Infrastructure’s Role in Lowering Asia’s Trade Costs

Infrastructure’s Role in Lowering Asia’s Trade Costs

Building for Trade

ADBI series on Asian Economic Integration and Cooperation

Edited by Douglas H. Brooks and David Hummels

This book analyses and draws policy implications from infrastructure’s central role in lowering Asia’s trade costs.

Chapter 2: Trends in Asian Trade: Implications for Transport Infrastructure and Trade Costs

David Hummels

Subjects: asian studies, asian development, development studies, asian development, development economics, economics and finance, development economics


David Hummels INTRODUCTION The Asian region has long been home to some of the world’s most dynamic trading economies. The last decade has proved no exception to that rule, with China and India achieving historically unparalleled trade growth. This growth brings prosperity but also a series of challenges for both private and public sectors. Chief among these challenges is building and maintaining a trade infrastructure adequate to the new trading environment. The purpose of this chapter is to examine the evolution of merchandise trade in Asia with a focus on how this evolution affects infrastructure needs. The starting point is an analysis of rapid growth in aggregate volumes of trade, its geographic orientation and growing cargo imbalances. The extent of trade growth carries obvious implications for infrastructure demand, as more trade requires improved infrastructural development to keep pace. However, aggregate changes are reasonably well understood and so the primary focus of this chapter is change in the composition of Asian trade. A traditional approach to thinking about composition is to disaggregate trade by product categories, for example, manufacturing versus agriculture and mining. Instead, I focus on four types of compositional change, each of which affects the type and intensity of transportation services demanded. These include: changes in the weight–value ratio of trade; growth in air shipping and the demand for timeliness; growth in new flows and large versus small shipments; and growth in fragmentation/vertical specialization. AGGREGATE TRADE: GROWTH AND ORIENTATION Aggregate trade volumes are growing rapidly in...

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