Abstract
The digital revolution changes the perception of the economy and business. The emergence of the industrial internet of things (IIoT) poses a large impact on established business models of manufacturing companies. As an important economic partner of China in South Asia, Pakistan plays an important role in the Belt and Road Initiative. This paper based on the three models: trade specialization coefficient (TSC) index, revealed comparative advantage (RCA) index, and trade complementarity (TC) index, analyzes the competitiveness and complementarity of Chinese Fruit and Vegetable (F&V) trade between China and Pakistan. The results showed that China-Pakistan had their own comparative advantages in F&V export, and there was a big difference in the types of F&V, and the competitiveness of F&V export between them was weak. The import and export structure of F&V between China and Pakistan is consistent, and there is strong trade complementarity. Therefore, it is suggested that China-Xinjiang and Pakistan should establish an import and export cooperation mechanism for F&V and export F&V with strong complementarity to each other. We should build a well-connected logistics network, which relies on the geographical advantages of Xinjiang, and comprehensively upgrade the level and quality of agricultural cooperation with Pakistan to enhance the agricultural cooperation between China and Pakistan. At the same time, China-Pakistan should strengthen cooperation in agricultural technology, trade, and equipment so as to achieve win-win results.
1. Introduction
The competitiveness and complementarity of trade constitute the trade relationship between nations. When the main export category of one country matches the main import category of another country, the trade between the two countries is highly complementary [1]. The more similar the product structure and market structure of the two countries’ exports are, the more competitive their exports will be [2]. The more complementary trade between two countries is, the greater the benefits of trade will be [3]. However, when the two countries establish a free trade area (FTA), the benefits of an existing complementary trade relationship are greater than those of a competitive trade relationship because the trade creation effect of the FTA is small and the potential for rapid growth in bilateral trade is small [1].
Pakistan is the 25th largest economy and also a developing country with a fast economic growth rate in the world [4]. Agriculture is an important sector of Pakistan’s national economy, and Pakistan has good natural conditions for agricultural production [5]. Since the signing of the China-Pakistan Free Trade Agreement in 2006, the scale of agricultural trade between the two countries has been expanding [6], and the agricultural trade between the two countries will continue to deepen with the advancement of the Silk Road Economic Belt initiative [7]. In view of the characteristics of the agriculture of the two countries, the two countries’ agriculture is highly complementary. Strengthening the agricultural trade between China and Pakistan not only can bring the comparative advantages of the two countries in agricultural resources and structures into full use to meet the needs of the two countries but also can further increase the incomes of farmers [8]. The processing capacity of agricultural products can be enhanced, and bilateral agricultural trade cooperation can be strengthened, promoting the level of agricultural cooperation between the two countries [9]. At the same time, with the development of the CPEC, under the political premise of mutual assistance and mutual trust [10], the trade links of agricultural products between the governments of China and Pakistan will become increasingly close [11].
However, the existing literature on analyzing the trade of F&V between China-Pakistan still has the following shortcomings: (1) the literature on F&V trade from the perspective of the overall economic and trade relations between China and Pakistan is not specific enough and (2) some literature specifically analyze the production and trade of certain F&V, but most literature describe the trade phenomenon without empirical analysis. Is the F&V trade between China and Pakistan generally competitive or complementary? What are the comparative advantages of F&V between the two countries? What is the potential for bilateral trade in F&V in the future? This paper intends to analyze from the empirical point of view and put forward the corresponding countermeasures and suggestions.
2. Materials and Methods
2.1. Materials
The fruit and vegetable (F&V) involved in this paper are mainly in the categories set out in chapters 07, 08, and 20 from HS codes of UN Comtrade (as shown in Table 1): chapter 07 for edible vegetables, roots, and tubers; chapter 08 for edible fruits, such as watermelon and nuts; and chapter 20 for processed products of vegetables, fruit, nuts, or other parts of plants. Chapter 9 (coffee, tea, yerba mate, and spices), chapter 17 (sugar and confection), chapter 21 (miscellaneous food), chapter 22 (beverage, wine, and vinegar), and other agricultural products and processed products are not included.
According to the research scope set in this paper, garlic (070320) and onion (071220) belong to the vegetables in chapter 07, while ginger (0910) belongs to the seasoning products rather than vegetable products.
