Global Gateway can be Great
Lana Pedisic, YSC Research Fellow
Photo credit: Equipo Europa
Introduction
It is impossible to discuss the European Union’s Global Gateway (GG) without mentioning and, to an extent, comparing it to China’s Belt and Road Initiative (BRI). China’s inception of the BRI in 2013 symbolizes one of China’s and Xi Jinping’s vital foreign policy tools to exert China's soft power and geopolitical interests, which place China at the center of the world. To this day, this far-reaching foreign policy initiative carries so much weight that the Western world was instigated to imitate it. Alternatively, the European Commission (EC) aimed to Westernise BRI into its vision that expels democratic and value-based guidelines. The EU launched the GG at the end of 2021 to do just that. This postdates the unsuccessful Build Back Better initiative or B3W initiated by the United States of America (USA) and the G7 countries and partners under Joe Biden’s administration in 2021. One year on, GG is still yet to become a competitive offer for the world and risks becoming a failure. However, given its novelty and the grand vision exerted by the EC, there is room for adjustment and development. Nevertheless, the commitment of the EU and its member states is of utter importance if the GG is to become a competitive offer.
Presently, the BRI is highly active and continues to build development partnerships around the world. Nevertheless, the projects carry deficiencies in quality, financial distress, political coercion, and security risks. Therefore, the GG has a gap to fill in the global development deficit. The EU should consider improving the GG by making a greater effort to raise awareness, focus on quality infrastructure and long-lasting partnerships, eliminate existing development initiatives that overlap with GG’s objectives, and build regional partnerships with like-minded countries around the world to maximize efficiency and know-how of regional development needs.
Evolving Issues of the BRI up to 2023
In its tenth anniversary, the BRI is a highly evolved infrastructure development plan that the Chinese Communist Party (CCP) has, with a large degree of success, curated and implemented worldwide. While the CCP is filling in the much-needed global development gap, it is plagued by several factors that do not make it the best option but the only one available. Particularly, it falters in areas such as the quality of the projects, economic feasibility, and the questionable political and military intentions behind the investments. The USA and her allies describe the BRI as a “Trojan horse for China-led regional development and military expansion”(McBride et al., 2023, p2). Today, the BRI is present worldwide, which aids Chinese soft power by encouraging the usage of the renminbi currency, and setting an infrastructure and digital standardization such as the 5G network and Huawei. Presently, “China has already spent $1 Trillion on the projects,” and the majority of the world (2/3) is signed up or interested in participating (McBride et al., 2023, p3).
Over the years, infrastructure built under the BRI has faced shortcomings in quality. This particularly concerns construction flaws, environmental degradation, underestimating costs that become economically unfeasible, and the lack of transparency. For instance, Uganda has reported over 500 construction defects in its hydropower plant, Ecuador over 17,000 defects in its power plant, and Pakistan had to go as far as to shut down its Neelum-Jhelum hydroelectric plant (Dube & Steinhauser 2023). When low-quality infrastructure starts to break down, it affects other critical infrastructure connected to it and defeats the purpose of infrastructure development. Moreover, it raises costs and creates dependencies. Unforeseen faults add to the accrued costs that do not help the murky loans with high-interest rates that sometimes result in debt distress. Low-quality infrastructure particularly affects countries that face economic challenges. Therefore, many countries are bound to China for further financing to fix the defects of low-quality projects and refinance them through the Chinese Export-Import Bank (Hawkins, 2023). Therefore, China traps a country in a cycle that is difficult to come out of. In addition, being indebted to China can come with political coercion, by exerting partner country policies that align with China’s interests and especially in voting in the UN organizations on issues such as Taiwan and human rights violations in Xinjiang (Lampton 2020). Oftentimes, weak democracies get intertwined with the BRI, which further deteriorates the country’s democratic governance system (Dearing Scott & George 2020). A country in urgent need of infrastructural development and development aid might find it easy to receive BRI investments, which, however, comes at the high price of becoming a creditor state of China, paired with low-quality projects, and economic and political uncertainty.
