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Europe Is Trying (and Failing) to Beat China at the Development Game

Europe Is Trying (and Failing) to Beat China at the Development Game

One year after the European Union launched Global Gateway, a much-touted new strategy for infrastructure development around the world, Brussels is struggling to convince skeptics inside and outside the bloc that it really means business and that the EU can be a credible player in a game that China has dominated for a decade.

Global Gateway aims to mobilize up to 300 billion euros from the EU budget, member states, and the private sector by 2027. The cash is meant to help underdeveloped countries accelerate their green and digital transitions, while also benefiting EU economies and boosting the bloc’s global influence.

The effort comes in part as a European response to China’s Belt and Road program, which since 2013 has channeled hundreds of billions of dollars into the construction of roads, railways, and ports around the world. Other Western countries, particularly the United States and the United Kingdom, are also pushing their own foreign investment schemes.

One year after the European Union launched Global Gateway, a much-touted new strategy for infrastructure development around the world, Brussels is struggling to convince skeptics inside and outside the bloc that it really means business and that the EU can be a credible player in a game that China has dominated for a decade.

Global Gateway aims to mobilize up to 300 billion euros from the EU budget, member states, and the private sector by 2027. The cash is meant to help underdeveloped countries accelerate their green and digital transitions, while also benefiting EU economies and boosting the bloc’s global influence.

The effort comes in part as a European response to China’s Belt and Road program, which since 2013 has channeled hundreds of billions of dollars into the construction of roads, railways, and ports around the world. Other Western countries, particularly the United States and the United Kingdom, are also pushing their own foreign investment schemes.

“Global Gateway is a values-based offer. Our investments reflect European social and environmental standards,” EU Commissioner for International Partnerships Jutta Urpilainen told Foreign Policy. “Of course, it is also a geopolitical project. Infrastructure is at the core of geopolitics today,” she said.

The question is whether these efforts are enough to make the EU stand out. China is estimated to have handed out up to $400 billion in foreign loans from 2014 to 2018 and claims to have signed Belt and Road contracts worth about $100 billion in 2022. The Belt and Road Initiative is one of Chinese leader Xi Jinping’s signature foreign-policy measures and is meant to export both Chinese excess economic capacity and geopolitical influence. Now Europe is seeking to steal some of China’s checkbook playbook.

Stefano Sannino, the secretary-general of the European External Action Service, the EU’s diplomatic branch, said that Global Gateway represents a new approach to EU foreign aid, one that no longer focuses only on helping out the target countries but takes more into account European interests as well, seeking to build mutually beneficial partnerships. “It’s a massive change,” he said.

As examples of the projects already financed and underway, EU officials cite a new fiber-optic submarine cable that will connect several countries in Northern Africa and Southern Europe, and the EU’s participation in the construction of a 5-billion-euro hydropower plant in Tajikistan that will reduce Central Asia’s dependency on Russian energy.

Sannino said he expected the initiative to accelerate this year. “Now we are at cruising speed, we should be able to have a much more significant impact on the ground,” he said. In December, the EU gave the green light to 40 investment programs in Sub-Saharan Africa, Latin America, and the Asia-Pacific.

But the scale of Europe’s plans pale compared to the challenge. With Africa alone needing infrastructure investments to the tune of $150 billion per year, what Europe is offering “is a drop in the ocean,” said Solange Guo Chatelard, a researcher at ULB in Brussels.

Critics of Global Gateway also point out that the initiative doesn’t bring any additional funding to the table, instead drawing on resources already allocated by individual member states or by the 2021-2027 EU budget, and that many projects currently being developed under its banner would likely have happened anyway.

“This is largely a rebranding exercise,” said Barry Andrews, an Irish member of the European Parliament with the Renew Europe political group.

It’s not even clear how much of the promised money will actually materialize. Almost half of the headline-grabbing 300 billion euros are, in fact, private investments that the EU is hoping to generate with a system of financial guarantees.

“Looking at the attitude of investors, I’m pretty confident that they see the opportunity,” said Reinhard Bütikofer, the chair of the European Parliament’s delegation for relations with China. He said involvement by the European business community will also receive a boost from a business advisory group that is expected to be set up in the coming months as part of Global Gateway’s governance.

However, previous EU attempts to involve the private sector in development projects have hardly been smashing successes, with very little evidence about the actual impact of the financial tools that the EU is using to woo businesses. “There is a huge gap of trust between the development community and the investment community, and a lack of understanding in both directions,” Andrews said.

That isn’t a problem for China, which has a constant surplus of productive capacity and a government that can use its influence over state banks and private companies to enlist them in its geopolitical endeavors. Private tech giant Huawei has reportedly built some 70 percent of Africa’s entire 4G network.

Half of Global Gateway’s resources are earmarked for Africa, but leaders on the continent have also been quick to notice the lack of new funding and the uncertainty over private cash that mar the EU scheme, said Ovigwe Eguegu, a Nigerian expert on China-Africa relations at Development Reimagined, a think tank based in Beijing. “The messaging indicates that the European Union is going to match China, but in Africa there is a lot of skepticism,” Eguegu said.

At an EU forum on Global Gateway last summer, sitting next to Urpilainen, Senegalese Economy Minister Amadou Hott urged Africans to “manage expectations.” A few months later at the G-20 summit in Bali, EU Commission President Ursula von der Leyen and U.S. President Joe Biden hosted an event about their joint efforts to compete with Belt and Road. Indonesia and India were the only emerging-market countries present.

Africans can see that their relevance in the eyes of Europeans boils down to the immigration issue, Chatelard said, while for China investing in foreign infrastructure is a fundamental component of its own economic model. “Europe just doesn’t have that kind of skin in the game,” she said. “The whole Global Gateway initiative is cosmetics to make the European Union feel better about themselves, whereas Belt and Road, for all the bad things you can say about it, has an agenda; it’s about getting things done.”

Among the bad things that Western governments do say about Belt and Road is that China burdens recipient nations with unsustainable debt in order to take control of their infrastructure and increase its influence; many cite the Chinese takeover of the Hambantota Port in Sri Lanka as an example.

“Our approach is based on openness, sustainability, and it doesn’t want to create dependency,” Sannino said.

Chinese loans do tend to come with higher interest rates than Western ones, but according to many analysts the “debt trap” narrative is largely unsubstantiated and rings hollow to African leaders. “It’s not all rosy when it comes to China’s finance on the continent. Far from that. But the intentionality on the part of the Chinese to saddle countries with debt and seize their infrastructure has no credibility whatsoever,” Eguegu said.

Even Global Gateway’s advocates admit that the program would benefit from more clarity about what its priorities are and that there is a risk that it boils down to a simple repackaging of existing programs.

“Whenever there is a new promising concept, there is always a tendency within every bureaucracy to reframe what they have been doing for many years under the new headline,” Bütikofer said. “New label, but old wine in new wineskins. That is obviously not what the Global Gateway initiative is supposed to amount to,” he said.

But even fresh optics could help Europe stake a bigger claim to global influence. By many indicators the EU as a whole is the largest world provider of foreign aid for development. Between 2014 and 2018, the bloc disbursed 350 billion euros in grants, but that came via initiatives at the EU and national levels, which failed to steal the spotlight from China’s Belt and Road.

“Europe has been very frustrated that it dishes out billions of euros to Africa and everybody talks only about China,” said San Bilal, a senior executive at ECDPM, a think tank focusing on Africa-Europe ties.

Written by Kristel Haire