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 14/11/2013 Maritime Connectivity and Trade

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

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

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

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

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) 14/11/2013 Maritime Connectivity and Trade

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

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

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

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

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

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

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

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

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

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

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