How the EU and India respond to China’s Silk Road

The Chinese Silk Road should not only prevail between Asia and Europe. The upcoming EU-India summit is about investment, infrastructure, transport. The fact that this happens at all is due to the rise of Beijing.

Camel and SUV: In India, the past and the modern meet.

“Nowhere”, is the answer from former EU Trade Commissioner Cecilia Malmström when asked where the trade talks with India are. They have been on hold since 2013 and until recently it looked like nothing would change.

But now diplomats and the European Commission are suddenly speaking of a new momentum: At the virtual EU-India summit between the European leaders and Indian Prime Minister Narendra Modi this Saturday, both sides not only want to resolve to resume trade talks and negotiations on investor protection. They also want to agree to work closely together on the expansion of infrastructure in the transport sector, the energy sector and digitization and thus provide a response to China’s Silk Road Initiative.

The European Commission has already done everything in advance to facilitate the dialogue with the country, which has been badly hit by Corona. Commission President Ursula von der Leyen was even open to a debate about patent release for vaccines. In addition, the EU has at least somewhat relieved the government in New Delhi with rapid aid deliveries. “Team Europe is deeply connected to our democratic partner India,” wrote von der Leyen on Twitter.

More protection for investors

The reason for the rapprochement is called China – even if the EU diplomats deny it. They try to justify the new dynamic with the fact that the two largest democracies and supporters of rule-based cooperation in the world, India and the EU, are simply “natural partners”. In fact, it is the Europeans’ urge to create a counterweight to China in the Indo-Pacific region at the same time as America.

To do this, they want to take a position in a huge but underdeveloped and overregulated market with 1.4 billion people. A look at the volume of trade shows the enormous pent-up demand: while the EU and India achieve around 65 billion euros, that of the Europeans with China is 586 billion euros. In addition, they do not want to be dependent on the British, who in turn are negotiating a free trade agreement with India.

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FAZ series Smarter faster: All roads lead to AsiaImage: Jens Giesel

The time is right for Europeans to draw closer together. Modi’s record is bad. The reduction in bureaucracy is not progressing, the promised reforms are stalling. The rating agency Standard & Poor’s warned on Friday of the consequences of the pandemic, the next peak of which it expects in June. The analysts therefore fear that the economic recovery in the financial year 2021/22, which began at the beginning of April, will be slower with a growth rate of 8.2 to 9.8 percent instead of 11 percent.

Fear of the EU-China deal

This means that the government in New Delhi must increase its pace of reform in order to attract foreign investors. The country has to create more than a million jobs every month in order to offer a future for the young people crowding into the labor market. The EU is already the largest foreign investor in India and is ready to increase its commitment.