The Highest Good Is Like Water

13 february 2016

How to Make the Silk Road Economic Belt an Area of Co-Development

Wan Qingsong is a research fellow at the Center for Russian Studies of Shanghai-based East China Normal University. He holds a Doctorate in Political Science.

Resume: A reasonable choice would be a trial and error method, that is, learning partners better through joint projects. Instead of creating new regional cooperation mechanisms that may lead to conflicts, China should gradually promote its project of the Silk Road Economic Belt.

This article is an excerpt from a research paper awarded the annual prize of the Shanghai Association for Russian, Central Asian and Eastern European Studies in 2015. The author expresses his sincere gratitude to the director, Professor Feng Shaolei, and other colleagues for their immense help in writing this article.

Speaking in Kazakhstan on September 7, 2013, Chinese President Xi Jinping proposed the concept of a Silk Road Economic Belt (SREB) based on an innovative model of cooperation. It is intended to strengthen economic ties, deepen cooperation, and expand space for development. The statement by the new leader on China’s future policy in Eurasia was a signal to mobilize comprehensive economic cooperation between China and Eurasian countries, and an important message to Central Asia and all regions adjacent to the Silk Road.

The idea immediately sparked heated debates in both China and the rest of the world. The initiative is yet to be systematized in order to avoid misunderstanding in the international community. The SREB can be viewed as a new open model for regional or trans-regional cooperation and may become an important experiment to create a mechanism of interaction among Western Europe, East Asia and Central Eurasia. It is not an easy task for China’s foreign policy.

Discussions in China And the World

In Astana, the Chinese leader formulated five major areas where countries could cooperate within the framework of the SREB project: 1) strengthening the coordination of countries in the region in the political field; 2) stepping up the construction of road networks; 3) developing trade through the elimination of trade barriers, reduction of trade costs, and investment; 4) increasing foreign exchange flows by switching to payments in national currencies; and 5) broadening direct ties among peoples. However, China’s immediate neighbors initially did not support the idea, either officially or at the expert level.

Russia, for example, at first simply ignored the Chinese initiative. Later, Russian diplomat Vitaly Vorobyov, Ambassador at Large and a special envoy of the Russian president to the Shanghai Cooperation Organization, in his article published in this journal expressed an opinion that Xi’s idea was “far from systemic;” rather, “it looks like a ‘test shot’ and its tone mostly sounds self-persuasive.” He asked several sharp questions: “Does this idea, disguised as a new brand name, actually suggest China’s utilitarian intent to find extra opportunities” in order to solve the increasingly acute tasks in both foreign and home policies? “Does the implementation of this idea suggest the creation of special institutionalized interstate instruments? Or is its real aim to create a Chinese-based flexible configuration of autonomous areas with liberalized trade and economic regimes, such as the Eurasian Union and Trans-Pacific and Trans-Atlantic partnerships? What are the criteria that make it possible to rate specific initiatives, facilities, and measures (multilateral or bilateral) as an embodiment of the idea of creating a Silk Road Economic Belt? How do you interpret China’s widely proclaimed principle of ‘common advantage’ with regard to trade and economic relations that are naturally permeated with the spirit of tough competition? Or is the objective quite different, where the emphasis is placed […] on creating a conceptual platform that would serve as groundwork for adjusting the fundamental principles of peaceful coexistence to China’s practices of doing business in the international political and economic arena?”

These issues are of much concern to many countries, and the Chinese government is faced with the serious task of systematizing the SREB initiative and filling it with concrete content. Numerous Chinese official think tanks are working on this problem. The first result of their efforts was a document entitled “Vision and Actions on Jointly Building the Silk Road Economic Belt and the 21st-Century Maritime Silk Road,” published on March 28, 2015 by the National Development and Reform Commission, the Ministry of Foreign Affairs, and the Ministry of Commerce of the People’s Republic of China. This document is of great importance both for the systemic development of China, and for the international community in general. It united both the land and oceangoing projects into one mega-project—“One Belt, One Road”—and set forth five principles of its implementation: promoting the development of transport and other infrastructure; removing customs and non-tariff barriers to trade; establishing a network of free trade areas; broadening the use of national currencies in trade settlements; and strengthening humanitarian contacts. However, the document does not include clear-cut plans or concrete steps to implement the mega-project. Beijing is yet to draw up a list of projects and offer attractive cooperation terms to countries along the Belt and the Road.

Experts offered their own understanding of what the SREB should be like and how to make it attractive and viable. Firstly, it is a new major bid for the implementation of global infrastructure projects. Secondly, it is a great strategy for peaceful growth. Thirdly, it is a new line of economic cooperation and development of China. Fourthly, it offers a perspective for cooperation and development of neighboring countries and regions. Fifthly, it is a practice based on a new type of diplomacy. Finally, it is a method of reconstructing the international order in Eurasia.

