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Jan Hoffmann, Chief, Trade Facilitation Section,

Determinants of international transport costs and connectivity and the mutual relationship between trade and transport facilitation and development. Jan Hoffmann, Chief, Trade Facilitation Section, Trade Logistics Branch, Division on Technology and Logistics. Trade. Transport Services.

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Jan Hoffmann, Chief, Trade Facilitation Section,

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  1. Determinants of international transport costs and connectivity and the mutual relationship between trade and transport facilitation and development Jan Hoffmann, Chief, Trade Facilitation Section, Trade Logistics Branch, Division on Technology and Logistics

  2. Trade Transport Services Transportcosts

  3. More income to finance trade facilitation -> Better trade facilitation -> More Trade -> More income to finance trade facilitation Angola

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

  5. Better services -> More trade -> More income to finance infrastructure -> Better services

  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. Transport CostsConnectivityTrade Geneva, May 2010 Jan.Hoffmann@UNCTAD.org

  8. Transport CostsConnectivityTrade Geneva, May 2010 Jan.Hoffmann@UNCTAD.org

  9. Freight rates in May 2010 40’ container from Dalian to • DUBAI 1200 • COLOMBO 1300 • B.ABBAS 1300 • CALCUTTA 1700 • BAHRAIN 1800 • UM QUASER 3000 • PORT SUDAN 3300 • ROTTERDAM 3500 • TEMA 4600 • SANTOS 4800 • VALPARAISO 5200

  10. Freight costs for countries Source: UNCTAD

  11. Freight as % of commodities value UNCTAD, Review of Maritime Transport

  12. TradeVolumes Transport Services ? Transportcosts

  13. Distances Economies of scale Imbalances Differences in freight costs depend on… • Type & value of goods • Competition • Port characteristics

  14. Distances Economies of scale Imbalances • Type & value of goods • Competition • Port characteristics

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

  16. Distance matters much more over land than at sea Distance matters more with higher oil prices Distance

  17. Distances Economies of scale Imbalances • Type & value of goods • Competition • Port characteristics

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

  19. Source: UNCTAD, Review of Maritime Transport 2010, forthcoming and data from Drewry Shipping Consultants

  20. CRS, 25 April 2010

  21. Distances Economies of scale Imbalances • Type & value of goods • Competition • Port characteristics

  22. Imbalances CI-Online 10 May 2010

  23. Distances Economies of scale Imbalances • Type & value of goods • Competition • Port characteristics

  24. Increase the value by 1% implies an increase of transport and insurance costs by around 0.3 – 0.4% Merchandize type and value

  25. Distances Economies of scale Imbalances • Type & value of goods • Competition • Port characteristics

  26. Competition between carriersCase study Caribbean Source: Hoffmann, Wilmsmeier, MEL 2008

  27. Distances Economies of scale Imbalances • Type & value of goods • Competition • Port and infrastructure characteristics

  28. Difference between “best” and “worst” case in Latin America: 25% of worst case Port reform

  29. Dependent variable: maritime transport costs per tonne of containerizable cargo Wilmsmeier, Hoffmann, Sanchez, in: Porteconomics, 2006

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

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

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

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

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

  35. Distances Type & value of goods Imbalances Differences in freight costs depend on… • Competition • Economies of scale • Port and infrastructure characteristics

  36. TradeVolumes ? Transport Services Transportcosts

  37. Transport Costs ConnectivityTrade Geneva, May 2010 Jan.Hoffmann@UNCTAD.org

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

  39. “Maritime connectivity” UNCTAD’s “Liner Shipping Connectivity Index” (LSCI): An indicator for the supply of liner shipping services Components: • Ships • Container carrying capacity • Shipping companies • Services • Maximum ship sizes

  40. The UNCTAD LSCI componentsIndex of country averages Source: UNCTAD, based on data from Containerization International

  41. New ships no longer have their own cranes

  42. The UNCTAD LSCI componentsIndex of country averages Source: UNCTAD, based on data from Containerization International

  43. Bad news for smaller economies • In 2009, there were fifteen LDCs with only one to four service providers – almost a doubling compared to 2004, when there had been just eight LDCs with such low levels of competition.

  44. Bad news for smaller economies (cont.) • The global average of direct connections per country has remained stable, while the number of direct connections per LDC has declined by 20 per cent during the last three years.

  45. TradeVolumes ? Transport Services Transportcosts

  46. LSCI African countries UNCTAD LSCI (Liner ShippingConnectivity Index) 2009 values

  47. Determinants of connectivity • Trade volumes (+) • Distance (-) • Development (+) • Infrastructure (+)

  48. Better services -> More trade -> More income to finance infrastructure -> Better services

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

  50. Transport Costs Connectivity Trade Geneva, May 2010 Jan.Hoffmann@UNCTAD.org

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