A massive Eurasian supercontinent is forming. From Lisbon to Tokyo, groups of European and Asian nations are striking out colossal trade deals and building billions of dollars’ worth of infrastructure to connect themselves better.
With ideological lines between the West and East during the Cold War fading away, trade links between Asia and Europe are expanding at a colossal speed.
Also, Latin America is being drawn deeper into the Eurasian sphere.
These deals, trends, and infrastructure projects have one common denominator; they exclude the United States.
Rebuilding the Ancient Silk Road
China has taken the lead towards integrating Eurasia through the Belt and Road Initiative (BRI).
Born in late 2013, the BRI includes 80+ countries accounting for about 36% of global GDP, 68% of the world population, and 41% international trade.
The project seeks to rebuild the ancient "Silk Road" network of land and sea routes that facilitated the flow of goods from China to Africa, Asia, the Middle East, and Europe.
To achieve that, China plans to build roads, seaports, rail networks, bridges, and pipelines in Asia, Africa, the Middle East, and Europe. In addition to infrastructure, China plans to build fifty special economic zones in Central Asia, the Middle East, and Europe.
To understand the BRI project, one must look back to the original Silk Road, which connected Europe to Asia centuries ago. The original Silk Road came into existence during the westward expansion of the Han Dynasty between 206 BCE–220 CE.
China forged trade networks with what is now Central Asia, India, Pakistan, Egypt, Iran, Syria, Turkey, and many European nations. The trade route comprised several bodies of waters such as the South China Sea, the Indian Ocean, the Arabian Sea, the Persian Gulf, and the Red Sea.
Chinese silk, spices, and other products moved west to the Roman and Byzantine Empires. At the same time, China imported precious metals, ivory, gold, and glass products.
However, the Crusades and the Mongol Invasion and conquest of Central Asia from 1216 to 1221 diminished trade with Europe.
Apart from the BRI project, on January 16th, 2016, China inaugurated the Asian Infrastructure Investment Bank (AIIB).
China established the bank to support its Belt and Road infrastructure projects and promote its influence globally. AIIB offers countries an alternative to the US-dominated institutions, including the International Monetary Fund and the World Bank. The bank is an economic weapon for China to challenge American leadership openly.
Despite US pressure, many of America’s Asian and European allies and partners joined the bank.
China is increasingly playing a prominent role in international trade. It is the largest trading nation in the world. Of the world’s 500 largest companies, about 124 are headquartered in China. Also, it is one of the world’s fastest-growing consumer market. It is the largest exporter and second-largest importer of goods. It is a net importer of services products. Finally, China has the world’s largest foreign-exchange reserves worth $3.3 trillion.
European Nations Gradually Joining the Belt and Road Initiative.
Many developing countries in Asia, Africa, and the Middle East have signed on to the BRI project.
In Europe, many nations are skeptical. They are worried about China's human rights abuses and unfair trade practices.
Europeans also fret that China's debt-trap diplomacy would force them to make concessions they would never make. For instance, In 2017, Greece blocked a European Union statement at the United Nations criticizing China's human rights record.
Also, Europe's traditional postwar alliance has been toward the United States.
However, as anti-American sentiments rise within the continent, some European nations joined the BRI project.
On March 23rd, 2019, resisting pressure from Brussels and Washington, Italy, a NATO, and an EU member state became the first G7 country to join China's Belt and Road Initiative. For Beijing, Italy's central geographic position along the middle of the Mediterranean Sea could accelerate its trade with Western & Southern Europe and North Africa.
On March 27th, 2019, Luxembourg signed an MOU with China to cooperate on the BRI. Bordering Belgium, Germany, and France, Luxembourg is the vital gateway to the European market and its 500 million consumers. About 40% of the European Union's wealth is concentrated in a 500 km area around Luxembourg. When extended to 700 km, the figure rises to about 70% of the EU wealth. It is the Eurozone's leading financial center and the world's second-largest fund market.
Apart from Luxembourg, Austria, Portugal, and Switzerland have signed Memorandum of Understanding with China to cooperate on the Belt and Road Initiative.
