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“One Belt One Road” From The Perspective Of The European Union: Challenge Or Opportunity

By Viktor Eszterhai, Senior Researcher, Pallas Athene Geopolitical Institute

Together with the multipolarisation of the international order, One Belt, One Road, the central initiative of Chinese foreign policy creates a new environment for the European Union. The analysis gives an account of the challenges posed and the opportunities offered to the European Union by One Belt, One Road.

The Place of the EU in the International Order Led by the USA

After World War II, countries of Europe integrated into the liberal international order led by the United States, which turned into a unipolar, global hegemony of the USA after the Cold War.  Typically, the power of the United States rested on four pillars: the leadership role taken in the world economy and financial life; military dominance, ensured by its unique military capacity and system of allies; the international system of institutions, briefly called the Bretton Woods system; and Western rules and norms, which have become universal in international life.

After World War II, Western European countries typically were active supporters of the international order led by the United States.  This was not only because they did not have such economic and military capacities that would have allowed them to compete with the USA, but also because the international system provided them with numerous benefits. The USA, as a player ensuring “common good” has indeed contributed to the economic development of European countries. In the quick recovery from the collapse after World War II, Marshall aid played a significant role, but the openness of the American market or the protection over maritime transport routes were also significant factors.  Furthermore, the USA supported the idea that post-war Western Europe and later the European Union (EU) should become an important centre of world economy. In addition, the USA provided military protection for Western Europe within the framework of the North Atlantic Treaty Organisation (NATO) during and after the Cold War, allowing the majority of EU countries to spend only a small amount on military defence. A third important factor is that European countries also took a prominent role in the international system of institutions, which had its centre in the USA.  It is best demonstrated by the fact that the two of the five permanent members of the UN Security Council are European countries – the United Kingdom and France–, and, generally speaking, Western European countries have typically taken – often despite their smaller economic might – greater roles in major international organisations of finance, such as the International Monetary Fund (IMF) or the World Bank.  Finally, the Western rules of international relations could be regarded as natural and universal for European states, because they stemmed from the fundamentals of the European Westphalian interstate system. As decision-makers of the EU saw the world in a similar way as the USA did, they often sought to apply these rules and principles in international life and expect them from other players in cooperation with it, sometimes by passing on a normative model (integration of Central and Eastern European countries, or the Eastern Partnership Programme), sometimes with coercive military power (e.g. Libya).

Against this backdrop it is clearly visible that although the EU had landed in a kind of subordinated position to the USA, and could fulfil the role of a second-rate power, fundamentally, it was favourable for it due to the benefits received, as it strongly supported its existence. Thus, the decision-makers of the EU – based on Gramsci’s analogy – created an elite who did not just accept but actively supported an international order based on American hegemony.

The Multipolarisation Of International Order and China – The Initiation Of An Alternative International Order

After the financial crisis of 2008-2009, the unipolar nature of the existing international order, prevailing since the end of the Cold War, has been questioned more and more often. There are voices claiming that due to the growing international weights of developing countries – such as China, India or Russia –, in addition to the “relative decline” of the USA, the world might soon return to a period of multipolarism. According to classical geopolitical schools and the structural realist school of the theory of international relations, a multipolar structure represents more instability and more competition between major powers. According to a different approach, rivalry between major powers does not necessarily ensue conflict if players find a path to cooperation, mainly by way of newly established institutions and transregional mechanisms, or by imposing a new international order. Multipolarisation does not automatically mean the creation of an international order based on new rules, but it definitely creates such changed environment and conditions to which all players must adapt, irrespectively of the fact whether it is favourable or unfavourable for them.

The current potential challengers of the hegemony of the USA – with one exception – tend to have no coherent concepts of world order; what they have in common is their critical view of the hegemonic role of the USA and their aspiration to dismantle US hegemony. The only exception is constituted by the large-scale One Belt, One Road initiative, launched by China.

One Belt, One Road

The One Belt, One Road (or by its longer name, the Silk Road Economic Belt and Maritime Silk Road) initiative was announced by the President of the People’s Republic of China, Xi Jinping in Kazakhstan in September, 2013. The initiative can be best grasped as a draft concept with a goal to redefine the system of relationships between Europe, Asia and Africa. The emphasis is put on connecting regions, five types of which are identified by official state documents. The first one is political coordination, which means the coordination of the policies of national, regional and international institutions. The second one is implementing physical infrastructure, which consists of connecting new and existing networks of roads, railways, oil and gas pipelines and optical cables, completed by industrial parks, logistics centres and sea ports cooperating with each other, redefining traditional economic relationships between manufacturing hubs, markets and sources of raw materials in this vast region. The third type is constituted by ensuring unimpeded trade, which initially means the removal of bureaucratic trade barriers, but, in the long term, it also includes the extension of free trade zones. The fourth one is financial integration, the aim of which is the harmonisation and joint control of financial services and the currency swap of the regions concerned. Finally, the fifth type is constituted by strengthening people-to-people bonds, which lays great emphasis on cooperation in research and development, promoting tourism, and providing scholarship opportunities and exchange programmes for students, experts, researchers.

