/ Latvia's 'China Policy' and the role of '16+1'

SUMMARY
From the inception of the cooperation platform between China and 16 Central and Eastern European countries (henceforth referred to as “16+1” cooperation) in 2012 up through today, the Republic of Latvia has appreciated the opportunities brought by the format. These include regular high-level meetings with Chinese Prime Minister Li Keqiang and President Xi Jinping, political will expressed by China for increased cooperation, resulting in a smoother export produce certification process among other things, as well as a boost in people-to-people exchanges.

On the other hand, the Baltic States in general and Latvia in particular have also raised concerns that the regional and national appeal of these countries might be watered down due to the extensive pool of partners looking to engage with China in similar ways, namely through export increases and investment attraction. In light of this concern and other factors, both internal and external, Latvia was pushed to develop a China policy. The result has been an interlinking three-dimensional solution: 1) analysing and utilising the opportunities brought forward by China, 2) proactively taking part in formulating new regional formats to engage with the PRC on a Baltic and Northern European scale, and 3) stepping up cross-institutional coordination and creating a network of information exchange. Also, thanks to a consistent orientation towards the official position of the European Union, Latvia has avoided any friction with Brussels regarding its increasingly active China policy.

This paper argues that the “16+1” regional cooperation format has served as a catalyst and contributed to the creation of a China policy of unprecedented scope in Latvia. This development can be considered a success of the “16+1” cooperation in its own right. In order for Latvia to be able to benefit from the momentum, however—aside from vectors such as the transport and logistics sector, product certification and export increase, and widening the scope of people-to-people exchanges—it would be valuable to further promote national visibility and consistent national brand-building by engaging all involved institutions, both governmental and non-governmental, in a strategically designed narrative of what Latvia is and what it wants to achieve vis-a-vis China.

“16+1” EARLY DAYS—A FOCUS ON ECONOMY AND INFRASTRUCTURE
The early flagship offer of “China’s Twelve Measures for Promoting Friendly Cooperation with Central and Eastern European Countries”—a document that presented a vision for China’s cooperation with the 16 countries in question before the institutionalization of the “16+1” platform had taken place—centred on infrastructure loans. The second measure declared the plan to “Establish a US$ 10 billion special credit line, a certain proportion of which will be concessional loans, with a focus on cooperation projects in such areas as infrastructure, high and new technologies, and green economy”.1

This offer, however, was never binding for Latvia and the other 10 European Union member states that were invited to take part in the “16+1” format, as the proposed framework would include some requirements that were not compatible with the EU. The Chinese policy had a clause that required at least 50% of components to be Chinese in the project execution, and it asked for a mandatory state guarantee even for private projects. The negotiations revealed other problematic issues as well, such as the reluctance of Chinese enterprises to take part in open procurement tenders. Naturally, the initial mismatch between China’s offer and the EU legislation and practices led to suspicion of the format in Brussels, Berlin, and Paris alike, which all see China’s initiatives as primarily “investment in influence”.2

As the “16+1” format progressed, it experienced some fine-tuning from the Chinese side, but this was not enough to put European suspicions to rest.

Valuing its relationship with China, and at the same time wanting to avoid becoming a part of the China-EU controversy over the “16+1” framework, Latvia began proactively developing its China policy, which has resulted in a visible increase of platforms, stakeholders, and contacts.

A CONSISTENT CHINA POLICY— THE REAL VALUE OF THE “16+1”
Originally the “16+1” format was primarily viewed as a potential boosting mechanism for Sino-Latvian economic and trade cooperation, largely to counter the negative trade balance with China. This notion is exemplified by China’s positioning in the “Economy relations promotion” section of the Latvian minister of foreign affairs’ yearly reports. Still, it has widely been demonstrated that progress has been slow and significant results in terms of FDI have yet to be achieved. The export of Latvian goods to the PRC has increased from 39.74 million euro in 2011 to 139.45 million euro in 2017,3 but even with the rising imports, the import-export imbalance problem is far from tackled—to be fair, this situation cannot be simply resolved on a national scale, as it persists with all 11 EU “16+1” countries.

Cooperation in transport and logistics provides more grounds for optimism. The Latvian transportation and logistics sector, albeit with its own challenges, such as the current under-electrification of the railroad, is still composed of a synergetic network of ports, an airport, broad-gauge railways, and the upcoming narrow-gauge railway project “Rail Baltica”, and is responsible for about a fourth of the country’s services exports. Following a gradual decrease in transit links with Russia, and in accordance with a policy of risk diversification and integration into new markets, the sector is naturally opening itself up to the opportunities brought by the Chinese initiatives. The “Development of container shipping in the Eurasian space”4 is one of the goals in the 2017 Minister of Foreign Affairs’ Yearly Report.

