[email protected] geneva, may 2007. the demand and supply of international transport services:...
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[email protected] Geneva, May 2007.
The demand and supply of The demand and supply of international transport services: international transport services: The relationships between trade, The relationships between trade, transport costs and effective access to transport costs and effective access to global marketsglobal markets
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TransportTransportcostscosts
TradeTradeVolumesVolumes
TransportTransportServicesServices
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Lower Transport Costs-> More trade-> Economies of scale-> Lower Transport
Costs
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More income to finance trade facilitation
-> Better trade facilitation-> More Trade-> More income to finance
trade facilitation
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More trade-> More shipping supply-> More competition-> lower freights-> More trade
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The challenge:The challenge:
• Avoid a vicious circle, where high transport costs and low service levels discourage trade, which will further endear transport and reduce connectivity…
• Instead: Initiate a virtuous circle
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1) Transport Costs2) Connectivity
3) Trade
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1) Transport Costs
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TransportTransportcostscosts
TradeTradeVolumesVolumes
TransportTransportServicesServices?
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Transaction costsTransaction costs
Source: World Bank, GEP 2002
International transport costs
are usually higher
than Customs Duties
in the destination country
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Global tradeGlobal trademerchandise and servicesmerchandise and services
billion USD % growth 2005 2000-05
Source: WTO
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What explains the differences?What explains the differences?
UNCTAD RMT 2006
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Freight as % of goods value: Freight as % of goods value: Changes over time and by productChanges over time and by product
UNCTAD, Review of Maritime Transport
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Higher transport costs in Higher transport costs in land-locked countriesland-locked countries
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DistanceDistance• Doubling the distance
leads to a increase of maritime transport costs (incl. insurance)by
about 15-20%
… averages, empirical datae.g. ECLAC, FAL 191
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y = 0.6206x + 1019.9
R2 = 0.2058
0
500
1,000
1,500
2,000
2,500
3,000
3,500
0 500 1,000 1,500 2,000 2,500
Distance
Frei
ght r
ate
Freight rates and Distance in the Caribbean, July 2006Freight rates and Distance in the Caribbean, July 2006
UNCTAD Transport Newsletter, 1st Quarter 2007
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Dependency on Transit TradeDependency on Transit TradeStudy on US exports: • 1000 km by sea increase freight by 4%• 1000 km by land increase freight by 30%• Being landlocked increases freight by
50%
Limao and Venables
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Economies of ScaleEconomies of Scale
• moving 10 000 tons instead of 100 (in one transaction)
reduces unit costs by around 40 to 50 %(maritime)
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ImbalancesImbalances
CI-Online February 2007
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ImbalancesImbalances
UNCTAD, RMT 2006
In West Africa, which freight rates would you expect to be higher: •Those for imports, or•Those for exports ?
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ImbalancesImbalances
In China, which freight rates would you expect to be higher: •Those for imports, or•Those for exports ?
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ImbalancesImbalances
In the Caribbean, which freight rates would you expect to be higher: •Those for imports, or•Those for exports ?
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Merchandize valueMerchandize value
• Increase the value by 1% implies an increase of transport and insurance costs by around 0.36%
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Competition with land transportCompetition with land transport
• If countries are neighbours, with paved roads, maritime transport costs can be around 10% lower
Fotos: Jan Hoffmann
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y = 1814.9e-0.0671x
R2 = 0.4348
0
500
1'000
1'500
2'000
2'500
3'000
3'500
0 2 4 6 8 10 12 14 16 18 20
Number of Carriers providing direct services
Frei
ght r
ate
Freight rate per containerFreight rate per containerin the Caribbean in the Caribbean (July 2006)(July 2006)
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Dependent variable: maritime transport costs per tonne of containerizable cargo
Better Better port infrastructureport infrastructure reduces maritime transport costsreduces maritime transport costs
Port reformPort reform
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Dependent variable: maritime transport costs per tonne of containerizable cargo
Port reformPort reform
Better (perceived)Better (perceived) port efficiencyport efficiency reduces maritime transport costsreduces maritime transport costs
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Dependent variable: maritime transport costs per tonne of containerizable cargo
Port privatizationPort privatization in the EXPORTING country in the EXPORTING country reduces maritime transport costsreduces maritime transport costs
Port reformPort reform
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Dependent variable: maritime transport costs per tonne of containerizable cargo
Trade facilitationTrade facilitation in the IMPORTING country in the IMPORTING country reduces maritime transport costsreduces maritime transport costs
Port reformPort reform
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Dependent variable: maritime transport costs per tonne of containerizable cargo
Better Better connectivityconnectivity between ports/ between ports/ more competition among carriersmore competition among carriersreduces maritime transport costsreduces maritime transport costs
Port reformPort reform
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To sum up: To sum up: Differences in maritime freights depend on…Differences in maritime freights depend on…• Distances• Type & value of
goods• Imbalances
• Competition• Economies of
scale• Port
characteristics
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To sum up: To sum up: Differences in land freights depend on…Differences in land freights depend on…• Distances• Type & value of
goods• Imbalances
• Competition• Economies of
scale• Infrastructure• Border crossings
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Changes over Changes over timetime
Clarkson Research Studies April 2007
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2) Connectivity
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0
50
100
150
200
250
300
350
400
450
1985 1995 2005
transhipment
empties
full
Port moves (Port moves (containerizedcontainerized trade) trade)
Million TEUs
DVB/ Drewry
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• TradeTrade grows faster than GDP
• South-South and regional trade of developing countriesdeveloping countries grows even faster than trade in general
• Containerized tradeContainerized trade of developing countries grows even faster than trade of developing countries in general
• Containerized port trafficContainerized port traffic grows even faster than containerized trade…
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Containerization of trade, and access Containerization of trade, and access to containerized transport services to containerized transport services
are important determinants of are important determinants of countries’ trade competitivenesscountries’ trade competitiveness
How can we measure this?
