Research finds disagreement in Europe over China's Belt and Road scheme

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Some member states have been going behind the EU's back in terms of trading with China, it seems.

New research has discovered that some member states of the European Union have been disregarding the bloc's regulations by making trade agreements with China under the Asian's country's famous Belt and Road Initiative (BRI).

A report published by the European Court of Auditors (ECA) this month shows 15 countries have broken the rules by agreeing bilateral commercial deals, thereby bypassing the European Commission and, it says, creating 'multiple risks' of a political and economic nature.

Member states that have signed agreements with China include Italy, Greece, Estonia, Croatia,
Latvia, Lithuania, Malta and Romania. Significantly, the report notes that many of these have borders with other non-EU members - and much of the BRI's infrastructure has been created with the goal of linking the bloc with other parts of the world.
Indeed, ten of the members that have broken the rules were part of the Soviet Union until 1992 and so share a very different culture to some of the other EU members further west, as well as more desire to link up with trade routes in the east.

It has been suggested that making such deals with China could simply be a way of keeping the Asian giant happy and on-side, but the ECA said it is concerned that the regional politicians who made them have less experience in dealing with China and so could find themselves in hot water trade-wise further down the line.

Launched in September 2013 after President Xi called for the creation of a 'Silk Road Economic Belt', the ambitious BRI was hailed by official Chinese news agency Xinhua as "a Chinese solution to global economic blues".

It aimed to boost trade and stimulate economic growth by building huge infrastructure projects to connect China to other nations. Among the initiatives were railways to Russia and bridges to Bangladesh in the hope of creating a new trading route as significant as the original Silk Road, which China hoped could start a new era of globalization.

In its latest research, the ECA discovered the EU executive had not been notified of any of the new agreements being made, despite EU rules saying it must be.

Lead auditor of the report Annemie Turtelboom told it is essential for the EU to demonstrate a more unified approach.

"What we are seeing in our report is divide and rule within the EU. We need 27 players on one team.

"There is no comprehensive risk analysis, and this leads us towards the question if the EU is driving blind towards China. It certainly appears that we are sailing with no compass," she added.

The EU has always insisted it is open to positive trading relations with China, but under the proviso that it trades fairly, respects intellectual property rights and meets its obligations as a member of the World Trade Organization (WTO).

Although China agreed to do this when it joined the WTO in 2001, it still has some problems with a lack of transparency, industrial policies that discriminate against foreign companies and government intervention.

In 2016, the EU adopted a new five-year strategy on China promoting reciprocity, fair competition and a level playing field with a view to a new bilateral investment treaty, so it will undoubtedly be irked to find its own members going behind its back and effectively letting China do what it likes without honoring its commitments.

This will especially be the case lately, when the EU has been more critical than usual of Beijing and even published a document last year describing it as "an economic competitor in pursuit of technological leadership and a systemic rival promoting alternative models of governance".

China, though, continues to see Europe as a way to balance the pressures of its ongoing spat with the US, with European deals also having the potential to boost the BRI's credibility. 

However, it may be that all the tension is for nothing. In June 2020, the Chinese Foreign Ministry announced that 20 per cent of BRI projects have been negatively affected by the coronavirus pandemic, with travel restrictions and closed borders also taking their toll on many more.

Even before COVID-19, the BRI had been facing criticism, with many naysayers insisting a vast infrastructure project could never live up to its lofty ambitions.

China had therefore already been considering placing more focus on its Health Silk Road and Digital Silk Road, and - as long as the row on alleged spying and 5G can be put to bed - this might be something the whole EU wants to get behind in order to ensure unbroken supply chains in a post-COVID world.