maritime economics - module 2 - seaborne trade
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Module 2 Seaborne trade
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Maritime Economics
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Module objectives:
Reasons for trade
Development of seaborne trade
Seaborne cargo classification (shipping operational perspective)
Trade patterns
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Introduction
Demand of shipping is derived from trade
World trade is increasingly activeReasons?
Globalisation
Efficient resource allocation
Technological transfer
Higher level of specialisation
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Why countries trade
Why countries trade?
They benefit from trade (profitable)!
Trade theory explains!
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Basic trade theory
Absolute advantage
Comparative advantage
Factors of production
Labour (differences in costs, habits, regulation, etc.)
Capital (differences in availability, quantity, cost, etc.)
Land (differences in climate, resources, location,availability, cost, etc.)
Technology (differences in production and managementknow-how, marketing, etc.)
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Basic trade theory
Absolute advantage:
To compare productivity of one producer, firm or nation
with that of another.
The producer that requires a smaller quantity of inputs
(factors of production) to produce the same quantity of
a good is said to have an absolute advantage in
producing that good.
The ability to produce a good using fewer inputs than
another producer .
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Basic trade theory
Comparative advantage:
A country has a comparative advantage in producing a
good if the opportunity cost of producing that good is
lower in the country than in other countries.
The benefit or advantage of a country in producing a
commodity at a lesser opportunity cost than other
countries is referred to as comparative advantage in
international trade theory
What is opportunity cost?
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Basic trade theory
Opportunity cost
Whatever must be given up to obtain some item
The most valuable forgone alternative
Marginal cost
What you must give up to get one additional unit of it
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Absolute and comparative advantages
When countries specialize in production of a good which
they have comparative advantage, more goods and
services can be produced and consumed.
Trade benefit does not depend on whether countries have
absolute advantage or not.
What is competitive advantage?
It occurs when an organisation acquires or develops anattribute or combination of attributes that allows it tooutperform its competitors
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Development of international trade
International trade expand 1,700% (over the last 5 decades)
Customs tariffs from 40% to 6% (past 15 years)
Industrialised countries 70% of total world trade
US is the largest single participant in international trade
Emerging Newly Industrialized Countries - NICs (esp. China) are
significant in world trade
1970s-1980s: Hong Kong, South Korea, Singapore and Taiwan;
Late 2000s: South Africa, Mexico, Brazil, China, India, Malaysia,the Philippines, Thailand and Turkey
Current:
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Booming world trade and seaborne trade
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Source: UNCTAD, 2015 1990=100
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Growth in the volume of world merchandise tradeand GDP
Source: WTO secretariat 2014
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Main determinants of trade
Resources (Heckscher-Ohlin model)
Technology differences
Distance (Gravity model)
Trade promotion policies (diminishing trade barriers) Regional economic changes (open market)
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Relationships among trade, GDP and maritimetransport
A strong relationship between GDP growth and tradegrowthfigure shows (3 tremendous downturns)
A close relationship between trade and maritime transportregression result shows
Trade pattern transport pattern
y = 1.0011x - 10.965
R = 0.65
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15 20 25 30
Fleetsize
(lnofDWT)
International trade (ln)
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Maritime transport
Source: UNCTAD 2012
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Seaborne tradeby country group
Source: UNCTAD 2015
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Seaborne tradeparticipation of developingcountries
Source: UNCTAD 2015
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Seaborne tradeby region
Source: UNCTAD 2015
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International seaborne trade by type of cargo
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Source: UNCTAD, 2015
Millions
of tons
loaded
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Seaborne trade commodities
Source: UNCTAD, 2015
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Containerized cargo flows on major East-West routes
Source: UNCTAD, 2015
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MillionTEUs
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Major dry bulk seaborne trades
Source: Paragon Shipping
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Crude oil trade flow
Source: BP 2015
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Contributing to trade growth
Development of transport, especially maritime transport
Without Shipping?
No globalisation Societies will remain separated
No interchange of cultures
Full economic potential unrealised
Half the world would starve and the other half would freeze