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““Maritime connectivity”Maritime connectivity”
An indicator for the supply of liner shipping services (containerized trade)
• Ships • Capacity to transport containers
(TEU)• Shipping companies• Services• Maximum ship sizes
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Benefits of a high connectivityBenefits of a high connectivity
1. More choice for the user (importers and exporters)
2. Lower transport costs for the user(importers and exporters)
3. Direct income for the port (private operator, port authority)
4. Indirect income if value added services can be sold
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““Connectivity”Connectivity”1) Per country – in a “point”2) Per route – between pairs of
countries
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The UNCTAD “LSCI”The UNCTAD “LSCI”
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Going upGoing up
• TEU deployment + 14%
• Maximum vessel size + 18%
• Average vessel size+ 11%(change of country
average 2004-2006)
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Going downGoing down
• Number of companies - 6.2%
(change of country
average 2004-2006)
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We have reached a peak We have reached a peak Until very recently:• In spite of the (global)
process of concentration, the number of companies providing (local) services increased due to the expansion of global players into (so far) new markets
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We have reached a peak We have reached a peak Today:• As global players are
(now) covering all regions of the world, mergers among them (start to) lead to a reduction of competition on individual routes.
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Connectivity per routeConnectivity per route
Top 25 routes (out of 13041)June 2006
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Route TEU Vessels Maximum vessel size
Average vessel size
Carriers
China – Hong Kong, China * 3839910 1028 9449 3735 68 Germany – United Kingdom * 2250164 586 9449 3840 66
Germany – Netherlands * 2130690 582 9449 3661 71 Netherlands - United Kingdom * 2090939 592 9449 3532 82
China – United States ** 2027659 458 8238 4427 30 China – Singapore * 1948345 514 9449 3791 50
China – Taiwan, prov of China * 1936339 496 8073 3904 45 Hong Kong, China – Taiwan, prov of China * 1914258 581 8073 3295 51
China – Korea, Rep. * 1914018 574 9200 3335 61 Hong Kong, China – Singapore * 1812848 517 9449 3506 50
China – Germany ** 1662922 296 9449 5618 27 China – United Kingdom ** 1571199 266 9449 5907 24
Belgium – Germany * 1563971 538 9449 2907 76 China – Malaysia * 1539303 385 8750 3998 37
Hong Kong, China – Korea, Rep. * 1535001 481 9200 3191 53 Belgium – United Kingdom * 1534819 510 9449 3009 72
China – Netherlands ** 1501368 259 9449 5797 26 Hong Kong, China – United States ** 1484955 326 8238 4555 28
China – Japan * 1467611 481 8204 3051 51 Germany – Hong Kong, China ** 1409978 244 9449 5779 26
Hong Kong, China – United Kingdom ** 1326064 219 9449 6055 24 Hong Kong, China – Malaysia * 1314977 349 8750 3768 36
Hong Kong, China – Netherlands ** 1300770 220 9449 5913 26 Belgium – Netherlands * 1223148 451 9449 2712 77
Hong Kong, China – Japan * 1194285 391 7929 3054 41
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TransportTransportcostscosts
TradeTradeVolumesVolumes
TransportTransportServicesServices
?
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Case study CaribbeanCase study Caribbean• 189 routes • About half served by direct liner shipping
services• Examples:
– Costa Rica – Colombia: 14 companies, 50 container ships, total capacity 61000 TEU; largest vessel 2500 TEU
– Costa Rica – Jamaica: 5 companies/ 16 ships/ 17,400 TEU/ 2105 TEU maximum size
– Costa Rica – Guyana: no direct servicesUNCTAD Transport Newsletter, Third Quarter, 2006
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Case study CaribbeanCase study CaribbeanDeterminants of connectivityDeterminants of connectivity
• Trade volumes: (+)• Distance: (-)• GDP per capita in exporting
country (+)• Port infrastructure (+)
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3) Trade
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TransportTransportcostscosts
TradeTradeVolumesVolumes
TransportTransportServicesServices
?
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• Example: You want to buy a car “made in Mexico”.
• Today: is its transport from Mexico to Cairo more or less expensive than 20 years ago?
Globalization and Globalization and international transportinternational transport
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Globalization and Globalization and international transportinternational transport
• Less expensive • BUT: You pay MORE for “transport”
then 20 years ago. Why?
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Case study CaribbeanCase study Caribbean
• Most Central American and Caribbean countries trade very little with each other.
• Examples: – less than 0.001 per cent of Guatemala’s
exports in manufactured goods are destined for Surinam,
– 0.24 per cent for Jamaica,– 1 per cent for the Dominican Republic, and – around 8 per cent for Costa Rica.
• What are the main explanations for such differences?
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Case study Caribbean:Case study Caribbean:Gravity model – what about distance?Gravity model – what about distance?• Distance / trade: negative correlation (as expected)• But: the parameter for distance is not statistically
significant if other variables are incorporated that capture the supply of shipping services and transport costs.
• Instead of distance: – number of liner shipping companies that provide direct
services between a pair of countries.– Existence of direct liner shipping services.– Increase of the freight rate per TEU (twenty foot
equivalent unit) by 1000 USD: Reduction of the share of country A’s exports to country B of almost half a percentage point.
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[email protected] Geneva, May 2007.
Shipping Costs, Connectivity, Shipping Costs, Connectivity, and the Geography of Tradeand the Geography of Trade