By Yasas Mudalige

The Belt and Road Initiative (BRI) is an infrastructure development project initiated by the Chinese government. The project was announced in 2013 by the current Chinese premier Xi Jinping. This massive infrastructure program aims to connect China with Europe, Asia, and Africa through a network of roads, railways, ports, and other infrastructure projects worth USD 575 billion. The initiative consists of two major components. The “Belt” refers to the overland routes that connect China to Europe through Central Asia and the Middle East. This goes along the areas of the historical silk road that connected China with other Eurasian regions for centuries. This overland “Belt” consists of six major economic corridors. The “Road”, on the other hand, refers to the maritime routes that connect China to Southeast Asia, South Asia, the Middle East and Europe. Since its launch in 2013, the BRI has significantly impacted on international trade. This article will explain some of the BRI’s positive and negative impacts.

The Good and the Bad

At first glance, the BRI embraces the idea of making international trade more accessible and available. However, the past few years have driven various debates on whether the BRI is, in fact, beneficial for other nations. Here are some key takeaways on the BRI:

It Has Increased Connectivity and Reduced Trade Costs

The infrastructure development projects under the BRI will increase the connectivity between China and other countries, making it easier to trade goods and services. Ultimately this would lead to high levels of economic integration in the Eurasian region. The infrastructure projects will improve transport and communication networks, reducing the time and cost of trade. For example, the China-Pakistan Economic Corridor (CPEC) includes the construction of trade routes from Kashgar in China to the Pakistani port of Gwadar, which will provide a more direct and cost-effective route between China and the Middle East. According to World Bank estimates, if completed, the BRI transport projects will reduce global trade costs by 1.1 per cent to 2.2 per cent, and these projects could reduce travel times along economic corridors by 12%. The overland economic corridors coming under the BRI have created new trade routes, especially in Central Asia and the Middle East.  These new routes have reduced the dependence of these regions on traditional trade routes and have diversified the sources of imports and exports. This would help countries participate in international trade with fewer barriers and ultimately improve trade balances. The BRI has helped to improve the trade balance of some countries. For example, Pakistan has seen an improvement in its trade balance since the launch of the CPEC.

It Has Opened New Markets and Increased Levels of International Trade

The BRI has increased trade between China and other countries. The improved infrastructure has made it easier for businesses to access new markets and has increased the volume of trade between China and other countries. China’s trade in goods with the BRI countries has doubled in the past ten years, from USD 1.04 trillion in 2013 to USD 2.07 trillion in 2022, with an average annual growth rate of 8%. The BRI includes the development of new ports, such as the Hambantota port in Sri Lanka and expansion of existing ports, such as the Gwadar port in Pakistan and the Port of Piraeus in Athens. The Port of Piraeus has seen a significant increase in trade from China, and it is currently among the busiest ports in the Mediterranean. The energy infrastructure projects coming under the BRI have also increased energy trade between regions. For example, the China-Central Asia Gas Pipeline, which is being expanded under the BRI, has helped to provide a new market for Central Asian gas. With increased connectivity and reduced trade costs, international trade will significantly increase. According to the World Bank, projects under the BRI can lead to a 4.1 per cent increase in trade flows in 71 participating countries.

It Lacks Transparency and Sustainability

The BRI projects are criticised for their lack of transparency and sustainability. The lack of transparency in funding and decision-making processes and the resulting corruption and mismanagement of funds have become key focal points of these criticisms. The BRI projects are often compared against the infrastructure development projects funded by other multilateral agencies with robust mechanisms to ensure high levels of transparency and eradicate corruption. Fundings for the BRI projects are also associated with “Debt Trap Diplomacy”, which is one of the most debated topics in this decade. Even though the existence of a debt trap diplomacy could be debated, it is true that there are serious concerns about debt sustainability in some of the participant countries of the BRI. For example, countries like Sri Lanka, Pakistan, and Djibouti have seen rapid increases in debt to GDP ratio in recent years. This unsustainable funding is also seen as a form of neocolonialism to increase the Chinese influence in the Eurasian region since it allows China to acquire these assets once the states are unable to meet debt repayments. Also, there is less emphasis on the environment and human rights. There are serious environmental concerns regarding the BRI projects such as the projects under CPEC, the development of the Sihanoukville Special Economic Zone in Cambodia and the development of the Kyaukpyu port in Myanmar. Some of the BRI projects have not even undergone environmental impact assessments.  Even though international trade is expected to grow due to BRI projects, the level of sustainability is being questioned.

Other Ways the BRI Is Affecting the World: Its Geopolitical Implications

The BRI has geopolitical implications, which will have severe implications for international trade. One important point in this respect is that the BRI gives China greater influence over the countries involved in the initiative. Some countries have expressed concerns about the potential for China to use the initiative to expand its geopolitical influence. Increased Chinese economic influence has become a serious threat to the existing international order which is mainly governed by the institutions formed after the second world war based on Eurocentric principles such as the International Monetary Fund, World Bank and World Trade Organisation. Currently, matters related to international trade are largely governed by these institutions. However, the BRI might reduce the influence of these institutions as it is forming a new set of institutions, such as the Asian Infrastructure Development Bank (AIIB), to fund the BRI projects. This might lead to a Sino-centric international trade network. These concerns have led to increased geopolitical tensions between these countries. As we have observed in the last few years, such geopolitical tensions often get translated into trade wars. For instance, the United States – China trade war negatively impacted the trade flow between the two countries.

How Does Sri Lanka Play a Role in the BRI Projects?

Sri Lanka is located in one of the most strategic locations in the Indo-Pacific region and is home to one of the most important ports built under the BRI. Hambantota port serves as a vital link in the maritime silk road that comes under the BRI. However, Hambantota port is often cited as an example of Chinese debt trap diplomacy that took place under the BRI, as it was leased to China for 99 years due to Sri Lanka’s inability to pay debts. Although the leased money was utilised to repay the loans obtained from international financial markets rather than Chinese loans. Hence the debt trap diplomacy associated with the Hambantota harbour itself is a myth and rhetoric. The Colombo International Financial City is another project built under the BRI and is the largest ever FDI received by the Island. It is expected to bring in much-required FDIs into the Island. Both Hambantota port and Colombo International Financial City would positively impact the International trade of goods and services. At the same time, these investments have increased Chinese influence in the region along with other projects in Bangladesh, Myanmar and Pakistan. This has led to a geopolitical power struggle between China and India, often seeing the South Asian region as its own sphere of influence.  India is actively engaging with neighbours to ward off Chinese influence caused by the BRI projects in the region.

So, Is the BRI Actually Good for International Trade?

Overall, the BRI has significantly impacted international trade by increasing connectivity, increasing international trade, creating new trade routes, and improving trade balances. However, it has also raised concerns about the environmental and economic sustainability of the projects and China’s increasing influence and the potential for geopolitical tensions. The ultimate purpose of international trade is to uplift the individual’s quality of life. As there are serious concerns regarding the BRI’s sustainability, it is doubtful whether the increased trade influenced by the BRI projects can serve this ultimate goal.

The views and opinions expressed in articles submitted to the Comparative Advantage Blog are those of the author and do not necessarily reflect the views of The Moot Court Bench



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