La international presence of a State It can be measured by observing its activity in different fields on the world stage, from the economic to the commercial sphere, either competing or collaborating with the rest of the international actors. Now, The Chinese state machinery goes much further, Its ambition and capacity are materialized in its large global projects, from which no place in the world escapes. The branches of influence of the Asian country are going to bring several headaches to the rest of the international board, since with the shift of the world order towards Asia, it is increasingly becoming a referent structural growth who must be taken into account, as he is proving to be eager to increase his role.
It can be stated that the flagship project This desire to increase their power is reflected in the so-called New Silk Road (Belt and Road Initiative). This route is a Chinese government's contribution to development not only regional, but global, and an instrument of foreign policy and geostrategy with which they intend to create a new Sinocentric order that changes the axes on which the international system has been circulating. At the same time, it is a tool with which they try to guarantee the sustainable growth of the country to legitimize its system and form of government before its population and the international community.
This project, which It started almost seven years ago., aims to connect the Asian continent with the African and European continents through different combined land and sea routes[1], with which to acquire a greater importance, presence and influence in all those States where the Route can take place, thus enhancing its international dominance. One of the axes of this project is built on a powerful financial tool which serves as a catalyst between Chinese intentions and the infrastructure needs of the Route.
Chinese investments internationally have been booming for a decade, becoming the main support for the initiative and a key element in convincing countries to join this project, although the trap is observed from afar. Necessity is a dangerous factor, because under its cloak acts can be committed that would not be carried out under normal circumstances, and that is why it must be taken into account and stopped as soon as possible, so as not to have regrets.
Let us remember that the BRI – or New Silk Road – is forged on bilateral agreements between China and its partners, regardless of whether they are intergovernmental organizations or States. Beijing has no interest in institutionalizing the initiative, so there are no multilateral rules that commit all participants. If this project is completed, according to authors such as Fernando Delage "it has the potential to alter the current balances of the world economy, transform the global financial architecture and reconfigure Eurasia and the Indo-Pacific as a geopolitical space."
The BRI has the potential to alter the current balances of the world economy, transform the global financial architecture and reconfigure Eurasia and the Indo-Pacific as a geopolitical space.”
Fernando Delage, 2018
The New Silk Road, more than setting objectives, integrates the different Chinese economic priorities under the same project. Therefore, Xi's priority in terms of foreign policy is no longer independence - as in the Maoist era - or development - as in Deng's time - but unapologetic pursuit of preeminent global status. If the “reform and opening-up” policy from 1978 focused on attracting investment and technologies to China, and in the 2018s companies were encouraged to internationalize, the New Silk Road will foster a new transition that will bring in the interconnection between the People's Republic of China as an economic giant and the dynamics of globalization” (Maillo, XNUMX).
The BRI will reestablish Eurasia as a central pillar of the global economy, replacing the Euro-Atlantic axis, and will cause the international financial system to stop being led by the dollar. According to the 2015 BRI Action Plan: we are facing “a new model of regional integration and global governance.” And this is how they have treated it in their promotion to the top political leaders of the EU, in business, academic, think tanks and media. The Chinese narrative has been characterized by highlighting the inclusive and open nature of the project, its complementarity with other initiatives and by enhancing its importance as it is a process of transformation and creation of regional integration. win-win.
However, in this expansion of his foreign policy, an obstacle that you will have to face, if you want your project to continue standing, is, without a doubt, the European Union[2] (EU). The Union, According to own Xi Jinping, as he stated during his visit to Duisburg, Germany, in 2014, It is essential to achieve the project objectives; both for its importance in integrating the Asian and European markets and for its ability to materialize this initiative. However, it is not a surprise that the supranational organization is experiencing one of its lowest moments, from demographic problems to complications due to high levels of public deficit of the components of the Union.
This set of variables does not go unnoticed in the upper echelons of Chinese power, as they know first-hand that the same variables generate a perfect breeding ground to be able to present themselves as a effective and accessible alternative to solve these problems. Of course, this will not come for free to European countries, which see the Asian giant from a great duality: on the one hand, a good ally if the conditions required by the Chinese government are met, and, on the other hand, as an actor that can exert pressure given that it knows the weak points of the European economies.
