Dudo que sean capaces de cerrar fronteras, tras tantos años de globalización y tantos países tan beneficiados…
This is how China's New Silk Road initiative could impact European trade
Much has been written about the Belt and Road initiative since Xi Jinping made it Beijing’s flagship initiative in September 2013. There are many interpretations of the initiative’s ultimate objectives, but one objective is clear. The belt and road scheme will bring huge improvements in regional and international connectivity through infrastructure upgrades and trade facilitation across a massive geographic area.
Indeed, the regional potentially affected covers as many as 63 countries (even if vaguely defined), sixty percent of the world’s population and thirty percent of global GDP.
This massive project is centered in two main routes, along which connectivity is to be fostered: land and sea. On land the focus is on transportation infrastructure and energy. For the sea, investment in ports and new trade routes are the main pillars. Both routes will have a major impact on Europe. In fact, the land route ends up in Europe, while the sea route is currently the most heavily used for trade between Europe and China. Undoubtedly, the belt and road initiative will affect Europe and the European Union (EU).
Image: Wall Street Journal
The designations employed and the presentation of material on this map do not imply the expression of any opinion on the part of the World Economic Forum concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.
More specifically, the huge investments in infrastructure have the potential to ease bottlenecks in cross-border transportation. Among the many benefits of improved connectivity, trade stands out. The idea that improved transport infrastructure should generally foster trade is of course very intuitive. However, it is less sure that such benefits can be spread across countries and, more specifically, which countries stand to win/lose the most depending on their proximity to/distance from the improved infrastructure, among other considerations. In a working paper recently published by Bruegel, we addressed exactly this question by assessing empirically how the belt and road initiative, through a substantial reduction in transportation costs, may foster trade. Beyond the relevance of trade for Europe, our results show that a reduction in transportation cost can indeed increase international trade. A 10 percent reduction in railway, air and maritime costs would increases trade by 2 percent, 5.5 percent and 1.1 percent respectively (see on this scenario and others below).
While the current belt and road initiative is centered on building infrastructure, there are other ways in which it may evolve. One obvious objective, as far as trade is concerned, is dismantling trade barriers. In fact, Chinese authorities have started considering free trade agreements (FTA) with the belt and road countries[1]. Because most of the EU countries are not directly included in the initiative, and it is only possible for China to jointly strike an FTA with all EU countries, the chance for the EU to benefit from an FTA is slim. The previously mentioned Bruegel working paper also develops this scenario by focusing on the impact on EU trade of China-centered free trade bloc among belt and road countries. As one could imagine, a scenario where the belt and road initiative focuses on trade barriers is much less appealing than the previous one in which only transport infrastructure is built. In fact, the EU would no longer benefit from a free lunch (we are assuming that China and the belt and road countries will finance the infrastructure and not the EU – indeed, this is the case so far) and would be excluded from a very large free trade area just outside its borders.
Finally, the paper develops a third scenario in which both transport infrastructure is improved and a FTA is agreed among belt and road countries. This scenario is relatively neutral for the EU as a whole, although there are clear winners and losers within EU.
Our analysis has special policy implications for the EU. China has been advocating for the EU’s involvement in the project since 2013. We believe it is in the EU’s interest to actively take part in the initiative and push for more emphasis on cooperation in transportation and infrastructure. This makes sense, as it stands at the other end of the road from China and there are clear gains to be made. In a nutshell, if we focus on trade, the belt and road is very good news for Europe under the current set up, namely one in which the EU benefits from the infrastructure without a financial cost attached to it, because it is so far being financed by China and other belt and road countries.
It is, thus, quite striking that the discussion on the impact of the belt and road on Europe is still very embryonic. It goes without saying that more research is needed on the topic, as trade is only one of the many channels through which the belt and road initiative may affect Europe. Financial channels, such as FDI and portfolio flows are also very relevant and should also be analysed.
Some more details on our three scenarios:
Scenario I: Simulating the impact on EU trade of a reduction in transportation costs with the belt and road
From a regional perspective, the EU is the largest winner from the belt and road initiative, with trade rising by more than 6%. Trade in the Asian region is also positively affected by the reduction in transportation costs, with trade increasing 3%, but this is only half as much as for the EU. In fact, Asian countries are found to be neither the top winners nor losers. This is probably explained by the fact that the estimated reduction in maritime transportation costs is quite moderate. Conversely, the cost of railway transportation is halved, which is behind the large gains for rail transit to Europe — in particular for landlocked countries. The rest of the world suffers from the deviation of trade towards the belt and road area but only with a very slight reduction in trade (0.04%). As a whole, our results point to the belt and road being a win-win in terms of trade creation, as the gains in the EU and Asia clearly outweigh the loss in the rest of the world.
