Jan.Hoffmann@UNCTAD Geneva, May 2007 .

1. The demand and supply of international transport services: The relationships between trade, transport costs and effective access to global markets Jan.Hoffmann@UNCTAD.org Geneva, May 2007.

2. TradeVolumes Transport Services Transportcosts

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

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

5. More trade -> More shipping supply -> More competition -> lower freights -> More trade

6. 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

7. 1) Transport Costs2) Connectivity3) Trade

8. 1) Transport Costs

9. TradeVolumes Transport Services ? Transportcosts

10. Transaction costs International transport costs are usually higher than Customs Dutiesin the destination country Source: World Bank, GEP 2002

11. Global trademerchandise and services billion USD % growth 2005 2000-05 Source: WTO

12. What explains the differences? UNCTAD RMT 2006

13. Freight as % of goods value: Changes over time and by product UNCTAD, Review of Maritime Transport

14. Higher transport costs in land-locked countries

15. Doubling the distance leads to a increase of maritime transport costs (incl. insurance)by about 15-20%… averages, empirical datae.g. ECLAC, FAL 191 Distance

16. Freight rates and Distance in the Caribbean, July 2006 UNCTAD Transport Newsletter, 1st Quarter 2007

17. Dependency on Transit Trade Study 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

18. moving 10 000 tons instead of 100 (in one transaction) reduces unit costs by around 40 to 50 %(maritime) Economies of Scale

19. Imbalances CI-Online February 2007

20. Imbalances • In West Africa, which freight rates would you expect to be higher: • Those for imports, or • Those for exports ? UNCTAD, RMT 2006

21. Imbalances • In China, which freight rates would you expect to be higher: • Those for imports, or • Those for exports ?

22. Imbalances • In the Caribbean, which freight rates would you expect to be higher: • Those for imports, or • Those for exports ?

23. Increase the value by 1% implies an increase of transport and insurance costs by around 0.36% Merchandize value

24. If countries are neighbours, with paved roads, maritime transport costs can be around 10% lower Competition with land transport Fotos: Jan Hoffmann

25. Freight rate per containerin the Caribbean (July 2006)

26. Dependent variable: maritime transport costs per tonne of containerizable cargo Better port infrastructurereduces maritime transport costs

27. Dependent variable: maritime transport costs per tonne of containerizable cargo Better (perceived)port efficiencyreduces maritime transport costs

28. Dependent variable: maritime transport costs per tonne of containerizable cargo Port privatization in the EXPORTING country reduces maritime transport costs

29. Dependent variable: maritime transport costs per tonne of containerizable cargo Trade facilitation in the IMPORTING country reduces maritime transport costs

30. Dependent variable: maritime transport costs per tonne of containerizable cargo Better connectivity between ports/ more competition among carriersreduces maritime transport costs

31. Distances Type & value of goods Imbalances To sum up: Differences in maritime freights depend on… • Competition • Economies of scale • Port characteristics

32. Distances Type & value of goods Imbalances To sum up: Differences in land freights depend on… • Competition • Economies of scale • Infrastructure • Border crossings

33. Changes over time Clarkson Research Studies April 2007

34. 2) Connectivity

35. Port moves (containerized trade) Million TEUs DVB/ Drewry

36. Trade grows faster than GDP • South-South and regional trade of developing countriesgrows even faster than trade in general • Containerized trade of developing countries grows even faster than trade of developing countries in general • Containerized port traffic grows even faster than containerized trade…

37. Containerization of trade, and access to containerized transport services are important determinants of countries’ trade competitiveness How can we measure this?

38. “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

39. Benefits of a high connectivity • More choice for the user (importers and exporters) • Lower transport costs for the user(importers and exporters) • Direct income for the port (private operator, port authority) • Indirect income if value added services can be sold

40. “Connectivity” • Per country – in a “point” • Per route – between pairs of countries

41. The UNCTAD “LSCI”

42. Going up • TEU deployment + 14% • Maximum vessel size + 18% • Average vessel size + 11%(change of country average 2004-2006)

43. Going down • Number of companies - 6.2% (change of country average 2004-2006)

44. 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

45. 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.

46. Connectivity per route Top 25 routes (out of 13041) June 2006

48. TradeVolumes ? Transport Services Transportcosts

49. Case 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

50. Case study CaribbeanDeterminants of connectivity • Trade volumes: (+) • Distance: (-) • GDP per capita in exporting country (+) • Port infrastructure (+)