Photo credit: Emerging Europe
BRI in EU Candidate States
China has had a particular interest in fostering relationships through the BRI with the EU, respectively, member states, and EU candidate states. Within the EU, Hungary, and Greece have been enticed by BRI investments to obstruct an EU bloc-wide effort to criticize China’s human rights violations (McBride et al., 2023, 10). However, China has been wooing EU candidate states, such as those in the Balkans, with BRI investments because of their potential to become part of the bloc one day. This can therefore bring China’s influence within the EU closer. By establishing a firm hold through the BRI, China can eventually gain influence within the EU and its common market once a country becomes an EU member. For instance, China has been fostering close relations with Serbia under President Aleksander Vucic, and 83% of Serbian citizens, view China positively. In contrast, EU member states, on balance, have a negative view (Silver et al. 2020; Vladisavljev, 2023). Despite the EU, unbeknownst to the Serbian public, providing 67.58 percent of Foreign Direct Investment (FDI) in Serbia, the population believes that China (4.28%) and Russia (9.33%) provide the largest amount (Vladisavljev 2023; Gledic et al. 2020). China, through the BRI, has over 60 infrastructure projects in Serbia, and its presence is the biggest in the region. However, with time, the Serbian illiberal government and the CCP found ways to expand the relationship to military procurement of drones and missiles, digital infrastructure such as Huawei, and security technology (Pedisic 2023). China’s established and mutually close relationship with Serbia is a concern for the EU as Serbia is an EU candidate state. It can be assumed that China, through the BRI, has achieved its objectives of establishing a lasting relationship with Serbia.
What is the Global Gateway?
The GG is the EU’s mega infrastructure and investment plan. Since its publication in December 2021, the initiative has been described by the President of the EC, Ursula Von der Leyen, as a “positive offer” regarding global infrastructure investment (European Commission 2021). The EU publication is a response to the changing global environment caused by the Covid-19 pandemic. What makes the GG a “positive offer” in contrast to the BRI is that it concentrates on sustainable, environmentally friendly, responsibly financed infrastructure, promoting health and education, and prioritizing local communities (European Commission 2021). Moreover, the G20 has estimated that the global infrastructure investment deficit will reach 13 trillion euros by 2040. Therefore, the EU must contribute to a more sustainable and secure world to fill that gap (Chatzky & McBride 2020). Accordingly, values are underscored as one of the main motivating factors in conceptualizing this initiative.
The EU wants to embody a larger presence around the world, by claiming to make it safer for ‘like-minded’ partners for cooperation and continued economic prosperity; the GG is a plan to do that by linking the world through infrastructure, education, standardization, and values pertaining to the EU (European Commission, 2022). It aims to achieve this by “offering attractive investment and business-friendly trading conditions, regulatory convergence, standardization, supply chain integration, and financial services (European Commission, 2022). The initiative is set to operate in a ‘Team Europe’ approach, solving the unanimity issue in EU foreign policy-making, meaning countries that wish to contribute can, under an EU umbrella, and those who wish not to can opt out. The EU uses a multilateral approach by converging resources and capabilities within EU institutions, member states, and financial institutions, of which 300 billion euros are projected to be available from 2021-2027 (European Commission 2022, 2). In addition to being projected as mainly serving political and economic objectives, the GG does indicate security as an integral part of its objectives.
Besides EU financial institutions such as the European Development Bank or the European Central Bank, the EU aims to exert financing from the European private sector, member states, and other partners interested in investing under the EU umbrella in global infrastructure. The EU by itself cannot provide high-cost infrastructure projects as it is hard to approve funding that can be agreed upon amongst member states and EU institutional bodies. Prior to the GG, the EU contributed to external infrastructure investment from 2014-2020: 9.62 billion euros, accounting for 14% (European Commission 2021, 9). This amount is set to increase by 300 billion euros by 2027. The creative means to pool more money will be through different EU bodies such as European Fund for Sustainable Development Plus, Pre-Accession Assistance III, Horizon Europe, InvestEU, Interreg, and EU banks.
Global Gateway’s Shortcomings
The motivation behind the creation of the GG by the EU comes from the exposure of vulnerabilities of the global supply chains during the Covid-19 pandemic, the deterioration of democracy worldwide, the global infrastructure investment deficit, and the EU’s push for strategic sovereignty (Varvelli & Rizzi 2023). On paper, the initiative sounds like a formidable plan to achieve the EU’s objectives, particularly to export the EU’s “development policy in its wider foreign policy interests”(Bermingham & Nyabiage p1, 2022). However, in practice, people are unaware of it and what it precisely does; the initiative is unclear and financially questionable, and it duplicates or overlaps many existing development initiatives already established.
