EU Scrambles to Forge Unified Stance on China’s ‘New Silk Road’ After Italy Signs Up

By James Carstensen | March 27, 2019 | 9:39 PM EDT

French President Emmanuel Macron and Chinese President Xi Jinping in Paris this week. (Photo by Chesnot/Getty Images)

Berlin (CNSNews.com) – Meeting with Chinese President Xi Jinping in France, European Union leaders hinted at the possibility of joining Beijing’s “new silk road” initiative, but only after concerns over equal trade are addressed.

Tuesday’s meeting came days after Italy signed its own memorandum with China intending to join the so-called “Belt-and-Road” initiative (BRI).

Known by the Chinese as “One Belt, One Road,” the initiative is a massive infrastructure program which China says is designed to promote global trade and growth – but has triggered alarm bells in some Western countries.

Xi met with French President Emmanuel Macron, German Chancellor Angela Merkel and E.U. Commission head Jean-Claude Juncker for “high level” talks on multilateral trade and the BRI.

Macron said that, despite “divergences” between the regions, the E.U. stands to gain more through actively cooperating in the BRI than resisting it.

“Cooperation brings more than confrontation,” he said. “We have more to win through openness than through closing doors.”

Xi said that China and the E.U. should be “working side by side and helping each other,” rather than being “worried about watching our back with suspicion while moving forward.”

The leaders agreed on the need for more transparent trade mechanisms, such as reforming the World Trade Organization to more efficiently tackle questions of transparency, state subsidies and dispute settlement.

The BRI envisages a land and sea infrastructure network linking China with more than 60 countries, in Southeast and Central Asia, the Middle East, Europe and Africa, reminiscent of the ancient “Silk Road” trade route.

Merkel said the E.U. wants to “play an active part” in the initiative, but added that it would only do so if it leads to increased trade reciprocity from China.

The E.U. is China's largest trading partner, and China is the E.U.'s second-largest. Combined, trade between the two amounts to more than €1 billion ($1.28 billion) per day.

‘Partner’ and ‘systemic rival’

The E.U. has been critical of both China and the BRI of late, voicing concern about unfettered Chinese investment in European companies leading to dependence, while European countries often faced investment restrictions in China.

Earlier this month, the E.U. Commission described China as both a “partner” and a “systemic rival” due to its tightly controlled market, discussed possible measures against the “unfair practices of third countries and investments that threaten security or public order.”

It also discussed measures for a more “balanced and reciprocal economic relationship,” such as anti-dumping tariffs, screening foreign investments, and a proposed mechanism that would require third countries to grant reciprocal access to their public procurement markets.

Despite the caution, the meeting with Xi appeared to be a bid to present a unified front to mitigate individual bloc members from doing their own deals with China. Italy’s non-binding memorandum of understanding (MOU) with Xi last week included energy, finance, and agricultural projects potentially worth $20 billion.

Germany criticized Italy before the MOU signing, telling an E.U. summit in Brussels last week that the bloc needs a unified stance.

“In a world with giants like China, Russia or our partners in the United States, we can only survive if we are united as the E.U.,” Foreign Minister Heiko Maas said. “If some countries believe that they can do clever business with the Chinese, then they will be surprised when they wake up and find themselves dependent.”

Despite the criticism, China and France announced a dozen business deals on Monday, worth twice as much as those China agreed with Italy. They include agreements on energy deals and Beijing committing to buying 290 Airbus A320 and ten A350 aircraft.

E.U. members Latvia and Poland expressed interest in the BRI in the past, with Poland establishing an eastern European BRI hub last year, and Latvia signing an MOU similar to Italy (though those deals did not draw as much criticism as the more recent ones.)

“This is all about presenting a unified front,” said Robin Allen, Managing Partner for international investment firm Esperance Private Equity. “It is imperative that Western interests be involved in shaping the Belt-and-Road initiative. It evokes images of [President Lyndon] Johnson’s ‘Great Society’ infrastructure investments, which I suspect it is intended to do.”

Albert Goldson, executive director of geopolitical risk think-tank Cerulean Global Capital Council, said that in Italy’s case, “economic necessity supersedes political and security concerns because the BRI can create much needed jobs.”

He said it was important to bear in mind that an MOU is non-binding, and as such could provide the Italian government with flexibility and leverage in negotiating a more advantageous final agreement.

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