MAKING A TWO-WAY SILK ROAD
It’s time to approach the project from both sides, China and Europe, to reduce some of the skepticism surrounding it
The Belt and Road Initiative, created by President Xi Jinping in 2013, is now on everyone’s lips. The Economist devoted its cover story to it (July 28), and the international media report regularly about it. Think tanks analyze the advantages and disadvantages, strategic options and security policy consequences.
The project has true geopolitical dimensions. The BRI aims to reach a vast Eurasian economic area from the east coast of China to the Atlantic. Ninetytwo countries, 4.5 billion people and 60 percent of global economic power are covered by this — not to forget Africa, which plays an important role in this context, a concept recently supported by the China-Africa Cooperation Forum Beijing Summit. Whoever masters this area could also dominate the future world economy.
This also explains the mixed reception.
“The Chinese project of the century inspires admiration and anxiety. There are good reasons for both,” according to The Economist. “Countries eager for Chinese financing welcome it as a source of investment in infrastructure between Europe and China via the Middle East and Asia. Those who fear China see a sinister project creating a new world order with China as preeminent power. The confusion is — there is no single plan at all. No blueprint of that kind: so much money to be spent, so many kilometers of track to be laid, so much port capacity.”
And the focus is even wider. Now talks about a Pacific Silk Road, a Silk Road on Ice crossing the Arctic Ocean, a Digital Silk Road ... .
It would perhaps be better to concentrate on the origins of the project. The Eurasian area is already economically important today and will be even more so in the future. The Organization for Economic Cooperation and Development estimates that in 2050, China’s economy will make up around 25 percent of global GDP; the European Union and the United States will each have around 15-18 percent.
Between Western Europe and the eastern coast of China, however, there is a large belt of very poor countries, with an economically sluggish space in between. This can affect China’s stability just as much as it can affect — to a smaller extent — Europe’s security. But this is where its greatest potential is.
Already today, EU trade with four economies — the Chinese mainland and Hong Kong, South Korea and Mongolia — worth 770 billion euros ($900 billion; £686 billion) is almost as much as with North America (US, Canada and Mexico). In the next 10 years, this Chinese bilateral foreign trade with the EU will develop in a much more dynamic way (plus 80 percent) than with the US (plus 30 percent). This was proved by Professor Gabriel Felbermayer, the next president of the Kiel Institute for the World Economy, in a noteworthy analysis in the German magazine Frankfurter Allgemeine Zeitung on Aug 4.
Here, you could transform transEurasian trade in a sustainable way, as it is currently carried out almost completely via sea or air. Only 3 percent of goods are transported via rail, though with a strong increase over the last few years. Between 2014 and 2017, the goods trade carried out via rail has increased fivefold, while overall trade has increased by only 20 percent. Transportation by rail takes half as long as by sea and is much cheaper than air freight. So, if the rail and road infrastructure were significantly improved, saving time and money, goods trade could increase sustainably by 25-30 percent — around 200 billion euros — each year.
There can be little doubt that the planned infrastructure offensive makes economic sense, but the question is whether the planned Chinese funding is sufficient to cover such a transcontinental project. And where is Europe in all of this? That’s a question asked by many in this situation. Indeed, the EU will have to make a much stronger contribution with constructive ideas, and probably also important funding, to be able to positively shape the development and implementation of these ideas.
Such a concept is now available and could be intertwined with China’s BRI. Experts at the Vienna Institute for International Economic Studies recently developed the plan of a European Silk Road, which is supposed to connect the industrial center of Western Europe with the highly populated but less-developed areas in the east.
The full version of this European Silk Road is around 11,000 kilometers on land (rail and road). The northern route (6,700 km) runs from Lisbon to Uralsk at the border of Russia and Kazakh. Its core piece connects Lyon with Paris and leads via Brussels and the Netherlands into the Rhine-Ruhr region. Via Berlin, Warsaw, Minsk and Moscow are connected with an expansion via Nizhny Novgorod, Samara, to Uralsk.
The southern route (somewhat shorter at approximately 4,300 km) would start in the metropolitan region of Milan, the economic center of Italy, and lead via Zurich and highly developed southern Germany to Vienna, Budapest and Bucharest to the port of Constanza on the Black Sea. From here, the sea route could lead via the Russian port of Novosibirsk to Volgograd and, on the other hand, via the Georgian port of Poti and Tiflis to Baku on the Caspian Sea.
Modern high-speed trains and motorways connected with logistics hubs, seaports, river ports and airports should set new European standards, even in e-mobility. Over a period of 10 years, the investment of around 1 trillion euros (8 percent of the GDP of the countries covered by both routes) would lead to economic growth of 3 to 3.5 percent on average and a growth in employment of several million in wider Europe.
This initiative can be networked with no problem with the BRI. It would be complementary to it, instead of in competition. Regardless of this, it is in the interest of the EU to expand markets with its eastern neighbors using modern transport infrastructure. This region is home to almost as many people as in the EU itself — 30 million in the Balkans, 200 million in the former Soviet republics, almost 90 million in Central Asia and the Caucasus, 80 million each in Turkey and Iran. But incomes are only half as much.
So, the time is ripe for such a farreaching European visionary answer amid the public argument about globalization. Protectionism and isolation, tariff increases and threats of trade war on one side, and the defense of open trade relations, proponents for the breakdown of non-tariff barriers on the other. Europe is probably a trustworthy advocate for an open, global and socially better-balanced order.
“Each previous round of globalization was marine-based, spreading from the Atlantic to the Pacific. This time it is different. The inland economy will become a large component in economic globalization,” said Zheng Bijian, former executive vice-president of the Central Party School and now chairman of the China Institute for Innovation and Development Strategy.
“Connecting container cargo transportation, expressways, highspeed trains, air transportation, internet ... is fully integrating the marine economy and inland economy, which will bring about overall economic rise of the eastern, central and western regions of China and economic cooperation and development across the Eurasian continent.”
With such visionary projects, it is also a question of sustainability (debt sustainability), transparency of tendering and suppliers, including the local population, taking into account civil and social objections and including ecological aspects. Otherwise, the financial carrying capacity of smaller states can easily be overstretched and the understanding of citizens overtaxed. Even the temptation to corruption and cronyism can become too strong. The union has built up a vast wealth of experience over decades and could contribute a great deal in intensive exchange and cooperation with the BRI and perhaps help reduce some skepticism surrounding Chinese projects.
So, it is time to approach each other and tackle the Silk Road Project from both sides, from China and Europe. French President Emmanuel Macron was right in January when he said: “The ancient silk roads were never purely Chinese; these roads are to be shared and they cannot be one-way.”
Let’s start it!