Alex Veitch, Head of Multimodal Policy, FTA explains how the OBOR and TIR are transforming Europe-China freight travel and how the global rail industry is reacting to this development…
In 2013, Chinese President Xi Jinping embarked on what is arguably the largest infrastructure development plan in modern history: the construction of the Belt and Road Initiative (OBOR), a multimodal transcontinental route connecting Europe and China. While the OBOR has led to dramatically improved rail connections between the two regions, it has – in conjunction with China’s decision to sign up to the TIR (Transports Internationaux Routiers) transit system – also made road travel across this route a new possibility for businesses; the position of rail and air as the dominant mode of travel along this stretch is no longer secure.
China’s global trading ambitions
The OBOR, which comprises the Silk Road Economic Belt and the 21st Century Maritime Silk Road, is China’s most ambitious foreign policy and economic initiative in recent history. The former connects the country’s underdeveloped hinterland to Europe through Central Asia, with the latter connecting the fast-growing Southeast Asian region to China’s southern provinces through ports and railways. And with China’s decision to sign up to the TIR, journey times have been dramatically reduced: trucks can now transit from Germany to China on road in just twelve days.
The TIR transit system allows for approved trailers or containers to move securely across multiple customs territories under a single guarantee, substantially reducing border procedures and monitoring of international journeys. The IRU (International Road Transport Union), the facilitators of the TIR programme, claim that China-Europe road transport under TIR could save transport companies up to 50 per cent on door-to-door costs compared to air, and at least ten days delivery time compared with rail.
After successful trials of intermodal container travel by sea and road, in November 2018, the first ever TIR truck completed an eleven-day, 7,000-kilometre journey from Khorgos in China to Poland, via Kazakhstan, Russia and Belarus; this ground-breaking trial heralded the start of regular overland China-EU truck services from early 2019.
Despite improved road connectivity under the OBOR, rail is expected to continue to dominate the space. Container volumes on the four main China-Europe rail routes are expected to climb to 742,000 20-foot equivalent unit (TEU) by 2027 (from 324,700 in 2018), equating to more than 20 trains a day each hauling 82 TEU, according to a report by the European Commission in February 2019.
Maersk Line, an international container shipping company, plans to double the volume of containers moved by freight trains from China to Europe in 2019-2020. Intermodal rail prices have fallen in response to the increase in container volume; according to The Journal of Commerce, rates have fallen by almost 70 per cent as of September 2019. As China and its neighbouring countries – in particular, Kazakhstan – commit to improving the efficiency of operations at their borders, volumes are likely to continue increasing for years to come.
The relevance of this project to the FTA is not simply limited to changes in the way our members may be trading in the future; we have a direct link to the project via our membership of the IRU (the global road transport organisation), which facilitates this new trade by means of the TIR customs transit system. FTA is one of only two authorised UK guarantor associations of TIR customs carnets and works in partnership with HMRC (HM Revenue & Customs) and the IRU to oversee the national administration of the system.
Despite various geopolitical challenges, OBOR has the potential to transform the nature of future global logistics modes as well as connectivity to and from the UK. As such, FTA is very supportive of the initiative. While businesses in the logistics sector may be under immediate strain from the uncertainties of the UK’s departure from the EU, economically the world is becoming better connected and our industry remains at the forefront of innovation and change.
In the view of FTA, any new project that provides businesses with more options for trading internationally – while boosting efficiencies and reducing costs – is good news for both the logistics sector and wider global economy. And, regardless of any new Brexit customs requirements, it is feasible that we could see an extension of this Asian service to continue all the way to the UK in the near future.
Efficient logistics is vital to keep Britain trading, directly having an impact on more than seven million people employed in the making, selling and moving of goods. With Brexit, new technology and other disruptive forces driving change in the way goods move across borders and through the supply chain, logistics has never been more important to UK plc.