The new Silk Route: opportunities and challenges for EU transport

The new Silk Route, or “Belt and Road Initiative” (BRI), is a major policy initiative developed by China to improve connectivity between Asia and Europe. Although no official definition of the BRI exists, it refers to six major land corridors across the Eurasian continent and a network of maritime routes connecting Asia with Africa and Europe. It connects 65 countries which jointly account for 60% of global Gross Domestic Product (GDP) and 30% of global population.

The Transport and Tourism Committee of the European Parliament appointed us to examine the BRI and the opportunities and challenges it brings to European transport and logistics systems.

Since the BRI’s launch in 2013, it has been the subject of many launches and conferences. While there is no formally published programme or budget, or even an official list of BRI projects, many projects have been labelled “BRI”, in some cases apparently because they are in its geographical scope. Nonetheless, we identified around 80 air, road, rail or maritime projects, representing a total investment of over €100 billion, benefitting from Chinese financial engagement.

We identified investments in ports spread along the whole maritime trade route between Asia and Europe. In the EU, most investments are at transport nodes, through the acquisition of shares and/or investment in ports, airports and rail infrastructure, particularly at the EU’s borders in the Balkans and in central and eastern Europe.

The scale and variety of Chinese investment in the EU’s transport infrastructure has raised the question of how the BRI will affect the European transport and logistics systems and what opportunities it will bring. We found that:

• Chinese parties are willing to take construction risk and to build infrastructure in Europe.
• EU businesses may become involved in transport infrastructure projects along the BRI, particularly in Central Asia.
• Rail services between China and Europe are growing and offering new connections to European operators, shippers and industry.

In addition, the BRI could be good for the environment, offering a net reduction of CO2 emissions as some goods switch from air freight to rail. It could also become a platform for streamlining customs arrangements between China and Europe.

However, we also identified several challenges for the EU in its policy response to the BRI. The lack of a definitive BRI investment plan or programme may lead to projects which compete with or duplicate others, either inside or outside the EU, and/or projects which are implemented because Chinese funding is available, with little focus on the demand for, or sustainability of, the services that they are intended to support.

From the perspective of the EU:

• Improved accessibility for trade between China and the EU may alter the relative competitive positions of EU Member States.
• Chinese dominance in rail transport between Europe and Asia, or control of the entire logistics chain, may significantly increase its market power as a trading partner.
• Use of Chinese construction or operational standards in non-EU countries could reduce or supplant the use of EU standards and products.
• The study included recommendations to address these challenges.

On planning the EU’s infrastructure, we concluded that there was, as yet, no need to modify the EU’s TEN-T programme. However, we proposed that the TEN-T corridor studies are reviewed and developed periodically as the work of the “Connectivity Platform” progresses and the BRI is more clearly defined. We also recommended that the EU should seek greater clarity on emerging BRI plans, and encourage studies on connecting TEN-T and BRI corridors, starting with the North Sea-Baltic Core Network Corridor of the TEN-T and the New Eurasian Land Bridge Corridor of the BRI.

On promoting the EU’s standards and technology, we concluded that EU institutions should encourage the adoption of standards, particularly the European Railway Traffic Management System (ERTMS). ERTMS has been one of the largest beneficiaries of TEN-T funding in the 2007-2013 and 2014-2020 multi-annual Programmes and is increasingly used in China, particularly on its high-speed rail network.

We also made recommendations for engagement and consultation with China, and specifically for guaranteed reciprocity of access to EU and Chinese markets.

The final report of the study is available on the European Parliament website.

Alberto Preti, Associate at Steer, presented the report at the European Parliament TRAN Committee meeting in Brussels on 20 March 2018.

The study was managed by the Policy Department for Structural and Cohesion Policies of the European Parliament.