The Silk Road Trap: How China's Trade Ambitions Challenge Europe

by Jonathan Holslag

For almost two decades, China has claimed that its expanding economy benefits Europe, stimulating European growth, exports, and employment. But the reality is not so clear-cut. Whilst individual companies may have profited from China’s economic rise,unbalanced trade with China has actually cost Europe over 1.4 trillion euros in the last ten years as well as undermining its political influence. China’s monumental infrastructural project, the Belt And Road Initiative or New Silk Road as it has come to be known - is set to make this situation even worse.The Silk Road Trap is the first book to expose just how risky this uneven partnership is for Europe. In it, leading expert on Asian affairs Jonathan Holslag, argues that Europe must reduce its reliance on China and work on building a stronger and more sustainable European economic model. By revealing the political aspirations and economic strategy behind the new Silk Road, he lays out its implications for specific European industries, from steel over aircraft to robots. Holslag, though critical of China, does not, however, make the case for confrontational, Trumpian protectionism. Instead, he posits that the new Silk Road need not ensnare Europe; it offers the continent a unique opportunity to transition from a future "made in China" to one that is "made in Europe".

Genres: Nonfiction, China, History, Politics, Economics

167 pages, Kindle Edition

Published March 27, 2019

About the author

Jonathan Holslag is a professor of international politics at the Free University of Brussels, where he teaches diplomatic history and international politics. He also lectures on geopolitics at various defence academies in Europe and the Nato Defence College. He was invited as a guest lecturer to various universities, including the Central Party School of China, the Harvard Kennedy School, and Sciences Po, Paris.

Reviews

[Stephen · Rating 2 out of 5]

The title of this book is a bit of a teaser. The Silk Road is sexy and 'on trend', as they say. 'The Trap' is a bit mysterious. Put the two together, and you have a catchy title that grabs your attention on a topic of the moment. Our curiosity is aroused. Does the book satisfy it?

The first problem I have is in defining what the trap consists of. What is the trap? Who has set it? How can it be avoided? The book doesn't clearly answer these questions. As far as I can see, the author seems to be saying that the current trend of events suit China very nicely, and may not suit Europe at all in the years to come. That is the trap. As such, it's almost uninteresting. The trap is not something of China's devising. It is a trap that Europe freely enters into. That author fails to explain why this would be a problem.

The book is hostile towards Chinese interests, but the author fails to explain why this is a problem. The best he comes up with is that the Chinese government is playing to different rules from the European Commission. That's not exactly news. He also ties himself in his own logic. He castigates China for creating a trade imbalance with the EU, but fails to castigate Germany for doing the same thing with, say, Greece. He claims that the China trade is one sided, without recognising that the EU has the means to re-balance those trade flows.

I have to admit that I found parts of the book laughable. Mr Holslag bemoans the Chinese government providing trade subsidies of €1.4 trillion, without fully appreciating that the European consumer has been subsidised by an equal amount by the Chinese taxpayer. And this is a big flaw in the book. The author relies upon a mercantilist approach to international trade whilst claiming that he doesn't. Trade deficits only matter to mercantilists. To free traders, deficits don't matter because they are a measure by which overseas producers are subsidising domestic consumers.

The book is written by a mid-European academic. The style of writing is awkward and turgid. It was a real effort to wade through the arguments, which weren't expressed very clearly. At times, it was a bit like reading a shopping list. The book has managed to punch well above it's weight. I suspect that it was embraced by Sinosceptics without having read it. The arguments don't stand up. If China's trade ambitions do challenge Europe, this book doesn't tell us how.

[Xander · Rating 3 out of 5]

Consider the European Union (EU): 27 different countries - with 27 different cultures, languages and, most important, 27 different political and economic systems - united in one overarching political structure with a European Parliament, European Commission (consisting of European 'ministers') and the European Council (consisting of the 27 heads of state). Then consider the Eurozone: 19 different EU-members sharing a common currency, the Euro, and all subjected to one monetary institution, the European Central Bank. Then, finally, combine these two political structures and start analyzing.

The net result? A currency based on 'one size fits none' - i.e. certain (mostly Northern European) countries having strong economies and hence trade surpluses and certain (mostly Southern European) other countries having weak(er) economies and hence trade deficits. These economic tensions within both the Eurozone and the EU translate into political tensions within the EU, pushing individual member states to look for foreign (non-EU) partners to trade. This fundamental weakness in the EU framework leads to the situation that third parties (the US, China, Russia, etc.) play off member states against one another - either willingly or as a side-effect of trade deals.

Now, let's look at China. A huge country consisting of 1.4 billion people, run by a Communist dictatorship which views economics solely as a tool in geopolitical powerplay. The Chinese economy is characterized by overcapacity through over-investment, which means the Chinese state subsidizes home grown production even if more than 50% of this economic production is superfluous. Instead of letting this ecoonomic bubble burst the Chinese state uses its state banks to keep financing this. Why? In order to export this massive production surplus to the outside world. They even lend credits to buyers in order to let these buyers buy Chinese products. Combine this with lower wages and you have cheap products being dumped on Western markets with Chinese subsidies for the weaker countries.

