ROLE OF GLOBALIZATION IN

TRANSPORTATION

1
EXECUTIVE SUMMARY

Globalization is a episode that has remodeled the economy of virtually every nation, revamped almost
every production factory, industry and touched lives of so many, often in equivocal and sometimes
arguable ways. Globalization is among the most defining characteristics of our era. The extent of
economic activity is just as imposing as the speed of technological advancement,
and lower production costs and higher productivity have played a vital role in the creation of
greater wealth today than ever before.
Without a doubt, transport is an inseparable part of this process. It provides very important
dispensation for production, as well as crucial personal mobility, directly interconnecting
businesses to global markets. Transport is a key element of economic growth and
competitiveness
Globalization processes happening in the global economy are not without effect on the
transport and logistics sector. Transport, forwarding and logistics companies have to altered to
the requirements criteria for them by the globalizing economy as well so to yield to
advanced internationalization processes. Transport system evolution and implementation of new
solutions in integrated supply chains is a crucial and complex factor conductive to the globalization of
business relations.
The purpose of this report is to affirm the hypothesis that transport is a crucial factor supporting
globalization processes.

2
TABLE OF CONTENTS:

EXECUTIVE SUMMARY ..................................................................................... ................2

TABLE OF CONTENTS ........................................................................................ ................3

INTRODUCTION ................................................................................................ ................4

DISCUSSION ...................................................................................................... ................5

Evolution of Transportation..... .........................................................................................5
The Importance of Containerization and Intermodal Transportation...............................5
Understanding the relation between Transportation and International Trade................6
Environmental impacts of increased international transport ..........................................7
Priorities for policy action ..................................................................................................8
MSE sector joining the competition...................................................................................8

CONCLUSION .................................................................................................... ...............9

RECOMMENDATIONS ...................................................................................... ...............10

REFERENCES ..................................................................................................... ...............11

3
INTRODUCTION:

Before we would start to examine the connection of globalization and logistics, lit is important to
understand the concept of globalization. We could summarize it the following way:
globalization is the unification and democratization of the global cultures, infrastructure and economy
which is done through the speedy division of transnational investments, informational and
communicational technologies, and the consequences on local, regional and international economies.

Globalization is getting a great priority in both business and objective forecasts. The best approach is to
think of the up surge of global trade compared to the global GDP, in other words the production and
supply and trading markets in relationship with space and administration are separated from each
other. This results in new performances in supply and logistics. The spread of global business culture is
also involved in it(Jean-Paul Rodrigue, 2014).

With ever going improvements in transportation and comm. sectors, Global business grew
like a wild fire with the advent of the 20th century. International business includes all
commercial transactions (sales, logistics, investments and transportation) that take
place between different regions, countries and nations across the globe and beyond their political
boundaries.

The international diversity is linked with rigid performance and innovation, in a positive light in the case
of former and often negatively for latter case. Generally, private
firms commence such transactions for profit. These transactions usually consists of economic resources
such as capital, natural and human resources used for international

International trade is the interchange of capital, products, and services across the globe. In most of the
countries, international trade signifies a significant share of gross domestic product (GDP).
Industrialization, advancements in the field of transportation, outsourcing, multinational
corporations, and off shoring all have a substantial brunt on world trade. The development of
international trade is a principle and crucial aspect of globalization.

The nature of globalization processes seen from the economic point of view is understandable by the
following basic globalization features:
 A global network of interchange of goods and services is formed (globalization is the
reason for the expansion of such an exchange and its increased scale);
 Accelerated growth of movement of capital takes place that begins from intensive
growth of operations of a network of dominant banks in different countries of the
world, through the boost of securities trading.
 World transport system growth making it feasible for expansion of the mass and speed of
progress of cargo;
 creating a link with help of technology in the form of network of global IT connections via the
Internet.
 Transport considerably backs international economic connections and plays a vital role in
creating a global network of interchange of goods and in the transfer of
capital goods to different regions of earth.

