1. The “Three Seas Initiative” + China

in Economics 2019 · EN · Europe 2019 · Nation 2019 · Politics 2019 · Skepticism 2019 112 views / 11 comments
          
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GEOMETR.IT  jamestown.org

* “Fools are the only folk on the earth who can absolutely count on getting what they deserve.» Stephen King 

The China—Central and Eastern European Countries Cooperation Initiative (China—CEEC), organized in 2012, is an ambitious program intended to facilitate economic, technological, and cultural exchanges between the PRC and partner nations in Europe. The program is also frequently referred to as the “16+1” Initiative, in reference to the sixteen European countries who have joined the program. 

  •  Poland was one of the initiators, and a prospective leader, in the 16+1 Initiative: as a regional power and participant in multiple regional initiatives, as well as an important hub in the transportation corridors between China and Europe, Poland seemed to be well positioned to become a major partner for China.
  • Additionally, Poland is a country with a rapidly-growing market economy, which has displayed openness to Chinese economic activities—to include a significant presence for the Chinese telecommunications company Huawei (China Brief, February 1; Sinopsis, February ).

These factors have all made Poland a key partner for China in the 16+1 Initiative. However, the progress of bilateral cooperation within the China-CEEC framework has been slow and ineffective.

  • Boosting economic cooperation is one of the key goals of the 16+1 Initiative, but the program’s declarations have not yet translated into tangible benefits for Poland and other CEEC countries. The 16+1 Budapest summit in November 2017, and a subsequent summit in Sofia in July 2018, have not offered significant practical solutions and viable opportunities for member countries.
  • In addition, the ripples of tension between Beijing and Washington have also been felt in the Central and East European (CEE) region, as the White House has pressed states to choose sides in the conflict.
  • The Polish government has decided to align its foreign policy with the United States at the expense of ties with China—which may create serious impediments for the development of the 16+1 Initiative.

Poland Distances Itself from the “16+1”

Polish officials first began to signal disappointment with the 16+1 program in autumn 2017. Following the 16+1 Budapest summit in November 2017, then-Prime Minister Beata Szydło highlighted positive opportunities within the program, but she also admitted that China is “a demanding partner” (Polskie Radio, November 27 2017).

In January 2018, Prime Minister Mateusz Morawiecki expressed his dissatisfaction with Poland’s trade deficit with China, and praised U.S. President Trump for his contrasting “free and fair trade approach” (Forsal.pl, January 28 2018).

In July 2018, Morawiecki chose to attend a gathering in Czestochowa organized by the influential Roman Catholic Radio Maryja, leaving Vice Premier Jaroslaw Gowin to represent Poland at the 16+1 summit in Sofia, Bulgaria (TVP Info, July 8 2018; Office of the Polish Premier, July 7 2018).

Recent comments have moved beyond the economic sphere. At the “Future of Trans-Atlantic Relations” (FOTAR) conference held in November in the German city of Hamburg, PM Morawiecki said that China poses a challenge to NATO, as well as the wider democratic world (Dziennik.pl, November 17 2018). Just prior to Christmas, the Polish Foreign Ministry issued a communiqué on cybersecurity threats from China (Twitter, December 21 2018).

Such concerns were further reinforced in January, when two men were arrested in Poland on charges of alleged espionage linked to Huawei (Sinopsis, February 2). Leading Polish officials  announced a review of the use of Huawei equipment in the public sector (CRN.pl, January 15)—although officially, the recent ABW (Polish Internal Security Agency) operations targeted individuals and are not aimed at Huawei as a company (TVP Info, January 11; Radio Wnet, January 16).

Disappointments in the Economic Relationship with China

The lack of expected economic benefits has been a primary reason for Poland’s disengagement from China.  Exports to China from “16+1” members have seen ups and downs: mediocre results in 2014 (.35% increase) turned into a slump in 2015 (down 16.15%), followed by promising up-ticks in 2016 (up 7.57%) and 2017 (up 22.39%).

However, there is a bleaker picture behind these numbers. The value of exports to China increased from 10.5 billion U.S. dollars (USD) in 2013 to merely 11.7 billion USD in 2017.

By contrast, imports from China grew much faster: from 57.8 billion USD in 2013 to 73.2 billion USD in 2017. The “Visegrad Four” countries (Czech Republic, Hungary, Poland, and Slovakia), or V4, have more than a 75% share of total exports to China among 16+1 members, and around 80% of imports. The average trade deficit growth pace rate for the V4 was higher than for other countries in 16+1, with Poland recording the highest growth rate. Hungary was the only V4 country recording a moderate trade deficit decrease. 

  • Polish exports to China, which gained a little momentum in 2017 with 20% growth, lagged in the first ten months of 2018, growing only 11%. Poland’s trade deficit with China grew steadily between 2013 and 2017 (seeing a minor slip only in 2015), with imports exceeding exports roughly by a factor of ten. The cumulative trade deficit was above 106 billion USD for the years 2013-2017 (Asia Research Centre, July 2018).
  • Dissatisfaction with the growing trade deficit has been expressed on many occasions by senior Polish officials—to include PM Morawecki, the Ministry of Foreign Affairs, and Poland’s ambassador to China (Polska Agencja Prasowa, November 23 2017; Polish Ministry of Foreign Affairs, April 6 2018).

