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?
Identifying Logistics-intensive Sectors
As noted above, an important question from a trade policy perspective relates
to the impact of improved logistics performance on the pattern of sectoral
specialization. At its most basic, trade theory suggests that as the price of
logistics services falls relative to other goods and services in the economy,
those sectors that use logistics particularly intensively will tend to undergo a
relative expansion. We therefore expect improvements in logistics
performance to affect relative sector size, and thus the pattern of
specialization across countries.
To undertake a detailed analysis of the impacts of logistics performance on
sectoral patterns of specialization, it would be necessary to incorporate the
sector into a fully-specified general equilibrium model, such as the Global
Trade Analysis Project (GTAP). GTAP currently includes a transport sector,
which could be used as a first proxy for logistics. The model could therefore
provide a platform for examining possible changes in the sectoral composition
of production and trade by modeling improvements in logistics performance
as reductions in transport costs. To do so, however, it would first be necessary
to obtain an econometric estimate of the relationship between logistics
performance and transport costs. Such work has not yet been undertaken, but
future research focusing either on direct measures of transport costs or
omnibus measures such as the Novy index discussed above could make an
important contribution to a better understanding of this area.
Although the relationship between logistics and sectoral composition is a
complex one, it is possible to use basic input-output data to provide some
initial information on sectors in developing countries that are likely to be
particularly sensitive to logistics performance. The OECD's STAN database
input-output tables provide sectorally disaggregated data on intermediate
input use, from which it is possible to construct measures of logistics intensity
using the narrow and broad definitions discussed above; the medium
definition cannot be used due to a lack of necessary sectoral detail in the input-
output tables. “Logistics intensity” is defined simply as the percentage by
value of total intermediate input use accounted for by logistics services.
Table 5 lists the five most logistics-intensive sectors in 11 non-OECD countries, using the latest available input-output data from OECD STAN. The first stylized fact that emerges is clearly that each country is different when it comes to logistics intensity in production: some sectors that are strongly logistics intensive in some countries (e.g., agriculture in South Africa) do not display that characteristic in most other countries. Second, it is nonetheless apparent that some sectors are logistics-intensive in a number of economies, which suggests that modes of production are relatively similar across countries. Mining and minerals are examples. Third, a number of relatively "heavy" industries are logistics intensive in a range of countries. Boosting production and trade in such sectors relative to the rest of the economy would be consistent with the goal of export diversification in many developing countries. Recent cross-country empirical evidence indeed suggests that improved trade facilitation - of which logistics performance is an important component - can help boost export diversification.
Table 6: Top Five Logistics-intensive Manufacturing Sectors Based on Input-output Data; Non-oecd Countries.
Country |
Year |
Narrow Definition | Broad Definition |
---|---|---|---|
Argentina |
1997 |
Wood products; Mining and quarrying; Minerals; Food products; Radio, television, and communications equipment. |
Wood products; Office, accounting, and computing machinery; Metal products, Iron and steel; Minerals. |
Brazil |
2005 |
Mining and quarrying (energy and non-energy); Pharmaceuticals; Iron and steel; Minerals. |
Mining and quarrying (energy and non-energy); Pharmaceuticals; Minerals; Textile products. |
China |
2005 |
Mining and quarrying (energy and non-energy); Minerals; Rubber and plastic products; Wood products. |
Minerals; Rubber and plastic products; Mining and quarrying (energy and non-energy); Wood products. |
India |
2003/04 | Medical, precision, and optical instruments; Minerals; Mining and quarrying; Textile products; Paper products. |
Textile products; Iron and steel; Minerals; Medical, precision, and optical instruments; Food products. |
Indonesia |
2005 |
Wood products; Other manufacturing; Radio, television, and communication equipment; Pharmaceuticals; Medical, precision, and optical instruments. |
Wood product; Other manufacturing; Radio, television, and communication equipment; Pharmaceuticals; Medical, precision, and optical instruments. |
Romania |
2005 |
Mining and quarrying, Coke and petroleum products; Minerals; Medical, precision, and optical instruments; Iron and steel. |
Mining and quarrying, Food products; Motor vehicles; Medical, precision, and optical instruments; Minerals. |
Russia |
2000 |
Mining and quarrying; Minerals; Wood products; Iron and steel; Coke and petroleum products. |
Coke and petroleum product; Minerals; Mining and quarrying; Iron and steel, Wood products. |
South Africa |
2005 |
Mining and quarrying; Agriculture; Rubber and plastic products; Coke and petroleum products. | Mining and quarrying; Agriculture; Textile products; Food products. |
Taiwan |
2006 |
Minerals; Wood products; Pulp and paper products, Other manufacturing, Machinery and equipment. | Wood products; Pulp and paper products, Agriculture, Minerals; Transport equipment. |
Thailand |
2005 |
Mining and quarrying (energy and non-energy); Minerals; Wood products; Pharmaceuticals. | Mining and quarrying; Wood products; Pharmaceuticals; Agriculture; Pulp and paper products. |
Vietnam |
2000 |
Wood products; Coke and petroleum products; Mining and quarrying (energy and non-energy); Building and repairing of ships and boats. |
Pulp and paper products; Textile products; Motor vehicles; Electrical machinery; Medical, precision, and optical instruments |