China's Belt and Road Initiative: Can Europe Expect Trade Gains?

TLDR

The Belt and Road Initiative seeks to improve cross‑border infrastructure to cut transportation costs across a vast area between China and Europe, a goal that Xi Jinping’s vision supports and is expected to benefit European trade. The study estimates how much trade might be created among Belt and Road countries as a consequence of reduced transportation costs. The analysis finds that EU countries, especially landlocked ones, will benefit considerably from reduced rail and maritime costs, with similar gains for Eastern Europe and Central Asia and to a lesser extent Southeast Asia; however, if China establishes a free trade area within the B&R region, EU benefits would be smaller while Asian gains would increase.

Abstract

Abstract The Belt and Road Initiative (BRI) aims to improve cross‐border infrastructure to reduce transportation costs across a massive geographical area between China and Europe. We estimate how much trade might be created among Belt and Road (B&R) countries as a consequence of the reduction in transportation costs (both railway and maritime) and find that European Union countries, especially landlocked countries, will benefit considerably. This is also true for Eastern Europe and Central Asia and, to a lesser extent, South‐East Asia. In contrast, if China were to seek to establish a free trade area within the B&R region, EU member states would benefit less, while Asia would benefit more. Xi Jinping's current vision for the B&R, centered on improving transport infrastructure, is advantageous for Europe as far as trade creation is concerned.