Physical Trade Flows Research Articles

The open veins of Latin America: Long-term physical trade flows (1900–2016)

Latin America has long played a key role in the global provision of natural resources. Most of the continent's economies are net exporters of low-value, primary products and importers of manufactured goods at a high price. This pattern of specialised trade has highly negative consequences for economic development, the environment, and the local population’s wellbeing. Yet to date, little empirical evidence has been collected on Latin America’s total contribution to the rest of the world's regions in historical perspective. Applying the Material Flow Accounting methodology, this paper estimates the physical and monetary trade of 16 Latin American economies between 1900 and 2016. Our results show that: (i) yearly net exports of materials went from 4 Mt to 610 Mt between 1900 and 2016, and greatly accelerated since the World War II. (ii) Latin America is a net exporter of most types of materials (fossil fuels, non-energy minerals and biomass), so it harbours socio-environmental problems associated with different types of extractivism. (iii) Different regional export patterns exist: Andeans export subsoil (mining and energy carriers) while the rest export soil (land-based products). The countries with the lowest net exports are the smallest in size and with the highest population density. (iv) Europe and the USA have historically received most of the imports, but since the end of the twentieth century, the Southeast Asia region is the biggest importer of materials from Latin America. (v) The price received for exported material is much lower than the price paid for imported material; and (vi) various historical periods can be differentiated regarding the relationship between economic growth and physical trade balance.

An Approximation to the Environmental Impact of Economic Growth Using the Material Flow Analysis: Differences between Production and Consumption Methods, Applied to China, United Kingdom and USA (1990–2017)

The relationship between economic growth and environmental impact has become a recurrent subject of research in recent years. Currently, results that indicate that the accumulation of economic growth leads to a reduction in environmental impact coexist with others that do not show any evidence in this respect. This paper aims to analyse this relationship using Material Flow Analysis through the two most frequent methods: territorial or production and consumption. For this purpose, data from China, the United Kingdom and the USA from 1990–2017 are used. The results show that the method used influences the conclusions, mainly due to differences in the accounting of physical trade flows. The production method, in which physical trade flows coincide with monetary trade flows, tends to underestimate the material consumption of rich, importing countries, while overestimating that of exporting countries. Policies based on this method have limited capacity to reduce global environmental impacts. The consumption method allows the environmental impact to be allocated to each country in a way that is more in line with its true material requirements.

Determinants of spatial market efficiency of grain markets in Russia

Results of an unobserved effects model on the determinants of inter- and intraregional grain market integration in Russia in comparison to the USA highlights the differences of the mechanisms underlying market integration in each market. Physical trade flows are exclusively dominant in Russia; in contrast, in the United States, additional information flows induced by commodity futures markets play a great role. Policies which improve grain market efficiency in Russia should not only foster investments in transportation and trade infrastructure, but also the development of market information services and commodity futures markets.

Searching for market integration: Evidence from Ukrainian and European Union rapeseed markets

Trade liberalization and globalization processes are resulting in an increased spatial integration of agricultural commodity markets. According to the Heckscher-Ohlin model, land-abundant countries like Ukraine should export land-intensive goods. Therefore, the international integration of commodity markets should lead to the integration of factor markets, land markets among them. Biofuel expansion in the European Union constitutes a chance for a stronger integration of the Ukrainian agricultural market with the European Union market. However, trade policy and biofuel policy modifications create both chances for and threats to strengthening such market integration. In this framework, the present paper aims at assessing—for the first time—to what degree the Ukrainian and European Union rapeseed markets are horizontally integrated. Considering that rapeseed imported to the EU is processed to fulfil the mandatory blending of biofuels with diesel, the Ukrainian rapeseed prices are expected to follow the EU prices. To answer our research question, we employ linear vector error correction models (VECMs) and threshold autoregressive models (TAR) based on weekly prices for rapeseed from 2008–2018. The results confirm direct and indirect integration of both markets via physical trade flows of rapeseeds, rape cake, and rape oil, providing evidence that the prices of rapeseed in Ukraine and European Union are cointegrated and that adjustments to the long-run equilibrium relationship are asymmetric and seasonal.

