Belt and Road 2013 – 2020: “the roads” of improvements- Lessons for Europe

Implementing of the BRI in Europe has shown, that the CEE countries, along with the PRC and the EU, should also make an efforts to improve the Sino – European dialogue within initiative. Countries of the Eastern borders of CEE, nevertheless, are also playing an important role in this relation by creating the possible passes through their territories to the logistics of CEE region

Intensification of Dialogue and cooperation

An important starting point for improved coordination of the two policies is greater clarity on the definition of the BRI. The CEE and the EU is not in a position to initiate such studies unilaterally, not least because they would require information from a number of countries along the relevant BRI corridors, as well as from China. However, the EU could encourage their development through the framework of the “Connectivity Platform”. This would require the establishment of an Expert Group to identify key BRI corridors and to collect relevant information from the countries in which they lie.

The analysis of potential future traffic flows suggests that the first study should focus on the New Eurasian Land Bridge Corridor connecting with the North Sea – Baltic Core Network Corridor of the TEN-T. This would require dialogue with other organizations already engaged in the development of rail transport routes in Eurasia, in particular CAREC. It would also require engagement with organizations such as UNIFE, representing manufacturers of rail equipment, with an interest in the promotion and application of EU standards beyond its borders.

Logistics and infrastructure coordination of TEN-T project with Chinese initiative

The analysis of BRI-related traffic flows suggested that the BRI could generate additional rail freight of approximately 3 million TEU (equivalent to 50 – 60 trains per day or 2 – 3 trains per hour each way) between the Far East and the EU by 2040. Subsequently, it was concluded that the most likely TEN-T corridor to be required to accommodate this traffic would be the North SeaBaltic Core Network Corridor.

It is not expected that the BRI changes patterns of shipping traffic materially other than to reduce slightly the volume of freight entering the EU via the North Sea Ports. Any effect might be offset by a growth in the shipment of BRI-generated freight across the North Sea to the UK and Ireland. Nevertheless, it should be noted that maritime trade between China and the EU is already well-established, and that it is not possible to forecast possible changes in related trade patterns as a result of the BRI.

Given these results, and taking account of the uncertainties surrounding the definition and evolution of the BRI, recommendations to address particular constraints or bottlenecks on TEN-T beyond those already highlighted by the corridor studies would be premature. In the absence of greater clarity on the scope and priorities of the BRI, there is a risk that the development of specific investment projects designed to accommodate more traffic on the North Sea – Baltic Core Network Corridor, for example, would prove either inadequate or redundant.

At the same time, the TEN-T Corridor Studies should be reviewed and developed periodically as the work of the “Connectivity Platform” progresses and the BRI is defined more clearly. This would require TEN-T policy to become more outward-looking, with an explicit requirement to take account of major policy initiatives sponsored by countries outside the EU. It could also be facilitated by the development of periodic forecasts of BRI-related traffic, following the model of the European Commission’s Reference Scenario, with forecasts developed under the framework of the “Connectivity Platform” and jointly approved by participating countries.

Improving the SinoEU coordination within EU legislative frameworks

In Europe there is still a number of concerns expressed about the willingness and ability of Chinese investors and contractors to operate within the framework of market rules and standards defined by EU legislation. At the same time, some stakeholders consider that the BRI represents an opportunity to promote EU standards across Eurasia, thereby improving export opportunities for EU-based companies, notably those supplying or constructing transport infrastructure or equipment.

The EC is already alert to these issues, as indicated in the speech given by the President of the Commission in September 2017. This included an outline of European Industrial Policy comprising a number of initiatives of relevance in developing a response to the BRI. In particular:

  • The policy includes an initiative for establishing a modern standardisation system to ensure that the EU remains a global hub for standardisation. This will be particularly important in promoting European Railway Traffic Management System (Hereinafter ERTMS – Auth.) technology, one of the largest beneficiaries of TEN-T funding in the 2007 – 2013 and 2014 – 2020 Multiannual Work Programmes.
  • The policy also includes an initiative to improve the competitiveness of Europe’s export industries and to increase their access to global value chains. This should inform negotiations with China over the Comprehensive Agreement on Investments.