Furthermore, many countries in Eastern and Central Europe have joined China's Belt and Road Initiative. Sixteen of them belong to a group with China known as 16+1 or cooperation between China and Central & Eastern European countries.
Crashing America's Neighborhood
Although the Belt and Road infrastructure projects are concentrated in Africa, Asia, the Middle East, and Europe, China sees Latin America as a "natural extension" of the project.
Since 2017, 18 countries are in Latin American & Caribbean countries, including Panama, Chile, Peru, and Bolivia, have signed on to the project.
China has already constructed railways in Argentina, a port in Trinidad and Tobago, and roads in Costa Rica.
As China urges more Latin American and Caribbean nations to join the project, this region, vital to US security, will become increasingly aligned with Beijing.
Apart from China, the European Union is also crashing America's backyard. On June 28th, 2019, during the 2019 G20 Osaka summit after the European Union and Mercosur reached a free trade agreement in principle.
The agreement creates a free-trade area covering 740 million people, with an annual economic output of $19.5 trillion.
The deal will phase out more than 90% of the tariffs that the EU and Mercosur have on each other. The Tariff wall will allow Mercosur to keep out American goods while letting in goods produced in Europe.
Meanwhile, it allows Mercosur to sell cheap raw materials and agricultural goods to Europe. These are big wins for French and German industries.
The EU–Mercosur free trade agreement is more than just trade. It is also about cementing the close alliance between Europe and Latin America.
Trade Blocs Blocking Out the United States
Governments worldwide are eager to have trade agreements to counter significant uncertainties in the global trading system. As a result, massive new trade blocs are emerging around the globe without the United States.
The European Union has been incredibly aggressive. In recent years, it has signed new trade agreements with the United Kingdom (2020), Vietnam (2019), Japan (2018), Singapore (2018), and Canada (2017). The EU-Japan trade deal creates a free-trade area covering over 573 million people and a third of the global economy with an annual economic output of $20.4 trillion.
China, in May 2018, signed a free trade agreement with the Russia-led Eurasian Economic Union. On October 25th, 2019, the free trade deal between the Eurasian Economic Union and China entered into force. The Eurasian Economic Union is an economic union which includes Russia, Belarus, Armenia, Belarus, Kazakhstan, and Kyrgyzstan. The EAEU has also concluded free trade agreements with Vietnam, Iran, Serbia, Egypt, and Singapore.
Meanwhile, on December 30th, 2018, the Japan-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into effect. On January 23rd, 2017, President Trump signed an executive order to withdraw the United States from the agreement. The agreement includes Japan, Australia, Canada, Mexico, New Zealand, Singapore, Vietnam, Brunei, Chile, Peru, and Malaysia. The 500 million people residing in these countries represent about 13.4% of the global economy ($13.5 trillion).
Another massive free trade agreement that excluded the United States was the Regional Comprehensive Economic Partnership (RCEP). The RCEP is a free trade agreement in the Indo-Pacific region between the ten member states of the Association of Southeast Asian Nations (ASEAN) and five of ASEAN's FTA partners — Australia, China, Japan, New Zealand, and South Korea. India, which is also ASEAN's FTA partner, pulled out from RCEP in November 2019. The group signed the agreement on November 15th, 2020.
The 15 member countries account for about 30% of the world's population (2.2 billion people) and 30% of global GDP ($26.2 trillion), making it the biggest trade bloc in history. It means that RCEP is larger than the USMCA deal between the United States, Mexico, Canada; and the European Union.
The United States Under Trade Siege
All these trade agreements mentioned have one thing in common: they exclude the United States.
The anti-American views that helped shape these trade deals predate the Trump administration. However, his leadership has intensified such feelings.
In some of the agreements, the United States chose not to participate. Notwithstanding, more and more nations are forging a broad trade and economic alliance without the United States.
The increasing number of US-excluding trade blocs will surely reorient the world economy away from the United States to Eurasia.
© 2021 Meziechi Nwogu
MG Singh from UAE on January 04, 2021:
This is a nice article and I liked reading it. However, what is apparent is not real. The silk road is running into problems and it has a lot to do when the internal politics of China and the external policy it is following.