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Maritime Connectivity and Trade

Maritime Connectivity and Trade. Marco Fugazza UNCTAD. G-NEXID Workshop, 28 March 2014, Geneva . Plan of the Presentation. Motivation The Dataset Stylized Facts Some Empirical Results Implications. Motivation.

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Maritime Connectivity and Trade

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  1. Maritime Connectivity and Trade Marco Fugazza UNCTAD G-NEXID Workshop, 28 March 2014, Geneva

  2. Plan of the Presentation • Motivation • The Dataset • Stylized Facts • Some Empirical Results • Implications Maritime Connectivity and Trade

  3. Motivation • Maritime transport is at the core of international trade in merchandises: almost 80% of volume of goods exchanged in the world are transported via sea • Containerizable transport services, in particular, are key for trade in manufactured goods and global value chains • Without access to regular “liner shipping” services that make use of standardized sea-containers, countries cannot competitively participate in globalized production Maritime Connectivity and Trade

  4. Motivation • And globalized production has played an important role in South-South trade expansion Maritime Connectivity and Trade

  5. Motivation • Despite the importance of trade costs as drivers of the geographical pattern of economic activity, global value chains, and of exchanges of merchandise goods between countries, most contributions to their understanding remain piecemeal • Some worldwide estimates of transport costs have been recently published by the WB (“Trade Costs in the Developing World: 1995 – 2010”) Maritime Connectivity and Trade

  6. Motivation • Their estimates distinguish between trade in manufactured goods and trade in agricultural products • In both cases, they find that the absolute levels of trade costs are significant in ad valorem equivalent terms: • at least 100% in manufactured goods • and in excess of 200% for agriculture • Estimates are not based on any measure of bilateral maritime connectivity: e.g. no information about the existence of a direct connection Maritime Connectivity and Trade

  7. The Dataset • UNCTAD’s contribution: unique database reporting the shortest liner shipping routes between any pair of countries for a reference sample of 178 countries (33 landlocked) over the 2006-2012 period • The number of transhipments necessary to connect any country pair to allow for containerizable trade is retrieved • The information on the existence or not of a direct connection is retrieved from the UNCTAD's Liner Shipping Connectivity Matrix (LSCM)Liner shipping connectivity index (LSCI) Maritime Connectivity and Trade

  8. StylizedFacts • Over the whole period on average about 13 percent of country pairs are connected directly • About 10 percent need one transhipment, • About 49 percenttwo transhipments • About 21 percentthree transhipments • About 72 percentof country pairs are connected with no more than two transhipments • and more than 90 percentwith no more than three transhipments Maritime Connectivity and Trade

  9. StylizedFacts Top and Bottom Ten Countries: average number of Transhipments Maritime Connectivity and Trade

  10. StylizedFacts Top ten connected countries (selected years): number of direct connections Maritime Connectivity and Trade

  11. StylizedFacts Bottom ten connected countries (selected years): number of direct connections Maritime Connectivity and Trade

  12. Stylized Fatcs Average # of direct connections: North: 35 South: 20 Maritime Connectivity and Trade

  13. Stylized Facts Direct Connections per destination (share in Country/Group total direct connections) Maritime Connectivity and Trade

  14. StylizedFacts Distance may not precisely reflect trade costs Maritime Connectivity and Trade

  15. EmpiricalInvestigation: Impact on Exports Maritime Connectivity and Trade

  16. EmpiricalInvestigation: Impact on Exports Maritime Connectivity and Trade

  17. Empirical Investigation: Impact on Exports Econometric estimation (gravity model) • Not being directly connected to the final destination is associated with exports values 45% to 55% lower on average • Any additional transhipment is associated with exports values about 23% lower on average Maritime Connectivity and Trade

  18. Implications • More needs to be done: • Bilateral index of maritime connectivity (UNCTAD’s work in progress) • More precise estimates of bilateral trade costs • Getting exporters connected is crucial: • Beyond trade facilitation • Broader approach to trade facilitation • Connecting to a hub may be easier than working on bilateral direct connections • Role for international cooperation? Preferential access to maritime hubs? • How to attract shipping companies? Maritime Connectivity and Trade

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