It is recommended that the European Parliament supports the Commission in implementing these initiatives and continue to monitor progress on the Comprehensive Agreement on Investment. The key issues to consider in the context of the BRI are:

  • the screening of foreign direct investment (FDI);

Thus, the May 2017 EC paper ‘Harmonising Globalisation’confirmed that openness to foreign investment remains a key principle for the EU and a major source of growth. However, it also recognised concerns about foreign investors, notably state-owned enterprises, taking over technology-intensive European companies for strategic reasons, and that EU investors often do not enjoy the same rights to invest in the country from which the investment originates. In September 2017, it issued a draft Regulation (EC 2017/0224 (COD)80) to establish a framework for the Member States, and in certain cases the Commission, to screen FDI in the EU, while allowing Member States to take account of national circumstances.

It is recommended that the European Parliament supports the EC’s proposal, as it would ensure the EU’s ongoing openness to FDI while preventing the capture of key European intellectual property by competitors.

  • the establishment of a level-playing field in public procurement markets;

Underlining the European Commission’s concerns that many foreign public sector procurement markets remain closed, the EC has adopted a proposal for a “Regulation of the European Parliament and of the Council on the access of third-country goods and services to the Union”. However, this proposal, which was adopted by the EC in March 2012, did not complete its first reading, although it was discussed by both the European Parliament and the Council.

More recently, the EC has announced its intention to amend the initial proposal and to present new draft legislation as part of its current work programme.

It is recommended that, subject to careful review of the amendments, the European Parliament supports the proposal, in order to establish reciprocity of access to public procurement markets in the EU and China as soon as possible.

  • export credit guidelines.

Also there areconcerns that China is not bound by the OECD’s guidelines on export credit, providing Chinese companies with an unfair advantage in export markets. Of the ten largest economies in the world, only China (the second largest), India (the seventh largest) and Brazil (the ninth largest) do not participate in the OECD Arrangement on Guidelines for Officially Supported Export Credits.

It is suggested that, in monitoring progress towards a Comprehensive Agreement on Investment, the European Parliament seeks to ensure that China’s participation in the OECD framework is a key objective of the EU’s negotiating strategy.

Increasing awareness of the initiative in European political and business circles

When analyzing the European media for awareness of the EU political and business elites about the Chinese initiative, it was determined that the level of coverage of the initiative and its main tasks remains unclear. In this regard, an important recommendation is to implement a broader BRI-related information policy of European States.

Improving Trade flows connection

The analysis of the potential effect of the BRI on trade flows conducted for the purpose of this study suggested that a number of changes may take place, at least over the longer term:

  • Some high value goods may transfer to rail, potentially to the benefit of Poland, northern Europe, and landlocked Slovakia, Hungary, the Czech Republic and Austria.
  • Some low value goods may transfer from ports in the eastern Mediterranean to ports in the north of the Adriatic Sea and the Tyrrhenian Seas.

It appears likely that the EU can anticipate and mitigate these changes with existing mechanisms. To anticipate the changes, planning of transport infrastructure, and in particular the TEN-T, should take into account forecasts of trade between EU and China, as discussed further below. To mitigate any material effects on ports or regions which may suffer a loss in economic activity, the EU can make use of existing regional and cohesion policies.

A challenge for the EU will be to ensure that capacity, and commercially viable transit times, remain available through Asia and in rail transit countries including Kazakhstan, Russia and Belarus. This will require increasing coordination at the operational level between railways across Eurasia, rather than specific legislation.

Finally, bottlenecks may emerge in the EU’s transport networks, including the TEN-T, whether because of steady growth in trade with China and the Far East or, in the case of rail, because of allocation of rail capacity to intra-EU, national, regional or even suburban rail traffic. There may be scope for reviewing planning processes at the EU level, in relation to the TEN-T, and at national, regional and local level (For example, widening of the United Kingdom’s M20 motorway locally around Maidstone, between London and the English Channel, was planned in the mid-1980s. One section was designed and built with five traffic lanes in each direction. The traffic forecasts included an “overlay” of the expected traffic growth associated with Channel Tunnel, which was not yet under construction and which did not open until 1994.), to take explicit account of estimates of trade flows with China and the Far East. The analysis suggests that this may be material not only to rail routes (and in particular those in the North Sea – Baltic Core Network Corridor) but also to ports and the infrastructure supporting them (such as container stacks, warehousing and parking) and connecting them (such as onward road and rail connections).

