The Welfare effects of Liberalizing Maritime Transport
Mar 1, 2001

A recent World Bank working paper by C. Fink, A. Mattoo, and I. Neagu of the World Bank estimates that liberalization of maritime services could reduce average maritime transport prices by a third. The U.S. it self could save up to $3 billion every year on transport costs.

Even though new technologies have reduced transport unit costs especially for containerized transport, prices have not decreased proportionally. This evidenced led the authors to undertake an empirical exercise to determine the causes of relatively fixed maritime transport prices. The authors conclude that public policy has a strong influence in transport prices. Private carrier agreements, which are exempted from competition policy disciplines, fix prices between maritime conferences that increase transport prices by 25% and prevent cost savings of up to $ 2billion in the U.S. Protectionist practices such as cargo reservation schemes and monopoly rights to providers of port and auxiliary services increase prices by a further 9% and costs by $850 million in the U.S..

The authors propose that trade disciplines and competitive guidelines for maritime services be discussed in the WTO services negotiations to address this loss in welfare.

Source:

Carsten Fink, Aaditya Mattoo, and Ileana Cristina Neagu (2001). “Trade in International Maritime Services: How Much Does Policy Matter?” World Bank Working Paper 2522.

The paper may be downloaded at:

http://econ.worldbank.org/files/1338_wps2522.pdf