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Wednesday, July 12, 2017

Minister Stuart Young in a keynote address when the Chinese Silk Road and Economic Belt (Road and Belt) Initiative was introduced, indicated that our Government, in its diversification thrust, intends to include a variety of different investment projects (infrastructure, trade and finance) in this Chinese scheme. However, the Government will seek to ensure that local input is maximised and we get value for money.

In particular Minister Young said that we are not only interested in infrastructural projects where the Chinese would build a building and leave. According to him we want their participation in helping us operate and manage these facilities; for example, the La Brea Dry Docks which could service vessels coming from Asia through the Panama Canal. Further, T&T is well positioned to become the economic conduit for China into the region, particularly Central and South America. Dr Terrence Farrell, chairman of the EDAB, saw T&T benefiting from this kind of foreign investment, from the Chinese firms, and China should also be seen as a destination for products of our creative industries.

The Road and Belt Initiative is a global project of China proposed by its President, Mr Xi Jinping in 2013. This is a vast project in which China intends to invest its massive foreign exchange holdings, not in US Treasury Bills but in building a large network of new trade routes across the globe, multiple high speed rail networks to penetrate Europe, massive ports across Asia and Africa and a series of free trade zones.

China is investing this kind of money in infrastructure projects hoping to bind more than 65 countries, two thirds of the world’s population, to its economy. It is interesting to note that as President Trump retreats away from globalisation, into making America great again, China is hoping to increase its global trade by some US$2.5 trillion by flooding the world markets with cheap but high quality Chinese goods. Even in building the global infrastructure of railways, ports etc, China expects to supply these countries with commodities and port and railway technologies. For example, Chinese high speed trains which are some two kilometres long, travel 12,000 km to reach Germany in just 13 days, reviving ancient trade routes with modern efficiency.

This is the kind of trading network that China is also seeking in the South and Central Americas. Minister Young says his government sees T&T as the gateway through which China can access the region. Still there are some that see this massive project as a waste of resources that depends too heavily on the lumbering and inefficient state enterprises of China. However, our Government appears to see it as an opportunity for us to diversify our economy. In our economic context, being a gateway for China into the region is nowhere near diversification, unless it assists in the production of competitive goods and services for export—bear in mind that the One Belt, One Road project is a vehicle to bring cheap and high quality Chinese goods into the region and the world.

At the risk of being repetitive, economic development, the diversification of our economy, is not simply about attracting foreign investment to do their own thing, as long as it produces local jobs and rents to T&T. Economists throughout the ages in their different styles enunciated the pathways to economic development, diversification. Schumpeter tells us of creative destruction which keeps the economy dynamic as new ideas, new technologies create new products/services, new companies spring up and old ones that could not adapt die.

Prof Michael Porter talks about the stages of growth wherein the country at first depends for competitiveness on factor advantage (cheap labour, natural resources), then moves towards the investment stage (in plant, machinery and technology), then the innovation stage (where new ideas, new technologies are developed), then the decadent stage wherein the country may get fat on its riches and begin to decay economically.

Etzkowitz tells us how to build a sustainable economy via an integration of effort by government, the private sector and the R&D institutions. What is common about all of these approaches throughout the years is the need for economic dynamism and this is generated by acquisition of knowledge, its application and creation—innovation. Today the need for innovation is critical to economic development, its sustainability and global competitiveness.

This is the context in which we must place Minister Young’s enthusiasm to see the Chinese One Road, One Belt converge on T&T as the gateway into the South and Central Americas. How will this develop our economy as envisioned by Schumpeter, Porter and Etzkowitz? Dr Farrell is correct. The One Road, One Belt is a two-way street and it also connects us, trade wise, to the rest of the world and China. It benefits us if we have competitive products to export—the same criterion for all of the countries on the Road. It benefits us if it widens our connections to the World Trade Network and connects us to our choice of markets and manufacturers so as to exploit local innovations.

The point then is that T&T being a gateway for China is economically insufficient. Our objective is how do we build innovative export capacity and capability and, of importance, what are these specific and innovative products to be? The Road is made to export, to connect to our markets and economic partners.


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