How Much Will the Belt and Road Initiative Reduce Trade Costs?

43 Pages Posted: 17 Oct 2018

See all articles by Francois de Soyres

Francois de Soyres

Board of Governors of the Federal Reserve System

Alen Mulabdic

World Bank

Siobhan Murray

World Bank

Nadia Patrizia Rocha Gaffurri

World Bank

Michele Ruta

Economic Research Division, WTO; Columbia Business School - Economics Department; International Monetary Fund (IMF)

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Date Written: October 15, 2018

Abstract

This paper studies the impact of transport infrastructure projects of the Belt and Road Initiative on shipment times and trade costs. Based on a new data on completed and planned Belt and Road transport projects, Geographic Information System analysis is used to estimate shipment times before and after the Belt and Road Initiative. Two sets of data are computed to address different research questions: a global database based on an analysis of 1,000 cities in 191 countries and 47 sectors and a regional database that focuses on more granular information (1,818 cities) for Belt and Road economies only. The paper uses sectoral estimates of ?value of time? to transform changes in shipment times into changes in ad valorem trade costs at the country-sector level. The findings show that the Belt and Road Initiative will significantly reduce shipment times and trade costs. For the world, the average reduction in shipment time will range between 1.2 and 2.5 percent, leading to reduction of aggregate trade costs between 1.1 and 2.2 percent. For Belt and Road economies, the change in shipment times and trade costs will range between 1.7 and 3.2 percent and 1.5 and 2.8 percent, respectively. Belt and Road economies located along the corridors where projects are built experience the largest gains. Shipment times along these corridors decline by up to 11.9 percent and trade costs by up to 10.2 percent. The paper also shows that these effects are magnified by policy reforms that reduce border delays and improve corridor management.

Keywords: International Trade and Trade Rules, Transport Services, Ports & Waterways, Trade and Services

Suggested Citation

de Soyres, Francois and Mulabdic, Alen and Murray, Siobhan and Rocha Gaffurri, Nadia Patrizia and Ruta, Michele, How Much Will the Belt and Road Initiative Reduce Trade Costs? (October 15, 2018). World Bank Policy Research Working Paper No. 8614, Available at SSRN: https://ssrn.com/abstract=3266994

Francois De Soyres (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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HOME PAGE: http://https://sites.google.com/site/francoisdesoyres/home

Alen Mulabdic

World Bank ( email )

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Siobhan Murray

World Bank ( email )

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Nadia Patrizia Rocha Gaffurri

World Bank

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Washington, DC 20433
United States

Michele Ruta

Economic Research Division, WTO ( email )

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CH-1211 Geneva
Switzerland

HOME PAGE: http://www.iue.it/Personal/Fellows/MicheleRuta/Welcome.htm

Columbia Business School - Economics Department ( email )

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United States

International Monetary Fund (IMF) ( email )

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