Pending investment to address rail capacity bottlenecks, it might at first sight appear desirable to have mechanisms to reserve capacity for rail freight traffic between the EU and the Far East. The most effective means of addressing this issue may be for capacity allocators to take into account longer term forecasts of potential demand for infrastructure capacity.

The availability of capacity within the EU would be of limited benefit without sufficient capacity also being available on non-EU transit networks. This suggests that the TEN-T process could be more outward-looking. The TEN-T already provides maps for “neighbouring countries” including Norway, Switzerland, the Balkans and Turkey, as well as Belarus, Moldova, and Ukraine, but not Russia, which could be included, being a core country of the BRI rail flows. However, studying and sharing information with neighbouring countries will not, in itself, resolve problems of capacity and capacity allocation or prioritisation.

  1. To ensure that Europe remains a global hub for standardisation, EU institutions should foster the establishment of modern standardisation systems, in particular with reference to the ERTMS technology, one of the largest beneficiaries of TEN-T funding in the 2007 – 2013 and 2014 – 2020 multi-annual Programmes.
  2. EU institutions should continue to engage with the Chinese Government to agree possible specific contents of an EU and China Investment Agreement as soon as possible.
  3. The European Parliament and the European Council should support the proposal of the European Commission (EC) to establish a framework for the Member States to screen foreign direct investments in the European Union (EC 2017/0224). This would ensure the EU’s ongoing openness to foreign direct investments while preventing the capture of key European intellectual property by competitors.
  4. The European Parliament and the European Council should support the development of a legislative instrument, based on the European Commission’s COM(2016)34, to guarantee reciprocity of access to public markets in the EU and China by European and Chinese businesses.
  5. Increasing awareness of citizens and media control
  6. Creating a favorable business climate in the CEE countries and the Eastern borders of the region

The CEE countries have relatively recently embarked on a path of independent development and are significantly behind their neighbors in the West. Having passed through a socialist experiment, a series of crises and a systemic transformation in the second half of the twentieth century, the countries of Central – Eastern and South – Eastern Europe came close to solving the problem of creating and improving a social legal state only in the 2000s.

It is worth noting that the CEE region is affected by external factors, such as the economic depression of neighboring regions, inter-ethnic skirmishes and military conflicts. At the same time, the states of the region develop their economies in a special way, sometimes significantly differing from their Western neighbors in their openness.

Before the global financial crisis, this region was one of the most dynamically developing regions in the world. However, at the moment of its height, CEE entered a difficult period, accompanied by many negative consequences – economic downturn, lack of development dynamics, and weakening of the banking sector.

Despite the fact that they managed to overcome the obstacles of the first two crisis decades of the XXI century with varying degrees of success and gained rich, invaluable, and generally significant experience in the struggle for a better future, the business climate and policy for investment flows in the region still remains quite weak.

Thus, the normalization of the business climate in the region , as well as the increasing economic integration of CEE, with an ultimate goal of joining the EU (which seeks the most reforming states), requires adaptation and constructive dialogue between all the partners.

Resolution of conflict situations and disputes in the region

The security of the CEE region deserves special attention. The following conflict zones should be taken into account when resolving inter political tensions in the region.

In almost all countries of CEE, all conflicts have now been resolved. In each case, it is possible to trace a political solution to the conflict (it should be borne in mind that some conflicts may again turn into an armed stage (we are talking not only about the territory of Kosovo, but also about the geopolitical plans of Albania). The conflicts resolution took place either as a result of a military victory by one of the parties and subsequent negotiations, or under pressure from the military forces of NATO, the US and the EU. Thus, only on the territory of Ukraine, which is at the stage of transition to the geopolitical axis of EU democracies, there are clashes that are at the stage of armed confrontation.

The development of the region shows that the crisis due to internal political instability can be resolved through diplomatic channels, but it should be understood that the threats of border conflicts in the Balkans, as well as in the East of Ukraine and terrorism have unpredictable and irreparable consequences. In this regard, the countries of the region should more actively establish inter-state relations through constructive dialogue in order to minimize the occurrence of possible future contradictions.

