Global Gateway: EU wants more influence through strategic investments - response to China's Silk Road

Created: 01/20/2022, 14:17

By: Christiane Kuehl

Response to China's New Silk Road: EU Commission President Ursula von der Leyen presenting the Global Gateway initiative © Valeria Mongelli/Imago/Zuma Wire

In mid-2022, the EU wants to tackle the first projects of its Global Gateway infrastructure initiative.

The multi-billion dollar program is Europe's answer to China's New Silk Road.

Brussels/Munich — The EU has been wanting to do something to counter China's New Silk Road* for years: its own attractive program that supports developing countries in building important infrastructure and in digitization — and at the same time is intended to secure more geopolitical influence for Europe. No credit traps, no political dependency is the motto. Instead, transparently financed sustainable projects. However, a first attempt from 2018 with the so-called “EU-Asia connectivity strategy” never really picked up speed. So now the second attempt, with more support from the very top, and above all with more money. 

“Global Gateway” is the name of the program that aims to mobilize around 300 billion euros from state and private sources by 2027.

“Definitely” Global Gateway could compete with the New Silk Road*, said EU Commission chief Ursula von der Leyen when presenting the program in December.

The EU Commission intends to launch the first concrete projects as early as this summer.

That would be fast by European standards.

Business in Europe welcomed the plans, which also involve the private sector.

Global Gateway wants to stand out from the New Silk Road

China* recognized the strategic importance of global infrastructure earlier and launched the Silk Road Initiative in 2013. Since then, Beijing has wanted to build roads, railway lines, power plants and other things along old trade routes and in partner countries - and thus expand its influence in important markets. Critics, however, warn the developing countries involved of a debt trap, political dependency and a lack of environmental protection. Beijing also granted low-interest loans for infrastructure and energy in south-eastern Europe, including for the notorious “highway to nowhere” in Montenegro*.

The EU Commission* now wants to apply the highest standards to Global Gateway in terms of sustainability, governance and transparency. In its own words, the EU offers the recipient countries a “value-based option” for the construction of infrastructure and describes Global Gateway in its official document as a “climate-neutral strategy”. But it is still unclear which countries are even interested in these higher standards. In the past, too, high standards of human rights or transparency were obstacles to European development cooperation with some countries whose systems thrive on a lack of transparency or corruption. Countries that are democratically or at least efficiently governed are likely to be particularly interested – as well as those that are already having problems with Chinese projects.

New Silk Road: Some states complain about environmental pollution

In some recipient countries, displeasure is growing, for example about environmental pollution or the fact that only Chinese construction companies and workers are involved in many Silk Road projects. In the Serbian city of Bor, China took over a copper mine. Since then, complaints from residents about increasing air pollution have increased, although according to the official news agency Xinhua, the mine should meet EU standards for "green mines". But projects and conditions of the New Silk Road vary — depending on which corporation and development bank are involved on behalf of Beijing. Credit conditions are mostly non-transparent, but do not always really lead to a debt trap. The commitment of the Chinese shipping company COSCO is considered comparatively successful,which owns the majority of the Athens port of Piraeus - and recently also acquired shares in a container terminal in Hamburg.

"We have to look closely at the needs of our partners," stressed Reinhard Bütikofer, Chair of the EU Parliament's delegation for relations with the People's Republic of China*. The official document states: “Global Gateway projects are designed, developed and implemented in close cooperation and consultation with partner countries.” The program serves two masters, Bütikofer formulated it on Tuesday at a discussion event of the Brussels think tank Bruegel. It is based both on the interests of the recipient countries and on the strategic interests of the EU. One thing that potential recipient countries should like: Unlike China, the EU will primarily award grants to the countries involved, they say.The EU also wants to be on an equal footing with the funded partner countries in “Global Gateway”.

Global Gateway: Digitization instead of concrete

The EU is less concerned with realizing huge construction projects with a lot of concrete.

Rather, Brussels relies on digitization, data connections or the promotion of education.

In transport, the EU wants to focus primarily on sustainable means of transport such as railways.

The EU* wants to choose carefully where and how it invests.

"We are good at financing roads," said EU Commission President Ursula von der Leyen.

"But it doesn't make sense for Europe to build a perfect road between a Chinese-owned copper mine and a Chinese-owned port."

All of this sounds a bit vague.

According to Bütikofer, however, based on recently implemented or proposed EU projects, it is already possible to see where the journey on the Global Gateway will lead.

He cited as examples project plans for renewable energy generation in North Africa and an undersea optical power cable between Portugal and Brazil that was inaugurated in June 2021.

According to the EU Commission, the latter is to be continued with the help of Global Gateway, including in other South American countries.

"We need a few well-planned, sustainable flagship projects," says Bütikofer.

Three to seven successful pilot projects by the end of 2022 would be a good start. 

Global Gateway: where the money should come from

But where does the enormous sum of 300 billion euros come from? The EU Commission is mobilizing up to 135 billion euros through the EU Fund for Sustainable Development (EFSD+). European financial institutions are to contribute 145 billion euros. The German development bank KfW is one of these. However, nothing is known about commitments from these institutes. Another 18 billion euros are to be raised under other EU aid programs. In addition, billions more are expected to come from the private sector. 

In order for the companies to take part, they should also be involved in the selection process for future projects. To this end, Global Gateway intends to set up a corporate advisory board, the composition of which is still undecided. This is a crucial difference to the New Silk Road, also known as the “Belt and Road Initiative” (BRI), said Bütikofer. “The EU sees the private sector as a partner. In the BRI, the private sector is a tool in the hands of government.” A European export promotion agency specifically for Global Gateway is also being considered.

However, some critics miss fresh EU money for the initiative.

They see Global Gateway primarily as a repackaging of existing instruments.

Bruegel expert Simone Tagliapetra considers such an assessment to be short-sighted.

Europe is already supporting global development with more money than any country in the world.

“Using existing resources more strategically is the right priority now.”

Problem: Goals are still too broad - focus required

That's going to be the challenge now. The goals sound good, but are still quite broad. One thing is clear: Europe wants to work with other countries. One partner is the Build Back Better World* initiative launched by US President Joe Biden at the G7 summit in the summer. "We should strive to work with as many of these initiatives as possible to create a web of connectivity programs," Bütikofer said. India, the African Union (AU) and the Southeast Asian state association ASEAN are also interested.

The EU has already entered into cooperation agreements with India and Japan.

Bütikofer mentioned a focus on the Western Balkans, which, as mentioned, is a focus of Chinese Silk Road projects in Europe.

The six states of the Western Balkans, Albania, North Macedonia, Serbia, Bosnia-Herzegovina, Montenegro and Kosovo, are striving to join the EU.

However, these countries have not yet had any clear prospects of accession, which makes them open to advances from Beijing* or Moscow.

Global Gateway has to prove itself

During the implementation of the program, the EU will have to learn: Which projects are successful, what needs do the recipients have, how can companies make the commitment attractive? How can the EU create real alternatives to Silk Road projects? China is building data centers in some African countries, Bütikofer told Bruegel. There is nothing to be said against the EU also building data centers in other countries. In this way, differences could become visible. "I think the credibility of this new initiative needs to be built up," said Bütikofer. "There is interest but we have to prove we can get things done." In any case, he is optimistic — above all because Global Gateway enjoys broad support in the member states, in the EU Parliament and in business. Now only the first concrete projects have to be done.