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Edited by André de Palma, Robin Lindsey, Emile Quinet and Roger Vickerman
5 Transport costs and international trade Alberto Behar and Anthony J. Venables INTRODUCTION International trade has grown substantially faster than world income through most of the post war period,1 and at the same time the share of manufacturing in world trade has increased substantially (WTO, 2007). Globalization has transformed many economies, and some authors have heralded the age of ‘Flat Earth’ (Friedman 2005). Yet international economic interactions remain small relative to interactions that take place within national borders. Trade is choked off by distance, by borders and by a variety of political and cultural obstacles. Integration into the world economy is widely viewed as one of the key factors underlying the success of the fastest growing economies (Growth Commission, 2008) yet many countries remain isolated and have failed to achieve this integration. Transport costs are one, amongst many, of the factors that shape these trade patterns. This chapter investigates the impact of transport costs on international trade, looking both at the influence of transport costs on trade and at the determinants of international transport costs. 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 organization of production, particularly as ‘just-in-time’ methods get extended to the global level. In turn, these new production...
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