One Belt One Road and The Future of Globalization
Much ado has been made about China’s One Belt One Road Initiative since its announcement in 2013. The massive $5 trillion plan to develop infrastructure across Latin America, Africa, and the Eurasian landmass has generated a plethora of opinions amongst policy experts and heads of states. Some view it as China’s attempt to use its economic leverage to dominate smaller states, while others see it as a welcome endorsement of a global free trade system weakened by self-serving protectionist trade policies. These two drastically different representations of the same picture have contributed to some of the confusion around the initiative. After taking account of its costs and benefits, however, it is evident that China’s One Belt One Road project will leave a positive impact on the global economy by improving infrastructure, promoting trade, facilitating the spread of new technologies and ideas, and increasing cooperation between nations.
One Belt One Road is an ambitious policy plan set out by Chinese Premier Xi Jinping and Vice Premier Li Keqiang consisting of a network of strategic infrastructure investments aimed at boosting trade and regional economic development across Latin America, Africa, Southeast Asia, Eurasia, and the Middle East. The centerpiece of the project is a new “Silk Road“ connecting Europe and Asia through an overland “belt” and a maritime “road,” though OBOR will also encompass investments in all other major continents. Set to complete in 2050, the initiative seeks to radically transform the global economy and narrow the gap between developed and developing nations. It aims to accelerate the trend towards increased globalization, especially in poorer countries, to better integrate them into the global economy, and thereby to achieve prosperity. The plan has already opened ports in Greece, Pakistan, Sri Lanka, Djibouti, and Sudan, railways in Laos, Bangladesh, Kenya, Ethiopia, and Uzbekistan, and hydroelectric plants in Ethiopia, Uganda, Pakistan, and Tajikistan. The lack of infrastructure investment in many nations hinders economic growth, widens inequality, and impedes progress towards environmentally sustainable growth. The World Economic Forum forecasts a $15 trillion deficit in infrastructure investment by 2035. The One Belt One Road Initiative provides a large portion of these crucial investments which would help alleviate poverty, improve access to aid and welfare, promote economic development, and reach UN environmental sustainability targets. Trade and commerce occur in tandem with the sharing of new ideas, allowing the benefits of scientific discoveries and innovations to spread to a greater portion of the world’s population. Such openness would help bring about a future where the quality of healthcare no longer differs drastically between nations, where developing nations no longer depend on fossil fuels to drive economic growth, and where entire populations are no longer vulnerable to preventable diseases due to lack of existing medication. It would mean poorer countries having access to the latest water desalination technologies and agricultural innovations to boost productivity and eliminate food and water shortages, and crucially, that economic growth bears a stronger correlation to improvements in human welfare. Thus, the aspirations of China’s One Belt One Road initiative are not solely economic in nature, but also humanitarian.
China’s Belt and Road Initiative are a manifestation of Xi Jinping’s aspirations for “a community of shared future for mankind,” in which the self-interest of disparate nations is aligned with those of the global community. His 2015 speech at Davos defending globalization reflects his belief that China’s future prosperity is linked with those of other nations, and that self-serving economic nationalist policies do not benefit anyone. These values are rooted in China’s own experience of rapid economic growth following Deng Xiaoping’s 1979 Reform and Opening Up Movement. By liberalizing its economy, China invited foreign multinational corporations to open up shop and take advantage of its vast pools of cheap labor, as well as to sell their products to its massive consumer market. According to the National Bureau of Statistics of China, 60% of China’s imports and exports came from enterprises with foreign investments. Companies such as Boeing, Apple, and Volkswagen acquire a significant portion of their profits from their sales in China. As a result, Chinese workers saw their wages grow 26 times over as the nation underwent year after year of double-digit economic growth to ultimately become the world’s second-largest economy. Today, China’s economy is pivoting away from unsustainably high economic growth towards slower but steadier economic growth. In light of recent populist victories in the US and in Europe, as well as the uncertainty in the global environment, Beijing sees a growing need to defend the international framework of globalization from which it has benefitted so much from. One Belt One Road, then, can be interpreted as a commitment to the international free trade system, as well as a signal of its intention to pursue future growth by investing in nations abroad. China’s rate of domestic infrastructure investment has slowed in recent years, leaving its construction industry with excess capacity. By securing building contracts abroad, Beijing helps its domestic construction companies to continue growing, improves its relations with other countries, and create new bonds of economic exchange to boost its exports. Many recipient nations of Belt and Road funds suffer greatly from a shortage of infrastructure investments. Plans to build a solar panel plant, wind farm, and a hydroelectricity dam, will help Pakistan deal with chronic power shortages which cost its economy $8.4 billion in business losses. Research conduction by the UN Economic Commission for Africa forecasts positive results of OBOR projects in Africa, citing “under modest assumptions, the total exports of countries could increase by $192 million and welfare by about $1 billion. The BRI would result in a particularly pronounced increase in intra-regional trade.” Kazakhstan, one of the first countries to sign on to One Belt One Road, has received over 50 projects ranging from power lines to roads and highways which would improve transportation and access to international markets for the landlocked nation.
