This publication considers the suggestion that further international economic integration depends largely on the reduction of trade costs originating in the transport sector. Benefits to be expected from investment in international transport facilities and the reduction in the costs of crossing borders are described. It is noted that transport costs may be many times higher for some poorer countries than for developed countries. While sea shipping costs are currently no higher than in the 1970s, air freight costs have decreased and the use of air for freight transport has increased considerably. The effects of economies of scale on costs are discussed. The value:weight ratio of goods traded has increased with time as the technology content of goods has increased. Improved logistics efficiency at ports, and also at customs, streamlined regulatory policies, better harmonisation of standards, and conformance to international norms are considered important for lowering transaction costs. Three policy categories (port efficiency, regulatory regimes and IT infrastructures) are likely to increase exports more than imports and would be particularly beneficial to new and candidate members of the EU. The highest trade gains (40%) were predicted from improvement of IT infrastructure, followed by a 30% gain from improved port efficiency.
Abstract