GEOG 80 – Transport GeographyProfessor: Dr. Jean-Paul Rodrigue

Topic 5 – International and Regional Transportation

A. The Strategic Space of International Transportation

B. Transportation, Globalization and International Trade

C. Freight Transport and Commodity ChainsD. Logistics

B – Transportation, Globalization and International Trade

■ 1. Trade and the Global Economy■ 2. Global Trade Patterns■ 3. International Transportation

1. Trade and the Global Economy

■ Interdependencies• In a global economy, no nation is self-sufficient.• All involved at different levels in trade:

• Sell what they produce.• Acquire what they lack.• Produce more efficiently in some economic sectors.

• Historical growth:• International trade occurred at an ever increasing scale over the last 500

years.• Significant technical improvements.• Possible to trade between parts of the world that previously had limited, if

no access to international transportation systems.• Division and the fragmentation of production expanded trade.

Major Global Trade Routes, 1400-1800

Mexico Havana

PeruBrazil

West Africa

WesternEurope

Manila

PacificOcean

PacificOcean

IndianOcean

East Africa

IndiaChina

Southeast Asia

Baltic

Hormuz

Aden

Aceh

North America Central Asia

Canton

MalaccaCaribbean

AtlanticOcean

Trade RouteDominant Capital Flow

1. Trade and the Global Economy

■ International trade• Trade promotes economic efficiency:

• Lower productions costs.• Achieve economies of scale.

• Demonstrates the extent of globalization:• Increased spatial interdependencies between elements of the world-

system.• Numerous relationships:

• Huge variety of resources being made accessible.• Raw materials, energy, goods, food and labor.• Exchanges of capital, merchandises, raw materials and services.

• Level of integration:• Growing level of integration.• The more integrated economies are, the more they trade.

Levels of Economic Integration

Free trade between members: NAFTA, Mercosur, ASEAN (partial)

Free Trade

Common external tariffsCustoms Union

Factors of production move freely between members

Common Market

Common currency, harmonized tax rates, common monetary and fiscal policy: EU (partial)

Economic Union

Common governmentPoliticalUnion

Leve

l of i

nteg

ratio

n

Complexity

1. Trade and the Global Economy

■ Supporting activities• Distribution-based:

• Multimodal and intermodal freight transport systems composed of modes, infrastructures and terminals.

• Regulation-based:• Customs procedures, regulations and handling of documentation.

• Transaction-based:• Banking, finance and insurance activities where accounts can be settled.

2. Global Trade Patterns

■ Context• Growing trend in the global economy.• Shift in the global trade flows:

• Developing countries having a growing participation.• 27% of the global trade.• Increasing share of manufacturing activities taking place in developing

countries.• More complex and interdependent world-system.• Trade accounted for 15% of global GDP in 2000.

World Exports of Merchandise, 1950-2004

0

1

2

3

4

5

6

7

8

9

Valu

e (T

rillio

ns o

f $US

)

0

2

4

6

8

10

12

14

16

Shar

e of

Wor

ld G

DP (%

)

ValueShare

2. Global Trade Patterns

■ Factors• Production systems are more flexible and embedded:

• Encourages exchanges of commodities and services.• Transport costs have decreased significantly:

• The transferability of commodities has improved. • Integration processes promoted trade.

■ Cycles• Evolution of international trade has a concordance with the

evolution of production.• Significant fluctuations in international trade:

• Economic cycles of growth and recession.• Fluctuations in the price of raw materials.• Disruptive geopolitical events.

2. Global Trade Patterns

■ Nature• Growing flows of manufactured goods.• Relatively less bulk liquids (such as oil) and more dry bulk and

general cargo. ■ Geographical distribution

• Dominance of North America and Western Europe.• Growing share of developing countries of Asia.• China accounting for the most significant growth.• Changes over trans-oceanic trade with Trans-Pacific trade

growing faster than Trans-Atlantic trade.

Global Exports of Merchandises, 1963-2000

0%

20%

40%

60%

80%

100%

1963 1975 1990 1994 2000

Manufactured productsMineral productsAgricultural products

Merchandise Exports per Continent (in %), 1980-2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 1985 1990 1995 2000

AsiaMiddle EastAfricaEastern EuropeWestern EuropeLatin AmericaNorth America

World’s 10 Largest Exporters and Importers, 2003

0 200 400 600 800 1000 1200 1400

Germany

United States

Japan

China

France

United Kingdom

Netherlands

Italy

Canada

Belgium ImportsExports

Share of World Goods Exports, Selected Countries, 1950-2001

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

United StatesJapanGermanyP.R. ChinaSaudi Arabia

Trade by Ocean, 1995

0% 20% 40% 60% 80% 100%

1990

1995PacificAtlanticOther

2. Global Trade Patterns

■ Geographical scale• Regionalization has been one of the dominant paradigm.• Formation of economic blocs.• The bulk of international trade has a regional connotation,

promoted by proximity and economic blocs.