Therefore, the double-edged axis is lurking, The EU observes how several Member States are very receptive to the initiative. Some of them are Greece, Cyprus, Malta, Portugal, Spain and Italy or group 16 + 1 (Poland, Estonia, Latvia, Lithuania, Romania, Bulgaria, Croatia, Hungary, Czech Republic, Slovakia and Slovenia, plus China). The countries of Eastern Europe are a vital target for the survival of the Silk Road. Given their geographical position, they have become a fundamental pillar in the terrestrial expansion of the project, as they are positioned as the first essential connection point with the continent. While the organization sees Beijing as a systemic rival that does not give in to European pressures while advancing without any control in the old continent.
To understand the Chinese incursion into these countries, we must look at the underlying problems that drive certain European governments to become committed to the Chinese initiative, as well as the Chinese strategic interests in Europe, since it is a combination of both that determines that move forward and the influence of the Asian country continues to grow. Economic, financial and commercial problems are the main assets that the Chinese government has to control the negotiations. Financial imbalances, excessive imbalances in the balance of payments, lack of investment, deficits and public debt are some of the elements that determine the opening of European countries.
With the current context generated by the COVID-19 crisis, The EU has been hit hard economically and morally, provoking a wave of doubts about its usefulness in providing aid to the most affected countries and their chances of recovery. He European panorama continues to darken and it does not seem that it will change, with the forecasts of economic decline on the rise and with few signs of agreements on the restructuring plans[3]. In addition, the problem of Brexit is added, since the final terms have not yet been agreed upon, when, in addition, the deadlines have already been exhausted.
That is why the EU has turned towards Japan, achieving a Free trade agreement to counteract the weight of Chinese investments within the framework of the Silk Road (highlighting investments in infrastructure, transportation and trade from the agreement). Furthermore, the EU-China summit has expressed the European ideology of standing firm in the face of the enormous amount of Chinese investment if a adequate multilateralism and reciprocity in the conditions for Chinese companies in European territory and towards European companies in Chinese territory, something that seems to hinder the negotiations. The status of the negotiations being based on three fundamental values: transparency, non-discrimination and fair competition, the latter is of maximum interest to the EU, having as its maxim not to allow China to establish itself in Europe through unloyal corporate tactics[4].
With all of the above, and taking into account the current context, it is necessary for the EU to act and re-emerge in the best possible way in the face of the Chinese “threat”, to be able to negotiate from a strong position and leave no possibilities for the Asian power to make their demands without giving anything in return. The urgency of the above lies in the rapid progress of the project, which has moved on to a second phase, called the Belt and Road, where the central focus is Europe, intensifying pressure on the European organization and the old continent.
Implications of the New Silk Road for the European Union
Diplomatic relations between the actors They started in 1975, were reinforced in 1978 through a Trade Agreement caused by the opening of the Chinese regime y were delimited in 1985 with the Agreement for Economic and Trade Cooperation, which today is the legal framework of relationships, developed through more than 50 dialogues held at ministerial conferences, forums, and annual bilateral summits since 1998, where they discuss issues about development, network security or global governance. Measures that, among many others, are included in the new Strategic Cooperation Agenda 2020, developed between 2006 and 2015; and, regarding the fact that the European Commission established in 2019 that relations must be based on consistency with Union legislation, rules and policies, as well as its values and interests.
They claim some mutually beneficial relationships that have been altered by China's rise and desire for leadership in the international community. In fact, in the XXI EU-China Summit 2019, committed to equal conditions in the field of infrastructure connectivity and to the promotion of the EU-China Connectivity platform, created in 2015 and which aims to strengthen connections between Europe and Asia within the framework of the New Silk Road.
Read: EU connectivity initiative could mean Belt and Road cooperation
So that we see the importance of the BRI: More than 70 States are already involved and many other OOII. The EU knew this from the beginning, although thinking that it was only an internal tool to maintain China's growth and the cohesion of the area, it remained quite cautious. So As the initiative has evolved, so has the Union, and today, it already actively participates to benefit both itself and its Member States (Member States), but also so that they do not act on their own. Likewise, for the EU The BRI poses numerous challenges such as the unfair competition that can be generated between actors or the possible application of Chinese standards instead of international ones.. For all these reasons, the European Parliament demands that the project be developed based on international law. Wants collaboration based on reciprocity, sustainable development, good governance and open and transparent rules; as he already stated in his proposed resolution on China-EU relations (2019).