There is still no consensus about where the SREB belongs—to the sphere of geopolitics, economic cooperation or diplomacy, or whether it is an attempt at comprehensive revival of the Chinese nation. Scholars seek to summarize the initiative and believe that it should include countries of Europe and Africa and even the whole world, thus becoming a mechanism not only for broadening economic cooperation and building infrastructure, but also for developing friendly relations with neighbors. It must be admitted that the vagueness of the project, its essence and goals will have a negative impact on China’s foreign-policy practices. The sooner this vagueness is cleared up, the less space there will be for idle discussions, speculations and conjectures.

China should certainly place greater focus on this issue. The director of the Institute for Social Development in Europe and Asia of the Development Research Center of the State Council of China, Li Fenglin, sees good prospects for integrating the Chinese project with that of Russia.

How to Tap the Huge Potential

The SREB initiative is not based on a theoretical foundation yet. The existing theories of international and regional cooperation, as well as the practices of countries with economies in transition, are not quite applicable to relations in Eurasia. There should be theoretical support for regional cooperation and the development of interstate relations in general.

First of all, one should think of the content for the integration plan. Summarizing the existing practices, we can distinguish at least three models.

The first one is integration of developed countries. The European Union offers a good example. The European integration, which began in the 1950s, has several aspects: economic, political, diplomatic, and military. The novelty is in the transition from cooperation to a truly supranational community. The member states consistently passed through various stages of integration, including a free trade area, a customs union, a common economic space, and an economic union, and gradually built supranational governance bodies. In other words, the EU members had to break the traditional borders of modern nation-states and delegate part of their sovereignty in order to establish a supranational regulation mechanism. This bold attempt was aimed at creating a new norm of international and regional cooperation. The EU really works and ensures progressive development for all member countries of united Europe. The European Union has become the most successful and attractive model of regional integration. Some countries seek to become its members, while others seek to create its analog.

The second model is integration among developing countries. The Association of Southeast Asian Nations (ASEAN) serves as an example of its relatively successful implementation. After the end of the Cold War, the association gradually moved from cooperation in politics and security to economic cooperation, and eventually it achieved great success in developing regional integration. ASEAN’s importance is in assisting regional cooperation through the “ASEAN way.” This notion means a special approach of Southeast Asian countries to interstate cooperation, and it is based on their acceptance of basic behavioral norms, including the achievement of consensus through detailed, patient, formal and informal negotiations, as well as respect for the sovereignty of all member states. This approach aims to prevent conflicts in relations among the members and in the Association’s relations with external actors. However, some scholars point to a downside: the principle of mandatory consensus has slowed down the establishment of institutions and reduced their effectiveness.

The third model is a hybrid combining elements of the first two types. One example of this model is the North American Free Trade Agreement (NAFTA). Three countries—the United States, Canada, and Mexico—have pooled their efforts to destroy stereotypes, ideological barriers, and discriminatory policies against developing countries. They seek to transform the North American free trade area into a typical cooperative regional organization promoting North-South economic integration. NAFTA not only pioneered in using a free trade area for developing cooperation, but it also has a huge demonstration effect.

Can these models be applied to the SREB? One should take into account the real situation in the Eurasian region. Firstly, the level of social and economic development of Eurasian countries is far from that in the EU, and the majority of transition economies have not yet completed the construction of modern nation-states. Therefore, they are very sensitive to issues of national sovereignty, and they find it difficult to follow the European Union’s path. Secondly, although free trade areas have become an important strategic choice for deepening cooperation in many parts of the world, the situations in concrete regions are not the same, especially China and member countries of the Commonwealth of Independent States and the SCO. It is noteworthy that in 2003, China proposed a program for multilateral trade and economic cooperation among SCO members, and their prime ministers at their second meeting approved this program. It said, in particular, that “until 2020, the member states of the SCO will seek to maximize the effective use of regional resources for mutual benefit, and contribute to the creation of favorable conditions for trade and investment with a view to achieving free movement of goods, capital, services and technologies.” However, trade and economic ties within the SCO are still maintained largely at the bilateral level. Experts have long known that member countries of the CIS and the SCO are generally negative about the Chinese proposal concerning a bilateral or multilateral free trade area. They are worried that a free trade area with China may destroy their industries and agriculture and will cause them huge economic losses. If the SREB were aimed at creating a free trade zone, the result would be easy to imagine.

