China Will Govern EurasiaMon 9:30 am +01:00, 24 Aug 2020
ER Editor: The highly informative comparison piece by the Gefira team, comparing the New Silk Road Project with the infamous TPP trade deal, makes some key takeaway points:
- The TPP was designed to limit and override the sovereignty of participating nations in favour of US corporations; and to form a trade ‘club’ around China geographically without including it.
- Deals like the TPP deliberately disempower the state sector and state-run enterprises in participating countries.
- The New Silk Road, in contrast, respects national sovereignty and seeks to trade with state sectors where appropriate.
- Poorer participating nations benefit from enhanced infrastructure, energy sector development and industrial production.
- Some participating nations, however, may succumb to China’s power through burdensome levels of debt, a western trick.
China will govern Eurasia
Every state tries to make as much profit as possible. These come for the most part from taxes along with customs duties, which remain an important source of income.
The Obama administration, serving the neo-liberal US elites, forged a plan to encircle China in the Asia-Pacific region called TPP. The Transpacific Partnership was designed to get China to open its market completely, to waive customs duties and to align its law with that of the US. The TPP has been denounced by many of its critics, oddly enough mainly in Europe and in the United States, and not in China. Julian Assange’s statement is perhaps best known: “If the treaty is adopted, the TPP’s trademark regime will trample on human and civil rights.”1) The TPP was in fact created to give US corporations a head start in Asia by limiting the sovereignty of participating countries. Trump, realizing that Democrats were on very thin ice with the project, cancelled the contract and began his trade war with… tariffs, which brought considerable gains to the US budget. Both governments – Obama’s and Trump’s – realized and still pursue the same strategy by different means: America must countervail China’s superpower. The strategy has failed.
China’s New Silk Road plan opposes American attempts to reduce Beijing’s role in world trade. The TPP works even without the USA, and China is surrounded by the participating countries in the Pacific. Japan, Vietnam, Brunei, Malaysia and Singapore form a semicircle around the South China Sea, a sea that plays a key role for China in trade with the rest of the world. This is why the Chinese decided to shift trade to the railway – a bold, huge and risky project. Let’s take a closer look at it.
The main difference between the New Silk Road and TPP is that it does not force the countries of Asia and Europe to change their policies or laws. The roads and railway lines to be built as part of the major Chinese project will benefit not only China but also the countries where they will be constructed. Even so, the Chinese can use the same method that Western countries are using everywhere in underdeveloped countries: Beijing might, too, make countries dependent on Chinese companies (e.g. those that will maintain new infrastructure) through loans and dependence on them. On the one hand, this will boost growth in the countries along the New Silk Road, while on the other, they could easily fall into Beijing’s debt trap. By the way, Beijing has already taken over a large port in Sri Lanka2)and is slowly buying up Pakistan.3)
The TPP forces countries to limit the role of the state sector and the state in the economy, which is not the case with the New Silk Road initiative: it respects the authoritarian governments of Central Asia and focuses on cooperation with state enterprises. In addition, the TPP focuses on agriculture, intellectual property rights, environmental protection and high-tech industries, in other words, areas where the US is a leader and where it would like to export its know-how for a fee and without customs duties. The New Silk Road, on the other hand, focuses on what the underdeveloped countries of Asia lack most: infrastructure and the creation of a large energy supply network that could prevent eternal blackouts (see the example of Pakistan, where the Chinese are building coal-fired power plants) and boost industrial development.
Great Britain, the Netherlands, Spain, France, Portugal and latterly the USA have built up their power through maritime trade. Three or two hundred years ago, in the agricultural era and later in the early industrial era, it didn’t matter whether you had to wait one or two months for a commodity. Today, the ever faster flow of information has increased the need for fast transport. In the IT era, we want to have everything immediately. Maritime trade became too slow for the consumer society. The days of air freight are also numbered in view of the climate targets of Western governments. The governments of Western Europe will have to rely on the connection to the Chinese express train network, also because of the green agenda.
Within the framework of the New Silk Road, Beijing is planning three main train routes:
1. from Manchuria to Western Europe via Russia, Belarus, Poland;
2. from Xinjiang in northwest China via the Central Asian countries, Iran, Turkey to Europe;
3. from the Chinese city of Kunming directly to Singapore.
With an average transit time of 16-20 days, train transport between China and Europe is now 15-20 days faster than ocean freight. There are connections between China and Germany which are even faster (e.g. 11 days). Of course, the fastest way is by air, but the volume and weight are very limited there so that the freight does not become too expensive. Therefore, rail freight is expected to have an average cost advantage of at least 80 percent compared to air freight.
However, Beijing is planning to build a network of super-fast trains with the aim of reaching Shenzen from Western Europe within 48 hours. In his book “Currency Wars 5”, the Chinese financial expert and bestselling author Song Hongbing calculated in 2015 that the three train routes mentioned, with a total length of more than 30,000 km, would cost around 650 billion dollars. Apart from the possible unprofitability of the whole undertaking, there are other risks:
1. Technical problems. China has great experience in building fast passenger trains, but in order to become competitive with sea transport, trains would have to be able to transport large loads through different climatic zones at lightning speed.
2. Infrastructure safety in many regions of Asia. In Pakistan, for example, the power of the government does not extend to every corner of the country.
3. Different track width in the countries of the former Soviet Union and in Europe is not a technical obstacle that can be easily overcome. It is a kind of military protection. Trans-shipment costs time and money.
4. Non-standardised customs clearance, bills of lading, communication systems.
5. Currency. Will all countries be ready to settle trade via the New Silk Road in the yuan?
6. Power supply. Parallel to the rail network, enough electricity would have to be provided for the energy-consuming express trains.
We believe that the New Silk Road will be built and operated despite all these potential problems. History and politics provide arguments for this.
Remember the Marshall Plan. It seemed to be unfavorable for America; it cost the US budget an insane amount of money for a prolonged period. Yet, after World War II, it forced Western European countries to use the dollar for trade. The dollarisation of Europe (it also involved the purchase of US government bonds) took a very long time, until the 2000 introduction of the euro. Now China can “yuanise” Euro-Asia to consolidate its position as a superpower. The flooding of the world with the yuan will certainly bring dividends.
A Eurasia united by a common energy and rail system, with the yuan as its lead currency, is Washington’s nightmare. America would then be like an island on the edge of the largest continent where most of the world’s people live.