TEN-T Days 2016

Workshop on "China One Belt One Road : opportunities and challenges for the EU".

The view point of the Industry.

Rotterdam 20 June 2016, 14:30 – 17:30 Van Nelle Factory, Van Nelleweg 1, 3044 BC Rotterdam (meeting room communicated at a later stage)

Concept note

I – OBOR versus TEN-T.

As it is well known, transport is an enabler of growth and prosperity by facilitating connectivity between regions, countries, continents. China and the European Union have been developing over the past years connections and infrastructure networks in their own territories: in particular the EU has developed the Trans-European Transport Policy (so called "TEN-T") to ensure the good functioning of the Single Market through an infrastructure planning aiming at ensuring smooth and seamless transport for goods and persons. Now, the EU is committed to extend the Trans-European transport networks and policy beyond EU borders. However, a lot remains to be done, in particular – but not exclusively - in terms of infrastructure investments to better connect the heart of Europe with the new Member states in the East and South, but also – looking forward - with the neighbours of our neighbours.

In parallel, China has been promoting its own initiative to build the Silk Road Economic Belt and the 21st-Century Maritime Silk Road which aim to ensure seamless transport connections between Asia and Europe. Given that China and the EU are at the beginning and the end of these links and they are both developing transport initiatives with their neighbours, coordination between the two parties is essential in order to ensure compatibility and complementarity between their relevant plans and policies.

Beyond that aspect, the implementation of the OBOR (One Belt One Road) is a clear challenge for Europe and for the European industry (transport first, but not exclusively) which requires a strong, motivated, and coordinated answer.

There is little doubt that the development of such – "connectivity" plan cleverly advertised by the Chinese top's leaders – does not only correspond to a transport vision and trade needs, but it also covers other aims. It is not a mystery that the OBOR is also aiming at absorbing the overcapacity of production of China in various sectors (in direct competition with EU companies in the transport sector) as well it is seen as a tool to foster the regional development of China's Western provinces.

The OBOR is primarily an instrument for China's internal and neighbouring supremacy policy. It is now our common responsibility to make it also beneficial to China's partners, including the EU.

In view of the large funding needs of European infrastructure, in particular rail, third country investments and financing – like those foreseen in the framework of the "OBOR" can be an important and welcome contribution. This is, however, not without risks as the development and implementation of such massive plan could also affect the coherence of the planning set – for instance – by the EU to develop in a coordinated manner its transport infrastructure through the TEN-T framework. In this context, it is of primary importance to recall that investments within the EU have to follow the existing EU legislation, in particular procurement and environment rules, Technical Specifications for Interoperability and the TEN-T-Regulation. This is to be monitored closely by the Commission, in its function as guardian of the Treaty.

In addition, the "OBOR" planning – raises also the question of the overall cost of the building new infrastructure (rail one in particular), in the EU, China and in the countries between the EU and China. Attractive offers of financing or (co-)funding may incentivise Member States as well as EU's neighbours to prioritise infrastructure projects not in line with TEN-T priorities, thus diverting national funds away from other necessary works, affecting their financial stability.

It is worth noting in this respect the obligation of Member States to complete the TEN-T network by 2030 (core network Art. 38) and 2050 (comprehensive network, Art. 9) respectively. In this context, Article 8 (4) of Directive 2012/34 establishing a Single European Rail Area states that Member States shall ensure that, under normal business conditions and over a reasonable period, which shall not exceed a period of five years, the profit and loss account of a rail infrastructure manager shall at least balance income from infrastructure charges, surpluses from other commercial activities, non-refundable incomes from private sources and State funding, on the one hand, including advance payments from the State, where appropriate, and infrastructure expenditure, on the other hand. Member States thus carry a certain amount of risk related to future traffic flows. This aspect must not be underestimated while China pushes for projects in countries located at the periphery of the Union which characteristics might be above the real needs and their profitability not as high as promised.

Furthermore, uncoordinated investments in capacity, for example in ports or terminals also bear the risk of creating overcapacity. If such investments require or trigger public follow-up investments, for example for connecting hinterland infrastructure, it will be important for Member States to be sure that overall expected traffic flows match the investments. II – The EU-China connectivity platform.

Since 2013 China has been promoting its "One Belt One Road" (OBOR) policy which aims to connect Asia to Europe. In the meantime, China has begun to challenge the EU in developing bilateral transport cooperation with Central and Eastern European Countries (CEEC) both EU MS and neighbours (including candidate countries), through its "16+1 initiative". The way this cooperation is led raises both questions on its compatibility with the TEN-T policy and on its compliance with EU basic legislation (public procurement – technical standards…). While China's appetite to invest in the EU/neighbours may represent an opportunity for these countries, if it is not well steered, it may undermine the overall TEN-T policy and have negative consequences on the budget of our MS and partners.