Still, it is safe to conclude that the “16+1” format has not yet delivered on Latvia’s initial economic expectations. But it can also be argued that the format has served as a catalyst for a comprehensive China policy in Latvia.

To back this assumption, several developments should be highlighted.
1) Exchanges with China have greatly increased on the ministerial, parliamentary, and local levels, with as many as 30 high-level visits by Latvian senior officials to China since 2012, as opposed to just 22 visits over the 18-year-long period of 1994–2011;5

2)the Ministry of Foreign Affairs of Latvia has established a cross-institutional coordination workgroup on Latvia-China cooperation within the “16+1” format, involving state, municipal, and NGO actors;6
3)  China’s role in documents relating to the national foreign affairs strategy has been gradually amplified since 2012;7
4)  New parliamentary cooperation platforms, such as the “Nordic-Baltic 8 plus China” and the “Baltic 3 plus China” ones, have been promoted by the Baltic States with the goal to, in part, tackle the over-saturation of the “16+1” platform and reshape the image of the Baltic States as Northern European, instead of Eastern European— these platforms were ultimately accepted by China;8
5)  The Baltic region in general and Latvia in particular has specified cooperation offers towards China in the fields of transport, logistics, and innovation, contributing to an adjustment in China’s “16+1” strategy and ultimately resulting in more tailored regional approaches.

As China began proactively engaging in an increase of exchange opportunities and extended cooperation in more and more sectors, including tourism, product certification and exports, local cooperation, science, education, and culture,9 Latvia’s involvement became increasingly tailored, and a significant number of stakeholders emerged across these fields, including both governmental and non-governmental players.

From the governmental perspective, the institutions that had previously not been actively involved with China, such as the Ministry of Culture, the Ministry of Education and Science, the Ministry of Finance, the Ministry of Agriculture, and the Ministry of Environmental Protection and Regional Development, have become more visible in shaping their approaches to China and are present at the discussion table next to the traditionally active stakeholders—the Ministry of Foreign Affairs, the Latvian Institute, the Saeima, the State Chancellery, the Ministry of Economics and its Investment and Development Agency, and the Ministry of Transportation.10

On the NGO side, the Employers Confederation and the Latvian Chamber of Commerce and Industry, as well as several think tanks and business councils, began to provide consistent feedback, raising awareness of the issues their members were facing, thus actively contributing to the factual base that informs policy decisions.

China has become more visible in the public space as well, resulting in a rise of analytical publications in the media regarding developments in its economy, politics, society, and values. Although the image of the PRC in Latvian media is more polarised than in states that have a longer history of exchanges with it, there is still a substantial growth in reporting on the country, demonstrating a rise in demand for locally applicable analysis.11

CONCLUSIONS AND RECOMMENDATIONS

For the first time in the century-long history of Latvian statehood, national and subnational actors are faced with an unprecedented level of diversity and coordination in Latvia’s policy-shaping vis-a-vis China.

This development, along with a rise in people-to-people contacts, can be viewed as the most significant contribution of “16+1” cooperation from the Latvian perspective. As the economic aspect of Sino-Latvian cooperation is developing more slowly than the people-to-people aspect, Latvia should neither overemphasise nor underemphasise China’s role in its economy, but rather continue to consistently develop its China policy. One of the pillars of said policy should be further engagement in the activities presented within the “16+1” cooperation format. Latvia should exercise all available multilateral and bilateral platforms, namely the EU-China high-level strategic dialogue, “16+1”, the Belt and Road Initiative, and regional formats such as NB8 or Baltic 3 plus China, in order to:

• Work towards an increase in the export of services, prioritising the transport and logistics sector;
• Work towards further product certification and export increases in priority groups;
• Widen the scope of people-to-people exchanges, including but not limited to anincrease in tourism;
• Invest in national visibility and consistent national brand-building.

To dwell on the final point—Latvia must continue to counter the unifying narrative that marks the 16 involved countries as “post-Socialist”/“post-Soviet”, “the EU’s periphery”, “economically underdeveloped” and “new”, or even “Europe’s new Eastern bloc”12—both in China and in Europe. Latvia should furthermore strongly adhere to an “EU comes first” policy, clearly state that it identifies as a Northern European country, and continue to demonstrate both through actions and declarations the complementarity of the “16+1” cooperation format with the China-EU strategic partnership. Further narrative aspects should be devised in cooperation with brand-building consulting parties; it is imperative, however, that the narrative remains consistent for all actors representing Latvia who are involved in dealings with China—any fragmentation in the strategic and public positioning of Latvia creates a fuzzy message and dilutes its selling points in the eyes of Chinese partners. To take Latvia’s emerging China policy one step further, national brand-building to counter negative stereotyping is key in a format where all 16 partners are still considered largely alike by China.

Latvia’s presence in the format can be viewed as a useful tool for expertise-building to make up for the years of practically non-existent exchanges with China, as well as being an opportunity to contribute to the wider EU political dialogue with the PRC.