Scenario II: Simulating the impact on EU trade of an FTA within the belt and road area
If China established a FTA zone in the belt and road area, the EU, which would be the biggest winner from the reduction in transportation costs, now suffers slightly. This result is intuitive, because we assume that EU members are left out of this trade deal and that no bilateral trade agreement with China is signed either. The rationale for such negative impact is that EU trade with China and other belt and road countries would be substituted by enhanced integration among them. This is true even for countries within the EU which are formally included in the belt and road initiative, such as Hungary and Poland, because they will not be able to enter any belt and road FTA without the rest of the EU joining. The Asian region thus becomes the biggest winner, followed by non-EU European countries since they can also benefit from the elimination of trade tariffs. If we consider countries one by one, the top winners are all from Middle Eastern and Central and East Asian countries, who would see their trade increasing by more than 15%. This compares favorably with the trade gains of 3% stemming from a reduction in transportation costs previously estimated for this group of economies.
Scenario III: Simulating trade gains for both transportation improvement and FTA
Lastly, we consider a combined policy package including both transportation improvement and establishment of an FTA within the belt and road region. Most Asian countries now become the biggest winners since they benefit from both the reduction in transportation costs and the elimination of trade tariffs. Some EU countries also benefit quite significantly but less than Asian ones. This is specially the case for some landlocked countries, such as Slovenia and Hungary. Also Germany benefits slightly more than France or Spain. This is actually very intuitive because these EU countries benefit from the transportation cost reduction but not from the FTA as they are not part of it. Also, as is in the previous two scenarios, there are always some slight losses for countries far from the belt and road project. The biggest loser is Japan, while the impact on the USA and Canada is close to zero.
Abrazos,
PD1: China, invirtiendo millones en empresas de fuera, creando lazos inmensos con acuerdos comerciales con todo el mundo…, así es imposible que se frene la globalización…
Why China could lead the next phase of globalization
Donald Trump is on his way to becoming the 45th president of the United States. Among his promises are a 45% import tax on Chinese products, the cancellation of the Paris climate agreement and, as was confirmed today, the end of the Trans-Pacific Partnership trade deal.
If he doesn’t go back on his plans for global trade and international affairs, Trump will give room to other nations to take the lead in shaping globalization. While the US might be taking a step back from the world – a world it helped to create, to a large extent – China in particular can be expected to take on a more prominent role.
While the US is currently the world’s largest economy, in purchasing-power terms China is expected to overtake it in 2016, according to the International Monetary Fund. China has benefited significantly from globalization. Over decades, it has invested in enhancing its capabilities and built economic links with many countries. It has become viewed as an important overseas partner and investor.-after
This chart shows how China is forecast to overtake the US as the world's dominant economic power by 2030, based on share of global GDP, trade and exports.
Image: Economist
Something China understands very well is the importance of connectivity – and hence transport infrastructure – for economic growth and development. Its major development framework is the One Belt One Road initiative with its two pillars, the Silk Road Economic Belt and the 21st Century Maritime Silk Road. This development project involves a territory equal to 55% of global GDP, 70% of the global population and 75% of its known energy reserves. “The investments will involve about 300 projects extending from Singapore to Turkmenistan,” reports Reuters.
One building block of One Belt One Road – also known as OBOR – is the Regional Comprehensive Economic Partnership (RCEP). This China-driven alliance will comprise Australia, New Zealand, China, India, Japan and South Korea – as well as the ASEAN region. In 2014, ASEAN was the seventh-largest economic power in the world. It was also the third-largest economy in Asia, with a combined GDP of US$2.6 trillion – higher than all of India.
China on the world stage
On the African continent, China is lending billions towards large-scale infrastructure investments, again part of OBOR, and particularly in transportation. One of its flagship projects is the Standard Gauge Railway in Kenya. There’s also the development of deepwater ports in cities such as Dakar, Dar es Salaam and Djibouti. These are likely to become industrial hubs, following the model of China’s development of the new Cameroonian deepwater port of Kribi.
The Russian Trans-Siberian Railway (TSR) is at the origin of rail transportation between Europe and Asia. Recently, Anthony Cuthbertson wrote in Newsweekthat Vladimir Putin may be envisaging a Hyperloop Silk Road. This could present an alternative to the planned construction of 64,000 kilometres of rail tracks that are intended to strengthen existing pathways between the east and west. CRRC Corp, China’s largest maker of railway equipment, was in talks for a potential investment in Hyperloop One, the company behind the idea, Bloomberg reported earlier this year.
Meanwhile, China is launching an $11 billion fund for Central and Eastern Europe, targeting investments in infrastructure and high-tech manufacturing, among other things, both in the region and beyond. Supply-chain operator DB Schenker started running weekly block trains between China and Germany as long ago as 2011. Four years later, the first train carrying containers from China arrived in the Rail Service Centre freight terminal in the Port of Rotterdam.
With the New Development Bank (NDB), the Silk Road Fund and the Asia Infrastructure Investment Bank (AIIB), China has prepared itself for responses to major financing needs – within and beyond the Belt and Road area. This shows some similarity with the Marshall Plan, the US support plan that helped to rebuild western Europe after the end of the Second World War.
