Impact of Transport Costs on International Trade: The Case of Spanish Ceramic Exports

Abstract

This paper aims to investigate the determinants of maritime and overland transport costs and the role they play in deterring trade across countries. We estimate a transport cost function using data on maritime and overland transport of the ceramic sector (tiles) obtained from interviews held with Spanish logistics operators. We also study the relationship between transport costs and trade and estimate an import demand model for ceramic products. Additionally, we present a discussion on the sensitivity of trade flows and transportation costs to the existence of back-hauling, special conditions for transport and number of reloads.1 The study of modal transport (overland versus maritime) and its differential characteristics are of relevant interest for maritime economists and should be taken into account in economic policy-making. Furthermore, the proven impact of infrastructure on transport costs and trade points towards the importance of investing in new port infrastructures as a way of fostering trade and income. Our results from the transport cost estimation show that higher distance and poor partner infrastructure lead to a notable increase in transport costs. Inclusion of infrastructure measures improves the fit of the regression, thus corroborating the importance of infrastructure in determining transport costs. The distance coefficient remains significant and with similar magnitude when we add infrastructure variables. Our results from the trade equation estimation show that importer income, as expected, has a positive influence in bilateral trade flows. Higher transport costs significantly deter trade, and distance does not appear to be a good proxy for transport costs in the ceramics sector.