[email protected] geneva, may 2009 the demand and supply of international transport services:...

[email protected]

Geneva, May 2009

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

TransportTransportcostscosts

TradeTradeVolumesVolumes

TransportTransportServicesServices

More income to finance trade facilitation

-> Better trade facilitation-> More Trade-> More income to finance

trade facilitation

Lower Transport Costs-> More trade-> Economies of scale-> Lower Transport Costs

Better services-> More trade-> More income to

finance infrastructure-> Better services

More trade-> More shipping

supply-> More competition-> lower freights-> More trade

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

Transport CostsConnectivityTrade

Transport Costs Connectivity Trade




?

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?

Case study Caribbean:Case study Caribbean:Gravity modelGravity model

• Participation of country B in global imports is the basic determinant of the share of country A’s exports that are destined for country B.

• Neighbouring countries can be expected to trade more with each other than those that are not neighbours.

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.

Transport Costs ConnectivityTrade

• TradeTrade grows faster than GDP

• Containerized tradeContainerized trade grows even faster than trade in general

• Containerized port trafficContainerized port traffic grows even faster than containerized trade…

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?

““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

Benefits of a high connectivityBenefits of a high connectivity

1. For the user (importers and exporters): lower transport costs, more choice, higher speed and frequencies

2. Direct income for the port (private operator, port authority)

3. Indirect income if value added services can be sold

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)

““Connectivity”Connectivity”1) Per country – in a “point”2) Per route – between pairs of countries

““Connectivity”Connectivity”1) Per country – in a “point” (162)

2) Per route – between pairs of countries

““Connectivity”Connectivity”1) Per country – in a “point” (162)

2) Per route – between countries (13041)

1) Connectivity per country1) Connectivity per country

based on www.ci-online.co.uk

http://www.ci-online.co.uk/

Container ship deploymentContainer ship deployment

China 1,448 Hong Kong, China 1,242 United States 1,037 Singapore 947 United Kingdom 842 Germany 821 Netherlands 797 Belgium 777 Korea, Rep. 706 Malaysia 700

1448

Number of companiesNumber of companies

Netherlands 118 Belgium 113 United Kingdom 108 Germany 103 France 97 United States 91 Singapore 89 China 84 Spain 83 Italy 79

118

The UNCTAD “LSCI”The UNCTAD “LSCI”

BarbadosBarbados

www.ci-online.co.uk

http://www.ci-online.co.uk/

Components of LSCI Components of LSCI (country averages)(country averages)

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

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.

2) Connectivity per route2) Connectivity per route

Top 25 routes (out of 13041)June 2006




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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 services

UNCTAD Transport Newsletter, Third Quarter, 2006

Case of BarbadosCase of Barbados

Case study CaribbeanCase study CaribbeanDeterminants of connectivityDeterminants of connectivity

• Distance: (-)

• Trade volumes: (+)

• GDP per capita in exporting country (+)

• Port infrastructure (+)

Transport CostsConnectivityTrade




“connectivity”

Transaction costsTransaction costs

Source: World Bank, GEP 2002

International transport costs

are usually higher

than Customs Duties

in the destination country

The Baltic Dry Index (BDI)The Baltic Dry Index (BDI)

Source: via Capital Link Shipping

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Per cent of goods' market price

Jute from Bangladesh 12.1% 19.8% 21.2% 44.2%

Tea from Sri Lanka 9.5% 9.9% 10.0% 13.4%

Coffee from Colombia 4.2% 3.3% 6.8% 2.5%

Coca beans from Ghana 2.4% 2.7% 6.7% 3.5%

1970 1980 1990 2007

Freight as % of Freight as % of commoditiescommodities value value

UNCTAD, Review of Maritime Transport

Freight costs in percent of imports

0

5

10

15

20

25

30

35

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Haiti

Jamaica

Mexico

Chile

Argentina

Antigua and Barbuda

Source: UNCTAD

Freight costs Freight costs for for countriescountries

0%

20%

40%

60%

80%

100%

Admin.

Transport

Inventory

Admin. 4% 4% 4% 4% 4% 4%

Transport 47% 53% 53% 57% 59% 63%

Inventory 49% 44% 43% 39% 37% 33%

1980 1985 1990 1995 2000 2005

Transport Transport within logisticswithin logistics expenditures (USA)expenditures (USA)

“Status of Logistics Report”, Cass Information Systems, various issues, and “Logistics Management”.

Source: UNCTAD

Lower Transport Costs-> More trade-> Economies of scale-> Lower Transport Costs

Better services-> More trade-> More income to

finance infrastructure-> Better services

More trade-> More shipping

supply-> More competition-> lower freights-> More trade



TransportTransportServicesServices?

Transport Costs (more…)ConnectivityTrade

[email protected] geneva, may 2009 the demand and supply of international transport services:...

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