Who gains, who loses? – The impact of the belt and road initiative on bilateral agricultural trade

Summary

The Belt and Road Initiative (BRI), a global development strategy proposed by China, has received extensive attention from researchers in the field of international trade and development economics. However, little is known about the BRI's effect on bilateral agricultural trade. This paper quantifies the effect of BRI on global agricultural trade, especially between China and BRI participating countries, based on structural gravity models and the General Equilibrium Poisson Pseudo Maximum Likelihood (GEPPML) method. Our results show that BRI has a significant and positive impact on global agricultural trade. BRI not only improves the agricultural trade between China and its BRI partners but also stimulates agricultural trade between BRI participating and non-participating countries, indicating a pure trade creation effect. We find the heterogeneous effect of BRI in participating countries regarding per capita income, showing an increase in agricultural exports from China to non-high-income BRI countries but a reduction in exports from China to high-income BRI countries. It highlights the importance of considering specific economic status when formulating trade agreements with trade partners. We find the significant positive impact of BRI on welfare gains, particularly for consumers in China and producers in BRI participating countries. Meanwhile, BRI leads to a reallocation of China's agricultural imports away from the United States and Brazil towards neighboring BRI participating countries.