2.2. Trade Specialization Coefficient
Trade specialization coefficient (TSC) is one of the common indicators to measure trade competitiveness. It measures the competitiveness of a certain industry by the ratio of the balance of import and export of a certain commodity to its total import and export volume [12]. The specific formula is as follows:where Xjk and Mjk, respectively, denote the export volume of commodity J of a country to the market of country K and the import volume of commodity J of a country from the market of country K. When TSC = 0, it means that the import and export of the commodity are in equilibrium; when −1 ≦ TSC < −0.5, the competitive disadvantage is very obvious; when −0.5 ≦ TSC < 0, the competitive disadvantage is obvious; when 0 ≦ TSC < 0.5, the competitive advantage is strong; and when 0.5 ≦ TSC < 1, the competitive advantage is very strong.
2.3. Revealed Comparative Advantage
Revealed comparative advantage (RCA) has become an important measurement index to study the export competitive advantage of certain products in a country. The export index of revealed comparative advantage (RCA) is defined as the ratio of a country’s exports in a particular commodity category to its share in total merchandise exports [13]. The specific calculation formula iswhere Xik and Xit are, respectively, the export of commodity K by country I and the total exports of all commodities by country I and Xwk and Xwt are, respectively, the world exports of commodity K and the total world exports. The empirical principles for judging the comparative advantage of Category I export commodities based on the RCA index are as follows: RCA greater than 2.5 indicates a very strong comparative advantage; 1.25 < RCA < 2.5 indicates a relatively strong comparative advantage; 0.8 < RCA < 1.25 indicates a moderate comparative advantage; and RCA < 0.8 indicates a weak comparative advantage. After calculation, this paper selects the commodity category of RCA > 1.25 to carry on the comparative study.
2.4. Trade Complementarity Index
Trade complementarity index (TCI) reflects the corresponding relationship between one country’s export product structure and another country’s import product structure. This paper uses the TCI to further evaluate the complementarity of agricultural trade between China and Pakistan. The index takes into account both the comparative export advantage and the comparative import disadvantage of a country involved in bilateral relationships. When the main export category of one country matches the main import category of another country, the index of complementarity between the two countries increases [14]. On the contrary, when one country’s main export category does not correspond with another country’s main import category, the index of complementarity between the two countries will be smaller [15]. It is generally believed that when the trade complementarity index is greater than 1, the complementarity between the exporting country and the importing country is higher than the average level of other markets, and the trade relationship between the two countries is relatively close [1]. The specific calculation formula is as follows:where RCAxik refers to the comparative advantage of country I in exporting commodity K in bilateral trade and RCAmjk represents the comparative disadvantage of country J in importing commodity K in bilateral trade. The calculation formula of the latter is as follows:where Mjk is the amount of imported commodity K in country J, is the amount of imported commodity K in the world, Mjt is the total amount of imported commodities in Country J, and is the total amount of imported commodities in the world.
3. Results
3.1. China’s Share of F&V in Pakistan’s Import Market
Pakistan’s imports of fruits and vegetables from China are mainly concentered on garlic (070320), walnuts (080231), tomato sauce (200290), canned mushrooms (200310), and apple juice (200979). The sum of these five products accounted for 82% of Pakistan’s total imports of F&V from China in 2018. Pakistan’s garlic imports from China in 2018 (070310) accounted for 82% of the total vegetable imports from China (07) and 100% of Pakistan’s total garlic imports in the same year. In 2018, walnut imports from China accounted for 96% of China’s fruit exports. The trade volume of tomato sauce imported from China accounted for 58.7% of the trade volume of processed F&V imported from China in 2018 (as shown in Table 2).
3.2. TSC Index of China and Pakistan F&V Trade
As it can be seen from Table 3, China has strong export competitiveness of vegetable products, while Pakistan has weak competitiveness of vegetable products, and the competitiveness index of vegetable products in China is much higher than that of Pakistan. Secondly, the competitiveness index of fruit products in China appears to be weak and decreases year by year, while the competitiveness index of fruit products in Pakistan is higher than that of China. Thirdly, it shows that China’s fruit and vegetable processing products have strong competitiveness and the index is relatively stable, while the competitiveness index of Pakistan’s fruit and vegetable processing products is lower than that of China.
3.3. RCA Index of Chinese F&V
As shown in Table 4, the RCA index of vegetable products is relatively stable, showing a strong and stable export competitive advantage. Among them, 0712 and 0703 showed strong export comparative advantages, with exports of 4.02 billion US dollars and 1.98 billion US dollars, respectively, in 2018.
