Connectivity: views from East and West

Joint EU-China effort needed to boost Asia-Europe connectivity

A decade on from the global financial crisis and eurozone debt crisis, the world of today seems only more divided between adherents and opponents of globalisation. The outbreak of COVID-19 has shown just how connected the world already is and has served as a stark reminder of the necessity of international cooperation in such times of crisis.

The world’s top three economies, China, the European Union and the United States, should be leading global efforts. Yet the US, under the Trump administration, has chosen the path of unilateralism and ‘America First’. Now, this great responsibility falls on the shoulders of China and the EU. It is up to them to maintain their partnership and jointly sustain multilateral cooperation. China and the EU can start by enhancing the Asia-Europe relationship.

Despite the rise of nationalist and protectionist sentiments over the past decade, Asia and Europe have persisted in strengthening ties and exchanges. For instance, the EU has signed free trade agreements with South Korea, Singapore, Japan and Vietnam in the past few years to boost trade and investment flows. The highest level of exchange between Asia and Europe, the Asia-Europe Meeting (ASEM), has grown in size from 45 members in 2008 to 53 today. ASEM now accounts for 60% of global population, 65% of global economy and 75% of global tourism. A constructive relationship between Asia and Europe could ‘spill over’ to other regions of the world.

Both China and the EU support continued globalisation and recognise the untapped potential in further connecting Asia and Europe. As such, in 2013 China proposed the Belt and Road Initiative (BRI), while in 2018 the EU unveiled its Strategy for EU-Asia Connectivity. Both plans seek to boost Asia-Europe connectivity. They are also founded on the shared belief that improving networks in transport, digital and energy, and bolstering people-to-people exchanges will increase the wealth and well-being of all partners involved.

However, due to a number of differences – in economics, politics, values and culture – China and the EU have yet to coordinate their two connectivity initiatives, which indeed share common goals. Many EU observers view the Strategy for EU-Asia Connectivity as the EU’s counter-reaction to China’s BRI. Worse, the EU has officially labelled China as a “systemic rival” in a policy paper released in March 2019.

While the EU has voiced concerns about the sustainability, rules-based principles, and transparency of China’s BRI, the Chinese have expressed exasperation at the growing antagonism with which its desire to promote growth and development has been treated.

The current focus on divergences instead of convergences hinders not only the China-EU partnership but also their contribution to wider Asia-Europe cooperation. Both sides agree on the necessity of enhancing connectivity. They also share the understanding that no side individually can provide adequate funds to meet the enormous demand for development.

If joint efforts on an inter-regional level are not feasible for now, China and the EU can return to a basic bilateral approach. Though less well-known than other such initiatives, the EU-China Connectivity Platform established in 2015 demonstrated the willingness of both parties to cooperate on transport infrastructure development. Yet, as of its most recent meeting in 2019, no concrete project has been implemented.

Hopefully, the two sides can soon agree to realise some projects from the list proposed by the Expert Group meetings of the EU-China Connectivity Platform. Good practices and lessons learned from these concrete projects can serve as the basis for a code of conduct on connectivity. This bilateral code can also guide trilateral cooperation – such as joint EU-China projects with third countries in Africa or Central Asia. Eventually, the EU and China can share such codes with partners in ASEM.

This code of conduct should collect opinions from as many stakeholders as possible, namely international financial institutions, multilateral development banks, industry representatives, and civil society. Another principle to keep in mind is simplicity. As each project involves different participants, each party should be able to add those elements which are essential to their own core interests and/or values. If the basic code of conduct itself is already too long and complicated, it would make implementation of such projects difficult.

Without any concrete examples of success, policy papers and codes of conduct are just words on paper. If the EU and China want to take the lead in boosting connectivity between Asia and Europe, initiating tangible projects via the EU-China Connectivity Platform is a good start.

