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
14/11/2013
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
14/11/2013
Maritime Connectivity and Trade

4. Motivation
And globalized production has played an important role in South-South trade expansion
14/11/2013
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”)
14/11/2013
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
14/11/2013
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 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)
14/11/2013
Maritime Connectivity and Trade

8. Stylized Facts
Over the whole period on average about 13 percent of country pairs are connected directly
About 10 percent need one transhipment,
About 49 percent two transhipments
About 21 percent three transhipments
About 72 percent of country pairs are connected with no more than two transhipments
and more than 90 percent with no more than three transhipments
14/11/2013
Maritime Connectivity and Trade

9. Stylized Facts
Top and Bottom Ten Countries: average number of Transhipments
Top 10
Mean
Bottom 10
GBR
0.73
TKM
3.20
FRA
0.79
NER
BEL
0.84
BLZ
3.23
DEU
0.87
SVK
3.31
NLD
0.88
HUN
ITA
0.92
BLR
3.32
ESP
0.93
NRU
3.42
CHN, HKG SAR
0.95
MLI
3.53
CHN
0.97
MDA
3.62
USA
0.98
ARM
4.10
14/11/2013
Maritime Connectivity and Trade

10. Stylized Facts
Top ten connected countries (selected years): number of direct connections
2006
2008
2010
2012
GBR
105
108 99 93
BEL 98
FRA 96 92 97
USA 91
DEU
HKG 89
NLD 88 90
ESP
CHN
ITA 86 85 84 87 83 82 81 79
MYS 77
14/11/2013
Maritime Connectivity and Trade

11. Stylized Facts
Bottom ten connected countries (selected years): number of direct connections
2006
2008
2010
2012
NRU 1
ALB
IRQ 2
MMR
QAT 3
BHR
PLW 4
SOM
BRN
MDV
BGD 5
BLZ
KWT
SYC 6
14/11/2013
Maritime Connectivity and Trade

12. Stylized Fatcs Direct Connections M South North X 46% 21% 12% Direct
(share in total) M
South
North X
46%
21%
12%
Direct
Connections
(share in group total) M
South
North X
67%
33%
62%
38%
Average # of direct connections:
North: 35
South: 20
14/11/2013
Maritime Connectivity and Trade

13. AVG Number of direct connection per country
Stylized Facts
Direct Connections per destination (share in Country/Group total direct connections)
2012
AUS
Africa
America
Asia
CAN
CHN
EUR
Europe
IND
JPN
NZL
Pacific
USA
0.00
0.01
0.03
0.02
0.04
0.42
0.17
0.10
0.24
0.22
0.12
0.38
0.08
0.18
0.11
0.58
0.07
0.15
0.19
0.05
0.13
0.26
0.09
0.36
0.33
0.25
0.20
0.30
0.31
0.27
0.28
0.23
0.16
0.14
0.06
0.45
AVG Number of direct connection per country 35 16 22 40 85 36 14 55 51 30 15 91
14/11/2013
Maritime Connectivity and Trade

14. Stylized Facts Distance may not precisely reflect trade costs
14/11/2013
Maritime Connectivity and Trade

15. Empirical Investigation: Impact on Exports
14/11/2013
Maritime Connectivity and Trade

16. Empirical Investigation: Impact on Exports
14/11/2013
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
14/11/2013
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?
14/11/2013
Maritime Connectivity and Trade