4
5
DISCUSSION

The growth of a global trade is a comparatively a modern phenomenon and for most of history of
human kind, volume of products were too expensive to move over long distances, which made
economic production adequate to the specific location of natural resources. An important factor,
collapsing down these constraints is what N. G. Lundgren explains as three “revolutions” in transport
technology.

EVOLUTION OF TRANSPORTATION
The first innovation occurred between the 16th and 18th centuries with an array of
important improvements to sailing ship architecture and efficiency. Although up surged costs made it
over expensive to transport all but the most expensive commodities, such as coffee, cocoa, spices and
precious metals, across the seas, ocean transport eventually linked the coastal areas of North and South
America, Africa and Asia with Europe, creating for the first time a “global economy(Aleksandra Koźlak,
2008).
A second transport revolution happened in the mid-19th century with the invention of
steam power to two different modes of transportation i.e. land and sea transportation. It altered the
economics of transporting low-value goods at the best cheap prices across great distances. Railways
recouped tertiary transport by carts and horses, and as metal machines in the form of steamships took
the place of old wailing wooden sailing vessels. A wide range of main assets, particularly agricultural
products, in North America, South America, Africa and Asia were all of sudden accessible to the world’s
industrial centers. This expanded the enticement to involve in overseas trade, and investment and
expanded the scope for industrial expansion.
Final innovation in transportation technology happened after the 1950s with the significant
growth in the average size of merchant ships use for transporting goods. The closure of the Suez Canal in
1956-57 (and again in 1965) played an important role in launching this process. Coming face to face with
the expense of transporting fuel like oil, coal, iron ore and other bulk assets over much longer distances,
the ocean transportation industry decided to invest in huge, specialized merchant carriers, as well as in
the harbor facilities required to handle the new mode of transportation. This has greatly expanded the
volume of the traded raw materials, kilometers covered, and the goods involved. Almost every
believable bulk good – from iron ore and phosphate fertilizers, to crude oil and natural gas – is now
routinely transported across kilometers from land and oceans. Even resource waste – such as metal
scrap, mining tailings, or rejects from forestry and agriculture – is increasingly traded
globally.
The airline industry has also had an very crucial role in the disclosure of a global economy. It all started
with air mail services since they in the beginning proved to be more profitable than transportation of
passengers . In 1919, the first commercial air transport service started between England and France, but
air transport was in a bad condition because of limitations in terms of capacity and range.

The Importance of Containerization and Intermodal Transportation

The container is a basic loading unit that has the benefits of being used by various transport
modes. Sea travel, railway and road modes are capable of handling containers, improving the
resilience of freight transport, particularly by reducing transshipment costs and delays. Containerization
focus on growing relationship between freight transportation modes and a standardization of loads. The
container has a reference size of 20 feet long, 8 feet high and 8 feet wide, corresponding to a Twenty-
foot Equivalent Unit (TEU). The most accepted containers are 40 feet in length, permitting them to fit
well on a ship, truck or
railcar.

6
Efforts have been made recently in international transportation to accommodate separate transport
systems using of at least two different modes. This came to be known as intermodal transportation,
which revolutionizes the economic performance of the transportation system by the use of respective
modes in the most productive manner. The onset of intermodal transportation has been brought about
in part by technology.
Techniques for movement of freight via one mode to another have helped intermodal transfers. Early
examples include piggyback, where truck trailers are kept on rail cars, and LASH (lighter aboard ship),
and there river barges are arranged directly on board seagoing ships. The significant development has
however been the container, which allows handling between different modal systems with ease.

Understanding the relation between Transportation and International Trade

International transportation systems have been placed under growing pressures to support the
ever increasing demands of international trade and the globalization of production and consumption.
This would have been impossible without technical advancements allowing to transport gigantic
quantities of freight and people, and this swiftly and more efficiently. Since containers and intermodal
transportation advances the efficiency of global distribution, an increasing share of general cargo
travelling globally is containerized(Beata Ślusarczyk, 2013).
The growth of maritime transportation has resulted in by many issues. First, there is an
growth in energy and mineral cargoes as a result of a growing demand of industrial
(mainly Europe, North America and Japan) and industrializing nations. Second, the
international division of the production and trade liberalization allowed by the phenomenon of
globalization has resulted in additional calls for long distance trade. Third, advancements in ship and
maritime terminals have helped the flows of freight, particularly containerized traffic.
In terms of weight, about 90% of the world trade is carried by maritime transportation. This
transportation system is modeled around dominant maritime transport gateways like Shanghai, Hong
Kong, Singapore and Busan for Pacific Asia, Rotterdam and Antwerp for Europe and Los
Angeles / Long Beach and New York for North America, among the largest container ports in the world.

