The “16+1” Initiative and Poland’s Disengagement from China

Introduction

The China—Central and Eastern European Countries Cooperation Initiative (China—CEEC), organized in 2012, is an ambitious program intended to facilitate economic, technological, and cultural exchanges between the PRC and partner nations in Europe. The program is also frequently referred to as the “16+1” Initiative, in reference to the sixteen European countries who have joined the program. [1] Poland was one of the initiators, and a prospective leader, in the 16+1 Initiative: as a regional power and participant in multiple regional initiatives, as well as an important hub in the transportation corridors between China and Europe, Poland seemed to be well positioned to become a major partner for China. Additionally, Poland is a country with a rapidly-growing market economy, which has displayed openness to Chinese economic activities—to include a significant presence for the Chinese telecommunications company Huawei (China Brief, February 1; Sinopsis, February 2).

These factors have all made Poland a key partner for China in the 16+1 Initiative. However, the progress of bilateral cooperation within the China-CEEC framework has been slow and ineffective. Boosting economic cooperation is one of the key goals of the 16+1 Initiative, but the program’s declarations have not yet translated into tangible benefits for Poland and other CEEC countries. The 16+1 Budapest summit in November 2017, and a subsequent summit in Sofia in July 2018, have not offered significant practical solutions and viable opportunities for member countries. In addition, the ripples of tension between Beijing and Washington have also been felt in the Central and East European (CEE) region, as the White House has pressed states to choose sides in the conflict. The Polish government has decided to align its foreign policy with the United States at the expense of ties with China—which may create serious impediments for the development of the 16+1 Initiative.

Poland Distances Itself from the “16+1”

Polish officials first began to signal disappointment with the 16+1 program in autumn 2017. Following the 16+1 Budapest summit in November 2017, then-Prime Minister Beata Szydło highlighted positive opportunities within the program, but she also admitted that China is “a demanding partner” (Polskie Radio, November 27 2017). In January 2018, Prime Minister Mateusz Morawiecki expressed his dissatisfaction with Poland’s trade deficit with China, and praised U.S. President Trump for his contrasting “free and fair trade approach” (Forsal.pl, January 28 2018). In July 2018, Morawiecki chose to attend a gathering in Czestochowa organized by the influential Roman Catholic Radio Maryja, leaving Vice Premier Jaroslaw Gowin to represent Poland at the 16+1 summit in Sofia, Bulgaria (TVP Info, July 8 2018; Office of the Polish Premier, July 7 2018).

Recent comments have moved beyond the economic sphere. At the “Future of Trans-Atlantic Relations” (FOTAR) conference held in November in the German city of Hamburg, PM Morawiecki said that China poses a challenge to NATO, as well as the wider democratic world (Dziennik.pl, November 17 2018). Just prior to Christmas, the Polish Foreign Ministry issued a communiqué on cybersecurity threats from China (Twitter, December 21 2018). Such concerns were further reinforced in January, when two men were arrested in Poland on charges of alleged espionage linked to Huawei (Sinopsis, February 2). Leading Polish officials  announced a review of the use of Huawei equipment in the public sector (CRN.pl, January 15)—although officially, the recent ABW (Polish Internal Security Agency) operations targeted individuals and are not aimed at Huawei as a company (TVP Info, January 11; Radio Wnet, January 16).

Disappointments in the Economic Relationship with China

The lack of expected economic benefits has been a primary reason for Poland’s disengagement from China.  Exports to China from “16+1” members have seen ups and downs: mediocre results in 2014 (.35% increase) turned into a slump in 2015 (down 16.15%), followed by promising up-ticks in 2016 (up 7.57%) and 2017 (up 22.39%). However, there is a bleaker picture behind these numbers. The value of exports to China increased from 10.5 billion U.S. dollars (USD) in 2013 to merely 11.7 billion USD in 2017. By contrast, imports from China grew much faster: from 57.8 billion USD in 2013 to 73.2 billion USD in 2017. The “Visegrad Four” countries (Czech Republic, Hungary, Poland, and Slovakia), or V4, have more than a 75% share of total exports to China among 16+1 members, and around 80% of imports. The average trade deficit growth pace rate for the V4 was higher than for other countries in 16+1, with Poland recording the highest growth rate. Hungary was the only V4 country recording a moderate trade deficit decrease. [2]

Polish exports to China, which gained a little momentum in 2017 with 20% growth, lagged in the first ten months of 2018, growing only 11%. Poland’s trade deficit with China grew steadily between 2013 and 2017 (seeing a minor slip only in 2015), with imports exceeding exports roughly by a factor of ten. The cumulative trade deficit was above 106 billion USD for the years 2013-2017 (Asia Research Centre, July 2018). Dissatisfaction with the growing trade deficit has been expressed on many occasions by senior Polish officials—to include PM Morawecki, the Ministry of Foreign Affairs, and Poland’s ambassador to China (Polska Agencja Prasowa, November 23 2017; Polish Ministry of Foreign Affairs, April 6 2018).

Additionally, overall Chinese foreign direct investments (FDI) in Poland through the end of 2017 were mediocre at best, with a range between as much as $1 billion USD or as low as $130 million USD, depending on the methodology (Sinopsis, August 25 2018). FDI that occurred in 2018, with a declared value of over $50 million USD, doesn’t make a significant difference (Bankie.pl, January 21). Chinese financing for infrastructure projects is also not an attractive option for the Polish government, which has better options—with EU funding as a primary choice (OSW, September 15 2017).

“16+1” and China’s Bilateral Relations in Central and Eastern Europe

The economic disappointments of 16+1 are explained in part by the model imposed by Beijing, wherein the initiative is not truly a regional development mechanism—rather, it is a “regional institutional gathering that masks the bilateral nature of the relations that are being established primarily between countries.” [3] As a result, Beijing and other member countries have been unable to find a common thread for the 16 European countries to create an integrated community with common objectives.