Major Economic Blocs, 2000

Other

Economic BlocNAFTA

Andean Pact

Mecosur

Caricom

EFTA

EU

Europe's Associates

ASEAN

Trade by Major Economic Bloc

0 5 10 15 20 25 30

Intra AFTA

Intra EU

Intra NAFTA

EU-NAFTA

NAFTA-EU

Percentage

19951990

3. International Transportation

■ Context• Support large quantities of freight flows.• Considerable technological innovations:

• Transport larger quantities of freight and people more quickly and more efficiently

• Transportation is often referred as an enabling technology.• A mean over which international trade could not occur without.

■ Transportation chains• Large distances involved; several modes.• Transport chains reinforce the importance of points of transfer.• Answer the mobility of freight and people.

A B

Rail

Origin Destination

Transport Chain

Maritime Road

International Trade

Transshipment

International Trade and Transportation Chains

A BAssembly Disassembly

Trade barrier

Customs

Share of Containerized Cargo in Global Trade, 1980-2000

0

100

200

300

400

500

600

700

800

1980 1985 1990 1995 2000

Milli

on to

ns

Containerized Cargo Other General Cargo

3. International Transportation

■ Transportation infrastructure• Physical infrastructures such as terminals, vehicles and

networks.• Either promote or inhibit international trade.

■ Transportation services• Services involved in the international circulation of freight and

people.• Warehousing, logistics, finance, insurance and marketing.

■ Transactional environment• Legal, political, financial and cultural setting.• Exchange rates, regulations, quotas and tariffs, but also

consumer preferences.

NAFTA Truck Flows, 2003

D – Commodity Chains and Freight Transport

■ 1. Contemporary Production Systems■ 2. Commodity Chains■ 3. Commodity Chains and Freight Transport

1. Contemporary Production Systems

■ Production and consumption• Core components of economic systems.• Both interrelated through supply / demand relationships.• Basic economic rationale:

• What is being consumed has to be produced.• What is being produced has to be consumed.• They tend to have separate locations.

• Market failure:• Lack of supply or not enough demand.

• Realization of production and consumption:• Cannot occur without flows of freight between locations of production and

markets.

1. Contemporary Production Systems

■ Production factors• Three dominant factors of production are land, labor and capital:

• Previously could not be effectively used at the global level.• Factors of production have an extended mobility.• Many firms have relocated segments (sometimes the entire

process) of their industrial production systems to new locations.• In 2003 American corporations were performing around 27% of

their manufacturing activities abroad.• 15% for Japanese corporations.• Strengthened by economic integration and trade agreements.

1. Contemporary Production Systems

■ Distribution• Overcoming distances used to be related to constraints in

physical distribution as well as to telecommunications.• Production systems were mainly built through regional

agglomeration economies with industrial complexes.• Efficiency in distribution has reached a point where it is possible

to manage large scale production and consumption.■ Industrial linkages

• Relationships used to take place between autonomous entities.• Uncoordinated linkages.• Multinational corporations:

• Higher level of linkages within production systems.• About 30% of all global trade occurs within elements of the same

corporation.

The World’s 20 Largest Corporations by Market Value, 2003 ($US millions)

0 50,000 100,000 150,000 200,000 250,000 300,000

Microsoft

General Electric

Exxon Mobil

Wal-Mart Stores

Pfizer

Citigroup

Johnson & Johnson

Royal Dutch/ Shell

BP

IBM

Ameri. Int. Group

Merck

Vodafone

Proctor & Gamble

Intel

GlaxoSmithKline

Novartis

Bank of America

NTT DoCoMo

Coca Cola

London

New YorkLos Angeles

Singapore

Hong Kong

Tokyo

Telecommunications

Space

Time

Hint

erla

nd

Stock Market Opening Period

Global Financial Centers

Fordist and Post-Fordist Corporate Structure

Characteristics Fordism Post-FordismOrganization Pyramidal Networked

Focus Supply Demand

Style Structured Flexible

Reach Regional / National Global

Resources Physical Assets Information / Knowledge

Production Mode Mass Production Mass Customization

Production Structure Self-Sufficiency Alliances

Inventories Months Hours

Production Cycle Time Weeks / Months Days

Information Weekly Real-Time

Product Life Cycle Years Months

Quality Affordable Best Zero-Defect

2. Commodity Chains

■ Definition• A functionally integrated network of production, trade and service

activities.• Covers all the stages in a supply chain:

• Transformation of raw materials.• Intermediate manufacturing stages.• Delivery of a finished good to a market.