Additionally, overall Chinese foreign direct investments (FDI) in Poland through the end of 2017 were mediocre at best, with a range between as much as $1 billion USD or as low as $130 million USD, depending on the methodology (Sinopsis, August 25 2018). FDI that occurred in 2018, with a declared value of over $50 million USD, doesn’t make a significant difference (Bankie.pl, January 21). Chinese financing for infrastructure projects is also not an attractive option for the Polish government, which has better options—with EU funding as a primary choice (OSW, September 15 2017).

“16+1” and China’s Bilateral Relations in Central and Eastern Europe

The economic disappointments of 16+1 are explained in part by the model imposed by Beijing, wherein the initiative is not truly a regional development mechanism—rather, it is a “regional institutional gathering that masks the bilateral nature of the relations that are being established primarily between countries.”  As a result, Beijing and other member countries have been unable to find a common thread for the 16 European countries to create an integrated community with common objectives.

  • There are some signs that China will try to better address the needs of specific 16+1 members. Agricultural cooperation, e-commerce, and transportation have been singled out as prioritized sectors for future development.
  • However, to develop more effective cooperation, two major elements will be required: detailed analysis of the sectors where trade can be mutually beneficial, and China relaxing access to its markets. Questions remain as to whether Beijing will be willing and able to follow through on this latter course of action.

The “16+1” Initiative and the Role of the European Union

Disappointments with trade have been amplified by political issues connected to the European Union (EU). The influence exercised by Russia and China has prompted different reactions among CEE states: it is a concern for some countries (such as Poland and the Czech Republic), while it has been embraced by others (such as Hungary and Serbia).

  • Warsaw’s concerns have until recently been muted, as lackluster progress on economic issues was partially offset by the political benefits that Poland has obtained from 16+1.
  • The EU is anxious about the positions on China taken by the eleven states that share both EU and 16+1 membership, and about their high level of cooperation with Beijing (European Parliament, July 2018). As one of the key countries in 16+1, Poland could leverage its parallel position within the EU, and use the Chinese card to press Brussel and Berlin for concessions.

The loudest EU critic of growing Chinese influence in the CEE region has been Germany—which uses many countries in the region as parts of its own production chains, and treats them as part of an informal sphere of political influence (China-CEEC Think Tanks Network, August 7 2017). Facing the growing anxiety in Berlin over the 16+1 structure, Beijing decided to appease Germany, and has invited Berlin to participate in the initiative’s meetings. Despite this, 16+1 continues to be seen by some in Europe as a Chinese wedge into the EU.

The publication is not an editorial. It reflects solely the point of view and argumentation of the author. The publication is presented in the presentation. Start in the previous issue. The original is available at:  jamestown.org

GEOMETR.IT

11 Comments

  1. Among various economic, financial, infrastructural and political dimensions of the Belt and Road initiative, the security aspects of China’s presence in Europe, especially the Balkans, emerge as the most important set of issues that will determine the full scope of the initiative.

  2. EU membership offered CEE countries two key opportunities in relation to China. Firstly, EU accession concluded the European integration process and this allowed the CEE countries to re-evaluate their foreign policies and establish new goals, including re-establishing links with China.

  3. For example, Hungary’s focus on China raises its profile on the global stage in ways that its relationship with its biggest trade partner, Germany, cannot do. Therefore, it is assumed that politics must be at play in explaining why the CEE countries are so fixated with China.

  4. The Trojan horse description signifies the political and not the economic nature of the initiative. Limited academic research explores this; most published literature concentrates on trade and investment relations with little or no deep analysis of the political context.

  5. The participants of the meeting also exchanged views on new possibilities to foster the process of cooperation within the 16+1 format, such as proposition to create a CEEC-China transport infrastructure priority list, which would include projects of all the 16+1 countries.

  6. One of the issues raised in the meeting was also the border crossing delays, which downgrade efficiency of transport. The participants discussed the solutions which should be implemented in order to provide smooth transport of goods within the 16+1 countries.

  7. Besides the agreement on the new centre, little concrete information has come out of the Sofia summit. During the summit 18 bilateral agreements and memorandums were signed, but without specific results or projects being announced. Within those memorandums, however, China has promised to invest billions of dollars into development projects in the region as part of its Belt and Road Initiative (BRI).

  8. However, since its kick-off in 2012, 16+1 generated a trade imbalance of 1 country versus the other 16, with Chinese exports growing far more steadily than imports from its other 16 counterparts.

  9. For them, the platform can be used as a bargaining tool within EU negotiations and up competitiveness among the region ­– a voice made stronger given with the pioneers of the platform all being euro-sceptics: the Czech Republic, Hungary, Poland and Serbia.

  10. Conclusively, for all the 16 participants, their role in the platform will be beneficial if in line with their respective most important partner – the EU. The 16+1 platform can enhance opportunities on both bi- and multi-lateral levels, but only by adhering to the Union’s standards will the recipients be able to channel and benefit from Chinese investments. In other words, 16+1 needs to shift from being an alternative to becoming a full-fledged complement of the framework of EU–Chinese relations.

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