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Impacts of Trade and Transport Policy on International Cargo Shipping and Economic Activities

Impacts of Trade and Transport Policy on International Cargo Shipping and Economic Activities (final draft report) Ryuichi SHIBASAKI, Dr. Eng. Senior Researcher National Institute for Land and Infrastructure Management (NILIM), MLIT JAPAN. Steps Forward. Japan 2010.

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Impacts of Trade and Transport Policy on International Cargo Shipping and Economic Activities

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  1. Impacts of Trade and Transport Policy on International Cargo Shipping and Economic Activities (final draft report) Ryuichi SHIBASAKI, Dr. Eng. Senior Researcher National Institute for Land and Infrastructure Management (NILIM), MLIT JAPAN

  2. Steps Forward Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 • 30th TPT-WG (April 2008, Philippines): approval of the proposal • 31st TPT-WG (August 2008, Peru): intermediate reports and discussion [1] • 32nd TPT-WG (July 2009, Singapore): intermediate reports and discussion [2] • 33rd TPT-WG (October 2010, Japan): final presentation and discussion for final report submission

  3. Contents of Today’s Presentation Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 1) Introduction (Background, Objective, Methodology) 2) Examples of policies to be simulated by this system A. Trade Policy B. Transport Infrastructure Investment and Cost Reduction Policy C. Risk Management on International Shipping 3) Discussion

  4. Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 1) Introduction

  5. Introduction Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 - Trade liberalization and efficient transport are the most important key issues for regional development of APEC economies. • For further discussion in order to realize trade liberalization and • efficient transport, if we can know the quantitative effects of these • policies, the discussion would be very effective and fruitful. • Ex) - What economic growths are expected by trade liberalization • and facilitation? • - To what degree transport cost is reduced by constructing • transport infrastructure and removing cross-border barriers?

  6. Introduction Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 Excerpt from 5th APEC Transportation Ministerial Meeting, Joint Ministerial Statement: 2. Transportation plays a key role in the APEC agendafor trade facilitation and economic integration in the Asia-Pacific region. The movement of people and goods underpins economic and social development in the region. Transport sector activity itself accounts for a significant portion of regional economies. It is therefore necessary that the transport systems are efficient, convenient and secure.

  7. Objectives of the Project 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 • To develop “Trade and Logistics Forecasting System for the APEC region”, a successive prediction system of trade amount and international cargo flow, in order to support a quantitative discussion for realization of trade liberalization and efficient transport among APEC economies as well as for each economy • This system can be shared for each member economy for some analyses on the APEC region and its own economy, by collaborating with a development group of the system and preparing some additional data if needed

  8. Trade and Logistics Forecasting System for the APEC Region Economic Growth INPUTS 1. Trade Forecasting Model (chapter 2) A. Trade Policy Trade Amount • - Values per unit weight • Modal Share • Containerized Ratio, etc. 2. Cargo Shipping Demand Transforming (chapter 3) INPUTS Cargo Shipping Demand (OD cargo flow) B. Transport Infrastructure Investment C. Risk Scenario on International Shipping 3. International Cargo Flow Model (chapter 4) Maritime / Land Transport Cargo Flow by Route Reduced Shipping Cost OUTPUTS 8 OUTPUTS

  9. Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 2) Examples of policies to be simulated by this system • Trade Policy • Transport Infrastructure Investment • and Cost Reduction Policy • C. Risk Management on International Shipping

  10. A. Trade Policy Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 What impacts on international cargo volumes and economic activities of the APEC region are expected by trade liberalization and facilitation towards? including bilateral and multilateral negotiation for concluding Free Trade and Economic Partnership Agreement (FTA, EPA)

  11. Model Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 Global Trade Analysis Project (GTAP) Model • Most popular model package among the world for trade forecast • CGE (Computable General Equilibrium) framework based on • Microeconomic theory - Many applications in practical field e.g. GATT [1994] … Economic Analysis at Uruguay Round APEC [1997] … Economic Impact of Trade Liberalization based on Manila Action Plan

  12. Four Future Economic Scenarios prepared Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010

  13. 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 Example of Forecasting Results (1) Increase rate of trade amount(year 2008 = 100)

  14. 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 Example of Forecasting Results (2) Increase rate of international cargo shipping demand(year 2008 = 100)

  15. B. Transport Infrastructure Investment and Cost Reduction Policy Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 What impacts on international cargo flow patterns, transport costs and economic activities of the APEC region are expected when transport policies are implemented? such as - constructing new terminal and berth in port - smoothing transaction and shortening lead-time at terminal - discounting charges and fares, and - removing cross-border barrier