Due to the revival of relationships, One Belt, One Road can be best grasped as a network which can be expanded extremely flexibly in space, encompassing state-owned, economic and institutional players as well as cities, private individuals, NGOs, etc. These make the initiative more than a large-scale infrastructure programme; through five connections China creates the hardware of a new international order that places the Eurasian continent in the centre. A deeper integration of Asia, Europe and Africa may change the geopolitical fundamentals of the current architecture of global order, originally established trough the management of sea trade and sea trade routes by Western powers since colonisation in the 16th century.  China, however, does not influence the existing international order by creating a new network – it has already started to fill the framework One Belt One Road represents with its new, “parallelly working” institutions.  These include transregional agreements to redesign the relationship between specific regions and China, such as the Forum on China-Africa Cooperation (FOCAC), or the “16+1 Cooperation”, but the new financial institution of the Asian country, the Asian Infrastructure Investment Bank (AIIB) has also attracted great attention.

One Belt One Road is an initiative that targets to reshape the international order. Therefore, all players concerned have no other choice but give a response to this new challenge.  It is a burning issue also for the EU, as the Chinese concept counts on a new Eurasian system of relationships, in which the EU would be quite evidently given a prominent role.

One Belt One Road and the EU ONE

The relationship between the EU and China has been extremely ambivalent in recent decades.  On the one hand, they are important partners for each other, which is symbolised by a comprehensive strategic partnership agreement concluded in October, 2003. Trade between the EU and China has dramatically increased in recent decades, and the two parties are important trade partners for each other. On the other hand, the relationship used to be characterised by several conflicts of interest and disagreements, featuring a combination of economic, political, normative and ideological elements. This creates a framework that strongly influences beliefs about One Belt One Road within the EU. Unsurprisingly, there is as yet no common EU position on the initiative. The study seeks to give an account of major opportunities given and challenges posed to the EU by the initiative.

Challenges

One of the most frequently voiced criticism of One Belt One Road within the EU is that it is basically a draft vision, in which the exact responsibilities of the parties concerned remain unclear. It is unknown which Chinese institutions are responsible for planning, and with whom the specific subsystems of the EU should cooperate. The position taken by some decision-makers of the EU is that under such circumstances efficient planning is impossible, and Chinese leadership cannot expect the EU to support an initiative that raises several questions.

A criticism often expressed about the initiative is that projects implemented so far – especially infrastructure investments and their form of funding – are not transparent and conflict with EU regulations (public procurement, environmental impact assessment, technical standards, etc.), and pose a challenge to European principles and values.  It is not only within the Union, however, where the implementation of projects poses a challenge but also in neighbouring countries and regions (Eastern Partnership, Central Asia), where Brussels has tried to act as a kind of normative actor in past decades. China’s new rules and norms might mean a newly emerging alternative in these countries.

The projects to be implemented within the framework of One Belt One Road (e.g. through railway lines or road networks) provide Chinese firms with better connectivity with nearby countries, which, naturally, might mean increasing competition for some companies in the EU. Furthermore, this is completed by the restructuring of the Chinese economy taking place now: increasing wages and more rigorous internal regulations make China take a step towards high-quality, innovation-driven industrial production, supported by smart industrial production, i.e. a modernisation programme announced by the government focussing on the intertwining of information technology and production (Made in China 2025). Chinese companies producing with a higher and higher added value inevitably enhance competition for European companies of the manufacturing industry.  Earlier, major trade routes concentrated in Western European ports – located mostly in countries with a greater influence within the EU –, but the new infrastructure implemented within the framework of One Belt, One Road prefers the Eastern Member States of the EU and Mediterranean ports (e.g. Piraeus), which is another significant economic impact. Finally, European companies would get into competitive disadvantage compared to Chinese companies due to the lack of transparency even if they were interested in taking part in the projects of the initiative.

The fact that new institutions related to the initiative (e.g., AIIB, Silk Road Fund, etc.) have been established without the active participation of the EU and it can only join them is another frequently voiced agreement. The renunciation of rule-making rights creates a kind of dilemma, reflecting China’s intention to obtain the supportive attitude of the EU towards the initiative while providing Europe with a typically passive and inclusive role in it. Finally, the One Belt, One Road initiative serves explicitly geopolitical goals, critical voices claim. First, it divides the EU, splitting Member States into supporters (typically countries of Central and Eastern Europe and Southern Europe) and opponents, which – based on the “divide and rule” principle – creates an opportunity to China to intervene in the domestic affairs of the EU. In a wider context, the goal of the initiative is to undermine the existing international order characterised by global US leadership.  For the reasons explained in the introduction, however, the EU has many advantages in the existing order, which, reasonably enough, several interest groups do not want to give up.  Taking an active role in the One Belt, One Road initiative would definitely affect the EU-USA relations, contribute to a further fragmentation of the current order, leading to unforeseeable economic, political and military consequences. The EU seems unprepared for the new situation especially in terms of military, as supporting the Chinese initiative could almost certainly result in the simultaneous weakening of the NATO. In addition, it has been suggested that the initiative could pose a challenge to security policy as China’s influence, growing through its investments, violates the freedom of major (primarily maritime) transport routes – ensured by the USA –, putting international trade in jeopardy.