Further down the road, the “16+1” cooperation platform, along with other aspects of China’s growing visibility in Latvia, can serve as a motivation to further develop a national China strategy in Latvia.

ENDNOTES

• 1  Ministry of Foreign Affairs of the People’s Republic of China. “China’s Twelve Measures for Pro- moting Friendly Cooperation with Central and Eastern European Countries”. 26 April 2012. https://www.fmprc.gov.cn/mfa_eng/topics_665678/wjbispg_665714/t928567.shtml
• 2  For more analysis, see: Angela Stanzel, Agatha Kratz, Justyna Szczudlik, Dragan Pavlićević. Chi- na’s investment in influence: the future of 16+1 cooperation. European Council on Foreign Relations. 14 December 2016. https://www.ecfr.eu/publications/summary/chinas_investment_in_influ- ence_the_future_of_161_cooperation7204
• 3  Ministry of Foreign Affairs of the Republic of Latvia. “Sadarbiba ekonomikā”. Latvijas Republikas un Ķīnas Tautas Republikas divpusējās attiecības.31 August2018. https://www.mfa.gov.lv/arpoli- tika/divpusejas-attiecibas/latvijas-un-kinas-tautas-republikas-attiecibas#ekonomika
• 4  Latvian Ministry of Foreign Affairs. “Ārlietu ministra ikgadējais ziņojums par paveikto un iecerēto darbību valsts ārpolitikā un Eiropas Savienības jautājumos”. 2017. https://www.mfa.gov. lv/images/ministrija/Arpolitikas_zinojums_2017.pdf, p. 9
• 5  Ministry of Foreign Affairs of the Republic of Latvia. “Sadarbiba ekonomikā”. Latvijas Republikas un Ķīnas Tautas Republikas divpusējās attiecības. 31 August 2018. https://www.mfa.gov.lv/arpoli- tika/divpusejas-attiecibas/latvijas-un-kinas-tautas-republikas-attiecibas#ekonomika
• 6  Latvijas Republikas tiesību akti. Par darba grupu Centrāleiropas un Austrumeiropas valstu un Ķīnas sadarbības formāta ietvaros organizēto pasākumu koordinēšanai. 18 January 2016. https://likumi. lv/ta/id/279414-par-darba-grupu-centraleiropas-un-austrumeiropas-valstu-un-kinas-sadarbibas- -formata-ietvaros-organizeto-pasakumu-koordinesanai
• 7  China was mentioned only once in the 2012 Minister of Foreign Affairs’ Yearly Report (See: Ministry of Foreign Affairs of the Republic of Latvia. Ārlietu ministra ikgadējais ziņojums par paveikto un iecerēto darbību valsts ārpolitikā un par paveikto un iecerēto turpmāko darbību Eiropas Savienības jautājumos. 2012. https://www.mfa.gov.lv/images/archive/data/zinojums_par_valsts_arpolitiku_2012.pdf). The 2013 report already carried 2 paragraphs and 11 total mentions of China. (See: Ministry of Foreign Affairs of the Republic of Latvia. Ārlietu ministra ikgadējais ziņojums par paveikto un iecerēto darbību valsts ārpolitikā un Eiropas Savienības jautājumos. 2013. https://www.mfa.gov.lv/ images/archive/data/file/arpolitikas_zinojums_2013.pdf
• 8  The Saeima of the Republic of Latvia. “Baltijas un Ziemeļvalstu parlamentu spīkeri kopīgā vizītē apmeklēs Ķīnu”. 5 January 2018. http://www.saeima.lv/lv/aktualitates/tiksanas-un- vizites/26475-baltijas-un-ziemelvalstu-parlamentu-spikeri-kopiga-vizite-apmekles-kinu
• 9  Cooperation in All Areas. Cooperation Between China and Central and Eastern European Countries. 11 November 2018. http://www.china-ceec.org/eng/hzjl_1/glyhz/
• 10  Latvijas Republikas tiesību akti. Par darba grupu Centrāleiropas un Austrumeiropas valstu un Ķīnas sadarbības formāta ietvaros organizēto pasākumu koordinēšanai. 18 January 2016. https://likumi. lv/ta/id/279414-par-darba-grupu-centraleiropas-un-austrumeiropas-valstu-un-kinas-sadarbibas- -formata-ietvaros-organizeto-pasakumu-koordinesanai
• 11  Jukka Aukia. China in Eastern Europe: Geospatial Analysis. Conference presentation. China and the “Wider” Eastern Europe. Turku University CEAS. 2018.
• 12  Martin Hala. “Europe’s new ‘Eastern bloc’”. Politico. 13 April 2018. https://www.politico.eu/arti- cle/europes-new-eastern-bloc-china-economy-model-belt-road-initiative/