Recover, reconnect and rebuild better – EU-Asia connectivity beyond 2020

The COVID-19 pandemic has hit the world in an unprecedented manner. From a European perspective it is particularly worrying to see how the pandemic has disconnected continents, countries, economies and societies. The US and China are decoupling, borders within the Schengen area and beyond have been closed, supply chains have been disrupted, global trade is expected to fall by up to 32% in 2020 and foreign direct investment (FDI) flows are predicted to decrease by 30 to 40%. People-to people connectivity, global conferences, events of all types and international student exchanges may take a long time to recover. However, the pandemic has also accelerated new forms of connectivity by incentivising innovative ways of working, interacting and living.

The post-pandemic recovery is already underway, and countries – in partnership with international organisations – are rebuilding economies and societies. Leading economists warn that the global recovery will only be successful if the world is rebuilt stronger and remains connected and globalised. In this context, Europe’s relation with China, jointly accounting for approximately 36% of the world’s GDP, is critical to reconnecting economies and jumpstarting the global recovery.

It is therefore time to reconsider the EU response to the Belt and Road Initiative (BRI). This firstly requires an understanding of how the pandemic might impact the BRI: the economic consequences of COVID-19 will likely accelerate developments which were already underway prior to the crisis. Chinese lenders will face challenges like renegotiations of existing loans because recipient countries will have difficulties maintaining their obligations. Chinese capital is likely to be mobilised for domestic needs, which may limit the ability and appetite for extensive outbound lending. This could lead to more cost-efficient and sustainable infrastructure projects.

Some observers already expect a greater openness from China on a more collaborative BRI model including co-financing. This could build on the results of the 2019 BRI Forum which introduced a number of sustainability-related deliverables. For instance, China could make use of the International Green Development Coalition and the Debt Sustainability Analysis Framework, which is flanked by the Multilateral Cooperation Center for Development Finance.

Furthermore, the BRI may see a shift away from huge infrastructure projects into other areas of connectivity, such as strengthening health systems of low-income countries and responding to the rising demand in digital commerce, telemedicine and automation. The effects of the pandemic may lead to a heightened focus on sustainability and the financial viability of the BRI, accelerating the multilateralisation of the BRI as well as broadening its scope.

To identify adequate European responses to post COVID-19 collaboration on connectivity, EU officials should reconsider existing strategies. This includes the EU Connectivity Strategy for Asia, which was unveiled in 2018 and interpreted as a long-expected response to the BRI. It was presented as a European approach to connectivity that is sustainable and rules-based. The Strategy also emphasises the importance of a comprehensive approach to connectivity – that includes digital and people-to-people. It also underlines the need to align connectivity with existing international rules, as well as the central role of international financial institutions in funding connectivity and securing sustainability.

These elements of the Strategy seem compatible with the re-orientation predicted for the post-COVID-19 phase of the BRI. However, to turn strategy into action, a more vital EU-China collaboration on connectivity may need a specific code of conduct or another consensus on joint rules. To negotiate such code of conduct or any other new agreement would most certainly be a protracted process. Given the urgency for an inclusive global recovery, it seems more practical to build on already existing mechanisms and align them with relevant multilateral frameworks.

The ideal cooperation mechanism to enhance collaboration between the EU and China, and beyond, would be the EU-China Connectivity Platform. It was established in 2015 between the EU Commission and the National Reform and Development Commission (NDRC), but so far has limited itself to the transport sector. The objectives of the Platform should be enlarged to other areas of connectivity, such as digital connectivity and the health sector.

The Platform should also embrace and integrate existing multilateral frameworks related to cross-border action and thus support sustainable, comprehensive and rules-based connectivity. The aforementioned Multilateral Cooperation Center may prove useful, as well as the guidance on sustainable infrastructure issued by the G20 and the OECD Guidelines for Multinational Enterprises. In trying to find more common ground between the EU and China on rules-based connectivity, lifting the scope of the EU-China Connectivity Platform to another level could lead to a new phase of collaboration. Thus, EU-China and Eurasian connectivity could be at the heart of the post-pandemic global recovery.