ECONOMY

How the EU plans to counter China’s investment strategy abroad

Good morning and welcome to Europe Express.

The European Commission tomorrow is set to put some numbers in its investment strategy abroad dubbed “Global Gateway” — an attempt to counterbalance China’s investment spree via its Belt and Road Initiative. The Financial Times has got a hold of the draft and we’ll unpack its proposals.

Meanwhile, officials in Brussels say it’s likely that EU leaders will hold a conference call in coming days to improve co-ordination amid a flurry of national restrictions to deal with Omicron. Here is a great explainer of what we know about the new coronavirus variant.

In trade news, a tit-for-tat mechanism that would force other countries to open their public procurement market to European companies is inching towards adoption. We’ll look at the main bones of contention between the parliament and member states.

And in a rare exercise of self-awareness, the commission has drafted internal guidelines on how to be more inclusive in its communication when it comes to gender, age, religion and disability.

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Belt and Road, EU edition

Having watched China extend its global economic and political power via the sprawling Belt and Road Initiative for more than seven years, western capitals are trying to develop alternatives, writes Sam Fleming in Brussels.

This week the EU will put forward its contribution, in the wake of a decision at the G7 summit in Cornwall in June for democracies to collaborate more closely on addressing developing countries’ multitrillion-euro infrastructure deficit.

The Global Gateway project pushed by Brussels will focus on physical infrastructure including fibreoptic cables, green energy, and transport, as well as health systems and education. The project aims to mobilise up to €300bn of private and public spending by 2027, according to a draft seen by Europe Express.

The plans do not explicitly name-check China and its signature infrastructure initiative, but the BRI looms heavily over the document. The EU wants to offer its financing under “fair and favourable terms” — in a reference to concerns that some BRI recipient countries have been hobbled by unsustainable debts.

Projects will be delivered with good governance, it says, and to high standards. The scheme will aim to “forge links and not create dependencies”.

The question is whether the Global Gateway lives up to the commission’s highly ambitious billing. The headline sum in the draft, for example, is a princely one that represents an increase from earlier internal proposals, and it will be closely scrutinised.

The commission’s plans hinge heavily on its ability to “crowd in” private spending using very modest amounts of public funding. This construction is long familiar to Brussels watchers, who have followed initiatives such as the Juncker Plan for EU infrastructure.

About €135bn of investments will be enabled by guarantees from the EU’s new European Fund for Sustainable Development Plus programme, the draft says. This will entail the Luxembourg-based European Investment Bank catalysing €25bn of investments.

Grant financing of up to €18bn will come from other EU programmes. And half of the targeted spending will come from European financial and development finance institutions.

All this involves a “Team Europe” approach — a slightly cringey label for Brussels joining forces with the EU member states and other financial institutions. Left unclear is how much of the Global Gateway spending will drive new initiatives, and how much amounts to a rebranding exercise.

What the draft makes abundantly clear is the commission’s newfound ambition to turn the EU into a serious player in the global infrastructure arena. The question is whether the outcomes live up to the heady billing.

Open sesame

With government procurement still one of the most closed markets worldwide, the EU is attempting to force it open with a tit-for-tat measure that would make it harder for companies to win contracts in the EU if their own government does not open tenders to European companies, writes Andy Bounds in Brussels.

The European Commission first proposed the International Procurement Instrument almost a decade ago. Some member states felt it was too protectionist and blocked it for many years. But now the instrument is inching towards adoption, a symbol of how the bloc has moved to a more defensive trade policy.

Member states in the council of ministers have agreed their negotiating position and the European parliament’s international trade committee will announce its position today. With all the main political groups backing the legislation, it should pass easily and then be rubber-stamped by the full parliament in mid-January. That will kick off negotiations between the three institutions before the law is finally adopted.

France, a big backer of the plan, would like to pass it during its presidency of the EU in the first half of next year.

“It should be an effective market opener” in an “increasingly hostile environment” for trade, said Daniel Caspary, the German EPP member who has steered the legislation through.

Government procurement typically accounts for 10 to 20 per cent of an average economy’s gross domestic product, according to the commission.

The EU has a €2tn market for public procurement of goods, services and public works. The commission estimates that half the global procurement market is closed to foreign bidders and greater access could more than double EU procurement exports, from €10bn annually to €22bn.