Through this economic mechanism, the EU has lost 1.4 trillion Euro in just 20 years of trade with China. This money could have been used to invest in European enterprises, technological development and social welfare. Instead, this money has gone to the Chinese Communist Party and all the EU and its citizens got in return were cheap products - temporarily countering inflation through dumping practises.

This would be a problem, but simply an economic one. The problem: Chinese economic policy is pure geopolitical powerplay. Their long term strategy is to buy up technology, patents and natural resources to become fully self-dependent and thus dictate to other countries their wishes. Under the guise of 'globalism' and 'free trade' the Chinese Communist Party has changed its policy from economic defence to economic agression. It has sucked up trillions of foreign currency (artificially keeping their currency more competitive than it otherwise would be) from Western countries and dumped cheap products on these markets. And even worse, it has bought up and/or built huge infrastructure networks in all sorts of places where natural resources are found, effectively creating a monopoly on many of these rare Earths and minerals.

And what has the EU done? Basically nothing but talk and talk and talk. And in the meantime letting Chinese economic policy weaken its cohesion and economic power. There seems to be no strategic plan apart from the neoliberal dogma of 'free trade' and 'globalism' creating prosperity for the whole wide world. With friends like these politicians and bureaucrats, which European needs enemies?

As Holslag rightfully points out, the core problem is the immense and structural trade surplus of China. Analyzing hundreds of Chinese policy documents and economic statistics, he concludes that the CCP has no intention of changing its course. This means that the EU has to change its approach and take a more hardline position with regard to trade with China. To do this, European politicians need to develop a common economic policy which will serve individual member states and the general interest, instead of creating competitive advantages for individual businesses and entrepeneurs. One important ingredient for such a viable European economic strategy - Holslag calls it "Made in Europe" - is to solve the problem of the trade surplus/trade deficit problem inherent in the EU and Eurozone. Northern countries should invest more in Southern countries while Southern countries should reform the national economies and invest in durable industries in order to become more productive and competitive.

According to Holslag (who is a political and economic realist) trade policy should be viewed as a means to an end - the end being the well being, prosperity and happiness of citizens. This means that individual European governments as well as the EU as a whole should focus on its own citizens and consumers, even if that would take difficult and sometimes painful decisions. As long as Europe tolerates the Chinese trade surplus China will continue weakening and undermining its position - both politically and economically.

With The Silk Road Trap (2019) political scientist Jonathan Holslag delivers a fatal blow to the economic policies of dimwitted, geopolitically naive and dogmatically brainwashed EU bureaucrats. They have undermined and weakened European countries and the EU and they don't seem to change their course. So Holslag's book is a strong reminder for these fools to finally reconsider their positions. We have seen how their policy decisions can lead to disastrous results with regard to Russia and Ukraine. Don't make the same mistake twice.

Personally, I don't buy Holslag's argument that individual European countries need the EU and I even think many countries would be better off without a shared political structure and/or a common currency and monetary policy. The disastrous trade policies of the EU are a prime examply of the malfuctioning of this oversized, overly ambitious and democratically detached supranational institution. One size fits none seems to be the conclusion both for the EU and the Eurozone. But if one wants the EU and the Euro as political projects, Holslag's strategic analysis with regards to European trade policy concerning China and his policy advice seem to me to be the only viable way forward.

If Holslag's warnings and suggestions aren't heeded, I fear Europe will become the museum of the world in the coming decades. Having lost almost all its technological advantages to China and the US, and lacking natural resources, the European econnomies (and economy) are in for a rough ride. And with economic weakness comes military weakness. The Russian-Ukraine war should wake up these bureaucrats, but so far there seems to be no indication of changing policy, just a bunch of ad hoc decisions based on emotion and short term political success. It's not too late yet for structural and fundamental changes in trade policies but I am pessimistic, perhaps more so than Holslag - who, notwithstanding his bleak analyses, seems to be optimistic with regards to the future.

[Kamran · Rating 3 out of 5]

Holslag contends that bilateral trade between the EU and China has been favoring China (mostly) and a few European multinationals. The assertion that cheap goods from China depress inflation in Europe & accentuate purchasing power of European citizens is flimsy at best, because this situation is untenable. EU has run trade deficit of over €1.4 trillion with China during the last decade only, which has adversely impacted industrialization, entrepreneurship and employment in European countries.

He suggests that merely anticipating change of behavior in China will not solve the economic problems between the EU and China. The national governments and EU must execute a holistic review of Chinese trade & economic practices and develop a comprehensive pan-Europe response.

[Natan Hertogen · Rating 3 out of 5]

Het boek lees eerder als een studie dan als een roman. Het is wat saai in opbouw en stijl. Maar dat neemt niet weg dat het een informatief boek is, waar je iets van opsteekt.