Strengthening the region’s economic security

The current socio-economic model of the CEE countries, as a result of their long-term adaptation to the EU market conditions, is more focused on external sources of economic growth. Thus, there was a reorientation of industrial production from the domestic market to the external one. The achieved openness of the region’s economies and their involvement in the world economy were primarily due to integration into the production links of European (and partly global) TNCs and subordination to their interests.

The acquisition of Western funds and technologies, on the one hand, led to a general modernization of the economies of these countries, and on the other – made them dependent on supranational capital and associated not only economic, but also political influence.

In the last decade, there has been an increase in the independence of the region –  in the process of economic restructuring and adaptation to EU standards, the countries of the region are beginning to rely more and more on themselves, on their region. In other words, as the share of mutual supplies increases, the region’s reserve independence increases. However, despite significant progress in building economic security in the region, the process of adaptation of CEE economies to EU standards is uneven and requires further strengthening of coordination of energy security, environmental friendliness of production, patenting authorship of technical developments,which will lead them to form a unified policy on an everexpanding range of issues.

Solving the problem of refugees and illegal migration in the CEE region

The problem of refugees has caused the most painful blow to the CEE countries, because in the situation with migrants from Africa and the Middle East, it were the southern border of the EU, in the case of Ukraine – that took on the main flow of labor migrants from the East.

The main recommendations which UNHCR and EC can implement are:

  • to increase quotas for the reception of migrants;
  • to agree on lists of “dangerous” and “safe” states;
  • to establish at all “problematic” EU borders, refugee reception centers that will register migrants;
  • to start an active fight against the criminal structures which are engaged in the transportation of migrants.

Of course, it will be extremely difficult to implement these recommendations in practice, however, their gradual implementation can in the near future eliminate the negative consequences of the crisis and reduce the risk of its inflaming.

Normalization of EUCEERussia relations in the sphere of economic and political relations

Today, the issue of normalization of relations between the countries of the region and Russia is also on the agenda of the European countries. This resolution of this issue is urgent due to, first, to the problems of Russian gas supplies, which have become more complicated after the failure of Russia and Ukraine to reach a consensus on the price of fuel transportation and as a result of the crisis in Russian – Ukrainian relations. All the schemes of the European Union, so-called “diversification”, deprive the region of its former privileged position as the first recipient and further distributor of Russian gas if it is supplied through Ukraine. Attempts by both individual countries and the EU as a whole to block bypasses of Russian supplies increase the uncertainty and concern of these countries about the prospect of providing themselves with a necessary and yet uncontested source of energy, while the leading EU countries themselves in the new conditions benefit from any alignment in resolving the issue of supplies.

The Ukrainian – Russian territorial conflict in Crimea and Eastern Ukraine added to the tension in the EU – CEE – Russian relations in the sphere of economic and political relations, which later served as an extension of the EU’s economic sanctions against Russia.

Thus, it should be understood that cooperation between Russia and Central Europe without finding a solution to the Ukrainian – Russian conflict is doomed to very low rates of development. Therefore, it is necessary to make joint efforts through the policy of “common neighborhood” and “joint Eastern European partnership”.

  • Resolving the issue of how to approach financing, researcher proposed few recommendations.
  • to develop commercially attractive, revenue-generating projects, with a sound financial rationale;
  •  to develop projects of key economic impact with lower financial returns.

Thus, summarizing the approaches of improving the Sino – CEE countries cooperation within BRI, it should be noted that, the geopolitical realities in the region should be considered. Thus, being located on the border of the EU, this region is a geopolitical map of the interests of both Western and Eastern countries. Based on this, it can be concluded that lying along the border of two civilizations, the region, strengthening its economic and infrastructural positions, creates a problem of contact between the geopolitical interests of the EU, the United States, the Russian Federation and, since 2012, the PRC. In order to resolve this conflict of interests, as well as for the peaceful promotion and participation of the region in the BRI initiative, the recommendation to continue pragmatic cooperation with all the subjects of the initiative comes to the fore.

Maria Smotrytska
Maria Smotrytska
Dr. Maria Smotrytska is a senior research sinologist and International Politics specialist of the Ukrainian Association of Sinologists. She is currently the Research Fellow at International Institute for Middle East and Balkan Studies (IFIMES), Department for Strategic Studies on Asia. PhD in International politics, Central China Normal University (Wuhan, Hubei province, PR China) Contact information : officer[at] SmotrM_S[at]