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EU citizens are not largely aware of the GG and what it does, nor the financing the EU provides in FDIs. The EU fails to highlight that, as a whole, it is the largest provider of foreign aid, “providing over 50 billion euros a year to help overcome poverty and advance global development” (European Commission, 2023). Apart from the grand announcement of the GG by von der Leyen in December 2021, the EU has been relatively silent. There are a few publications on the progress and brief information on what the GG does. Nevertheless, there is limited to no publicity in comparison to the BRI. For instance, the GG’s presence in Africa is little known compared to the BRI. Research Director at the University of Johannesburg, Emmanuel Matambo, states that “the EU failed to advertise as effectively as Beijing”(Bermingham & Nyabiage, 2022, 15). As much as words of grandiosity are inside the EC’s document, the EU has failed to advertise and market the GG within the EU and globally.
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Although one of the main characteristics of the GG is ‘transparency,’ the initiative lacks clarity regarding what it is; project details, financing, insufficient online information, and questionable governance. Hence, this sows confusion among EU officials and the broader public. The EC has the main document of the GG and a few other shorter publications on its website, broadly describing the kind of projects it is running and planning. However, scattered information and details on specific projects and how they are financed are unavailable. Although 300 billion euros were stated to be invested globally from 2021-2027, Vincent Grimaud, the acting Director in the Commission’s department for International Partnerships, stated that “there is no additional money when it comes to the EU level” (Bremingham & Nyabiage, 2022, 5). The figure of 300 billion euros is meager compared to China’s already invested one trillion dollars. Another spokesperson from the EC could not answer how much money has been spent but did confirm that there is no central list of planned projects (Bremingham & Nyabiage, 2022, 23). As of February 2023, The Commission’s Directorate-General for International Partnerships has been tasked as the main overseeing body for implementing the GG (Furness & Keijzer 2022). However, details of how the projects will be evaluated and measured remain unknown. Overall, the initiative is structurally loose, which makes it appear superficial. The EU negates the GG’s purpose and makes it unattractive for private investment and member states to contribute under the ‘Team Europe’ auspice.
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This leads to the question of how realistic the envisioned pool of finances that the EU has curated is. The EU stated it will spend 300 billion euros from 2021 to 2027. The planned financing will come from a mix of different EU financial bodies. Within the EU, most funding is from the Neighbourhood, Development, and International Cooperation Instrument at 135 billion euros, EU grant funding at 18 billion euros, and the European financial and development finance institutions will contribute 145 billion euros (European Commission, 2023). The rest is expected to come from member states and private investment. The EU is weak at facilitating private capital outside Europe due to the higher risk factor. Similarly, member states also do not trust the EU’s international development financing with their public funds. Therefore, the EU hopes to resolve the issue of private capital and member state investment by potentially creating a European Export Credit Facility (Furness & Keijzer, 2022). Nevertheless, the timing of this endeavor is unknown, and whether the EU will be able to achieve the 300 billion euros promised by 2027 is even harder to conceptualize in reality. Even if the EU was to achieve a pooling of private and EU member states capital, 300 billion euros is a meager amount compared to China’s BRI at over a trillion dollars spent up to date.
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Provided that the EU already has set development initiatives, it is unclear how the GG is a new initiative. Development programs already exist, such as the EU’s Neighbourhood, Development, and International Cooperation Instrument, Juncker Plan, External Investment Plan, and European Bank for Reconstruction and Development, and other regional development programs (Okano-Heijmans, 2022). Furthermore, the financing is projected to be relocated from existing initiatives and projects already set to be done under the existing frameworks but relabelled as part of the GG. This makes either the GG unnecessary or the existing development initiatives needless. Both are currently in operation, and their purposes overlap, creating an unclear differentiation. Nevertheless, The Secretary-General of the European External Action Service, Stefano Sannino, points out the difference by stating that the GG “takes more into account European interests as well, seeking to build mutually beneficial partnerships” rather than just helping countries with development financing (Barbero, 2023). The GG might be more of a geopolitical tool than a pure development aid program. However, it is unclear in which ways it is and why the overlapping programs are still in operation if the GG takes financing and projects from them.
