China Takes another Step towards One Belt, One Road
Posted by netrix | Nov 01, 2016
The hugely ambitious One Belt, One Road programme has been pushed forward another step by the Chinese government with the adoption of the Transports Internationaux Routiers (TIR) protocol for road freight.
The "One Belt" part of China's strategic approach to developing trade refers to the Silk Road Economic Belt which runs from China through Asia and into Europe along the route of the historic Silk Road. By adopting this well-established protocol, the paperwork and waiting times associated with transporting goods through the countries in the Belt should be reduced.
TIR allows lorries carrying goods to cross borders without undergoing checks. The lorries are required to be sealed and the driver must have a TIR "carnet". This is a document that contains a description of the goods within the lorry and which offers a financial guarantee to the authorities. The bearer of the carnet will not be required to pay duties or taxes on entry into a country and will instead be liable if the goods are removed from the vehicle when the lorry crosses the border on exit. If the lorry is not unloaded within the country, the driver is free to continue to the next country without paying taxes at all.
At present, TIR is widely used by logistics companies which transport goods between the EU and non-EU Eastern European states. China's decision to adopt this standard should help to make trade easier between itself and the countries to its west. This represents an obvious opportunity for transport companies.
As well as immediately speeding up trade and reducing costs, there will be opportunities for companies to establish new hubs in order to create a more efficient transport network. For the full benefits of TIR to be realised there will need to be significant investment in infrastructure to support the new routes that it makes possible.
With the ongoing development of new industries along the Silk Road Economic Belt there will be opportunities for businesses to supply goods and services from central Asia and Europe as well as to receive China's exports. Again, investment in infrastructure will be critical if these benefits are to be fully realised. For example, without investment in new railway wagons, transport via sea is likely to remain the only viable option for certain cargoes.
China is backing up the ambitious vision of its One Road, One Belt project with the Asian Infrastructure Investment Bank. This is said to be preparing to invest between $4 and $8 trillion over the coming years.
A further complication to the on-going development of trade between the countries along the Belt is the existence of pre-existing agreements between some of the countries relating to the movement of goods, services and people. These will need to be updated in order to facilitate China's grand scheme.
In conclusion, the adoption of TIR will have an immediate positive impact on trade across central Asia and Eastern Europe, but it may be many years before it gets anywhere near to realising its full potential to boost regional trade.