Among China’s fruit exports, 0812 and 0808 have shown strong comparative advantages in export in recent 10 years, with the export volume in 2018 reaching $50 million and $1.83 billion, respectively. Pine nuts (081290) dominate the import and export trade of 0812 products, while apples (080810) dominate the import and export trade of 0808 products. Chinese orange (0805) showed a relatively stable export comparative advantage in the past 10 years. At the same time, we found that the export comparative advantage index of grape (0806) increased significantly in the recent 10 years. Mainly due to the improvement of cold-chain technology and equipment, the export value of grape (0806) increased from $150 million in 2009 to $740 million in 2018. In F&V preparations, 2003 and 2006 have a strong export comparative advantage; 2008 exports comparative advantage is strong and stable; and 2005 exports comparative advantage increased significantly.
3.4. RCA Index of Pakistani F&V
It can be seen from Table 5 that 10 species of Pakistani fruit and vegetables appear to have a strong comparative advantage, while the RCA indexes of other species show to be below 0.5 or even below 0.1. When taking a closer look at the Pakistani import and export trade data from the UN Comtrade database, we can find that Pakistan imports fresh F&V in a small quantity and single variety and exports to the neighboring countries concentratedly, such as Afghanistan, Oman, Middle East countries, and Sri Lanka. Due to its geographical advantage, Pakistan exports a large number of F&V to such countries, while its imports are mainly concentrated in domestic production.
3.5. TCI Index of China-Pakistan F&V Trade
According to the calculation of the TCI formula, the complementarity index of Chinese and Pakistani F&V products is shown in Table 6. The products with high complementarity of China-Pakistan F&V products mainly include 0703 and 0713 for vegetables; 0806, 0808, and 0813 for fruits; and 2002, 2003 and 2008 for F&V preparations. After calculation, it is found that the complementarity of F&V between China and Pakistan is relatively concentrated, that is, the products with high complementarity show a very high complementarity index, while the products with low complementarity show a calculation result of the complementarity index, which is about zero.
3.6. TCI Index of Pakistan-China F&V Trade
As can be seen from Table 7, Pakistan-China vegetable products (chapter 07) are not complementary; the high complementarity index of fruit products (chapter 08) is high in 0804, 0813, and 0805; F&V preparations (chapter 20) have high complementarity products such as 2006, 2007, and 2009.
4. Discussion
4.1. Advantages of F&V Trade between China and Pakistan
Chinese F&V is competitive and complementary in the Pakistan market. Through the analysis, we found that Chinese F&V has export competitiveness compared with Pakistan. In terms of explicit comparative price advantage, garlic, grapes, citrus, dried vegetables, apples, radishes, and canned fruits and vegetables from China have a strong comparative advantage. In terms of market share, some fruits and vegetables from China have a high market share in Pakistan, including garlic, tomato sauce, walnuts, apple juice, canned mushrooms, and so on. At the same time, we found that Chinese fruits and vegetables are highly complementary to Pakistan, so China’s export of fruits and vegetables to Pakistan has great potential.
China Xinjiang has geographical advantages in the export of fruit and vegetable to Pakistan. The results show that grapes, apples, tomato sauce, and other fruits and vegetables with complementary and comparative advantages in the Pakistan market are also the main varieties planted and processed in Xinjiang. Pakistan imports grapes, apples, tomatoes, onions, and other varieties from neighboring Afghanistan, Iran, and other countries. China Xinjiang has the advantage of good quality, so as a large province of fruit and vegetable planting, China Xinjiang has great potential in the Pakistani market. At the same time, Xinjiang is adjacent to Pakistan and connected by the China-Pakistan highway. Kashgar of China Xinjiang is only about 1,000 kilometers away from Islamabad, the capital of Pakistan, and Lahore, the economic center of Pakistan, so it has the conditions to carry out overland trade. With the strengthening of mutual exchanges between the two countries and the promotion of the China-Pakistan Economic Corridor project, China Xinjiang fruit and vegetable products are gradually recognized by Pakistani consumers, so China’s Xinjiang has an advantageous position in the export of fruit and vegetable products to Pakistan.
