300 Billion to Counter the Silk Road

EU launches €300 Billion Infrastructure initiative "Global Gateway" pursuing global ambitions, a project directed against China's New Silk Road.

BERLIN/BRUSSELS | | china

BERLIN/BRUSSELS (Own report) - With an infrastructure initiative worth up to €300 billion, the EU attempts to compete with China's New Silk Road (Belt and Road Initiative, BRI). The initiative named "Global Gateway" was officially presented last Wednesday after bumpy preparations that were widely criticized as largely inadequate. It is intended to provide finances for the construction of roads, railways and digital links – infrastructure projects worldwide to be mainly undertaken by companies from EU countries. The pressure on Brussels to launch the initiative has recently increased. Despite temporary difficulties due to the Corona crises, the BRI has been quite successful with 142 countries participating so far. Only those powers in rivalry with Beijing are not participating – the USA, the leading West European countries (except Italy), Australia, India, Japan. Observers, however, are skeptical, because no concrete Global Gateway project has yet been named and significant portions of the financing have yet to be secured. A previous EU project has long been considered a failure.

Chinese Offers: "Often Unrivaled"

On the one hand, the EU has launched Global Gateway, because Beijing's New Silk Road (Belt and Road Initiative, BRI) is developing successfully. According to the World Bank's calculations, around $97 billion would need to be invested worldwide by 2040 to achieve the United Nations Sustainable Development Goals. The BRI is generating offers to meet the vast demand. According to estimates, it has the potential to boost the global gross domestic product (GDP) by as much as $7.1 trillion by 2040. This is nearly twice the GDP of Germany, the world's fourth largest economy.[1] The Federation of German Industries (BDI) admits that "the Chinese infrastructure offers made to other countries ... are often unrivaled."[2] This, in fact, means that the number of countries joining the New Silk Road by signing a memorandum of understanding is steadily growing. Even the corona crisis, which is also causing numerous difficulties for BRI projects, does not alter this fact. On the occasion of the China-Africa-Summit in Dakar, at the beginning of last week, two more African nations, Eritrea and Guinea Bissau, joined the BRI - bringing the number of member nations to 142.

German Companies: "No Great Opportunity"

On the other hand, it has become apparent over the past few years that enterprises from Germany and the EU cannot benefit as much from the New Silk Road as they had expected. Large companies can draw some benefit from the initiative. In late November, for example, the Deutsche Bahn AG announced the founding of a new subsidiary, the DB Cargo Transasia, which, within the framework of the BRI, seeks to expand the transport of goods between China and Europe. It is envisaged to increase its transport capacity from 200,000 containers in 2020 to 500,000 by 2025.[3] However, particularly for medium-sized enterprises from Germany, the New Silk Road is proving to be "no great opportunity," notes an expert of the federally owned Germany Trade and Invest (gtai) foreign business agency. "Interest" is shown, but German companies often do not find the aspired business opening.[4] For Chinese companies, on the other hand, this mega-project offers an optimal opportunity to land contracts, and reinforce their presence abroad. Chinese companies, in addition, usually prefer Chinese norms and standards in their activities. This means that a system of standardization is established that does not necessarily correspond to that of Germany or the West.[5]

So far Unsuccessful

Already in September 2018, the EU adopted its own infrastructure program spanning Europe and Asia - the "EU-Asia Connectivity Strategy" - to attempt to counter the New Silk Road. However, nothing really became of it. In October 2021, the gtai confirmed it had failed in "achieving [any] noticeable success."[6] In an effort to provide new impetus to the initiative and simultaneously expand it - the BRI now includes countries on all continents - EU Commission President Ursula von der Leyen announced the EU's new infrastructure initiative, the "Global Gateway" in her "State of the Union Address," on September 15. At first, preparations were slow. Still by mid-November, it was reported that the current planning status included financial commitments for road construction, rail lines and data connections worth only €40 billion, however, no concrete projects were named and no ambition was apparent. At the time, a diplomat was quoted with the assessment that the paper that was presented was "a missed opportunity and a serious setback for von der Leyen's geopolitical ambitions."[7]