The joint statement by Russia and China on the integration of the Eurasian Economic Union and the Silk Road Economic Belt, adopted at the summit in Moscow on May 8, 2015, confirms this conclusion. The document said the parties agreed to launch talks on an economic and trade cooperation deal, and mentioned the establishment of a free trade area between the EAEU and China as a long-term objective. In other words, the statement reflected the parties’ readiness to postpone the discussion of the sensitive issue of a free trade area for the future. There are no favorable conditions in Eurasia now for the creation of a free trade area between developed and developing countries; therefore, the hybrid model is not good, either.

ASEAN’s integration model has some shortcomings, too, for example, the low efficiency of the governance mechanism and the looseness of its institutions, but the principles of consensus and consultations among countries are useful for building the SREB.

As regards the Trans-Pacific Partnership (TPP), it breaks the traditional trade regime to reach a comprehensive free trade agreement covering all products and services. The greatest attention is attracted by the investor-state dispute settlement (ISDS) mechanism which grants private investors the right to use dispute settlement proceedings against a foreign government. This mechanism lets foreign investors challenge any regulatory measures or directives of the host state, if they believe that these measures violate the right of access to the market or reduce the investment value. Apparently, this practice will bring about a decline in legislative activity and may even challenge national sovereignty. Western industrialized countries are creating a regional organization of a new type to regain control over the world trade order. Obviously, this cooperation model is not acceptable to the majority of countries in Eurasia. In addition, they are not ready to accept all TPP criteria. Therefore, in the foreseeable future the SREB will not follow the TPP standards.

So, the existing models of regional integration are not good for the SREB. Unlike regional integration in the traditional sense (the creation of supranational institutions and the formation of an exclusive regional customs union) and the new type of integration represented by the TPP, with its high standards, the SREB should be built on the principle of consensus through detailed and patient negotiations, equality, respect for the sovereignty of all states, and non-interference in internal affairs.

Against the background of eroded globalization and a growing wave of regionalization, the SREB should position itself as a new model of regional cooperation and win-win solutions.

Since the 2008 crisis, international relations have undergone profound changes, one of them being an ever-growing competition among the great powers. The consequences of the recession are still felt; the world economy is slowly recovering; and one may expect yet another major overhaul of international trade and investment rules. On the one hand, globalization is facing new resistance; on the other hand, we are witnessing rapid development of regional integration. At the same time, numerous conflicts and factors of instability have emerged at the regional level.

After the end of the Cold War, the United States, as the sole superpower, has been seeking to prevent any challenge to its dominance. America regards China as a hypothetical enemy and constantly creates and tightens encirclements around it, which directly affects the country’s security. China’s rapid development caused the U.S. to step up its Asia-Pacific policy in order to retain its superpower status. In November 2011, the Obama administration put forward the Pacific Pivot concept and announced plans to return to Southeast Asia and interfere in South China Sea problems.

In the military-political sphere, the Pacific Pivot implies further and more active re-equipment of the U.S. Navy and Air Force, the deployment of a missile defense system in the region, and the development of various formats of security cooperation with new and old regional allies (Japan and South Korea) and partners (the Philippines and Vietnam). China is increasingly feeling political and military pressure from the U.S., especially amid escalating tensions over disputed areas in the East China and South China Seas. The American factor played a significant role in destabilizing China’s relations with its southern and eastern neighbors.

According to the head of the Stratfor analytical company, George Friedman, preventing the emergence in Europe of a superpower that would be capable of uniting the population and resources of the continent, is a major strategic goal of the United States. The emergence of such a heavyweight could radically change the global balance of power and undermine the American leadership. In this regard, the final imperative of the dominant power, the U.S., is to prevent the emergence of a rival in Eurasia. To this end, it should maintain the fragmentation of Eurasia and the existence of the largest possible number of mutually hostile powers there. This long-term strategy has come across Russia’s revival. Therefore, it is easy to see why the crisis in Ukraine has sharply intensified competition between the United States and Russia. Without a doubt, conflicts in U.S.-Russian relations have a negative impact on stability and peace in Eurasia and beyond.

President Barack Obama’s decision to withdraw U.S. troops from Iraq and Afghanistan has not put an end to the years-long conflict in the region. In addition, in late September 2015, for the first time since the disintegration of the USSR, Russia sent its aerospace troops to a region outside the former Soviet Union—it is conducting combat operations in Syria against the Islamic State and has already become deeply involved in Middle Eastern affairs. The situation in the Middle East remains unstable and will hardly change in the near future.

The global economic development has not fully recovered from stagnation after the financial crisis, and the traditional trade protectionism is being restored. The U.S. is trying to rewrite the rules of multilateral trade and investment and is promoting its Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership in circumvention of the World Trade Organization. The Americans have also stepped up economic dialogue with ASEAN countries within the framework of the U.S.-ASEAN Expanded Economic Engagement (E3) initiative in order to develop global trade rules for the new round. Participation in the aforementioned groups is almost ruled out for fast-developing countries led by China and Russia.