4.2. Disadvantages of F&V Trade between China and Pakistan
The overall market share of Chinese F&V in Pakistan is not high, and there is no brand advantage. Through calculation, we found that only part of Chinese F&V has a high market share in Pakistan, but the overall market share is not high. China’s F&V exported to Pakistan account for 17.93% of Pakistan’s import market, and it was mainly canned fruit and tomato sauce which were mainly primary processing and lack of independent brands. At present, China’s export of F&V processing products to Pakistan has the problems of competitive sales at low prices and disorderly operation, and lack of brand building and image publicity.
China-Pakistan logistics is mainly carried out by sea, while land transport is to be developed. At present, the logistics between China and Pakistan is still mainly by sea but limited by the poor land transportation from China Xinjiang to Pakistan, the cold chain logistics is underdeveloped, and the Pakistani consumers lack the necessary understanding of fruits and vegetables in Xinjiang, China. Therefore, the export of fresh F&V from China Xinjiang to Pakistan is less.
4.3. Opportunities for F&V Trade between China and Pakistan
Pakistan enjoys a promising market. Pakistan has a huge consumer market of 200 million people. In recent years, Pakistan’s infrastructure has been improved greatly, which provides necessary conditions for the development of logistics and cold chain transportation. The income of Pakistani residents has also increased significantly, and the demand for imported F&V is increasing day by day, so the market prospect is very huge.
Pakistani consumers tend to identify with China’s national image. The friendship between China and Pakistan has a long history, and the Pakistani people also have a strong favorable impression of China. With the implementation of various projects under the China-Pakistan Economic Corridor, more and more Chinese people are coming to Pakistan, and more and more Chinese companies, projects, and products are entering Pakistan. As a result, the Pakistani people’s favorable view of China has become more multidimensional. Because of the management system of Chinese companies, the working style of Chinese employees, the quality of Chinese products, and the promotion of Confucius Institutes, and other educational and training institutions, Pakistan’s understanding of China has become more concrete and multidimensional. Therefore, the positive people-to-people and cultural exchanges between China and Pakistan have increased mutual understanding, and Pakistani consumers have a favorable impression of China’s image.
4.4. Challenges of China-Pakistan Fruit and Vegetable Trade
Pakistani consumers lack awareness of the image of Chinese F&V. As the proportion of Chinese fresh fruits and vegetables in Pakistan’s imports is very low, there are not many kinds of Chinese F&V in the market, only garlic is labeled “Chinese,” and Chinese cabbage, watermelon, and other varieties are labeled “Chinese” in the local trial planting, which are not of high quality and expensive because they are only locally grown. Therefore, Pakistani consumers’ impression of Chinese F&V is not good taste and high price. However, F&V with a high proportion of imports are basically primary processed products, which will be reprocessed and branded locally. Therefore, there is a lack of Chinese brand F&V in the local market, so Pakistani consumers have little understanding of Chinese brands.
Competition from other countries: Pakistan’s main source countries of F&V are Asian countries such as Afghanistan and Iran, and the neighboring countries of the main importers of fresh F&V are strong competitors of China’s F&V export to Pakistan. At the same time, a lot of food and beverage brands from Europe and the United States are famous in the world, so F&V in Pakistan market is filled with a lot of European and American countries’ brands, they operate in Pakistan market for many years. Meanwhile, F&V products from European and American countries are widely known to Pakistani consumers due to their advanced processing technology and strict concept of food health and safety. Therefore, Pakistani consumers are more aware of F&V products and brands from European and American countries.
5. Conclusion and Future Recommendation
In view of the above analysis, the following suggestions are put forward. Firstly, under the context of the CPEC, we should promote trade in agricultural products actively, expand trade channels for agricultural products, and diversify trade structures and markets for agricultural products. Then, China and Pakistan should continue to strengthen trade in other types of agricultural products instead of only concentrating on a few types, so as to increase the total volume of bilateral trade in agricultural products effectively. Moreover, we should expand ways to reduce the cost of bilateral agricultural trade and promote the development of China-Pakistan agricultural trade actively. At last, we should build a well-connected logistics network based on the industrial internet of things (IIoT), make use of the geographical advantages of Xinjiang, and upgrade the level and quality of agricultural cooperation with Pakistan to enhance the agricultural cooperation between China and Pakistan comprehensively.
Data Availability
The data sets used and/or analyzed during the current study are available from the corresponding author on reasonable request.
Conflicts of Interest
The authors declare that there are no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Acknowledgments
This work was supported by the National Natural Science Foundation of China (Grant no. 71562033).