Unpacking the nexus: Different spatial scales for water, food and energy

Recent years have shown increased awareness that the use of the basic resources water, food, and energy are highly interconnected (referred to as a ‘nexus’). Spatial scales are an important but complicating factor in nexus analyses, and should receive more attention – especially in the policy-oriented literature. In this paper, we ‘unpack' the nexus concept, aiming to understand the differences between water, food and energy resources, especially in terms of spatial scales. We use physical indicators to show the differences in terms of absolute magnitude of production and the distance and volume of physical trade, for seven resource categories: water withdrawal, crops, animal products, bio-energy, coal, oil, and natural gas. We hypothesize that the differences in trade extent are related to physical characteristics of these resources: we expect high priced, high density, geographically concentrated resources to be traded more and over longer distances. We found that these factors, taken together, can explain some of the differences in trade extent (and thus spatial scale involved), although for each individual factor there are exceptions. We further explore the spatial scales by showing the bidirectional physical trade flows at the continental scale for crops, animal products, bio-energy and fossil fuels. We also visualize how nexus resources are directly dependent on each other, using a Sankey diagram. Since both direct dependencies and physical trade are present, we investigate the role of resource-saving imports, which is a form of virtual trade. The resource-saving imports highlight the importance of continental and global scales for nexus analyses.

Comparing apples and oranges: Some confusion about using and interpreting physical trade matrices versus multi-regional input–output analysis

The questions of how to account for upstream land requirements is highly relevant for assigning responsibility for global land use. Two approaches, physical trade flow analysis and multi-regional input–output analysis have been frequently used for land accounting of international trade leading to diametrically opposed results for countries such as China. In this study, we investigate and explain the differences by comparing the estimates of cropland embodied in international trade for China from studies using physical trade flows (PTF) and multi-regional input–output (MRIO) analysis and provide a step-wise calculation to explain the gap between estimates from these different approaches and their interpretation. Our results show that the gap between PTF and MRIO is largely due to the system boundary selection and truncation errors from the boundary cut-off. These two approaches should be used for different research purposes. If focusing on the flows of a particular product, in particular primary products such as rice, wheat or other grains, among countries the higher level of detail of physical flow model is more suited. Whereas when accounting for the total embodied land in trade and consumption-based land use by recipient countries to analyze drivers of land use, MRIO is more suitable for tracking entire global supply chains.

Modeling Financial Type 2b Globalization and its Repercussion on the Real Economy

The description of economic globalization still lacks a comprehensive formal and normative theory. The Globalization Types Model is a proposal to bridge this deficiency. Having modeled the globalization of physical trade flows, the so-called type 1 globalization with its different logics of subtypes 1a, 1b, and 1c, the aim now is to describe the globalization of finance, i.e. type 2b, and to integrate it into the Globalization Types Model. This paper analyses the repercussion of financial transactions on the evolution of economic cycles. Due to the mutual interactions of different systems, the modeling is not based on state equations but on principles of system dynamics with its positive and negative feedback loops. It puts the emphasis not on equilibrium but on transition modeling, i.e. on the triggering of state change. The result is a cognitive model showing the influence and systemic effects of financial transactions performed on commodity exchanges causing increased volatility of commodity prices and the repercussion on the industry value-chain. The model links the speculative part of financial type 2b globalization to physical demand and trade flows of globalization type 1, capital investments of globalization type 2a, as well as human migration of globalization type 3a and unemployment.

Forecasting Freight Flows

Trade patterns and transport markets are changing as a result of the growth and globalization of international trade, and forecasting future freight flow has to rely on trade forecasts. Forecasting freight flows is critical for matching infrastructure supply to demand and for assessing investment. This article models long-term dynamic physical trade flows and estimates a dynamic panel data model for foreign trade for the EU15 and two countries from the EFTA (European Free Trade Association) 1967–2002. The analysis suggests that a dynamic three-way-effects gravity equation is the best-fitted econometric model. The analysis uses a structural relationship to explain the structure of the exchange of the goods—a relationship that can be used in the year of forecast. This article also provides a new methodology for converting monetary aggregates into quantity aggregates. The resulting commodity growth rates constitute a valuable input to freight models for forecasting future capacity problems.

