The shifting sands of global trade

If the term “Silk Road” has you conjuring up images of romantic adventurers and ruthless traders travelling over mountains and through deserts in caravans or on camel back, it’s time for an update.

Welcome to One Belt One Road initiative, or OBOR, the 21st century reinvention of the Silk Road announced by China in 2013. “It’s a very ambitious project,” says Bruce Burnett, director of markets and weather information at Glacier FarmMedia. “It’s patterned like the old Silk Road and the idea is to optimize and maximize trade through Africa to Asia and Europe.”

The ancient Silk Road was a network of overland tracks and sea routes that connected the great historic civilizations of East and West. For centuries, it was the conduit for economic and cultural trade to and from China through Japan and south Asia to India and the Horn of Africa, through the Middle East and into Europe as far as Greece and Italy. Indeed, it’s said that the Silk Road was already well over 1,000 years old when one of its most famous travellers, Marco Polo, journeyed along its length and breadth in the late 1200s.

OBOR aims to recreate and expand those old trading routes by way of massive investment in transportation infrastructure to better facilitate commodities trade to and from China. This means roads, rail, transportation depots and commercial port facilities across the region.

To get a sense of the scope of OBOR goals, look no further than the two financial institutions established to fund the work — the Asian Infrastructure Investment Bank, a multilateral effort designed to support OBOR in the Asia- Pacific region, which has $100 billion USD in capital, and the Silk Road Fund, a $40 billion USD, Chinese state-funded and state-owned investment fund dedicated to OBOR development in Eurasia.

The idea for spending all this money, says Burnett, is to help other countries fund needed infrastructure projects in their own territory, or have China build and own them outright. “China is looking to decrease the friction of trade — for its own self interest, of course — but also so that other markets can improve,” he says. “We’re talking about countries that don’t have the ability to finance these kinds of massive projects and, because China is that large an economy, it has the wherewithal to do this kind of thing.”

He adds that OBOR also helps China split its sphere of influence a bit so that it is not so reliant on the U.S. as a trading partner. “China has already targeted Africa where it can access natural resources,” says Burnett. “I would equate this initiative with some of China’s investments in Brazil, for example.” Among the country’s many investments there is a recently established $20 billion USD bilateral fund specifically aimed at developing rail infrastructure to bring crop commodities to port.

Why does this matter to you?

Well, right now, it doesn’t. But that doesn’t mean Canadian farmers should ignore the geo-economics at play with OBOR. “The thing that’s interesting to me is the two big economies in Asia, India and China,” says Burnett. “They are going to be vying for supremacy in economic terms. One Belt One Road is something India is watching warily as it views this as a competitor to its own trade routes.

“From a North American perspective, we’re a bit isolated because we’re not part of this geographical block,” he adds. “But there has to be a recognition that the Chinese and Indian economies are expanding rapidly and they are going to be driving the bus when it comes to commodities.”

And let’s be clear that we’re not talking just about agricultural commodities; OBOR is aimed at the bulk transportation of all commodities — energy, agriculture, manufacturing, you name it — and about getting them into these burgeoning economies more efficiently and economically, says Burnett.

Will it mean a change to how Canada produces oilseeds, grains and pulses? Probably not — at least for now.

“What a lot of people don’t understand about China is that it’s a lot like North America with population clusters along the coastline,” says Burnett. “That’s one reason One Belt One Road is looking to develop the maritime routes.” So while Canada isn’t a recipient of OBOR investment, there’s no denying that we ship our commodities primarily by sea, and that’s something we should think about. “One of the things I’ve gathered from analysts is that some of them are worried about our infrastructure not keeping pace.”

Again, Burnett emphasizes that this is all speculative — just food for thought at the moment. He doesn’t believe OBOR will change where certain crops are produced or current trading routes overall. “Is One Belt One Road going to change Pakistan into a big oilseed producer? No,” he says. “It will be a refinement of the global supply chain, it’s not going to change it.”