Dear Karol,

thank you for your interest in the FIW project as well as your interesting and detailed questions regarding our policy brief on the “One Belt – One Road” (OBOR) strategy.

Our policy brief approached the analysis of OBOR from an international trade perspective. To answer your question, a firm-level survey would be necessary. The results might, however, be sobering: Even if European companies would like to engage in infrastructure investment projects, we think that the probability of large-scale employment effects is pretty low given the excess capacities that China has to reduce, particularly in the construction sector. From a political point of few, the direct participation in infrastructure investments would be most desirable, as it would go along with direct employment effects.

Regarding sectors, it really depends on the expertise in the country. In the case of Austria, we do have special expertise in tunnel construction and cable cars, which we could bring in directly in foreign investment projects. We could also be attractive for cooperation in the field of research or as a ‘gateway’ for trade with Southeastern and Eastern Europe, given the long lasting trade relationships and geographical proximity. Other countries for sure are competing for projects in the fields of construction of power plants, railways, harbour infrastructure and telecommunication networks.

Geographically, I would argue that a strong focus will be given to the Western Balkans, given the Chinese investments in Greek harbours. But regarding the economic and political turbulences in Turkey, Iran, and Pakistan, I do not dare to speculate on whether European firms are eager to invest in countries along the “one belt” land route.

If we look at the current plans of the ‘new sild road’, it appears that in Europe countries with low labour costs will be recipients of investments, whereas countries with a comparative advantage in technologies compete in strategies how they can actively participate in these investments. Whether FDI destination countries can profit from employment effects is questionable – again: due to the Chinese excess capacities. Although Eastern European countries do have a cost advantage over Western European countries, they probably don’t in comparison with Chinese labour.

In general, I can follow your argument, that there should be a difference in the perception of transport infrastructure investments, whether an EU country is a net exporter or net importer. My counter-question is: Is this question valid for ‘the factory of the world’? As you have already mentioned, it is more or less only Germany, that in the EU (also sometimes Scandinavian countries and the BENELUX states) that run surpluses. So one might want to distinguish the effect for Germany (the greatest net-exporter) and the rest of the EU.

I think your argument is, that net exporters appreciate better trading routes, whereas net-importers fear these developments. For OBOR this might not be true, as particularly low income countries and net importers are targeted by investments, stimulating the economies.

New train connections will for sure impact maritime transport, e.g. potentially shifting cargo from the Netherlands or Italy to Greece, with further on land transport to Eastern and Western Europe via rail.

Projects of the AIIB which have already been approved do not target European countries. Also in the future, AIIB investments will not focus on investments in Europe, but the presence of many European countries within the AIIB signatories might allow for more inclusive projects (involving EU members’ firms and expertise).

Best wishes,

Julia