Spatial Price Adjustment with and without Trade*

AbstractWe investigate the possibility that price transmission between spatially distinct markets might vary during periods with and without physical trade flows. We test for differences between trade and non‐trade regimes by using generalized reduced rank regression (GRRR) techniques suggested by Hansen (2003). We apply these techniques to semi‐weekly price and trade flow data for tomato markets in Zimbabwe and find that intermarket price adjustment occurs in both trade and non‐trade periods. Indeed, the adjustments are generally larger and more rapid in periods without physical trade flows. This finding underscores the importance of information flow for market performance.

The physical dimension of international trade: Part 1: Direct global flows between 1962 and 2005

The physical dimension of international trade is attaining increased importance. This article describes a method to calculate complete physical trade flows for all countries which report their trade to the UN. The method is based on the UN Comtrade database and it was used to calculate world-wide physical trade flows for all reporting countries in nine selected years between 1962 and 2005. The results show increasing global trade with global direct material trade flows reaching about 10 billion tonnes in 2005, corresponding to a physical trade volume of about 20 billion tonnes (adding both total imports and total exports). The share from European countries is declining, mainly in favour of Asian countries. The dominant traded commodity in physical units was fossil fuels, mainly oil. Physical trade balances were used to identify the dominant resource suppliers and demanders. Australia was the principal resource supplier over the period with a diverse material export structure. It was followed by mainly oil-exporting countries with varying volumes. As regards to regions, Latin America, south-east Asian islands and central Asia were big resource exporters, mostly with increasing absolute amounts of net exports. The largest net importers were Japan, the United States and single European countries. Emerging countries like the ‘Asian Tigers’ with major industrial productive sectors are growing net importers, some of them to an even higher degree than European countries. Altogether, with the major exception of Australia and Canada, industrialized countries are net importers and developing countries and transition countries are net exporters, but there are important differences within these groups.

Evaluation of sustainability schemes for international bioenergy flows

PurposeThe purpose of this paper is to outline a comprehensive picture of the coverage of various certification schemes and sustainability principles relating to the entire value‐added chain of biomass and bioenergy and comparing them accordingly.Design/methodology/approachA tri‐dimensional approach (sustainability issues; technical biomass conversion routes; physical trade flows) was developed for testing the coverage of various sustainability dimensions in different phases of the value‐added chain with the chosen certification schemes and sustainability principles.FindingsUsing the tri‐dimensional approach, a comparison of the chosen schemes and principles demonstrated that the application of existing schemes and the development of new ones have placed a major emphasis on the primary production of biomass. Economic and social dimensions related to biofuels and bioenergy processing and trade were either emphasised less or they were covered inadequately. In view of this, the schemes sometimes seem to ignore that the utilisation of renewable energy as such guarantee no positive or neutral climate impact and may not be economically sustainable, especially when bioenergy can often be more expensive than energy generated from fossil energy sources.Originality/valueThe analysis showed that the tri‐dimensional model is an applicable framework that could facilitate policy makers to formulate policies that comprehensively take into consideration the various sustainability dimensions throughout the entire value‐added chain, now and in the future. It can be applied to the future outlining and completion of certification schemes and sustainability principles for biomass and bioenergy, as well as in the testing of their applicability in the implementation.

Spatial Price Adjustment with and Without Trade

In this paper we introduce a switching error correction model (SECM) estimator that allows for the possibility that price transmission between markets might vary during periods with and without physical trade flows. Applying this new approach to semi-weekly data on tomato markets in Zimbabwe, we find that intermarket price adjustment occurs quickly and as much when there is no trade as when product flows from one market to another. This finding underscores the importance of information flow for market performance.