However, it is doubtful that this will be achieved, and to deduce it one only has to start from the disputes that the actors currently have. From anti-dumping procedures within the framework of the WTO to mutual tension over different visions about the economy, society, justice or politics. It is necessary to mention that the application of international standards in China remains a challenge. The harmonization and effective convergence of its standards in the international context implies a construction and deconstruction of their law. Already in the Article 15 of the Trade and Economic Cooperation Agreement They established the creation of a Joint Commission to review and monitor the different actions carried out by the actors to examine what has already been said. But, in addition, as members of various international institutions they can and do resort to them to resolve the conflicts that arise between them.
Conflict resolution mechanisms between the EU and China within the framework of the New Silk Road
According to authors such as Jiaxiang Hu, the conflicts that arise within the framework of the New Silk Road must be resolved by the same legal and political means that resolve the other conflicts between the powers, since there are no mechanisms of their own that deal with matters between these States in this framework, with Asian Infrastructure Investment Bank exception. Therefore, regarding commercial, economic or investment conflicts, recourse will be made, among others, to World Trade Organization where China has acted as a respondent before the EU already on 9 occasions. Although you can also learn about these International Center for Settlement of Investment Disputes investor-State, which, however, is evaded due to its apparent inclination to protect the interests of investors.
For its part, the Permanent Court of Arbitration also has capacity, although, seeing the animosity that China has towards it and that it has not respected the award favorable to Manila in the south china sea, it stops being an option. As for the Asian Infrastructure Investment Bank, Is the most important institution of the Route, and, although it does not have an established body as such, article 55 of its agreement allows arbitration , as well as mediation and consultations.
Regarding non-commercial conflicts, they can be resolved by diplomatic means such as good offices, mediation, investigation, conciliation and negotiation. The latter being the most frequent when treating not only the conflict from a legal point of view, but also determining its economic consequences or the political and social effects of the lack of agreement.
Regarding the international private legal conflicts It is necessary to emphasize the “dispute resolution mechanisms specific to the BRI”. The Chinese International Commercial Court and the China Council for the Promotion of International Trade were announced in 2018 by the Communist Party and the State Council as the bodies that would work to reduce the gap between the different legal cultures of nationals or residents of the participating States. For its part, the judgments or resolutions of the International Commercial Court of China are binding, final and enforceable in a foreign country thanks to the principle of reciprocity that China includes in its legal system. And, at the end of 2019 it was revealed that to date they had presented 9 commercial disputes mainly covering the identification of shareholders and the distribution of profits, from countries like Japan or Italy.
As to China Council for the Promotion of International Trade, It has been established courts like the Quinhai to collaborate with arbitration centers to manage BRI disputes. However, both this and the first face, according to authors such as Wilske (2018), their own challenges such as bias of judges or the opacity of Chinese laws. Although, what really prevents them from being used is their very short history. Moreover, since there are alternatives to them such as the Hong Kong International Arbitration Center (HKIAC), which is the institution through which most disputes related to the BRI have been resolved, the China Economic and Trade Arbitration Commission (CIETAC ), which is the oldest arbitration institution in the world and one of the main permanent institutions of international arbitration, or the highly regarded International Court of Arbitration of the International Chamber of Commerce.
Regarding litigation, the most important legal instruments are the Brussels Regulations I and II relating to the execution of judicial resolutions in civil and commercial matters, and in matrimonial matters, respectively. Just as the Rome Regulations I and II, which establish the law applicable to contractual or extra-contractual obligations and are applicable when the matter is closely related to a Member State of the Union; That is, the defendant is domiciled in a Member State. However, it is presumed that submission is best when an agreement is reached.
Read: Conflict resolution mechanisms between the EU and China within the framework of the New Silk Road
Conclusions
As a recapitulation, the conclusions that can be reached are several:
The first one is that The EU and China are strategic partners, But also systemic rivals that they keep disputes open for years. China even blames the Union for Eurocentrism or lack of understanding of its economic boom while the EU believes that precisely this has altered relations in recent years due to the Asian giant's aspiration to become the leading world power. Therefore, those who are the origin and destination of the BRI must work to resolve their points of confrontation if they want relations to go well within the framework of the New Silk Road.
The second is that The BRI seeks to ensure the sustainability of the economic growth of the Asian country in addition to being an instrument of geopolitics and foreign policy., which is indicating a turning point in the international system. The global economy and balance of power may be shifting towards China. What it can mean countless advantages to the EU, as a focus of opportunities for their companies, or greater stability and security in Eurasia and the Indo-Pacific, as well as the construction of infrastructure such as the railway between Madrid and Yiwu. So you must actively participate if you want to be part of it.