There is an increasing concern that the agreements recently passed for the implementation of infrastructure projects in the framework of the "16+1 initiative" might be in breach with the EU legislation. In this context, on 28 September 2015, the EU and China have signed the MoU setting up a "connectivity platform" which aim is to create an environment conducive to trans-national infrastructure investment / transport services improvement in all regions and countries linking China to Europe, taking fully in consideration the aspects previously mentioned, and caring about – above all – the overall EU's strategic interests. Furthermore, one of the main aims of the Connectivity Platform is to guarantee that transport markets could rely on free, fair and undistorted competition based on regulatory convergence, a level playing field and sustainability and promote cooperation in transport areas such as infrastructure, equipment, technologies, standards, engineering and construction.

The scope of the platform is currently restricted to transport, but could well be extended to other areas of mutual interests. The first meeting of the "connectivity platform" took place in January 2016 and a ministerial one is planned at the beginning of the summer.

III. EU-China customs cooperation and its relevance to the Connectivity Platform

The legal basis for customs cooperation between the EU and China is the "Agreement between the European Community and the Government of the People’s Republic of China on cooperation and mutual administrative assistance in customs matters" (CCMAAA) signed on 8 December 2004. Its scope covers all matters related to the application of customs legislation.

The provisions on cooperation commit the Parties to establish channels of communication, facilitate coordination among their authorities and develop trade facilitation actions. The section on mutual administrative assistance has the objective of ensuring proper application of customs legislation and preventing breaches.

In order to render this cooperation more operational and establish priorities, the Parties agreed on a Strategic Framework (current version signed in May 2014) creating a management structure. Six working groups on different priorities (Smart and Secure Trade Lanes, Mutual Recognition of Authorised Economic Operators, Enforcement of Intellectual Property Rights, Illicit Trade in Waste, Fight Against Fraud, Statistics) were set up.

Customs cooperation is of substantial relevance to the concept of connectivity. In today's economic policy debate, trade facilitation is a priority: much of its potential is linked to the role of customs. While customs will continue to fulfil the traditional tasks of collecting duties at the border and protecting citizens, more than before its role is to ensure that legitimate trade can cross borders as quickly and efficiently as possible. The smooth flow of trade is essential for economic growth and competitiveness.

One of the most relevant areas in regard to connectivity is the mutual recognition of Authorised Economic Operators, established in May 2014 and fully operational since November 2015. The EU and China have each a set of operators that have been deemed as reliable after having fulfilled certain requirements. This means that one side's reliable operators are recognised by the other and are provided facilitation which translates, in practice, in fewer controls and priority treatment at clearance.

Another important element is the pilot project on Smart and Secure Trade Lanes, which has he objective of strengthening end-to-end supply chain security against risk and enhancing risk management. The pilot has until now been limited to sea trade lanes between China and the EU, but is expanding to cover air and rail transport as well.

Trade facilitation is not the entire story, however: improved customs connectivity must be accompanied by measures that ensure the safety and security of our citizens as well as the fight against fraudulent trade.

IV. Questions for the industry.

Against this background - and in order to support the discussion in the workshop - it would be interesting for the EC to better understand the industry point of view of the following aspects:

1 - How the industry sees the development of the "OBOR" with respect to infrastructure needs in the EU (notably rail/ port / terminals)?

2 - Do the planned projects labelled "OBOR" correspond – in the EU - to real transport/economic needs? Is there a risk that these (supposed) massive investments – if not well targeted - could hamper the economic stability of EU and non-EU countries?

3 – China focusses mainly on the Silk road (rail) connections rather than to the Maritime Belt. Does the industry consider that more emphasis must be put on the maritime potential development? 4- What should the EU undertake to ensure that the EU MS and the countries located between China and the "hart" of the EU could fully benefit from the OBOR plans for their own development needs (and are not only considered as transit countries)?

5 - EU-China customs cooperation is overall in a good shape, with simultaneous progress being made in all areas, however, does the industry see areas / issues that should be addressed through the EU-China connectivity platform to improve the current situation and make transport operations more efficient?

6 - The Commission always emphasizes the principle of "level playing field" in all Connectivity Platform meetings and our Chinese counterparts repeat that all European industries are welcome to invest/ apply for any project in China (rail, road and ports). In this context, we would like to ask if there are projects in China where you are planning to work/participate or if there are projects – despite the level playing field principle - where you are prevented to participate.

Looking forward to seeing you in Rotterdam for a fruitful discussion!

… and don't forget to register to the TEN-T days through the official website https://www.tentdays.eu/2016/ !

Alain Baron Ana Rios Olmedo