With the US pulling out of the TPP, as Trump has indicated it will, China holds an advantage. The binding agreement, which connects Asian countries to North and Latin American nations, has been perceived by many as an obstacle to China’s reach and a way to solidify US alliances with other nations in the Pacific region. Other Asian countries with high export potential, such as Malaysia and Vietnam, are expected to benefit significantly from TPP, while countries that did not sign the agreement, such as the Philippines, risk losing out. This could have a disruptive effect on the region due to trade and investment diversion.
So far, China has faced scepticism and criticism for its international activities. Many have questioned its development in Africa, for example. But China could yet regain a level of moral authority; it could lead the global climate adaption effort if the US pulls away, for instance. It has already warned Trump against backing away from the Paris climate deal.
What’s in store for relations between the US and China? For a start, there may be tough negotiations over the US import tax on Chinese goods. If both nations find the right balance, they will not only avoid a global trade war, as in the 1930s when the implementation of the Smoot-Hawley tariff act intensified nationalism around the world, but they could also move their bilateral relations to new grounds.
Whatever happens, if the US pulls away from globalization, China stands ready to fill the gap.
PD2: Interesante carta de un abuelo a sus nietos. ¡Qué sabiduría!:
James Flanagan, por sugerencia de su hija, escribió una carta a sus nietos para cuando fueran mayores. La subieron a las redes sociales y ya acumula millones de visitas. Al poco tiempo el abuelo falleció y sus nietos se quedaron con su mejor legado.
Queridos Ryan, Conor , Brendan , Charlie y Mary Catherine,
Mi sabia y reflexiva hija Rachel me instó a escribir algunos consejos para vosotros, las cosas importantes que he aprendido acerca de la vida. Estoy empezando esto el 8 de abril de 2012, la víspera de mi 72 cumpleaños.
1 . Eres un regalo maravilloso de Dios tanto para nosotros como para todo el mundo. Recuérdalo siempre, especialmente cuando pases por momentos difíciles de la vida.
2 . No tengas miedo. . . de nadie ni de nada cuando se trata de vivir tu vida más plenamente. Persigue tus esperanzas y tus sueños, no importa cuán difícil o “diferentes” puedan parecer a los demás. Demasiadas personas no hacen lo que quieren o deben hacer por lo que otras personas puedan pensar de ellas. Evita los pesimistas. Lo peor de todo en la vida es mirar hacia atrás y decir: “Yo tendría , podría tener, debería haberlo hecho”. Tomar riesgos, cometer errores.
3 . Todos en el mundo sólo son personas ordinarias. Algunas personas pueden usar sombreros más chulos o tener grandes títulos o (temporalmente ) tener poder y querer que vosotros penséis que ellos están por encima del resto. No les creas. Ellos tienen las mismas dudas, temores y esperanzas: comen, beben y duermen como todos los demás. Cuestiona la autoridad siempre, pero sé prudente y cuidadoso acerca de la forma en que lo haces.
4 . Haz una lista de todas esas cosas que quieres hacer: viajar a lugares, aprender una habilidad, dominar un idioma, conocer a alguien especial. Que sea larga y haz algunas cosas de ella cada año. No digas: ” lo haré mañana” (o el próximo mes o el próximo año ). Esa es la manera más segura de dejar de hacer algo. No hay mañana, y no hay un momento “adecuado ” para empezar algo, salvo ahora.
5 . Sé amable y sal de tu caparazón para ayudar a la gente, especialmente a los más débiles y los niños. Todo el mundo lleva una pena especial y necesita nuestra compasión.
6 . No te unas a las fuerzas armadas o a cualquier organización que entrena para matar. La guerra es el mal. Todas las guerras son iniciadas por los viejos que fuerzan o engañan a los hombres jóvenes para odiar y matarse unos a otros. Los ancianos sobreviven e igual que empezaron la guerra con la pluma y el papel, la terminan de la misma manera. Así que muchas personas buenas e inocentes mueren. Si las guerras son tan buenas y nobles, ¿por qué no son los líderes los que combaten?
7. Lee libros, tantos como puedas. Son una maravillosa fuente de placer de sabiduría e inspiración. No necesitan baterías ni conexiones, y pueden ir a cualquier parte.
8. Sé sincero.
9. Viajen siempre pero especialmente cuando sean jóvenes. No esperen a tener el dinero “suficiente” o hasta que todo “esté bien”. Eso nunca sucede. Haz tu pasaporte hoy mismo.
10. Elige tu trabajo o profesión porque te gusta hacerlo. Claro, habrá algunas cosas difíciles al respecto, pero un trabajo debe ser una alegría. Ten cuidado en coger un trabajo solo por dinero: paralizará tu alma.
11. No grites. Nunca funciona, y te duele a ti mismo y a los demás. Cada vez que he gritado, he fallado.
12. Siempre mantén las promesas a los niños. No digas “ya veremos” cuando quieres decir “no”. Los niños esperan la verdad.
13 . Nunca le digas a nadie que lo amas cuando no es así.
14. Vive en armonía con la naturaleza: sal al aire libre, bosques, montañas, mar, desierto. Es importante para tu alma.
15. Abraza a las personas a las que quieres. Diles lo mucho que significan para ti ahora, no esperes hasta que sea demasiado tarde.
16 . Sé agradecido.
