GENEVA — One of the biggest obstacles apparel makers face in seeking to hone their competitive positions as quotas end on Jan. 1 may be in getting their goods to market, according to a World Trade Organization study.
The survey concluded that freight costs have greater influence on trade patterns than tariffs, which will be one of the few remaining tools at governments’ disposal to manage the textile and apparel trade after quotas are lifted.
“Differences across countries in transport costs, including relative costs between modes of transport, are a source of absolute comparative advantage and affect the volume and composition of trade,” the WTO’s World Trade Report 2004 said.
Shipping charges are crucial in determining a country’s ability to participate in the world economy and, ultimately, of its export competitiveness, the study said. The quality of transport infrastructure affects trade, and poor facilities increase total costs, adversely affecting the time of delivery and eroding the potential income of local producers.
“Governments cannot hope to reap the real benefits of open trade if they fail to secure macroeconomic stability, supportive infrastructure, properly functioning domestic markets and sound institutions,” said Supachai Panitchpakdi, WTO director general.
The report found that freight costs in poor, developing countries average 70 percent more than in developed countries. In Africa, they are particularly high, about twice the world average. In many countries in Latin America, the Caribbean and Africa, an importer pays more to transport the goods ordered than for tariffs.
A 10 percent increase in transport costs “may reduce trade volumes by more than 20 percent,” the study concluded. Transport costs include freight charges, insurance, holding costs for goods in transit and other related expenses.
An efficient logistic chain “is an important determinant of a country’s competitiveness, and helps reduce costs of transport, transit time and costs of production,” the report said.
In rich countries alone, total logistics costs — packaging, storage, transport, administration and management — are on average around 20 percent of total production costs, the WTO estimated.
More efficient ports with better infrastructure and strong services for cargo handling and storage, as well as for vessel fueling and repair, represent a competitive advantage for exporters.
The report noted that countries with efficient customs clearance, such as Lithuania and Singapore, can clear goods on average within one and two days, respectively. In countries with cumbersome customs clearance facilities, such as Nigeria, it takes an average of 18 days. In Ecuador, the average time is 15 days, while in Kenya, it’s 14 days.
Each day spent in shipping is estimated to add about 0.5 percent to the cost of an item, the study said. Allowing free competition in the provision of port services — rather than granting monopolies — “may reduce prices on average by 9 percent and the breakup of cooperative working agreements and price-fixing agreements could lower prices by 25 percent,” the WTO said.
The report said that in the lucrative Transpacific ocean liner trade, the average sea freight rate to haul from Asia to the U.S. is more than double than the rate to ship from the U.S. to Asia, and added that while westbound shipments have experienced the greatest decline since 2000, sea freight rates remain highest for cargoes loaded in Asia.
In 2002, shipping a standard-size 20-foot container from Asia to the U.S. cost an average of $1,502, the study said. Taking the same container from the U.S. back across the Pacific ran $768.