From 17+1 to 14+1

Estonia’s Foreign Minister Urmas Reinsalu

On August 11, Estonia and Latvia announced that they will exit China’s 16+1 trade group of Central and Eastern European Countries (CEEC). This points to a turn from a focus on economic interests to security interests in Europe when looking at China.

17+1 format
On August 11, Latvia and Estonia announced that they will exit the cooperation forum “Cooperation between China and Central and Eastern European Countries” (China-CEEC Cooperation) - also called the “17+1” format”. The two countries issued similar statements, stating that they would cease participation in the cooperation framework, but will continue to work towards “constructive and pragmatic relations with China” bilaterally and through EU-China cooperation while respecting the rules-based international order and human rights.

The China-CEEC Cooperation was set up by China in 2012. It is an economic forum dedicated to developing mutual investment and trade. It originally consisted of the following members: the Baltics (Lithuania, Latvia and Estonia), Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Slovakia, Slovenia as well as the non-EU countries Albania, Bosnia-Herzegovina, Montenegro, North Macedonia and Serbia. The forum - first established as 16+1 - came to be called 17+1 when Greece joined the forum in 2019.

The exit of Latvia and Estonia
What are the reasons for Latvia’s and Estonia’s exit from the China-CEEC forum? One can point to two primary factors. First, given the geographic proximity of the Baltic states to Russia, Russia is of high strategic importance to both Latvia and Estonia. Russia’s recent invasion of Ukraine - and China’s reluctance to condemn it - has added to the skepticism about Beijing. Second, the announcement that Estonia and Latvia would exit the China-CEC forum came just after China initiated military exercises in the Taiwan Strait following US House Speaker Nancy Pelosi's trip to Taiwan on August 2.

The exit of Latvia and Estonia from the forum thus indicates that - following Russia’s invasion of Ukraine - security concerns and concerns with which “camp” to belong to in the US-China rivalry has become of increased importance. In other words, whereas economic concerns were mostly dominant until recently, the two states’ exits are mostly driven by security motives.

However, as noted by Andrew Mertha, director of China studies at the Johns Hopkins School of Advanced International Studies, by claiming to seek "constructive and pragmatic relations" with Beijng, the two states " are signalling that they also understand that there are nuanced differences between Beijing and Moscow regarding their respective ”spheres of influence” that these Baltic countries can leverage, if not exploit outright”.

Thus, it is not a complete refusal of relations with Beijing, but rather that both Estonia and Latvia are open for bilateral trade with Beijing while leaving open a strategic window of opportunity in terms of which “camp” to belong to in the US-China rivalry.

China’s response
How did China respond to the exit of Latvia and Estonia from the China-CEEC forum? According to the government-controlled outlet Global times, Estonia and Latvia have withdrawn from the China-CEEC forum because they are “trapped in the anxiety of geosecurity and under pressure from the US”. The outlet cites unnamed Chinese analysts for saying that this is a "shortsighted approach" and that they will lose their diplomatic independence and sacrifice their opportunities for development.

Still, Liu Zuokui, a research fellow on European studies at the Chinese Academy of Social Sciences notes that whereas Lithuania quit the mechanism in May 2021, in a "destructive" way due to its dangerous move to challenge the one-China principle, Latvia and Estonia in their statements said they would continue to strive for pragmatic relations with China through EU-China cooperation. Unnamed analysts, cited by Global Times, say that the “move will not be a setback for China or the China-CEEC Cooperation … as the Baltic nations cannot represent the majority of the Central and European countries due to their limited participation in the mechanism”.

In other words, it seems that Beijing will not respond in a retaliatory fashion towards Latvia and Estonia and that the moves by the two states will not affect the China-CEEC forum.

Lithuania’s exit
Still, one can point to several problems visible in the China-CEEC forum. The exits of Estonia and Latvia come after Lithuania’s exit from the forum in May 2021. Subsequent to the exit - in November 2021 - Lithuania allowed Taiwan to open a representative office in the country. Beijing, then, in turn, imposed sanctions against Lithuania which, in turn, prompted the EU to file a lawsuit against Beijing at the WTO.

This lawsuit does not come at a good time for Sino-EU relations as the EU-China Comprehensive Agreement (CAI) which in principle was agreed in December 2020 is currently at a freeze. Moreover, with Russia’s invasion of Ukraine there is war in Europe once again which has led to a change of the mindset among European leaders placing stronger emphasis on security over economic interests.

Thus, certain problems are visible in the China-CEEC forum given the recent exits of three states from the forum as well as current problematic Sino-EU relations. Moreover, several other members of the forum, including the Czech Republic, have voiced discontent.

The future of the 14+1 forum?
What is the future of the 14+1 forum after the exit by the Baltic states? On the one hand, from the Chinese perspective, there are economic advantages to be obtained for the participating states, advantages that they cannot achieve through cooperation within the EU. Citing unnamed analysts in Global Times, the argument is that “CEEC nations are getting more development opportunities and regional interconnections through China-CEEC Cooperation”. Says Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies "When the economic and supply chain layouts in Asia have been completed, there will be no room for Baltic nations".

The argument is that there are concerns of some of the countries that are both members of the EU and of the China-CEEC forum which are not addressed in the EU. For example, the need for infrastructure. Says Liu Zuokui, a research fellow on European studies at the Chinese Academy of Social Sciences: “In the framework of the EU, cooperation with China is mostly dominated by large EU members that focus on green technology and the digital economy, but many CEEC members actually need more infrastructure”. This is something that China can help with.

Moreover, for the five CEEC-forum countries that are not members of the EU (Albania, Serbia, Bosnia-Herzegovina, Montenegro and North Macedonia) there are also clear benefits of membership. For example, China has offered large deals on infrastructure (as seen in Serbia).

Finally, citing data from NDRC, it can be observed that in the past decade, trade between China and the CEEC has doubled and Chinese investment in CEEC has increased six-fold.

Thus, it seems that as for now, the membership of the China-CEEC forum is (economically) rewarding for (most of) its members.

Concludingly
The exit of Latvia and Estonia from the China-CEEC forum points to that there has been a turn from economic interests to security interests in Europe when looking at China. To what extent the remaining 14 members of the China-CEEC forum will remain in the forum or whether they also – prompted by the changed security infrastructure in Europe – will tilt towards the West remains to be seen.