International transport costs: Why and how to measure them?

Reliable and low cost transport is critical to trade and development. But in many cases, there is little information about how much it actually costs to transport specific commodities around the world - a significant challenge for anyone trying to craft well-informed policies in area like climate or shipping.

International transport is a key enabler of global trade and therefore of the economic development of countries. Yet, the costs of transporting commodities vary widely across countries, routes, directions and commodities. Often, small island developing States (SIDS), landlocked developing countries (LLDCs), and least developed countries (LDCs) spend more than average on the international?transport and insurance?of their merchandize imports. This variation in transport costs levels - as illustrated by Figure 1 - is due to a wide range of factors: distance and geographical location, size of the economies and markets, scale effects, market structures, connectivity to transport networks, cross-border trade efficiency, infrastructure availability and quality - to name just a few.

Building the evidence base for informed policymaking

Measuring and understanding the differences in international transport costs will be essential in improving countries’ development outcomes. This is especially true in the current context, where global needs like cutting emissions from transport or responding to the COVID-19 crisis are likely to transform the industry in a fundamental way.

Take the shipping sector, for instance. Maritime transport currently carries?more than 80%?of global trade by volume, and plays a critical role in the supply of essential goods such as food, clothing, shelter, and pharmaceuticals to countries. Yet, the carbon footprint of shipping?already accounts for almost 3% of global greenhouse gas (GHG) emissions, and is expected to grow even further in the coming years without effective policy intervention. To address this, the International Maritime Organization (IMO) is now working to decrease emissions from ships by at least 50% by 2050 compared to 2008 levels—as defined by the IMO Initial GHG Strategy from April 2018.

How will this impact international transport costs? What are the potential implications for people and economies? More broadly, how can we reduce the climate impact of international transport while maximizing its economic and social benefits?

This is precisely the type of questions that the United Nations Conference on Trade and Development (UNCTAD) and the World Bank had in mind when they decided to collaborate on a new?Global Transport Costs Dataset for International Trade, with a special focus on international maritime transport. Launched just a few months ago, the dataset’s ambition is to cover a broader range of countries and provide more detail than existing datasets on international transport costs. This work has added another important piece to the global transport costs puzzle, and will help close a persistent data gap faced by policymakers, researchers, and transport industry stakeholders.

A more global and granular way to look at international transport costs

In the context of the IMO Initial GHG strategy, the new?Global Transport Costs Dataset for International Trade?allows policymakers and researchers to assess the expected impacts of specific GHG reduction measures for ships on transport costs among a broad range of export or import commodities between various countries. By displaying the transport costs in a multi-dimensional format, users can compare the transport costs across country pairs, commodities, and, most importantly, five transport modes (sea, air, railway, road, and non-standard such as pipelines, powerlines, etc.). This is expected to provide valuable input for the development of detailed impact assessments which seek to examine how any climate policy for shipping may impact international trade and economies of states, for instance.

A system that allows for expansion and improvements over time

The dataset will then be updated and reviewed on an ongoing basis to make sure it brings the highest possible value to policymakers, researchers, and to anyone who is interested in making a difference in the field of transport and climate. Let us know in the comment section how transportation costs affect your businesses and how you calculate the costs accurately.