From Beijing to the ports of Marseille and Guiyang, Europe is flexing its international trade muscles by announcing a new $300 billion economic development drive meant to counter China’s sweeping Belt and Road initiative.
The European Union, its member states and the European Investment Bank said Tuesday that they planned to bolster their multibillion-dollar foreign investment and industrial ties over the next five years. They also said they would boost employment opportunities for young Europeans and encourage French companies to focus more on the U.S. and Asia.
The ambitious plans set a heavy tax burden on industrial giants to build offshore hubs as well as boost the resilience of the common currency project, the euro.
The EU’s 11-year “Invest Europe” plan is the most ambitious in Europe’s postwar history. It will seek to mobilize $13 billion in assistance for businesses and up to $240 billion in projects each year. It will cost an estimated $400 billion to implement over the next five years, according to the European Investment Bank, a major EU agency.
“The trade and investment front is a matter of priority for the EU in this (2020) period,” the bloc’s leading economic official, German Commissioner Pierre Moscovici, said. He declined to specify what the “investment” part meant.
European Union leaders do not plan to start financing the new projects until September of this year. But this is probably too late to counteract China’s global drive, especially when that drive still lacks concrete details.
In total, China said its “Belt and Road” initiative – a broad plan that builds rail, road and other infrastructure across 67 countries – will invest $900 billion by 2025. The actual investment won’t be concrete until later this year.
Another plan by Beijing, a plan that would have China merge its state-owned enterprises and other financially affiliated entities to spur productivity, also remains in the works.
According to leaked transcripts of an announcement to the EU leaders this weekend in Brussels, Brussels, the BRI has only been formalized into an initiative by six countries: Egypt, Kazakhstan, Sri Lanka, Pakistan, Tajikistan and Turkmenistan. In addition, another 20-30 countries may join this economic and trade drive later.
Even if there are successes, it remains unclear whether they will unseat China’s effort. The BRI, unveiled last May, may already be linked to an unfair trade scheme involving $900 billion Chinese investment in Afghanistan. China’s investment also remains light on value added in the countries under consideration for its lofty investment plan.
There are also concerns over whether the BRI will only give China more influence in the countries under consideration. But earlier this year, the EU confirmed that the BRI must give equal opportunities for third countries involved. But even this remains contested within the EU, with Germany’s finance minister warning against subsidizing BRI-linked projects.
For Washington, a rising economic relationship with the EU has been a rare bright spot in trade talks since the U.S. administration launched a trade war with China last year. Since then, the EU has announced similar efforts to boost its own ambition.
The EU is striving to boost its brand to U.S. buyers. France just announced a $2 billion solar panel plant as part of an initiative to make it the “top manufacturer of solar panels in the world.” And the EU has already announced a $2 billion battery factory in Italy, to be followed by another, a world leader in free software.
The U.S. Embassy in Paris already named France as the “top supplier of French IT in the U.S.”
Though the EU is playing catch-up to China’s economy and state-backed industrial giants, the bloc has announced plans to build the infrastructure for a vast project, notably with a $3 billion commitment to overhaul the energy grid. It also pledged $8 billion for EU-U.S. energy infrastructure.
The EU and China had already begun talks on bilateral investment treaties this year, which EU officials said would start in June. But without concrete details, neither side was willing to commit to the agreement.