The EU Enters the Global Infrastructure Competition
China has a massive plan to connect the world to the Middle Kingdom. It is the Belt and Road project which — on top of billions of renminbi in funding — even has its own joyous theme song in Teletubby-style.
The United States and Europe have been watching this development warily over the last years. In a recent speech at Hudson Institute, Vice President Pence described China’s actions as “debt diplomacy to expand its influence.” Undoubtedly, there is a growing demand for infrastructure in Asia and beyond but by who and with what conditions, is the contested part.
The news of the week in Brussels is that the EU has come up with their own connectivity strategy for joining Asia and Europe, although it does not have a theme song yet (this year’s Eurovision must remedy that). It was given the thumbs up by EU’s Foreign Ministers this Monday. For the EU, it is also an essential part of the priority package for the Asia–Europe Meeting, which is held these days in Brussels with Asian top leaders such as Japanese Prime Minister Abe and Chinese Premier Li Keqiang flying into town.
The EU’s proposal is not trying to directly counter the Chinese Belt and Road Initiative. Instead, it proposes sustainable connectivity based on the European way. Accordingly, it sets its own exacting standards with open tenders and environmentally sound projects. Indirectly, it juxtaposes the EU’s approach to “debt diplomacy.”
The EU also wants to go broader than road-building. The strategy also covers digital and energy where the EU has its lessons learned with over-reliance on Russian gas connections. The strategy will be mainly financed through loan guarantees up to 60 billion euros and with private sector leveraging up to 300 billion euros. Thus, the EU could put substantial economic firepower behind its proposal. The EU plays on home field since it has a strong track record in connecting member states through the internal market. Still, the full potential of the strategy depends on private sector willingness to kick-start such projects.
The EU remains open to connecting with the Chinese Belt and Road Initiative and potentially to include Chinese companies in projects, if they fulfill the necessary standards. On that denominator, the EU has been able to corral member states behind the strategy. A more forceful approach would have encountered resistance. Several Southern and Eastern European states actively seek Chinese investment in their countries. They do not want the EU to pursue policies that could undermine that.
This is one of the weak spots of the EU strategy and leaves questions whether the strategy is sufficient to provide a course correction to China and its companies. For example, in the digital field, EU member states have welcomed Chinese telecom companies Huawei and ZTE with open arms. These companies are already part of the infrastructure backbone in several member countries. It is hard to see how the new EU strategy course-corrects that.
In 2015, the United States and Europe split over how to handle the Chinese-initiated Asian Infrastructure Bank, which the EU members joined and the United States and Japan did not. Europe does not feel it has the option to say completely no to Chinese overtures. After all, China and Europe are part of the same Euro-Asian landmass, so the geographical connection is a given. That is different for the United States, which is sealed off by protective seas in its own Western hemisphere.
Still, now, there seems to be more transatlantic bandwidth for coordinating how to address China’s infrastructure challenge. For policymakers in Washington and Tokyo, this EU-proposal seems an opportune moment to engage the EU. The ambition should be to connect the EU’s strategy with the Free and Open Indo-Pacific approach espoused in Washington, Tokyo, and Delhi. There should be ample common ground to work on providing alternatives to or making the Chinese Belt and Road Initiative into a two-way street.
The views expressed in GMF publications and commentary are the views of the author alone.