Trade Agreements and Global Value Chains: New Evidence from China’s Belt and Road Initiative

Fei Peng,Taoxiong Liu,Jia Cheng,Luxiao Ren,Lili Kang

doi:10.3390/su12041353

Fei Peng, Taoxiong Liu + Show 3 more

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https://doi.org/10.3390/su12041353

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Abstract

This paper investigates the relationship between China’s trade agreements (TAs) and partner countries’ upgrade in global value chains (GVCs). We focus on the experience of China and relate China’s TAs with one belt and one road (OBOR) initiative. A structural equation model (SEM) is applied on a dataset including 216 countries and regions to identify the direct and indirect effects of China’s TAs and OBOR initiative on its export, outwards foreign direct investment (OFDI) and partner economy’ GVCs upgrade over the period 2010–2015. We find that China’s TA partner countries are more likely to be included in the OBOR initiative than those non-TA partner countries. The positive effects of China’s TAs and OBOR initiative on China’s export, outwards foreign direct investment (OFDI) and partner countries’ upgrade in GVCs differ across country groups at the different locations of GVCs. Both vertical and horizontal spillover effects exist in China’s TAs. Therefore, the partner countries at low end and middle of GVCs might benefit more from TAs with China than those richer countries at the high end of GVCs.

Highlights

Since the early 1990s, international trade has become an important channel for each developed and developing country in the world to obtain sustainable development which is one of the most important objectives for a country [1,2,3]
As international trade is often mixed with technological innovation and transfer, integration into global economy is extremely important for the competition and sustainable development of the enterprise [4,5,6]
This paper contributes to the current literature on trade agreements and global value chains (GVCs) such as [9,14,19] in several ways

Summary

Introduction

Since the early 1990s, international trade has become an important channel for each developed and developing country in the world to obtain sustainable development which is one of the most important objectives for a country [1,2,3]. As international trade is often mixed with technological innovation and transfer, integration into global economy is extremely important for the competition and sustainable development of the enterprise [4,5,6]. GVCs as the internationally dispersed production system have changed the pattern of international trade and cross-border investment for good [8]. Intermediate goods traded in parts and components have increased almost six times in GVCs between 1990 and 2015 [9] as the total foreign direct investment (FDI) has increased about 12 times over the same period [10]

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