Logistics Costs and Competitiveness
Read this article. The document examines issues and costs related to domestic and international logistics. Sections 3 and 4 are most applicable here. What are the unique challenges facing domestic and global logistics?
Introduction
Despite the commercial importance of the logistics sector in helping firms
complete import and export transactions, international trade practitioners
have only recently come to focus on it in any detail. There are two main ways
in which logistics intersects with the trade policy agenda. First, logistics covers
a number of sectors that are subject to ongoing liberalization discussions at
regional and multilateral levels in the context of trade in services. Examples
include transport and distribution. Some regional initiatives, such as ASEAN,
have recognized the importance of logistics by treating it as an independent "cluster" for negotiation and liberalization purposes, even though it cuts across
a number of pre-existing sectoral definitions in the ISIC and GATS
classifications. There is thus a strong linkage between the logistics sector and
trade policy in services.
The second area in which linkages between trade and logistics emerge is in the
context of trade facilitation. Although the WTO has adopted a narrow working
definition of trade facilitation - focusing essentially on import and export
procedures - many other forums, such as APEC, have adopted a much broader
approach. More generally, trade facilitation can be considered as including the
full range of policies that tend to reduce the transaction costs affecting
international movements of goods. Improving logistics performance is in fact
at the core of the private sector trade facilitation agenda, and is an important
complement to public sector measures such as reducing red tape, and
improving infrastructure quantity and quality.
Although there is now an extensive body of analytical work on the links between trade facilitation - using both the broad and narrow definitions - and trade flows, there is as yet relatively little analytical work dealing specifically with the trade effects of logistics sector performance. Until recently, the data constraints involved in doing such work have proved formidable. However, a number of recent initiatives, such as the World Bank's Logistics Performance Index, have started to loosen that constraint.
Against that background, this paper has two main aims. First, it provides a first
overview of currently available data relevant to logistics, and suggests some
preliminary applications. Although data availability is limited in terms of
country coverage and sector specificity, it is useful to analyze freely-available data to see whether expected relationships appear to exist. Examining data in
this way can also provide important insights into the types of data that could
be collected in the future. Such exercises have not previously been conducted
in the literature. Clearly, though, a major caveat in relation to the analysis
undertaken here is that it necessarily relies on proxies for the logistics sector,
and does not purport to capture the full range of logistics activities considered
by more micro-level, industry-specific studies. Nonetheless, there is a tradeoff
to be made in terms of data availability versus specificity, and a number of
important insights arise from the basic analysis presented here.
The second objective of this paper is to frame the issue of logistics cost
measurement and data collection in terms of the types of inputs needed for
applied trade policy research. As will be shown, the needs of trade researchers
are fundamentally different from those of industry groups: the latter can make
use of data that effectively measure sector size for political economy purposes,
but trade researchers need to focus more on issues of performance as
measured by cost relative to some output price. Once such data become
available, however, a number of interesting research avenues are available. On
the one hand, logistics performance is expected to be an important
determinant of bilateral trade flows, and there is already some empirical
evidence to support that view. In addition, logistics performance combined
with sectoral logistics intensities can also be expected to have a significant
impact on the global pattern of production, exports, and specialization. The
cross-sectoral implications of logistics performance have as yet received only
cursory attention in the literature, but are likely to be the source of major gains
going forward. This paper is the first to sketch out a data-driven research
agenda for trade and logistics in this way.
The paper is organized as follows. The next section presents an overview of
possible directions in applied trade policy research using logistics data. Section
3 examines existing data sources that can be used to measure domestic
logistics costs, focusing on the national accounts, input-output tables, price
comparisons, and firm-level data. Section 4 presents a new methodology for
measuring international trade costs, and identifies the proportion of those
costs due to logistics. Section 5 uses input-output data to identify logistics-
intensive sectors in a range of countries. Section 6 concludes.