Policy Recommendations
Overall, the GG falls short in fundamental areas. Firstly, it is not popular, people are not aware that the initiative exists within Europe and globally. Secondly, it is structurally messy and lacks crucial details. Thirdly, the pool of finances the EU plans appears to duplicate from existing programs, and the feasibility of gaining member state’s and private capital is questionable. Fourthly, the initiative is repeatedly criticized for overlapping with existing frameworks, taking on existing projects, and placing them under the GG umbrella. Therefore, the EU should consider reformulating the GG in three critical areas:
Differentiate the GG by building a formidable marketing campaign and prioritizing quality infrastructure.
Get rid of overlaps by eliminating existing development programs. If the GG is a global development initiative and the EU’s geopolitical tool, then it is unnecessary that the existing regional programs run simultaneously.
The EU should strengthen the viability of the success of GG by partnering with like-minded countries that already have development initiatives within their respective regions.
Firstly, the EU needs a strong marketing and advertising campaign. The President of the EC, von Der Leyen, has emphasized that the GG is a “positive offer for the world” (European Commission 2022, 2). This is assumed to be in contrast to China’s BRI. However, if the GG is regarded as a European development ‘product’, the EU should treat it as such. The EU needs to provide more information and publicity to raise awareness for the initiative than it currently has with a single section under the Directorate for International Partnerships on the EC’s website. Assuming the EC’s documents are as grandiose as they sound, it will take a lot more dedication and resources to highlight the purpose and intentions of the GG within and outside the EU. Although the projects are currently opaque, and whether they are part of the GG or another development aid framework is unclear, the EU should prioritize high-quality infrastructure. In contrast to the BRI infrastructure, as earlier stated, the EU can prevail if it focuses on values and principles, quality, durability, and long-lasting support. The EU does not need to hurry in the number of projects it undertakes. The EU should differentiate itself by demonstrating sustainability through reliable, high-quality infrastructure investment upon value-based principles, prioritizing quality over quantity. Therefore, helping the EU within the normative framework of building stable democracies.
Secondly, it is imperative that either existing development initiatives or the GG is to be scrapped. Overlaps create unmanageable circumstances that are likely to be unsuccessful. The GG is built upon existing development frameworks but with an enhanced purpose of serving as a geopolitical tool. The existing regional and global investment and development aid loses its purpose if the GG is implemented effectively. If the EU is committed to pursuing the GG to be a success, then it should eliminate similar initiatives and run it under the GG umbrella. This would eliminate confusion and place all the necessary resources and energy into the GG.
Thirdly, The EC’s document on the GG has a section on global partnerships. This section briefly touches on the need to cooperate with like-minded countries on development projects. Expanding on this rhetoric, the EU should cooperate with countries in regions that are already running their development initiatives and have expertise in their respective regions. For instance, in Asia, Japan and India have notably contributed to development aid in response to the concern of China’s BRI (Barbero, 2023). Japan has already spent “300 billion dollars in public and private financing to infrastructure projects in Asia” (Barbero, 2023). Moreover, India and Japan are working on creating the Asia-Africa Growth Corridor. This is just one example where the EU can contribute to the GG and cooperate with like-minded partners. Although the USA did not succeed with the B3W, the USA, along with other democracies such as Canada, Australia, and South Korea, can all become important partners for the GG. Whether contributing to financing, offering regional expertise, or advancing geostrategic objectives, the GG can be that ‘positive offer’ for the world in cooperation with other democracies.
Conclusion
Momentarily, the EU’s GG is not a viable infrastructure plan and is therefore not taken seriously, neither internally nor externally. Critical flaws within the GG appear as if the EU is not serious about the initiative that it pledged so formidably to be a game changer in global infrastructure. Due to China’s easily available financing and lack of value-based partnerships, the BRI is a well-formulated global infrastructure plan for countries eager to participate. However, the BRI is flawed by low-quality infrastructure, questionable loans and financing structure, and China’s geopolitical aims. The GG does not have to quickly grab a large chunk of the Global South’s infrastructure investment. However, with time and demonstrable success in quality infrastructure, countries can choose between GG and the BRI.
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