The views expressed in this report are those of the authors. Their statements are not necessarily endorsed by the affiliated organisations or the Global Challenges Foundation.

Trade has long been a driving force in promoting international collaboration. In light of current geopolitical changes, what new forms of economic cooperation will guide the future of international trade and – beyond – of global governance? An important development is China’s recent Belt and Road strategy. Unlike the rules-based order structured around the WTO, this initiative combines diplomatic coordination with project-based collaboration, investment and infrastructure partnerships, to better foster economic integration across countries.

Trade has always been a driving force in boosting international relations, be it in Ancient Greece, following the discovery of the New World by Columbus, or after the Industrial Revolution. Its role is even more significant in today’s age of information technology. 

China’s recent “Belt and Road” initiative, which borrows from the idea of the ancient Silk Road trade routes, is set to complement and improve current international governance structures, particularly structures supporting international trade. 

The concept of the Belt and Road differs from the British Empire’s “imperial preference” system in the early 1900s, or the later U.S.-led multilateral trading system centering around the World Trade Organization (WTO). The imperial preference system favored the constituents of the British Empire, while other countries faced a range of restrictions. The WTO treats all members equally, in principle at least, through a framework of rules and protocols. However, power structures within the WTO have been evolving in recent years: as China rises, U.S. leadership relatively diminishes, causing internal tensions. There are even talks of the WTO dying after the long-stalled Doha Round negotiations. So far, however, there is no system to replace it. The Trans-Pacific Partnership agreement, one of the main candidates for succeeding to the WTO, is now struggling after the U.S. pulled out.

Unlike the WTO and Trans-Pacific Partnership agreement, the Belt and Road program does not primarily aim to set agreed rules and protocols. Rather, it harnesses infrastructure development as a way to enhance connectivity and further boost trade and investment. It will mainly involve bilateral agreements between China and countries along land routes over Asia and Europe, and sea routes around Southeast Asia, the Middle East and Africa. 

Trade has always been a driving force in boosting international relations. Its role is even more significant in today’s age of information technology.

The Belt and Road Initiative does involve coordinated diplomatic efforts. Beijing hosted a Belt and Road summit in May that gathered representatives from more than 100 countries and international organizations. But no multilateral organization was founded on that occasion – rather, the summit was an opportunity to explore joint issues and align understanding among participants. 

Some media reports have described the Belt and Road as China’s attempt to build a “tribute system,” in which the other countries pay tribute to the “Chinese empire”, as in old times. That is a misreading of the initiative. China is not proposing a new trade system that seeks to knock down existing ones. Rather, the Belt and Road initiative is a vital move by China to reignite global trade after multinational value chains have gone through profound changes since the Global Financial Crisis, a decade ago.

One important driver of the Belt and Road initiative is limitations in the WTO. The WTO is well suited to support relationships between developed countries, but limited when it comes to relationships with and among developing countries. The Belt and Road provides a more-flexible path between China and countries along land and sea routes, anchored in joint investment and infrastructure projects. Chinese companies going out will also help developing countries accelerate their economic development. 

At a time when globalization is facing the strong head winds of protectionism, the Belt and Road initiative aims to boost economic growth and balance trade, while also gradually influencing international trade relations. For China, the significance of the Belt and Road initiative lies in the opportunity for further opening up. For the broader world, it could represent an important step towards a new phase of global cooperation.

Hu Shuli

Hu Shuli is Editor-in-Chief at Caixin Media, and Professor at the School of Communications and Design at Sun Yat-sen University in Guangdong. Recognised as a pioneer of Chinese journalism with many awards to her name, Hu Shuli has focused on global economic governance and China’s role in the new economic order. She has been nominated as one of several top global intellectuals by Foreign Policy Magazine, and one of Forbes most influential people.