TRANSPORT COSTS AND INTERNATIONAL TRADE

Abstract

The first issue we study is the impact of transport costs on the volume and nature of international trade. To what extent has the rise in international trade been driven by changes in transport costs? Why is cross-country and cross-regional experience so different? Transport costs also influence modal choice, the commodity composition of trade and the organisation of production, particularly as ‘just-in-time’ methods get extended to the global level. In turn, these new production methods are placing increasing demands on the transport system. The second issue is the determinants of international transport costs. There is enormous cross-country variation in transport costs and in trade costs more generally. To what extent are these determined by geography, infrastructure deficiencies or institutional barriers? Through time, the evidence is that transport costs have not fallen as much as many people might expect. We explore this paradox.

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