Opportunities

In Addition to frequently voiced criticisms, there are more optimistic opinions as well. According to the supporters of the initiative, it offers several opportunities to the EU in the economic sphere in the first place. New interconnections implemented within the framework of One Belt, One Road may not only mean more intense competition but also new markets to European companies. The relative isolation of adjacent regions is a burden also to European companies, but the planned new infrastructure and the related services (e.g. logistics) can be a benefit for them as well. This process is perfectly illustrated by Eurasian railway transport, which is referred to as a symbolic realisation of One Belt, One Road, but in fact it came into being on the initiative of German multinational companies, years before the announcement of the Chinese plan. Further opportunities are offered by the reduction in transport costs due to the new infrastructure, which can be beneficial for EU trade.

In many cases, the projects of the initiative can present excellent investment opportunities to the European financial sector, supporters claim. Although China has established several banks and funds in recent years, alone it will be unable to implement the grandiose plans, therefore it will need to involve as many state and market players as possible. Furthermore, One Belt, One Road concerns several countries that are anticipated to have a more dynamic growth potential in the future than developed markets do. These are exactly the benefits that European countries joining AIIB as founding members despite the USA’s open disapproval wanted to grab.

The implementation of the grandiose projects may mean considerable orders for the European construction industry, with which it might be indirectly beneficial for other industries (machinery industry, electronics, etc.) and services as well. Furthermore, strengthening the East-West relationships to be built within the framework of the initiative significantly overlaps with the European Commission’s Investment Plan for Europe of (more widely known as “the Juncker Plan”), one of the objectives of which is to eliminate infrastructure bottlenecks, first of all in the Central and Eastern European region. The projects of One Belt, One Road can be coordinated with other European development programmes, such as the EU-China Connectivity Platform, or the Eastern Partnership, where China’s inclusion can theoretically enhance the efficiency of the projects.

Finally, for the economy of the EU, increasing Chinese investments do not only represent a challenge in the EU, but also raising significant capital and, in the future, an uptake of technology, for which there will be a growing need in the future. It is also justified by several successful acquisitions completed earlier (Volvo, Pirelli & C. SpA, BorsodChem), despite the fact that fear of Chinese investments has grown in recent years. Especially less developed states of the EU (Southern Europe, Central and Eastern Europe) regard Chinese investments as opportunities to be seized and which might promote their own socio-economic modernisation.

In addition to the economic sphere, the BRI offers political and geopolitical opportunities to the EU. Undoubtedly, the BRI may be effective at mitigating some challenges faced by the EU, because it may stabilise its environment through common economic development and is likely to reduce migration pressure or terrorism. In fact, the most exciting question is whether Europe, supported by the BRI, can transform its century-old Atlantic focus, leaving more room for a Eurasian orientation.  This new orientation would entail a decrease in the USA’s European influence and international role, which offers the opportunity to Europe to be able to break out from its subordinated, secondary role and could become a major power of international order enjoying full rights. Naturally, this radically new geopolitically orientation requires a more coherent defence and foreign policy, which would be indispensable for the EU to assert its interests more successfully.

Finally, active participation in the initiative would allow Europe to participate actively, as a policy-maker in the changes taking place in its environment. The EU lost considerable ground in East, Central and South Asia after the economic crisis in 2008. Theoretically, One Belt, One Road can become a platform providing for a turnaround. Active participation would result in the EU’s ability to more easily influence the operation of institutions established within the framework of the initiative, and to more strongly promote its own ideas, economic and social normative standards. With all these, it could exert a stronger impact on shaping One Belt, One Road than with criticising it as an outsider.

Conclusion

The arguments listed above reveal that the One Belt, One Road initiative poses serious challenges but, at the same time, also offers opportunities to the EU. All these, however, make the development of a uniform foreign policy strategy on community level extremely difficult, because the initiative is conceived in different ways both by nation states and various interest groups. Theoretically, the EU can give three responses: it does not deal with it, it rejects it or it takes part in its shaping. Whichever response is given, it is safe to assume that not all nations and interest groups concerned will be equal beneficiaries of it.

In fact, the transformation and multipolarisation of international order raises another question: to what extent can the EU ignore the changes generated by the One Belt, One Road initiative and taking place in its environment?  One Belt, One Road is expected to exert a growing impact on the life of Asia, Eastern Europe, the Middle East and Africa. In these regions – due to Brexit and internal economic and social problems, among others –, the EU is expected to be less able to compete with China, thus rejecting and ignoring the initiative may entail a further dramatic decrease in the international influence of the Union, accompanied by a certain international isolation. The transformation of international order might imply such coercive force that might possibly result in the implementation of a policy conflicting with the aspirations of the decision-makers of the EU.

 

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