.
Congestion at the Largest Container Ports, 2003

7
The act of air transportation in the global economy is also worth a lot as it is responsible for
about 40% of the value of international trade. Goods with a high costs to weight ratio
such as electronics account for this preponderance. Further, it is the fastest delivery possible,
which substantially leans on air transport, is a dominant segment of the air freight
industry. However, specialized cargo-only airplanes with specialized air freight carriers areassertive with
passing time. This goes in accordance with a level of specialization of airports particularly in the United
States where best possibly located airports such as Memphis and Louisville are in charge of a large share
of the freight. Pacific Asian airports such as Hong Kong, Singapore and Inchon have also a noticeable
prevalence as air freight gateways for Asian exports.

Travelling Passengers and Freight Traffic Handled by Major Airports, 2004

International trade in the world (in USD million)

8
Environmental impacts of increased international transport
Shipping
Global carbon emission (CO2) emissions from maritime shipping almost became three times between
1925 and 2002, and the corresponding SO2 relapse more than tripled. Most of the ships’ emissions
happened in the northern hemisphere, in well-defined system of international sea routes, One of the
studies indicate that up surge in the fleet was not always accompanied by growing energy consumption.
The principle reason for a large difference among activity-based release estimates is the number of days
assumed at sea.
Recent analysis signifies that the emission of CO2, NOx, and SO2 by transport ships accounts to about
2% to 3% (perhaps 4%), 10% to 15%, and 4% to 9% of global anthropogenic emissions, respectively.
Many researches till date indicate that ship emissions actually results in a net global cooling. This net
global cooling effect is not being experienced in other transport sectors. However, it is to be noticed
that the uncertainties with this conclusion are large, in particular for indirect effects, and global
temperature is only a first measure of the extent of climate change in any event.

Priorities for policy action

The problem of climate change will lie at the centre of efforts to deal with the environmental effects of
transport that result from globalization. No other issue other than environmental issue has so many
potential conclusions for transport sector policy today. Light duty vehicles on roads will remain to be the
largest culprits to this problem, but air emissions will grow at a faster rate.
Modes for already existing policies are relatively impractical, such as shipping and aviation, seem to be
perfect applicants for assimilation into wider efforts to introduce climate change policy frameworks.
Road and Rail transport, on the other hand, is characterized by rigid existing policies, so its further
integration into such broader frameworks seems less straightforward. Global economic activity also
results in problems other than climate change (including local air pollutants, such as NOx, SOx,
particulates and noise): these problems will need to be addressed.
At the national or local level, the road transport sector has heavily regulated norms. More cost-effective
chances may endure in other transport sectors (especially in aviation and shipping) .
At the international level, it might be a probability to give birth to common fuel-efficiency standards,
but this would not be straightforward.

MSE sector joining the competition

In contemporary world one the most crucial questions of the constant, long-term, continual growth
of economy is whether the micro-, small-scale- and mid-size enterprises who amount to the
most of companies can get in touch with the flows of the dominant economic processes adapting
to the current market challenges. The assessment of the role of the small-scale and mid-size
enterprises can importantly be linked to the ability to use the new business concepts, to fill the
market niches and to use the new innovations.
The European economy sees the decisive factor to its competitiveness in the enterprise sector,
to be precise the small and middle-size companies. Because of this, in its policy of support,
rather than using devices linked to direct – mainly financial – intervention it is shifting
towards the components used to revolutionize the working environment (supplying information,
lowering administration costs, network cooperation).