The third is that the initiative poses a series of challenges for the EU in trade, economic and investment matters that lie in the lack of transparency in tenders, investments and contracts, as well as difficult access to the market, among others. Challenges that can become, as they have done on other occasions, conflicts that must be be resolved in accordance with international law. Arbitration, as a legal means, being the most ideal for this because it is , and for its flexibility. And the WTO and the AIIB, the institutions that They can carry it out by being respected and recognized by the Asian giant.
The fourth is that The BRI can negatively affect the environment, climate, DDHH (Human Rights), and many others; whose controversies can be resolved according to diplomatic means such as negotiation or conciliation, which by enforcing political, social and economic aspects are the most suitable for the EU-China, as was already established with the creation of the EU-China Joint Commission and the dialogues in the various ministerial summits and forums, where these issues are discussed.
The fifth is that China is doing its part and wants to influence international regulations through its own mechanisms for the BRI. But that, however, As he still has little experience and there are rumors about his dubious performance, it will be difficult for him still be well received; more there being more mechanisms in China itself such as the Hong Kong International Arbitration Center; and others like the Chamber of Commerce International. What is clear is that arbitration is the best option also for the private as it is more flexible than litigation and has greater enforcement capacity than mediation.
As we see, what in 2013 was just an initiative, that of the New Silk Road, today is a key project in the international community, and especially, for Sino-European relations.
[1] Two more areas can be added to the category of the combined routes mentioned, the technological route and the aerospace route, whose characteristics differ from the rest but with the same objective, to increase China's role as a global power.
[2] The history of relations in relation to Chinese investments on European soil begins in 2012, with the negotiations and the agreement called 16+1, which brings together 16 European countries (11 of them belonging to the EU), which has served Chinese diplomacy to promote its commercial intentions and the introduction to its great project.
[3] Currently, as of July 9, 2020, the method and final amount of recovery funds in this emergency situation are still under discussion, pending the leadership of the new German presidency, acquired on July 1, 2020. The negotiations are not seem to develop favorably due to disagreements between European countries.
[4] As well as respect for Human Rights, an essential factor if Chinese companies want to develop in Europe.
[5] Figure 3. Online document, available at: http://www.ieee.es/Galerias/fichero/docs_opinion/2019/DIEEEO78_2019AGUPAR_RutaSeda.pdf
References:
Zhou, H. (2017) China – EU Relations. Reassessing the China-EU Comprehensive Strategic Partnership. Singapore, Springer Publishing
The state council of the people's republic of china (2015) Action plan on the Belt and Road Initiative. English.gov.cn. Retrieved 10-04-2020 from http://english.www.gov.cn/archive/publications/2015/03/30/content_281475080249035.htm
The people's Republic of China (2017). Full text of the vision for maritime cooperation under the belt and Road initiative. The State council. Retrieved 04/03/2020 from http://english.www.gov.cn/archive/publications/2017/06/20/content_281475691873460.htm
Leung, C. T. (2019). Silk Road to Belt Road. Reinventing the Past and Shaping the Future. Springer, Singapore.
Delage, F., Maillo, J. and others (2018). Spain's role in the New Silk Road. Opportunities, Challenges, Recommendations. Navarre. Thomson Reuters Aranzadi Publishing House.
European Commission (2017). White paper on the future of Europe. Reflections and scenarios for the Europe of the Twenty-seven in 2025. COM (2017) 2025 of 1 2017 March. Brussels.
European Commission (2019). The EU reviews relations with China and proposes 10 actions. News press. Visited on 18/2/2020 at https://ec.europa.eu/commission/presscorner/detail/es/IP_19_1605
European Commission (2019). EU-China Summit: Rebalancing the strategic partnership. News press. Visited on 18/2/2020 at https://ec.europa.eu/commission/presscorner/detail/es/IP_19_2055
https://www.bbc.com/mundo/noticias-internacional-48004208
http://www.ieee.es/Galerias/fichero/docs_opinion/2019/DIEEEO78_2019AGUPAR_RutaSeda.pdf
https://ec.europa.eu/commission/presscorner/detail/es/IP_19_1605
https://www.consilium.europa.eu/es/meetings/international-summit/2019/04/09/
LL.M in International Business Law and Law from ISDE and graduated in Law and International Relations from Loyola University. CEO and business internationalization consultant at Reáculoateypunto.
It is really very informative and interesting. I congratulate you on the initiative and I will follow you from now on.
A hug,
Adolfo
Thank you very much Adolfo! We love reading comments like this. A hug!
Excellent analysis… Very good contribution
Thank you!