Comment: One Belt, One Road the future for trade between east and west

China’s accession to the Transports Internationaux Routiers (TIR) convention in July has been hailed as a game-changer for international trading partners in Central Asia and Europe.

By signing the convention, the Beijing government aims to facilitate Chinese exports and support its ‘One Belt, One Road’ initiative.

Both these aims are positive for transport companies serving this vast region, but for the impact to be fully realised, further progress is needed.

There is little disagreement that China joining the TIR system will produce benefits. Transit times for cargoes should be faster and stakeholders across the region will be playing by the same rules. It also creates a business opportunity to organise additional distribution channels from new hubs.

At Wallenius Wilhelmsen Logistics, we see the decision as a step in the right direction in a continuing long-term project, rather than a quick win. It raises issues of infrastructure, logistics and risk management which must be addressed for full adoption to take place.

The new routes will primarily cater for industries that are developing along the New Silk Road. They are an opportunity to develop business in Central Asia more than just acting as new pipelines for China’s exports.

In order for it to be fully effective, the New Silk Road will need better infrastructure, with more wagons, trucks and trailers before it becomes a truly reliable and standalone opportunity for transport companies.

China wants to develop the “landbridge” from non-water ports in Chengdu, Urumqi and Beijing, which potentially means a modal shift from ocean transport towards rail and long-haul trucks.

However, given the lack of available rail wagons, ocean transport for ro-ro cargo will remain the only reliable solution in the mid- to long-term.

From a breakbulk perspective, there will continue to be issues around asset availability, as well as wider challenges around control and oversight of consignments. Shippers may be concerned about tracking and visibility if wagons do not move reliably or there is higher risk of cargo damage or loss.

In that sense, it seems reasonable to assume that containerised transport volumes will take the primary share of tonnage for these new routes, both for their reliability and the sheer volumes to be moved.

There are several existing agreements around free movement of goods and people along the New Silk Road, primarily between Russia, Kazakhstan and China. These also need to continue to evolve and progress, drawing from practical experience over the next few years.

As an umbrella initiative, One Belt, One Road clearly shows Chinese ambitions to improve trading opportunities with its direct neighbours and traditional allies, such as Mongolia, Russia, Kazakhstan and others, as well as further development and integration of Central Asia, reaching as far as Europe and Africa.

As such, it is not just a multimodal logistics initiative, but a grand political and economic development project. Many logistics and shipping professionals consider it a long-term game-changer, but one that comes with political risk attached.

However, if One Belt, One Road is to be the future of trade between east and west, it should be embraced and encouraged, as it represents a huge development opportunity among formerly “enclaved” economies to generate new transportation demand.

This is a guest post by Xavier Leroi, managing director of Wallenius Wilhelmsen Logistics’ China operation. The views are his own