• Conceptualized as a series of nodes, linked by various types of transactions, such as sales and intrafirm transfers.

• Each successive node within a commodity chain involves the acquisition or organization of inputs for the purpose of added value.

Flows M

arke

t

Transport Chain

Parts and rawmaterials

Manufacturingand assembly Distribution

Commodity Chain

Mar

ketStage

Bulk shipping Unit shipping

High volumesLow frequency

Low volumesHigh frequency

LTL shipping

Average volumesHigh frequency

2. Commodity Chains

■ Function of commodity chains• Sequential process used by corporations within a production

system.• Gather resources.• Transform them in parts and products.• Distribute manufactured goods to markets.• Each sequence is unique:

• Product types.• Nature of production systems.• Markets requirements.• Stage of the product life cycle.

• Adaptability to changing conditions.

Cereals Supply Chain

Farm

Wood Pulp Mfg

Processing Facility

Packaging

Label Mfg

Converter Distributor Store

Packaged Cereal

Packaged Cereal

Grain

Wood Pulp

Paperboard

LabelsWood Pulp

CerealDistribution and Retailing

ManufacturingExtraction

Product Life Cycle

Sale

s

Stage 1 Stage 2 Stage 3

Monopoly Competition

Research anddevelopment Maturity Decline

First competitors Mass production

Innovating firm

Competitors

Growth

Stage 4

PromotionIdeaDecline ofproduction

Centralized Production Regi

onal

Pro

duct

ion

Regional Specialization Verti

cal I

nteg

ratio

n

Country A Country B

Country C Country D

Global Production Networks

2. Commodity Chains

■ Types of commodity chains• Raw materials:

• Attributable to climatic (agricultural products) or geological (ores and fossil fuels) conditions.

• Developing countries export towards developed countries.• Semi-finished products:

• Have some transformation that confers them an added value.• Metals, textiles, construction materials and parts used to make other

goods.• Regional transport systems integrated to regional production systems.

• Manufactured goods:• Goods that are shipped towards large consumption markets.• Flows concerns developed countries, but a significant share is related to

developing countries.• Containerization has been the dominant transport paradigm.

D – Logistics

■ 1. Logistics■ 2. Distribution Systems

1. Logistics

■ Definition• Activities related to the transformation and circulation of goods.• Material supply of production.• Distribution and transport function.• Wholesale and retail.• All operations required for goods (material or nonmaterial) to be

made available on markets or to specific destinations.■ Logistics operations

• Purchase orders processing:• Related to the transactional procurement of goods.

• Stock management:• Related to the physical procurement of goods.

• Transportation:• Related to the physical distribution of goods.

Logistics Operations

Demand

Transportation

Stock

Management Purchase

Orders

Processin

g

Handling Packaging

Purc

hase

Sales

ProductionScheduling

Warehousing

1. Logistics

■ Physical Distribution• Activities involved in the movement of goods:

• From production to sale and consumption.• Insure that the mobility requirements of supply chains are met:

• Movement and handling of goods.• Transportation services (trucking, freight rail, air freight, inland waterways,

marine shipping, and pipelines)• Transshipment and warehousing services:

• (e.g. consignment, storage, inventory management).

1. Logistics

■ Materials Management• Activities related in the manufacturing of commodities in all their

stages of production along a supply chain.• Production and marketing activities.• Insure that the requirements of supply chains are met• Assembly and raw materials.• Packaging (for transport and retailing) and recycling discarded

commodities.

Changes in the Relative Importance of Logistical Functions

0% 20% 40% 60% 80% 100%

Supply Driven

Demand Driven

InventoryTransport SystemInformation System

Conventional and Contemporary Arrangement of Goods Flow

Raw Materials & Parts Manufacturing Distribution

RawMaterials

Storage NationalDistribution

RegionalStorage

LocalDistribution

Retailers

Supply Chain Management

RawMaterials

DistributionCenter

RetailersManufacturing

Cust

omer

sCu

stom

ers

Conventional

Contemporary

Material flow (delivery)

Information flow (order)Core component

2. Distribution Systems

■ Context• Changes in distribution because of logistics.• Supporting fragmentation of production.• Emergence of a separate branch of the industry specialized with

the function of distribution.• E-commerce offers new opportunities.

From Push to Pull Logistics

Supplier Supplier Supplier

Manufacturer

Customer

Distributor

Supplier Supplier Supplier Supplier

Supplier Supplier Supplier

Manufacturer

Distributor

Customer

3PL

Returns / Recycling Point-of-sale data

Freight flow

Push Pull

Logistics and E-commerce

Retailer

Supply chain

E-Retailer

Customers Customers

Supply chain

Warehousing

Warehousing

Trad

itio

nal L

ogis

tics

E-Logistics