Brussels battles Beijing’s Belt and Road

China has made no secret of its desire to control the trade links to its export customers. But a new deal with Japan could see Europe begin to push back

Infrastructure deal seeks to make financing more transparent and ensure environmental standards are met

CHINA HAS ALREADY MADE INVESTMENTS IN EUROPEAN PORTS SUCH AS PIRAEUS

ITALY’s decision to sign a memorandum of understanding with China on the Belt and Road Initiative indicates Beijing is determined to extend its model into Europe, but it may yet face challenges.

At the end of September, outgoing European Commission chief Jean-Claude Juncker and Japanese prime minister Shinzo Abe signed an infrastructure deal aimed at connecting Europe and Asia, in what was seen as a thinly veiled attempt to thwart the controversial BRI promoted by China.

The agreement, which involves infrastructure, digital and transport projects, explicitly underlines the importance of environmental and fiscal sustainability in the implementation of common projects.

While not directly mentioning China, the European Union has highlighted the importance of a connection between the various countries that does not depend on a single promoter.

“Connectivity must be sustainable in financial terms. We must leave the next generation with a more interconnected world, a cleaner environment and not mountains of debt,” Mr Juncker said. “It is also a matter of creating interconnections between all the countries in the world and not simply the dependence on a single country.”

Among the major criticisms of the Beijing project are the lack of clarity in the methods of financing, the risk of incurring unsustainable debts by the host countries and the failure to comply with environmental standards.

In response to these criticisms, the agreement between the EU and Japan provides for “transparent procurement practices, the guarantee of debt sustainability and high standards of economic, fiscal, financial, social and environmental sustainability”.

Mr Abe pointed to the growing co-operation between Brussels and Tokyo as a “resounding declaration” at a time when “the values and principles that are dear to us could waver or drift”.

In a white paper on defence published simultaneously, Tokyo accused Beijing’s ambitions of being “incompatible with the existing international order”.

Mr Abe also added that whether it was a single road or a single port, “when the EU and Japan undertakes something, we are able to build sustainable connectivity based on respect for rules”.

The EU-Japan collaboration could include EU funding for Japanese companies interested in testing new drone technologies to capture real-time high-definition mapping data in Africa to allow policy makers, public agencies and farmers to make informed, data-driven decisions.

The agreement could also see Japanese funding for European companies supporting renewable energy on the Asian market.

From a geopolitical point of view, the agreement puts the EU in a more central position, moving from observer to participant. Europe will place itself in a more central role both in terms of trade, investment and strategic definition in international politics.

Incoming commissioner Ursula von der Leyen will have the important task starting from November to follow up these intentions and restore a more significant geopolitical role to the EU.

First published on Lloyd's List website October 2019