Professional Documents
Culture Documents
SUCGANG IV
INTERNATIONAL TRADE LAW
2013-0644
October 23, 2015
TRANSPORT COST
"Good transportation systems connect people to the jobs, education, and
community supports that enable them to prosper and advance
economically." CLASP
Transport cost is the expenses a company incurs when it transfers its
inventory or other assets to another location. 1 They come as fixed and
variable costs, depending on a variety of conditions relation to geography,
infrastructure, administrative barriers, energy, and on how passengers and
freight are carried.2 How transportation is measured affects planning and
evaluating decisions. Consumers and merchants investigate all costs and
benefits before transacting in business and the need an accurate and
comprehensive information on all significant impacts when making
transport/travel policy and planning decisions.3
Transport costs have significant impacts on the structure of economic
activities as well as on international trade. Raising transport costs by 10%
reduces trade volumes by more than 20% and that the general quality of
transport infrastructure can account for half of the variation in transport
costs. In a competitive environment where transportation is a service that
can be bided on, transport costs are influenced by the respective rates of
transport companies, the portion of the transport costs charged to users. It is
thus common for public transit systems to have rates that are lower than
costs and targeted at subsidizing the mobility of social groups such as
students, the elderly or people on welfare.4
Transportation costs can be categorized by several attributes such as:
a. distribution which can be both internal and external impacts. Internal
impact, also called user, are borne or accrue directly by a goods consumer
1 www.freedictionary.com
2 Transport Costs and Rates by Dr. Jean-Paul Rodrigue and Dr. Theo Notteboom, (https://people.hofstra.edu)
3 Transportation Cost and Benefit Analysis, Todd Alexander Litman (Victoria Transport Policy Institute)
4 Transport Costs and Rates by Dr. Jean-Paul Rodrigue and Dr. Theo Notteboom, (https://people.hofstra.edu)
while external impacts are borne or accrue by others; b. variable and fixed
attributes. Variable costs increase with consumption while fixed costs do not;
c. market or non-market, market costs involve goods that are traded in a
competitive market, such as vehicles, land and fuel, while non-market costs
involve good that are not regularly traded in markets, such as clean air and
crash injuries; d. Perceived or Actual, motorists tend to perceive immediate
costs such as travel time, stress, parking fees, fuel and transit fares, while
costs that are paid infrequently, such as insurance, depreciation,
maintenance, repairs and residential parking, are often underestimated; and
e. Price which refers to what consumer pays in exchange for a particular
good, or perceived-internal-variable cost. In general, a market is most
efficient if prices reflect marginal costs.5
Planners often measure transport system performance based on
vehicle traffic conditions (e.g. average vehicle speed, roadway Level of
Service, congestion delay). This tends to skew planning decisions to favor
automobile travel improvements For example, wider roads, higher traffic
speeds and larger parking facilities benefit motorists, but tend to create land
use patterns less suited for transit, cycling and walking. If the benefits to
motorists are measured, but disbenefits to other modes are not, transport
planning decisions will tend to favor automobile travel at the expense of
other modes.6 Transport as mobility (measured as person-miles or persontrips) acknowledges that other modes (transit, ridesharing, bicycling and
walking) also provide access. Only if transport is evaluated in terms of access
can strategies that reduce the need for travel, such as telework and more
efficient land use, be considered as solutions to transport problems.
Increased mobility may simply indicate an overall reduction in access.7
Transportation offers a spectrum of costs and level of services, which
results in substantial differences across the world. The price of a transport
service does not only include the direct out-of-the-pocket money costs to the
user but also includes time costs and costs related to possible inefficiencies,
discomfort and risk (e.g. unexpected delays). However, economic actors
often base their choice of a transport mode or route on only part of the total
transport price. Many shippers or freight forwarders are primarily guided by
direct money costs when considering the price factor in modal choice. The
narrow focus on direct money costs is to some extent attributable to the fact
that time costs and costs related to possible inefficiencies are harder to
5 Transportation Costs and Benefits, Resource for measuring transportation costs and benefits (www.vtpi.org)
6 www.vtpi.org
7 John Whiteleg, 1993, Time Pollution, (www.theecologist.org)
calculate and often can only be fully assessed after the cargo has arrived.
Among the most significant conditions affecting transport costs and thus
transport rates are geography because it mainly involves distance and
accessibility; type of product being delivered which requires packaging,
special handling, in bulk or perishable; economic of scale as the larger the
quantities is transported, the lower the unit cost; energy is also a factor
because transport activities are large consumers of energy, especially oil.
About 60% of all the global oil consumption is attributed to transport
activities and transport typically account for about 25% of all the energy
consumption of an economy; trade imbalance also affects transportation
costs between imports and exports especially in the case for container
transportation since trade imbalances imply the repositioning of empty
containers that have to be taken into account in the total transportation
costs; infrastructures as to the efficiency and capacity of transportation
modes and terminals has a direct impact on transport costs. Poor
infrastructures imply higher transport costs, delays and negative economic
consequences. More developed transport systems tend to have lower
transport costs since they are more reliable and can handle more
movements; mode is also a basis since each has its own capacity limitations
and operational conditions. When two or more modes are directly competing
for the same market, the outcome often results in lower transport costs.
Containerized transportation permitted a significant reduction in freight
transport rates around the world; Competition and regulation as it concerns
the complex competitive and regulatory environment in which transportation
takes place. Transport services taking place over highly competitive
segments tend to be of lower cost than on segments with limited
competition; surcharges, it refers to an array of fees, often set in an
arbitrary fashion, to reflect temporary conditions that may impact on costs
assumed by the transporter. The most common are fuel surcharges, security
fees, geopolitical risk premiums and additional baggage fees. The passenger
transport industry, particularly airlines, has become dependent on a wide
array of surcharges as a source of revenue.8
Transportation provides tremendous benefits, and various techniques
can be used to measure these benefits.9 These are so large that it is difficult
to calculate the total benefits of all transportation activities. However, even if
such a number would be calculated it would have little practical use. The
important factor is the marginal benefits provided by a particular policy or
project compared with a base case. 10 How transportation is measured affects
planning and evaluation decision. Traffic, mobility and accessibility are often
8 https://people.hofstra.edu/geotrans/eng/ch7en/conc7en/ch7c3en.html
9 Goodwin and Persson, 1999
15 Ibid
16 ibid
17 ibid
18 Transportation Cost and Benefit Analysis II Transportation Cost Implications