Building for Trade
ADBI series on Asian Economic Integration and Cooperation
Edited by Douglas H. Brooks and David Hummels
Chapter 4: Empirical Estimates of Transportation Costs: Options for Enhancing Asia’s Trade
* Prabir De INTRODUCTION 1. The last few decades have seen signiﬁcant changes in international economic integration. A growing number of researchers have started to reveal a long list of trade cost barriers that aﬀect international economic integration. According to Anderson and van Wincoop, ‘The 170 per cent of “representative” trade costs in industrialized countries breaks down into 21 per cent transportation costs, 44 per cent border related trade barriers and 55 per cent retail and wholesale distribution costs’ (Anderson and van Wincoop, 2004, p. 692). What makes any study of trade costs in Asia signiﬁcant is that the price of the vast majority of traded goods depends on many exogenous factors. On the one hand, Asia conducts increasingly higher trade, where higher trade costs push up the landed price of imports, and, on the other, Asia’s trade covers an increasingly large volume of intermediate goods, where expensive imports, resulting from higher trade costs, escalate the cost of production. The present chapter attempts to contribute to the empirical literature on the dynamics of Asia’s trade. By using direct and indirect evidence on trade barriers, it seeks to enhance understanding of trade costs in Asia.1 How are the Asian countries performing in reducing trade costs? Which barriers matter most – tariﬀ or transport costs? Do inland transportation costs inﬂuence Asian trade much more signiﬁcantly than international transportation costs? What do the estimates of freight rates look like across Asian countries? This chapter provides empirical evidence to show that...
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