In spite of the promise the One Belt One Road Initiative holds for the global economy, many in the anti-globalist camp have voiced their opposition, claiming that globalization has done more harm than good. In addition, they claim that China’s motives are to establish economic hegemony by ensnaring foreign nations in debt and extracting their resources. They point to a sharp increase in the level of Chinese debt amongst African countries and draw comparisons to colonialism. These critiques, however, are far from the truth. While it is true that free trade and globalization have cost jobs in certain sectors as companies routinely outsource labor-intensive work to foreign countries with cheaper wages, it has also created new jobs and new industries. Free trade allows companies to sell their products and to overseas markets, generating new revenue streams that can be used to create new jobs. It raises the average productivity of a country, as resources are allocated to industries with large comparative advantages relative to other nations, thereby increasing economic growth. Nobel Prize-winning economist Paul Krugman defends free trade in his article “In Praise of Cheap Labor,” arguing that free trade creates much-needed jobs in low wage countries and thereby boosts economic growth. In regards to the critique that China’s motives for undertaking One Belt One Road are its aspirations for economic dominance, the economic benefits brought to other nations by improvements in infrastructure readily disproves this. Investing in the economic growth of other nations hinders any nation’s quest to achieve economic superiority. Though the debts incurred by particular nations in signing One Belt One Road contracts have in some cases been sizable, the projected benefits are even greater. Increasing integration into the global economy through the construction of new ports, roads, airports, and power plants allows poorer nations to escape their economic stupor and reach new heights of prosperity. Additionally, most African nations welcome Chinese investments in their economies, which have improved productivity, created new jobs, and increased connectivity with neighboring countries. The One Belt One Road initiative has inaugurated Kenya’s first high-speed rail system, the 300 mile long Mombasa–Nairobi Standard Gauge Railway, brought access to satellite TV to thousands of villages in Nigeria, and established ports in Nigeria, Egypt, and Djibouti. Rwandan president Paul Kagame has voiced his support for Chinese investments in Africa, stating “China can play an important role in supporting African Union reforms and promoting Africa’s development.” A recent report by the Rhodium Group, an independent research provider, comprehensively refutes allegations of debt-trap diplomacy. In an overwhelming majority of cases, Beijing has either written off debt(16 cases), deferred payment on debt(11 cases), withheld further lending(4 cases), refinanced debt(4 cases), or renegotiated terms of loans(4 cases). The sole case of China seizing assets in response to a failure to service debt was the Magampura Mahinda Rajapaksa Port in Sri Lanka, in which the Sri Lankan government leased the port to China after it failed to make good on its debt obligations. Far from revealing China’s neo-colonial ambitions, One Belt One Road reflects a commitment to assist other countries in their economic development, creating new jobs and opportunities, and allowing developing nations to pursue prosperity through environmentally sustainable means. The hundreds of billions of dollars in lost trade caused by ongoing US-China trade war and Trump’s unilateral imposition of tariffs on the European Union, Canada, and Mexico, and the incredibly high cost of subsidies given to European farmers to protect them from foreign competition, make a pretty convincing case for why protectionism as an economic policy is harmful.
The great question of our age is whether the global economic order should be one of greater common prosperity through free trade and globalization, or one of self-serving, and ultimately self-destructive, economic nationalism. Multilateral institutions such as the World Trade Organization, and regional free trade agreements, such as Mercosur in South America, ASEAN in Southeast Asia, and the EU in Europe, have come under fire from populist political parties. Exploiting popular discontentment with the existing economic world order, they seek to overturn the system ignoring the rules and pursuing self interest agendas. Trump’s campaign promise of returning jobs to the Rust Belt and to bring back America’s coal industry won him great support amongst discontented workers, but are betray a destructive short term view which will eventually cause more damage than good. China stands on the side of globalization, and commits to a long term vision of increased economic cooperation amongst nations lifting people out of poverty and improving human welfare everywhere. The consequences of this question are beyond economic, but will affect how we deal with issues such as global warming, terrorism, extreme poverty, and regional conflicts. A fractious world order of self-interested nation-states will hinder our ability to deal with these global issues. No single country can solve any of these issues on its own- increased connectivity and cooperation between nations is needed if we hope to overcome the challenges of the future. The One Belt One Road Initiative will play a big part in realizing this brighter future for all people.
