Reconfiguring maritime networks due to the Belt and Road Initiative: impact on bilateral trade flows

Abstract

This paper aims to analyse the potential effects on bilateral trade movements of the reconfiguration of maritime networks brought about by the Belt and Road Initiative (BRI). The gravity model of international trade is applied to examine the hypothesized impact of maritime network reconfiguration on the bilateral trade between nine exporting countries (Egypt, Saudi Arabia, Israel, Panama, Colombia, Costa Rica, Singapore, Malaysia and Indonesia) and their 128 trading partners. The panel data on the five components of the Liner Shipping Bilateral Connectivity Index, the export value, the gross domestic product (GDP) of the nine exporting countries, the GDP of their trading partners and the maritime distance linking them to these 128 trading partners for each of the years from 2008 to 2016 are used in the analysis. The results show that the estimated coefficient for the number of transhipments is negative, revealing an inverse relationship between transhipments and bilateral exports, reconfirming that a redesign of the maritime supply chain network in response to the BRI could significantly improve bilateral export values. Furthermore, a reduction in the number of required transhipments, because of a reconfiguration of maritime networks with BRI trading partners, will improve the maritime network structure between countries located along the three strategic chokepoints: the Suez Canal, the Panama Canal, and the Strait of Malacca. In general terms, the BRI-driven reconfiguration of maritime supply networks is linked to an improvement in the productivity of nine exporting countries. An innovative gravity-based econometric model, estimated on a large set of panel data, is introduced below, aiming at the modelling of the effect of BRI on supply chain network reconfiguration.