There are some signs that China will try to better address the needs of specific 16+1 members. Agricultural cooperation, e-commerce, and transportation have been singled out as prioritized sectors for future development. However, to develop more effective cooperation, two major elements will be required: detailed analysis of the sectors where trade can be mutually beneficial, and China relaxing access to its markets. Questions remain as to whether Beijing will be willing and able to follow through on this latter course of action.

The “16+1” Initiative and the Role of the European Union

Disappointments with trade have been amplified by political issues connected to the European Union (EU). The influence exercised by Russia and China has prompted different reactions among CEE states: it is a concern for some countries (such as Poland and the Czech Republic), while it has been embraced by others (such as Hungary and Serbia). Warsaw’s concerns have until recently been muted, as lackluster progress on economic issues was partially offset by the political benefits that Poland has obtained from 16+1. The EU is anxious about the positions on China taken by the eleven states that share both EU and 16+1 membership, and about their high level of cooperation with Beijing (European Parliament, July 2018). [4] As one of the key countries in 16+1, Poland could leverage its parallel position within the EU, and use the Chinese card to press Brussel and Berlin for concessions.

The loudest EU critic of growing Chinese influence in the CEE region has been Germany—which uses many countries in the region as parts of its own production chains, and treats them as part of an informal sphere of political influence (China-CEEC Think Tanks Network, August 7 2017). Facing the growing anxiety in Berlin over the 16+1 structure, Beijing decided to appease Germany, and has invited Berlin to participate in the initiative’s meetings. Despite this, 16+1 continues to be seen by some in Europe as a Chinese wedge into the EU.

The “Three Seas Initiative” as a Potential Alternative for “16+1”

Mediocre economic benefits and diminishing political opportunities for bilateral cooperation within the 16+1 framework have been two of the primary reasons for Poland’s disengagement from China. However, Warsaw is also strongly motivated by a desire to cultivate closer relations with the United States—which is an important source of security not only for Poland, but also for other NATO countries. Recent diplomatic spats between the EU and the United States—amplified by Washington’s efforts to deal directly with EU member states on a bilateral basis—have been treated by the Polish government as an opportunity to strengthen its position in Europe as a staunch U.S. ally (European Council on Foreign Relations, December 19 2018).

Warsaw is pursuing a regional agenda that strengthens its position in the EU, while also engaging Washington. The “Three Seas Initiative” (TSI), which has garnered the support of U.S. President Trump, is part of this effort (Central European Financial Observer, July 18 2017). The TSI was initiated jointly by Poland and Croatia, and comprises the twelve member states of the EU located between the Adriatic, Baltic and Black Seas. [5] The initiative is primarily focused on the development of energy, transportation and digital networks. It has a narrower scope than 16+1, and it will not provide a simple replacement for the wide agenda of the Chinese-led initiative (Uniwersytet Lodzki, 2018). However the detailed list of projects, including specific pipelines, rail lines, and highways, seems to better match regional needs than do the vague plans included in the 16+1 declarations (Three Seas Initiative, September 2018).

Conclusions

Poland, one of the pillars of the 16+1 Initiative and a former enthusiast of closer relations with the PRC, has dramatically changed its attitude. 16+1 has not delivered economically for the majority of its participants, and its “one size fits all” model has failed to take into account the specific situations of individual countries. Minor adjustments declared in the course of 16+1 summits in Budapest and Sofia are a good start, but remain insufficient to satisfy the needs of China’s partners. Beijing’s close cooperation with Russia, and its courting of Berlin, also do not make the PRC a particularly attractive partner for Poland.  Polish authorities have decided to put more focus on their bilateral ties with the United States—and with regional projects such as the Three Seas Initiative—rather than deepening cooperation with China.

Poland’s disengagement from China is likely to have a significant impact on the future of the 16+1 Initiative. A majority of 16+1 countries have also gained very limited benefits from the program—and if they follow the examples of Poland and the Czech Republic in distancing themselves from China, that will negatively impact PRC plans in Central and Eastern Europe. The decoupling from China is not preordained: Poland and other countries are interested in maintaining ties with Beijing, and the 16+1 structure still holds potential benefits for its members. However, to successfully reboot cooperation, the Chinese side will need to offer more of concrete value to Poland and other countries in the region.

Łukasz Sarek is a China market analyst and consultant. He is also a researcher at the Asia Research Centre, Centre for Security Studies, War Studies University in Warsaw.

Notes

[1] The sixteen European members of the China-CEEC Initiative are: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia. For summary information about the program, see: “Cooperation Between China and Central and Eastern European Countries,” official English-language website of China-CEEC, undated, https://www.china-ceec.org/eng/; and “About 16+1,” Republic of Latvia website for the China-CEEC program, undated, https://ceec-china-latvia.org/about.

[2] The trade statistics in this paragraph are the author’s own calculations, based on UN Comtrade data.

[3] This problem is acknowledged even in publications produced by China’s official China-CEE Institute, associated with the Chinese Academy of Social Sciences. See: 16+1 Cooperation and China-EU Relationship, China-CEE Institute, November 2018 (p. 8). https://china-cee.eu/wp-content/uploads/2018/11/161-cooperation.pdf.

[4] 16+1 Cooperation and China-EU Relationship, China-CEE Institute, November 2018 (p. 65). https://china-cee.eu/wp-content/uploads/2018/11/161-cooperation.pdf.

[5] The twelve members of the “Three Seas Initiative” are: Austria, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. See: Three Seas Initiative Summit webpage, 2018. https://three-seas.eu/about/.