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The EU's Global Gateway Is Not a Groundbreaking Plan for Domination in Global Infrastructure

The European Union (EU) has released its Global Gateway, its new €300 billion worldwide connectivity strategy seen as its response to China’s Belt and Road Initiative. When EU member states agreed to set in motion work on the plan, we contended that the EU’s Global Gateway would be a unique opportunity to realize the ambitions of the EU in transforming itself into a geopolitical heavyweight with an alternative to the Chinese BRI in the global infrastructure landscape. Now that the plan has been published, it’s clear that, while packaged and presented as a real competitor to China in infrastructure, the Global Gateway appears to be a paper tiger.

In this blog, we go beyond the headlines and unpack the Global Gateway’s strategy, narrative, finance, and governance.

The narrative

Seven years after the launch of the BRI, the Global Gateway is the EU's first major plan for infrastructure development worldwide. While Europe may never match China in terms of investment quantity, the EU’s main selling point is investment quality. Its “world-leading industry, private sector knowledge and investment capacity” is sold as an “attractive alternative for partner countries.” From the outset, the narrative is focused on countering Chinese finance, which has been criticized for saddling governments with unsustainable debt, attempting to differentiate the EU as “forging links” rather than “creating dependencies.”

The Global Gateway places strong emphasis on delivering infrastructure to the highest standards of sustainability, governance, and transparency—all in contrast to Chinese finance. The entire narrative is built on countering the threat of China’s influence through higher quality, greener, and more transparent infrastructure. The EU believes this strategy will be more appealing than the current offer on the table.

But while China’s BRI has a clear ideological drive and rationale running through the Silk Road, albeit focused on extractives and infrastructure, the EU’s Global Gateway is a sprawling multi-sector, global initiative, covering next-generation infrastructure such as fiber optic cables, 5G networks, and green energy plants in the developing world, as well as investments in health, education, and research, while also trying to compete with China on transport facilities, such as highways and airports.

The finance

Given the huge investments needs across the globe, the Global Gateway aims to mobilize a gargantuan €300 billion in infrastructure investments between 2021 and 2027. But don’t be fooled, the Global Gateway is a mere packaging exercise of things that have already been programmed.

The €300 billion is mainly made up of a mixture of existing commitments from European development finance institutions. These existing commitments include the EU’s de-risking instruments—guarantees and blended finance—mainly through the European Fund for Sustainable Development Plus (EFSD+). The Global Gateway also makes highly questionable assumptions about leveraging private investment, rather than actual spending or any new commitments. Some grant financing is also thrown into the mix, drawn from the EU’s external assistance programmes. And there is an opaque offer from the EU to throw an additional €750 million in annual tranches, but on the condition that the European Investment Bank (EIB) matches the funds. The EU’s presented breakdown is as follows:

  • €135 billion worth of investment “made possible by” the EFSD+, an existing EU budget fund, of which €25B will come from a new, yet-to-be created funding mechanism which would receive €750 million from the EU budget in annual tranches between 2022 and 2027, “conditional on the EIB matching these funds.”
  • €145 billion “planned investment volumes by European financial and development finance institutions.”
  • Grant financing of up to €18 billion under other EU external assistance programmes

However, this comes at a time when the EU has already set in stone its €79.5 billion development budget for the next seven years, and in the midst of its programming process of external assistance which is due to wrap up by the end of the year.

Strategic autonomy

The concept of “strategic autonomy”—the idea that the EU should be able to do and say what it wants, without being constrained by other powers—comes to the fore in the Global Gateway strategy and is seen as essential in shaping a new approach, particularly towards China. Hence, the strategy is explicit in its reference to “European preference,” appeasing European contractors who have consistently complained about being undercut by Chinese firms on pricing. It proposes a system of filtering out “abnormally low tenders” and “foreign subsidies that undermine the level playing field.” It also suggests that the EU will explore setting up a European Export Credit Facility to support European businesses, making it easier for them to compete with firms backed by the Chinese government.

The governance

As per the norm in the EU, a new strategy comes with new governing bodies. The strategy proposes the creation of a Global Gateway Board which will provide “strategic guidance” to the plan and participate in the design of the projects to be delivered under a Team Europe approach. However, there is no indication at this stage of who the members of this new board will be. The text also mentions the establishment of a Business Advisory Group to involve European businesses in the process. Again, membership of the advisory group is left open to question. At the top of these structures will sit the president of the European Commission, Ursula von der Leyen, who will steer the implementation of the strategy. This role will be a real litmus test as to whether she has sufficient standing to lead the EU’s challenge to the world’s second most powerful state.

So many questions remained unanswered. How will the Global Gateway be managed and implemented? How will it ensure coherence with the multiple Team Europe Initiatives already in play? During her last State of the Union speech in September, Urusla von der Leyen said that it “does not make sense for Europe to build a perfect road between a Chinese-owned copper mine and a Chinese-owned harbor.” How the plan will avoid this happening remains to be seen.

In conclusion, the EU’s Global Gateway appears more of a branding exercise rather than a groundbreaking plan for domination in global infrastructure. How the EU intends to finance the plan is poorly explained, and it is hard to get a sense of actual scale, especially as it largely relies on European development and financial institutions to bankroll a large portion of the money. With a global remit and an expansive scope, turning the pipedream into reality will be no easy feat.

 

 

Disclaimer

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.