Exports could go up 30% should transportation cost drop 10%, says IDB

Published: Wednesday October 29, 2008

The Inter-American Development Bank (IDB) says that Jamaica, as part of the Latin American region, could increase exports up to 30 per cent if transportation costs were lowered by 10 per cent.

The IDB says that a shift away from only negotiating reduced tariffs to one focussing on reducing transportation costs will lead to greater exports.

"Politicians need to look at transportation costs, as we can see. that it is now more important than tariffs," said Juan Blyde Inter-American Development Bank trade economist to public and private sector workers at the National Productivity Conference 2008 in Jamaica yesterday.

Blyde was referring to an IDB report released last month entitled 'Unclogging the Arteries: A Report on the Impact of Transport Costs on Latin American and Caribbean Trade'.

According to the report, "A 10 per cent reduction in freight costs in nine Latin American nations - including Brazil, Argentina, Chile, Colombia and Bolivia - would allow exports to the United States to soar 39 per cent on average, the study said. In contrast, exports to the United States from those countries would rise less than two per cent on average if import tariffs were reduced 10 per cent".

The statistics focus mainly on latin America, but Blyde said the findings apply to Jamaica. Essentially that the region is not taking full advantage of its logistical proximity to US.

The IDB cites as reasons: Poorly maintained roads; congested airports and ports; and inefficient custom services which increase shipping time and costs.

Over the decade, countries like China and India have reduced their transport costs in shifting from primary to secondary products. "One dollar of iron is going to be cheaper to transport than $1 of semiconductors because it weighs less," argued Blyde.

He also stated customs in Jamaica takes too long to clear products which affects productivity and adds to cost: "In Jamaica, it takes 21 days for products to be exported and 22 days for products to be imported which does not include the time to ship it."

Said the IDB: "The emergence of China and India as leading exporters in the world economy coupled with the growing fragmentation of production and time-sensitiveness of trade, has reshaped Latin America's comparative advantages and has given investments in the transport infrastructure an unprecedented strategic importance to the region. This new reality imposes heavy penalties for Latin American economies with high transport costs."


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081029T010000-0500_141907_OBS_EXPORTS_COULD_GO_UP_____SHOULD_TRANSPORTATION_COST_DROP______SAYS_IDB.asp