What the Belt and Road Initiative Means for the Modern Economy

WHAT THE BELT AND ROAD INITIATIVE MEANS FOR THE MODERN ECONOMY

WHAT THE BELT AND ROAD INITIATIVE MEANS FOR THE MODERN ECONOMY

UNDERSTANDING HOW NEW CONNECTIONS CAN TRANSFORM LOCAL, NATIONAL, AND GLOBAL ECONOMIES

The Belt and Road Initiative is a major undertaking, a project that aims to connect more than 70 countries across Europe, the Middle East, Africa, Asia and the Pacific region. The links are physical ones, with exceptionally long roads stretching across land to create new trade routes, as well as maritime routes enhanced by substantial building of ports and many other support systems. The ultimate goal of the project is to facilitate economic development, especially in currently underserved areas in Africa, Europe and Asia. Initially designed and in large part funded by China, the project has grown to include the participation of private businesses and many levels of government in the countries connected by the initiative.

How will this effort change international commerce once it's complete? The effects will likely be so transformative that it would be impossible to list a few major before-and-after differences. Instead, understanding the changes is best approached by looking at how this project can reshape individual economies and the global marketplace.
 

The benefits of easier international trade
 

The stated purpose of the Belt and Road Initiative is to foster greater economic cooperation and interaction. The construction phase of the project has already proven to be a boon for many countries. Long stretches of road, bridges, ports and many other infrastructure needs for a project of this magnitude, with spending on large individual projects in the millions or even billions, means more economic stimulus throughout all of the involved countries. Cat® equipment is at the forefront of some of the largest projects, helping turn an ambitious vision for increased worldwide connections into a physical reality. Some of the places where Cat machinery has played a major role include Belarus, Ghana, Kuwait and Pakistan.

This high level of construction also results in ongoing increases in employment. These infrastructure items need to be maintained, repaired and otherwise kept in good enough shape for regular, and sometimes very heavy, use. Service and support industries, from restaurants and lodging to vehicle repair and government regulatory needs, also add to the general economic and jobs boost provided by the project.

However, the substantial benefit comes from the permanent trade routes that will connect so many countries and global regions. In Ghana, for example, major additions to the Tema Container Port will greatly increase the capacity of what is already the country's largest port. With Cat equipment handling crucial tasks like excavating, the port will eventually enjoy four new 150,000-ton container berths. There are obvious benefits to be had for Ghana, both in the local area around the Port of Tema and the country as a whole. By making it easier to transport goods to and from the country on Africa's western coast, surrounding nations will benefit as well in terms of both import and export.

In Belarus, highway construction will improve over-land transport of goods, benefiting both the nation itself and the other counties the highway will eventually connect it to. This increased capacity for international trade allows Belarus to participate more substantially in the global economy while making the country more attractive to international investment and business expansion - a common sentiment among the nations connected by the project.

The Rand Corporation's analysis of the Belt and Road Initiative found that the countries involved have a generally lower state of infrastructure and connectivity, meaning there's clear room for improvement. More important to the economic position of the Belt and Road countries is the statistically significant relationship between improved infrastructure and connectivity and bilateral trade found by Rand's analysis. Rand also believes that, given a causal relationship between improving transport infrastructure and increased trade, countries outside of the initiative will also benefit.

A truly international economy with the transport infrastructure to match allows all countries and regions to participate more fully in global trade. While the Belt and Road Initiative isn't a single, global connection, it brings more players into increasingly substantial roles. Cat puts heavy equipment in the hands of the businesses that make these physical connections possible.

 

 

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