Silk Road Headlines_5th December, 2018

Joint-ventures are an added value for the BRI, but could be risky for participating countries in the long run.

Several joint ventures have been created between commercial parties in EU member states and Chinese companies. These alliances are becoming the driving force to create a uniform Eurasian transport system. They allow the involved to spread the risk and achieve higher returns while providing a bigger market for SMEs. The focus is mainly on freight transport by rail and sea, e.g. Northern Sea Route. This emphasizes that the current environmental changes in our climate are economically interesting. In general terms, it is becoming clear that Chinese Tier 2 cities are taking initiatives to spark logistic joint ventures with their European counter parts [Climate Change Set to Render Northern Sea Route Commercially Viable].

Besides rail and sea transport initiatives road transport is becoming popular. Ambitions are set at a 10-13 day transport period in a door-to-door manner, which makes it a formidable competitor. Commercially these projects are laudable. Yet they also provide challenges for the involved. For example, it is not clear if and how labour conditions shall be respected. European companies still need to safeguard employer’s safety, respecting local labour law. Countries with dubious labour conditions and applying equivalent labour contracts could circumvent European labour laws [First China to Europe TIR truck reaches Poland in 13 days].

Another challenge for European member states on a national and regional level is forging deeper alliances with China. This implies cooperating with their (economic) partners that are sanctioned by Western countries. In the long run, this could mean that member states need to re-evaluate their trade and diplomatic relations with western countries. Piraeus and several construction projects in Serbia and Hungary might be food for thought for China. Language differences, but also contrasting local (business) customs and local legislation might become a risk for Chinese investments, such as Piraeus. These investments disrupt the local and regional economy, which might upset the vested powers. Consequently, they might monetize their local advantage in order to remain in power [Cosco Shipping's Piraeus plans dealt a blow].

Aside from the challenges surrounding the Eurozone, the consequences of the migration-deals and Brexit might not be the only headaches for the European Union. It is worrisome to see how divided the European member states’ opinions are on the aforementioned dossiers. Aside from that, the EU must also re-evaluate the benefits of the current cultural and economic alliances, such as the United States, vis-à-vis deepening and widening alliances with new parties, such as China. At the moment, it is not clear who might win: the heart or the head.

By Clingendael