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Opportunities of and Challenges to “Belt and Road” Trade Cooperation

Submit Time:11-09-2017 | Zoom In | Zoom Out

Author:Yang Rongzhen, Jia Ruizhe | Source:Guangming Daily (August 1, 2017)

Abstract:

Status Quo and Opportunities of Trade Cooperation between China and the Countries along the “Belt and Road” 

China and the countries along the “Belt and Road” are important trade partners of each other. China’s economic development and trade growth provide large markets and diverse products for the countries along the “Belt and Road”. The countries along the “Belt and Road” with large populations, vast territories and abundant resources are China’s important trade partners. In 2016, the total GDP of the countries along the “Belt and Road” accounted for about 16.0% of the world GDP, their populations accounted for 43.4% of the world total, and their foreign trade volume accounted for 21.7% of the total world trade volume. In 2016, the volume of trade between China and the countries along the “Belt and Road” was USD 953.59 billion, accounting for 25.9% of China’s total cargo trade, showing the good trend of “Belt and Road” trade cooperation against the backdrop of the world’s slow economic recovery. 

China is a main import and export market for the countries along the “Belt and Road”. Among the countries along the “Belt and Road”, China is the main export destination of Singapore, Malaysia, Vietnam, Thailand, Russia, India and Indonesia, and the No. 1 import market of the main trade partners along the way. In 2016, China’s exports to the countries along the “Belt and Road” reached USD 587.48 billion, accounting for 27.8% of China’s total exports. The goods exported by China to for the countries along the “Belt and Road” are mainly labor-intensive products, with electric machinery, electric equipment and its parts, boilers, machines, mechanical appliances and parts accounting for the highest proportion reaching 35%. China mainly imports from the countries along the “Belt and Road” mineral fuels, mineral oils and products of their distillation, electric machinery, electric equipment and its parts, whose proportion is as high as 51.4%. 

The “Belt and Road” promote connectivity between China and the countries along the way and accelerate cooperation between China and the countries along the way in the areas such as railway, road, port and telecommunication infrastructure, providing important opportunities for Chinese enterprises to exploit the markets of the countries along the way. After the “Belt and Road” building was implemented, China first focused on carrying out connectivity of transport and telecommunication with the countries along the way, and achieved initial results in the building of a large number of infrastructure projects, propelling exportation of funds, technologies and production capacity and at the same time lowering costs and providing opportunities for conducting trade cooperation with the countries along the way. 

Positive progress has been made in the building of the “Belt and Road” trade cooperation mechanisms. Apart from the current bilateral and multilateral trade cooperation mechanisms, diverse cooperation mechanisms such as sub-regional cooperation, economic corridors, industrial parks, policy dovetailing and expositions establish institutional platforms for “Belt and Road” trade cooperation. At the Belt and Road Forum for International Cooperation held this year, positive progress was made in the “Belt and Road” trade cooperation mechanisms. The establishment and improvement of these trade cooperation mechanisms will provide institutional guarantees for “Belt and Road” trade cooperation. 

Main Obstacles to Trade Cooperation between China and the Countries along the “Belt and Road” 

The countries along the way are at different levels of economic development, and their trade ties with China are not equally close. The economic and trade development levels of the countries along the “Belt and Road” are quite different. The countries along the way include a few developed countries as well as least developed countries and many developing ones. Such differences will make it hard to form unified coordination mechanisms for “Belt and Road” building and make multilateral negotiation more difficult. 

The generally high tariff and nontariff barriers bring challenges to trade liberalization and facilitation. Most of the countries along the “Belt and Road” are least developed countries and developing ones with very high tariff barriers, which constitute certain obstacles to mutual trade. Besides, China’s increasing trade surplus with the countries along the way and certain homogeneous industrial competition are likely to cause trade friction. The generally low level of trade facilitation software, poor customs clearance efficiency, low border management transparency and trivial clearance formalities all hinder smooth trade. 

The system of international trade rules is still unstable. The “Belt and Road” is not a tight regional trade agreement itself. China and the countries along the way still mainly follow WTO multilateral trade rules and bilateral trade agreements. Besides, among the countries along the way, many countries have not officially acceded to the WTO yet. Their foreign trade policies will exert certain negative effect on free flow of goods. In terms of bilateral free trade agreements, China has only signed free trade agreements with a few countries along the way. Generally speaking, the system of international trade rules needs to be further strengthened with the countries along the way. 

Diverse cultures, constant regional conflicts and geopolitical instability lead to certain risks in trade cooperation. Now certain regions along the “Belt and Road” still suffer regional conflicts, geopolitical instability, regime changes, cultural gaps, religious conflicts, racial discrimination and economic differences. As a result, some countries and regions have not established stable development environment, and their market risk levels are very high. 

Strategic Choice for Strengthening “Belt and Road” Trade Cooperation 

Actively promote negotiation on bilateral and regional free trade agreements. “Belt and Road” trade cooperation requires international trade rules as institutional guarantees. Under the situation where substantial progress in multilateral trade negotiation can hardly be made, priority can be given to carrying out negotiation on bilateral and regional free trade agreements to promote trade cooperation with different trade partners in a step-by-step and planned manner. 

Look for new trade growth points. China’s advantages in traditional cargo trade lie in labor-intensive processing and manufacturing industry, while the advantages of some trade partners along the way mainly lie in resource-intensive products and some countries’ agricultural produce trade has obvious advantages. Though China and the countries along the way are highly complementary in trade, traditional comparative advantages are not effective enough to propel trade growth. Various countries should carry out scientific and technological research and development together, turn technological achievements into products’ real competitive advantages, develop capital- and technology-intensive industries, promote high-tech goods trade and elevate products’ status in the global value chain. 

Gradually eliminate trade barriers and realize trade facilitation. The countries along the “Belt and Road”, especially those that have not acceded to the WTO, still have very high tariff levels, and there is still much room for efforts to lower tariff barriers through bilateral and regional negotiation. The following measures may be taken to cope with nontariff barriers: for countries that use trade protection measures such as antidumping, diplomatic negotiation may be carried out to urge them to reduce irrational and nonstandard practice in investigation and try to lower the frequency of using trade relief measures; for countries that use technical trade measures much, they may be urged to strengthen transparent reporting of the relevant measures and standards to reduce unnecessary obstacles to trade under the framework of the WTO; the favorable opportunity should be taken to implement the WTO Trade Facilitation Agreement and urge various countries to simplify clearance formalities and ensure smooth flow of goods in a step-by-step and planned manner. 

Establish a sound risk assessment mechanism and give early warnings together to prevent risks. To minimize the negative influence exerted by unstable regional political situations on trade, a sound risk assessment mechanism should be established to comprehensively and objectively assess and determine the political risks and military risks in the countries along the way and their surrounding areas with their governments. Early warnings on risk factors should be given in the period of burgeoning and they should be guarded against timely to reduce conflicts and avoid risks. 

(Author’s Employer: China Institute for WTO Studies, University of International Business and Economics) 


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