  16. Model for International Cargo Simulation (MICS) Shipper Submodel Carrier Submodel Maximizing profit by alliance (carrier group) Minimizing “perceived” cost by individual shipper 1st level (equilibrium under a condition that other groups’ behavior are given) (stochastic assignment model) Demand by routes 2nd level Upper model: Choosing import/export ports and land transport routes Income maximization model: deciding freights of each route under transport cost given as well as considering shipper’s behavior of carrier choice Stochastic network assignment including Price competition model under differentiated goods Composition cost of lower model 3rd level Lower Model: Choosing carriers Cost minimization model: minimizing total transport cost of their own group under their demand by routes given Logit Model freights by routes and carriers System optimum network equilibrium assignment model

  17. 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 Container Ports dealt in the Model (total: 143 ports) Japan 2010

  18. 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 Land Transport Network for International Cargo Shipping zone representative (origin/destination) Northeast Asia, Central Asia and Russia

  19. zone representative (origin/destination) Southeast Asia

  20. Oceania zone representative (origin/destination)

  21. zone representative (origin/destination) North America

  22. South America zone representative (origin/destination)

  23. Estimated Results of Container Throughput (loaded/unloaded/transshipped container) in 2015

  24. Calculated reduced cost of international cargo shipping by container berth investment

  25. C. Risk Management on International Shipping Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 What impacts on international shipping market and economic activities of the APEC region are expected when some sea routes such as Straits of Malacca are blocked due to some security reasons?

  26. Risk Simulation 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 Blockade of Malacca Strait and detouring to Lombok Strait Klang TJ Pelepas Malacca Strait Singapore TJ Perark (Surabaya) TJ Priok (Jakarta) Sunda Strait (shallow) Lombok Strait

  27. Estimated Change of Container Throughput due to Blockade of Malacca Strait in 2008

  28. Calculated increased cost of international cargo shipping due to the blockade of the Malacca Strait

  29. Implication from Trade Policy Simulation (example) Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 • Trade liberalization and facilitation can accelerate • economic and trade growth as well as • international shipping demand increase • In particular, increasing rate of international maritime • container shipping demand will surpass • trade growth rate

  30. Expected Implication of Transport Infrastructure Investment Simulation (example) SINGAPORE 2009 32nd APEC Transportation Working Group Meeting, Singapore, 27-30 July 2009 • Logistics infrastructure investment (e.g. maritime • container berth construction and deepening) • will reduce international shipping cost • The benefits will spread not only the economies • that policies implemented, but also all of other • economies as well as the entire world

  31. Expected Implication from Risk Simulation Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 (example) • Detouring due to blockade the strait will increase • international shipping cost • Negative impact will broadly spread to the region

  32. Conclusion Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 • “Trade and Logistics Forecasting System for the APEC region” • is developed • This system will contribute to measuring impacts of trade and • transport policy on international cargo shipping and • economic activities of each economy as well as • a mutual development of the APEC region • By collaborating with a development group of the system and • preparing some additional data if needed, each member economy • can use this system to meet its own economy’s interest as well as • consider the impact of the entire APEC region

  33. Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 Thank you for your attention! for contact: Ryuichi SHIBASAKI, Ph.D National Research Institute for Land and Infrastructure Management Ministry of Land, Infrastructure, Transport and Tourism, Japan shibasaki-r92y2@ysk.nilim.go.jp tel:+81-46-844-5028, fax:+81-46-844-6029 3-1-1 Nagase, Yokosuka, Kanagawa, 239-0826, Japan

  34. data conversion process from bilateral trade amount into international cargo shipping demand

  35. Japan 2010 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 International Logistics Flow Model Model for International Cargo Simulation (MICS) • Developed by NILIM, Japan • Predicting international logistics flow (mainly maritime container cargo) • by inputting cargo transport demand (from a region to other region) • Calculated based on a Nash Equilibrium between oceangoing • carrier and shipper, as well as between major carriers • Mainly focusing maritime shipping, but also including international • and hinterland land transport (only East Asia presently)

  36. 33rd APEC Transportation Working Group Meeting, Japan, 11-14 October 2010 Prediction of Port Cargo Throughput (in East Asian ports, in 2003, tentative) Export/Import Container Transshipped Container (China) (China) (Malaysia) (Chinese Taipei) (Malaysia) (China) (Chinese Taipei)

  37. Predicted Land Cargo Flow in East Asia (in 2003, tentative) 32nd APEC Transportation Working Group Meeting, Singapore, 27-30 July 2009 TEU converted

  38. Methodology of Risk Scenario Simulation • Blockade of Malacca Strait Increasing Length of Links that were passed through Malacca Strait (assuming pass through Lombok Strait) South Asia Middle East Europe East Asia Southeast Asia West Coast of North America Malacca Strait

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