Cultural Distance,Institutional Distance And The Moderating Effect Of Diplomacy

The "Belt and Road" initiative has not only deepened the cooperation between China and countries along the route,but also increased the scale of agricultural trade.Cultural distance and institutional distance can have a great impact on trade.Because of the uniqueness of agricultural products,these two distance factors do not have the same impact on agricultural trade as they do on other products.Meanwhile,diplomacy can constitute a strong external constraint on institutional risk,create a stable external environment for trade,and have a moderating effect on the two distance factors.The outbreak and recurrence of the global epidemic have added new uncertainties to China’s agricultural trade environment.Diplomacy needs to play a bigger and stronger role to regulate the influence of two distance factors and optimize the outer trade environment between China and countries along the "Belt and Road".Therefore,it’s of great practical significance to study the role of diplomacy in regulating cultural and institutional distances in import and export trade.However,the present studies on the moderating effects of diplomacy on cultural and institutional distance have only focused on the investment field.Also,only the moderating effects on institutional distance have been verified,and no research has been conducted on cultural distance.Moreover,whether the proximity of diplomatic relations themselves,as well as the different structural characteristics of trade,make a difference in the moderating effect of diplomacy has not been tested in depth.Based on this,this paper focuses on the moderating effect of diplomacy on both institutional and cultural distance in the context of agricultural trade,as well as conducting group empirical evidence on diplomatic relations,which could complement the mechanism of the moderating effect of diplomacy.This paper first reviews and evaluates the existing research and literature.It includes studies on the impact of cultural distance and institutional distance on trade,the effect of diplomacy on the regulation of institutional distance,and the study of agricultural trade between China and the "Belt and Road" countries.This part points out the incompleteness of the existing literature.Secondly,I provide an overview of China’s agricultural trade with the "Belt and Road" countries,and analyze the current situation.Thirdly,I use institutional risk,transaction cost and demand preference theory to clarify the theoretical basis,conduct theoretical analysis,and put forward relevant research hypotheses.Finally,I select the agricultural trade data between China and 40 countries along the "Belt and Road" from 2003 to 2018,construct a moderating effect model with diplomatic relations as the moderating variable,and conduct an empirical test on the full sample and grouped samples.The principal results of this paper are as follows.1.Diplomacy has a moderating effect on cultural distance and political institutional distance.In the vast majority of cases,diplomacy has a positive moderating effect,and the effect on cultural distance is the most prominent.Optimizing diplomatic relations can expand the positive effect of cultural distance and political institutional distance on export trade,and also inhibit the negative effect of political system distance on import trade.In other cases,diplomacy has a negative moderating effect on cultural distance.This may be due to the fact that diplomacy likewise have an impact on cross-border investment.The growth of investment inhibits trade to some extent.Production replaces the original channel of import trade,ultimately creating a reverse moderating effect.2.The moderating effects of diplomacy on cultural distance and political institutional distance are verified in the sub-sample.The moderating effect of diplomacy on cultural distance in import trade differs by the structural characteristics.The moderating effect of diplomacy is significantly positive in the import trade of agricultural products with high technological value added,while it is significantly negative in the products with low technological value added.3.The moderating effect of diplomacy varies depending on the closeness of diplomatic relations.In export trade,the moderating effect of diplomacy on both cultural and political institutional distance is more significant for countries with closer diplomatic ties.Finally,based on the research results,this paper puts forward corresponding policy suggestions: first,attach importance to cultural diplomacy and increase the breadth and depth of cultural diplomacy activities;Second,through diplomatic activities,put forward proposals for institutionalization;Third,differentiated diplomatic activities should be carried out based on the distance of diplomatic relations.Fourth,carry out targeted diplomatic activities based on the characteristics of product.