Brussels is particularly irked by the Buy America Act, which allows public bodies to prioritise domestic companies, and China’s restrictions on selling services in its domestic market.

The EU instrument is rather unwieldy, by contrast.

First, a complaint must be made that a bid comes from a country with a closed procurement market. The commission will then investigate and could add a penalty to the bid so it is less likely to win. The council wants an extra 20 per cent and the parliament 100 per cent. Or it could ban the company from future bids. But the parliament wants the commission to be able to ban all companies from that country from bidding. Its favoured threshold for an investigation would be €10m for works and concessions, and €5m for goods and services.

There is no guarantee that retaliation will lead these countries to open up in return. They could just close their own doors even tighter.

Yet arguments that buying cheap from third countries benefits the taxpayer are seldom heard any more.

As Inma Rodríguez-Piñero, a Spanish Socialist on the trade committee, said: “We can no longer be naive when it comes to trade relations. Why should other countries build our bridges and roads when we cannot build theirs?”

Chart du jour: Vaccine inequality

Supplies of vaccines to poorer countries have ramped up since September, but the global disparities in the rollout are stark: So far, 66 per cent of people living in G7 countries have had two vaccine doses; in Africa, only 6 per cent. Almost twice as many people in high-income countries have booster shots as have had first and second doses in low-income countries. (More here)

What’s your pronoun?

The European Commission has come up with fresh guidelines on how to write inclusive communication with equality and non-discrimination as key values in mind, writes Javier Espinoza in Brussels.

Europe Express has seen an internal document outlining the way commission officials are expected to “update their language”, with concrete examples of what phrasings to use and what to avoid.

This is not the first time the commission has offered guidance to its staff. It last published a “reminder” to employees in 2018 and the document included a section on inclusion and language. The difference this time around is that the entire guide is on inclusion.

Here’s a quick run through of the main points included in the guide:

  • Gender-neutral: EU officials are asked to avoid using gender-specific pronouns and steer clear of gendered words including “chairman”, “ladies and gentleman” or “man-made” and instead use “chair”, “colleagues” and “human-induced”. Also, instead of asking a person which pronouns they prefer, they should simply ask what their pronouns are.

  • Rainbow minefield: Commission staff are warned to be careful when they use words including “gay” and “lesbians” as nouns because it may be inappropriate. “Transgender, bi or intersex are not nouns,” the guidelines say. “Say trans people, gay person, etc or refer to the person explicitly.” EU officials should also avoid using the word “homosexual” because it can be considered offensive and it is sometimes used by anti-gay activists.

  • Display diversity: Instead of assuming that everyone is Christian, white and married, officials are encouraged to use examples and images of people with diverse ethnic, religious or cultural backgrounds. Instead of referring to Christmas, officials should say “the holiday season”. They should also refrain from equating Middle Eastern or Arab to Muslim and be mindful of immigrants or stateless people when referring to “citizens”.

A commission spokesperson said the overall aim of the document was to “raise awareness about being inclusive in communication” and admitted there may be better examples that could have been used.

“We are not prohibiting nor discouraging the use of the word Christmas. Of course not. Celebrating Christmas and using Christian names and symbols is part of the rich European heritage,” the spokesperson added.

What to watch today

  1. The head of the European Medicines Agency fields questions from EU lawmakers on Omicron, boosters and vaccinating children.

  2. Nato foreign ministers meet in Riga.

Notable, Quotable

  • Record high: Inflation in Germany has surged to its highest level since 1992, increasing the pressure on the European Central Bank to explain why it still thinks it would be premature to tighten its ultra-loose monetary policy.

  • Protocol boost: The economy of Northern Ireland has largely recovered from the hit of the Covid-19 pandemic, with economic output in the third quarter just 0.3 per cent below that in the final quarter of 2019. This marks the best performance in the UK and points to the nation prospering under the Northern Ireland protocol.

  • Second time lucky: Magdalena Andersson is back as Sweden’s prime minister after having resigned last week, just seven hours into the job. But yesterday she mustered enough support in a parliamentary vote to reclaim the premiership.

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Today’s Europe Express team: [email protected], [email protected], [email protected]. Follow us on Twitter: @Sam1Fleming, @javierespFT, @valentinapop.


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