Europe's Self-Image

Last Wednesday, EU Commission President Ursula von der Leyen has now officially presented the Global Gateway. The financial volume has grown in two and a half weeks from €40, "up to €300 billion," these funds are to be used to promote "smart, clean and secure links in digital, energy and transport" and strengthen "health, education and research systems across the world."[8] The PR vocabulary ("smart," "clean," "secure") is meant to create the impression that European Global Gateway projects are qualitatively superior to the allegedly inferior Chinese BRI projects. This corresponds to Europe's self-image, although not necessarily to how Europe is being seen from the outside. The fact that the construction of an airport for the capital Berlin, has taken an impressive 14 years, but only four in Beijing, has not gone unnoticed outside the western world - in those priority countries targeted by the BRI and Global Gateway. Not only is a significant portion of the financing not clear: €135 billion are supposed to be provided by the European Fund for Sustainable Development Plus (EFSD+), €145 billion, on the other hand, from others, including national financial institutions, for example, from the German Development Bank (KfW). There is no mention yet of commitments.

"The German Industry Stands Ready"

Also, still unclear is what projects are to be concretely implemented. No details were given. Nils Schmid, the Foreign Policy Spokesperson for the SPD parliamentary group, calls for the Global Gateway to be "visible, as early as next year, ... with plans for the construction of railroads and electrical grids in the Balkans and in Africa."[9] In Southeastern Europe, as well as in many countries on the African continent, BRI projects have been successfully implemented. Above all, EU companies should benefit. This is "not just about standing up for European values, but also to economically strengthen Europe," a high-ranking EU Commission employee was quoted. Wolfgang Niedermark, an executive board member of the Federation of German Industries (BDI) demanded that it be "ensured that the economy" is "closely involved" in the projects: "German industry stands ... ready for Global Gateway's practical implementation."[10]

"No Big Deal"

In light of the fact that the EU often makes grandiose announcements of its objectives, which are much less often crowned with success - for example the "EU-Asian Connectivity Strategy" - several observers showed skepticism last week. "The real test for Global Gateway" would be "whether the EU can raise the funds promised and channel these into high-profile and strategically relevant projects," said Noah Barkin, from the Rhodium Group consulting firm.[11] The CSU MEP Markus Ferber declared "A big deal looks different. China is not going to freeze up in fear."[12]

 

[1] Council on Foreign Relations: China's Belt and Road. Implications for the United States. Independent Task Force Report No. 79. New York 2021.

[2] Ernst zu nehmende Alternative zur chinesischen Seidenstraßen-Initiative. bdi.eu 01.12.2021.

[3] Keri Allan: The New Silk Road is Booming for DB Cargo. railway-news.com 29.11.2021.

[4] Thilo Großer: Herausforderung Neue Seidenstraße. ICC-Germany Magazin 9/2019. S. 22-27.

[5] Council on Foreign Relations: China's Belt and Road. Implications for the United States. Independent Task Force Report No. 79. New York 2021.

[6] Sebastian Holz: EU-Konnektivitätsstrategie setzt auf Nachhaltigkeit. gtai.de 21.10.2021. See also "The Starting Gun Has Gone Off".

[7] Moritz Koch: Europa will Chinas Seidenstraßen-Initiative die Stirn bieten - mit mageren 40 Milliarden Euro. handelsblatt.com 12.11.2021.

[8] Global Gateway: Up to €300 billion for the European Union's strategy to boost sustainable links around the world. ec.europa.eu 01.12.2021.

[9] Moritz Koch: Der 300-Milliarden-Euro-Plan: Die EU stemmt sich gegen Chinas Seidenstraße. handelsblatt.com 29.11.2021.

[10] Ernst zu nehmende Alternative zur chinesischen Seidenstraßen-Initiative. bdi.eu 01.12.2021.

[11] Moritz Koch: Der 300-Milliarden-Euro-Plan: Die EU stemmt sich gegen Chinas Seidenstraße. handelsblatt.com 29.11.2021.

[12] Oliver Noyan: EU will Chinas Neuer Seidenstraße Konkurrenz machen. euractiv.de 02.12.2021.