EU to stand against OBOR?

Handelsblatt, a leading German newspaper has reported that 27 out of 28 EU ambassadors to China have signed a report criticizing China’s Belt and Road Initiative.

If these reports are true, then it would become one of the biggest setbacks to China’s ambitious project.

Background

China has initiated a Twenty-First Century Maritime Silk Road – ‘One Belt One Corridor’ that focuses primarily on connecting and encouraging cooperation among Eurasian countries. The emphasis is on enhancing land as well as maritime routes. The policy is significant for China, as it aims to boost domestic growth in the country. It is seen as part of China’s strategy for economic diplomacy as it underlines China’s goal to undertake a larger role in global affairs.

Most South Asian countries have signed this deal.  India has however, maintained a strong stand of not being party to the joint initiative. Abstaining from the OBOR forum that was held recently, India’s main concern is that the ‘China Pakistan Economic Corridor’ (CPEC) which is part of OBOR, runs through Pakistan occupied Kashmir. However, China has not yet tried to address this issue.

OBOR is a development strategy that focuses on connectivity and cooperation between Eurasian countries, primarily the People's Republic of China (PRC), the land-based Silk Road Economic Belt (SREB) and the oceangoing Maritime Silk Road (MSR). The strategy underlines China's push to take a larger role in global affairs with a China-centred trading network. The future of trade in Asia could depend heavily on what becomes of China’s expansive One Belt, One Road initiative.

European Union

The European Union (EU) is a political and economic union of 28 member states located in Europe. The EU has developed an internal single market by standardizing laws that are applicable across all member states. EU policies seek to ensure free movement of people, goods, services, and capital within the internal market, enact legislation in justice and home affairs, and maintain common policies on trade, agriculture, fisheries, and regional development. A monetary union was established in 1999, which came into force in 2002. It comprises of 19 EU member states, which use a single currency – the euro.

Analysis

Ever since China announced its OBOR ambitions, certain nations have expressed their concerns. On September 2017, India and Japan along with the US again sought to address concerns over China's OBOR. More recently, in February 2018, Britain has expressed concern claiming there were doubts about whether or not it would meet acceptable global standards.

In April 2018, it was revealed by Handelsblatt that 27 out of 28 EU ambassadors to China signed a report criticizing China’s Belt and Road Initiative. It should be noted that this report has since been confirmed by the South China Morning Post. It is also unclear on whether Handelsblatt saw a finished version of the report or an earlier draft. If this development is proven to be true, then it would become a massive obstacle for China as it concerns some of the biggest nations in Europe. According to the news report, Hungary was the only nation not to ratify this.

This development comes just before the proposed China-EU summit (to be held in July 2018). According to SCMP, the document accused China of trying to shape globalization to suit its own personal interests. It also notes that China is “pursuing domestic political goals like the reduction of surplus capacity, the creation of new export markets and safeguarding access to raw materials”.

Jyrki Kallio, a senior researcher at the Finnish Institute of International Affairs said, “Whether originally intended by China or emerging as a, no doubt, welcome side effect, China has been putting a wedge between some EU states, or between member states and the union. Some are concerned that if China continues to heavily invest, then it will become difficult for the international community to criticize China over its alleged human rights violations.”

Cui Hongjian, a European affairs expert at the China Institute of International Studies, said the document was meant to show that the EU has a united stance on China. “There has been a lot of discussion that the EU does not have a common policy towards China, and in particular the Belt and Road,” he said. “It is clear that EU countries are divided on Belt and Road, but I don’t think that this division is something we need to worry about. It’s a question of who wants to participate, and how deeply.”

Previously, Washington based think tank, the Centre for Global Development published a paper noting that China’s “Belt and Road Initiative” creates the potential for debt-sustainability problems. Researchers stated that it puts Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan and Tajikistan “at particular risk of debt distress”.

Counterpoint

China has dismissed these reports as inaccurate. "China has noticed the relevant report. As far as I know, the EU has clarified this to China. The relevant report from Handelsblatt does not conform to the facts”, Hua Chunying, the ministry spokesperson, told a press briefing in Beijing.

China has also argued in favour of this initiative noting that this could potentially revive and boost the economies of multiple countries across the world including Pakistan.

Assessment

Our assessment is that China’s OBOR project is both an opportunity and a test case for China to invent a new economic model based on the principle of peaceful co-existence and a region sans geopolitical rivalry. However, there are continuing fears that it will result in crippling the poorer nations that are part of the deal, and also affect Asian economy. Some of the more powerful nations in Europe as well as the US would also see this a threat to their own power and influence in the world. This project is also a source of concern for India. It was recently announced that Indian Prime Minister Narendra Modi will be meeting his Chinese counterpart at the end of this month. Could potentially losing ground on OBOR be the reason why China is now looking to improve its ties with India?

Read more: China defends OBOR

OBOR & the emerging world order