On October 5, 2015, twelve countries reached the Trans-Pacific Partnership agreement in Atlanta, U.S. The TPP is one of the most important priorities of Washington’s Asia-Pacific policy and viewed as President Obama’s great foreign-policy victory. This major breakthrough means that industrialized countries of the West have accelerated the creation of regional organizations of a new type based on high-level market cooperation. Undoubtedly, the TPP not only plays a guiding role in developing a new type of multilateral and bilateral forms of economic cooperation, but it also challenges future regional cooperation. One cannot completely rule out the possibility of bitter rivalry both within the region and between regions.

China cannot build the SREB on this principle and join in tough regional competition. It should offer a new and open model for regional cooperation and win-win solutions.

The SREB can position itself as a new model for inter-regional integration. Particular attention should be given to how to avoid conflicts among various regional cooperation mechanisms. On May 7, 2009, the European Union launched the Eastern Partnership program. Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine were offered free trade, visa liberalization and a European future to ensure regional security and resolution of conflicts in neighboring countries and regions. At the same time, Russia sought to enlarge the Eurasian Economic Union to other countries.

Formally, there are no insurmountable differences between Moscow and Brussels regarding development in neighboring countries and regions. Nevertheless, the competition between the two integration projects led to a serious crisis in Ukraine. According to Mikhail Troitsky and Samuel Charap, the fundamental reason for the growing hostility between Moscow and Brussels is not a geopolitical or civilizational confrontation but the well-known phenomenon of “integration dilemma.” An integration dilemma occurs “when one state perceives as a threat to its own security or prosperity its neighbors’ integration into military alliances or economic groupings that are closed to it. This exclusivity is the source of the dilemma: it transforms integration, a positive-sum process by definition, into a zero-sum game for the state that is excluded from the integration initiatives offered to its neighbors. […] One state’s dilemma becomes the cause of inter-state conflict as a result of the predisposition to making worst-case assumptions about the motives of other states. Such assumptions can lead to recurrent rounds of escalation—a costly spiral of action and reaction in the context of little or no communication between the rival parties. […] The negative impact of this rivalry increases as competition continues to spiral.”

The SREB, too, is faced with the problem of duplicating regional integration associations. China cannot repeat the mistakes of the EU and Russia. A more reasonable choice would be an active search for a new model of inter-regional or trans-regional cooperation. It should provide a platform and effective mechanisms for timely dialogue and fruitful cooperation so that regional integration projects could not only adapt to the variety of social and economic development processes in Eurasia but also exceed the regional framework with greater openness.

Sreb as an Advisable Choice for China’s Development

Since China launched the policy of reform and openness, it has been a supporter and proponent of regional cooperation and has already achieved much success in this field. However, as a new player in the international community, it still lags behind countries that lead regional cooperation.

In my opinion, the SREB can be viewed as a long-term policy that may determine China’s development. If it is only a “concept,” it may not adequately reflect some practical steps that China has already made to promote regional development. If this is a “comprehensive development strategy,” Beijing is yet to define short- and long-term goals and travel the difficult path of interaction with interested countries to eventually achieve mutually advantageous results.

In the short term, a reasonable choice would be a trial and error method, that is, learning partners better through joint projects. Instead of creating new regional cooperation mechanisms that may lead to conflicts, China should gradually promote its project. Ancient Chinese philosopher Laozi said: “The highest good is like water. Water benefits all things and does not contend with them.” The SREB, like flowing water, can spread everywhere, avoiding conflicts with existing cooperation mechanisms and overcoming the inertia of the winner-takes-it-all mentality. Its implementation depends on negotiations on concrete projects and the signing of bilateral or multilateral agreements.

So far, Western Europe and East Asia, which are located at the opposite ends of the Eurasian continent, have had relatively good conditions and opportunities for development. However, Central Eurasia is facing many difficulties and problems due to adverse environmental conditions. The promotion of trans-regional cooperation on the Eurasian continent can be viewed as a long-term fundamental policy in the SREB’s future. If Eurasia finds opportunities for its comprehensive development, it will be of benefit to all Eurasian countries as independent actors actively participating in regional processes. The SREB initiative can be considered a contribution of the Chinese people to assisting regional development, but the promotion of new inter-regional cooperation will be a long and difficult process. Its success will largely depend on whether China properly solves key internal and external problems in politics and economy, while taking into account the needs of interested countries to the greatest possible extent. It is only this approach that will allow all countries in the region to cope with their numerous problems and tap their enormous development potentials, instead of wasting valuable time and limited resources on rivalry with each other.

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