Holslag doet moeite om objectief te zijn, feiten op te lijsten en zijn punt rond de ongelijke economische relaties tussen China en het Westen te maken. Hij wordt vaak voor havik versleten, maar doet in dit boek moeite om die indruk niet teveel te wekken.

Opmerkelijk afwezig in het boek is wel een afweging tussen de handelspolitiek van China, met die van de EU of de VS. Daardoor kan Holslag gemakkelijk de zaak tegen Chna maken, terwijl de Westerde vrijhandelspolitiek evengoed geopolitieke en allerminst altruïstische doeleinden dient. Uiteraard kan daar de eigen ideologische insteek kijken. Goed verborgen als cruciaal hiaat.

[Laura C · Rating 2 out of 5]

This book is not about the new silk road or ‘belt & road initiative’ (BRI).

I’d say this book is about the EU’s stance towards China & then a compilation of lists of what the Chinese government has proclaimed to do and instruments it has constructed to promote its trade surpluses + export. I barely found any analysis in this book and didn’t learn much new things, if any. I do think readers that don’t know the subject matter well, might have a different reading experience.

The author has resorted to sum up a wide array of translated policy documents. He doesn’t take it a step further, which is underwhelming if you want to go deeper as a reader. He doesn’t go into checking the reality on the ground, which might have elevated this book to a whole different level. That would have made a more compelling and truly relevant read, maybe a next book can elaborate furthee. The author focuses on the realm of policy proclamations by China and expresses his dissatisfaction on EU leadership for not seeing China for what it really is.

For me as a reader it would have been so much more compelling and relevant to hold the Chinese policy, as described in the book, against its implementation. Assess what the result is for the countries involved. Nothing is said about the countries involved in the BRI. Some country names are mentioned and a few BRI projects, but that’s it. The book left me hungry for more.

The most interesting part was probably where the author explained how dredging is used as a strategic & defense tool by China (compared to the EU, where dredging is mostly seen as top notch civil engineering, but lacks the military aspect).

The book format: the core is about how the EU has miscalculated China. But in its conclusion it merely raises fingers at this situation. What should the EU really do? Nothing is said about possible courses of action. The book remains on the ‘raising awareness’ level.

It’s a lot of regurgitation of Chinese official policy and some some surface scratching about how the EU was satisfied with having some foreign direct investment by China and some EU companies that have directly benefited. But this book never goes deeper. It’s genuinely a missed opportunity.

The title is misleading to readers. More accurate would be any title involving ‘EU’s stance towards China’. The book is also flawed because fails to identify its own biases and doesn’t seem to be aware it looks at the Chinese trade / export / FDI policy from a very eurocentric position.

The author also goes on to state what he thinks the goal of any government should be (‘happiness’). By stating this, he totally fails to comprehend (or fingerpoint at least) that this happiness-centered life perspective is at its heart truly Western. In the Far East, the Western pursuit of happiness is not a ‘thing’. This point of view explains why this book remains at a superficial level. The author lacks a thorough understanding or firsthand experience in Chinese culture, Chinese motivations and Chinese deep historic statesmanship roots.

Overall this book didn’t live up to its premise as what one could expect from the title. I missed genuinely a thorough future projection and in-depth digging into what the BRI actually is.

For new readers: you can read this book as an academic paper that was modified for regular audiences and was published.

A truly underwhelming missed opportunity.

[Daniel · Rating 2 out of 5]

This book is not about the Silk Road. At all.

Instead, this is about China’s mercantilist approach: suppress consumption by its people by using the money earned from exports to invest overseas, subsidies key industries, and buy other people’s technology (IBM, Volvo etc). Or research its own (Huawei). Export excess capacities overseas by embarking on infrastructure (belt and road).

The book is not clearly written, and I got lost a few times following its argument. No traps were ever described.

Ultimately, it is a book by a European complaining that China had been smart in developing its economy. But Hei, the Chinese people suffer too, forced to maintain a poorer lifestyle, subsidising the lifestyle of Europeans.

The other problem is no solution is offered. So it feels like a book grumbling for the sake of grumbling.

Nonetheless this book is written at the right time: the negative Covid-19 effect on the global economy makes people want to blame others, and China that recovered quickly is an easy target.

So China will likely work more with countries friendly with it, such as ASEAN, Africa, Russia, Middle East, South America, the Pacific islands, and probably the reluctant South Korea, Taiwan and Japan.

[Stijn Schellinck · Rating 2 out of 5]

Interesting but nothing new. China is a bit naughty when it comes to free trade and Europe is naive. We should be more aware of the current balance and try to shift it more into a fair deal. But well played by the Chinese.
Not especially well written, just a combination of insights over publicly available Chinese documents.

[Matthew Dai]

This book depicts China's rise as the superpower nation to challenge the influence of EU countries in Africa and trade.

[Jane · Rating 2 out of 5]

Written from a Western point of view.

[Emiel de Wit · Rating 4 out of 5]

Taai maar erg interessant boek dat ons eens goed met de neus op de feiten drukt.