9
CONCLUSION

The boost of international competition and the exploration for new development reserves have
compelled many enterprises to expand into new output markets, to find cheaper resources of raw
material and man force resources located outside the borders of the nation of origin of the parent
company, sometimes in far locations of globe. Covering distances for this is always correlated with
transport and the efficient working of transnational firms would be not possible without the right
provision of transport and logistics functions.

Transport has become a very crucial factor that is integral part to the globalization process,
predominantly because of the application of advance technologies relating to haulage, and the flow of
important information between individual links in the supply chain. This has resulted in acceleration of
the transport process at every step and an increase in the reliability of delivery.

However, technical advancement in the design of means of transportation has been the reason for
making it possible to grow their carrying capacity and decrease transport costs and it has given birth to
the concept of transportation of bulk raw materials over long distances.

In the contemporary era of globalization and the continuing development of supply chains the two most
serious challenges facing corporations in the transport, shipping and logistics sector is competitive prices
that is cost reduction and also ensuring the best service level at the same time. For supporting the trade
in materials on a global scale it has had to undergo the processes of globalization and weave a network
of links related to the moment and structures of flows of goods.

The second clear impulse in this sector as a result of economic globalization is the assimilation and
alliance of transport, forwarding and logistics services. The sectors falling within the range of the three
types of services have a complementary nature, and handling them as an integrated package by firms
that work on the market facilitates the birth of integrated supply chains used in line with clients’ diverse
needs. The modernization of international goods flows means that we have to focus on emergence of
businesses instead of dividing the markets between sectors of transport.

10
RECOMMENDATIONS

The developments affecting international transportation services and ease of international trade has
explained the challenges and opportunities arising from such developments. Adapting the already in
practice physical and legal architecture required for the arrangement of logistics services and
multimodal
transport will give an significant chance for developing countries to participate in global trade.

Similarly, Information and communication technology offers numerous possibilities to everyone

involved in international trade and transport to get exposure to global markets and to properly control
the supply chain.

In accordance with the new security measures will create hindrances for most developing countries,
particularly the LDCs. While it is anonymously agreed it's important to advance maritime and port
security, the position of developing countries is of utmost importance in the process.
Putting this in practice of the proposed measures will have significant cost implications which will
create a heavy burden for some developing countries.

Issues, like multimodal transport and logistics services, will further keep on playing a significant role in
the development process. Thus, they warrant profound analysis based on deep research by future
Expert Meetings of UNCTAD so as to verify policies and strategies for maximizing their potential benefits
to developing countries, bearing in mind the latest developments.

The competitiveness of regions is explained by their branching structure and also the domestic
surroundings. The concept, by which the growth will become more efficient, relating to sectors instead
of differentiated participants and sectors, has resulted in becoming diverse in our nation as well.
The concept of network economy has only spread in the recent years. The birth of networks and sectors
can be taken as a fortunate solution for the challenges of the global competition. To cope up with this
the companies tried to conserve their competitive edge with various solutions.
As one of the moments long-term co operational forms were founded like clusters. Many of these
clusters have been formed all around the world without governmental intervention (in a spontaneous
way) in the recent years. It was demonstrated that clusters gives such advantages for the organizations
taking part which improves their competitive edge and thus help them to make their way up through
the competition becoming more and more global.

11
REFERENCES:

Eriksson, P. and Kovalainen, A., 2015. Qualitative methods in business research: A practical
guide to social research. Sage.

Archibugi, D. Howells, J. and Michie, J., 1999. Innovation Policy in a Global Economy. Cambridge
University Press.

Barro, R. J. and Sala-i-Martin, X., 1995. Economic Growth. McGraw Hill: New York.

Jean-Paul Rodrigue., 2014. Transportation and Globalization: London.

Aleksandra Koźlak., 2008. Transport as a factor of Globalization: Dosledky.

Beata Borodavko, Bela Illes, Agota Banyai., 2012. The relations of globalization to Logistics: Marseille

Beata Ślusarczyk., 2013. Transport importance in Global trade: Czestochowa

12