A Study On The Impact Of Trade Partner's Infrastructure On Bilateral Trade Costs

There are many countries along The Belt and Road,the development level among these regions is not balanced,thus their trade scale with China are not the same.With the implementation and development of The Belt and Road Initiative,China has signed many international cooperation agreements with countries along the routes,the economic cooperation is continuously deepened,and the trade relations have become increasingly close.For trade activities we must take the trade costs into account,and the good infrastructure such as transportation and telecommunication is an indispensable factor to ensure social operation.At present,the utility connection has been the main goal of The Initiative on Belt and Road,some scholars' research have shown that factors such as railway quality have significantly affected trade costs.And the continuously comprehensive study on the relationship between infrastructure and trade costs has great significance for China to carry out foreign infrastructure construction and cooperation.The bilateral trade costs between China and different countries along the routes are different.The research in this paper also verifies that the infrastructure level is an important factor affecting the costs of bilateral trade.Firstly,based on the relevant data from UN Comtrade and World Bank,the paper calculates the latest trade cost data of China and the countries along The Belt and Road in 1997-2017 according to measurement method improved by Novy,and analyzes the difference in bilateral trade costs between 25 countries which have been divided into 5 regions according to their actual situations.The study discovers that the bilateral trade costs between China and the countries along the routes shown a downward trend as a whole,however,the bilateral trade costs of China and Pakistan in the past two years has shown a sign of recovery,which may be due to the weak export situation caused by the increasing of local social risks and the weakening of China's labor advantage;Southeast Asia and South Korea are close to China in geography,for countries with close trade relations,the bilateral trade costs are relatively low;while for less developed countries in Central Asia and South Asia,the bilateral trade costs are relatively high although many of them share the borders with China.Secondly,this paper analyzes the current status of transportation infrastructure and telecommunications infrastructure in major countries along The Belt and Road in conjunction with the Global Trade Promotion Report,and finds that many of the countries that have high bilateral trade costs with China,their transportation and telecommunication infrastructure are relatively backward.Then,based on the characteristics of transportation and telecommunication facilities,this paper analyzes the mechanism by which infrastructure may affect trade costs.Thirdly,this paper formulates a dynamic panel that empirically verifies the impact of trade partner's infrastructure on its bilateral trade costs to China.The study shows that the levels of rail transport capacity,air transport capacity,mobile phone mobile network and telephone lines have a negative impact on bilateral trade costs,that is,the improvement of trade partner's infrastructure level will contribute to the reduction of bilateral trade costs;The impact of broadband usage on bilateral trade costs is not significant,may be which is affected by the use of mobile networks,but the overall impact of telecommunication facilities is greater than that of transportation facilities.Therefore,in the process of promoting The Belt and Road Initiative,China should continue to expand its openness,actively carry out the cooperation in the field of external infrastructure construction,develop bilateral trade potentials,improve financial services,and ensure the capital needs for infrastructure construction;and implement the cooperation of infrastructure construction in right fields in accordance with local conditions.Through these measures,China and the countries along The Belt and Road will be able to reduce the bilateral trade costs,thereby,can more effectively promote China's trade development,transfer China's excess capacity,enhance the economic vitality of countries along the routes,and improve the overall construction quality of The Belt and Road Initiative.