s second-largest trade partner after the US. Considering this co-dependence, it is unlikely that either side would play a negative role.