imb lecture 1

8/7/2019 IMB lecture 1

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Contents

International Trade Theory.International Trade Theory.

Role of Shipping in International Trade.Role of Shipping in International Trade.

Major Trade Lanes.Major Trade Lanes.

Major Maritime Nations.Major Maritime Nations.


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Definition of International Trade

Involves 2 parties in 2Involves 2 parties in 2 Exporter & Importer.Exporter & Importer.

Exporter : Seller of a commodity sourced fromExporter : Seller of a commodity sourced fromcountry A.country A.

Importer : Buyer of the commodity forImporter : Buyer of the commodity forconsumption in country B.consumption in country B.

Sale from the exporter to the importer is knownSale from the exporter to the importer is knownas International Trade.as International Trade. Shipper, Consignor

Receiver, Consignee


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Why international trade takes place?

Importer is in need of the commodity.Importer is in need of the commodity.

Uneven distribution of natural resources in the world.Uneven distribution of natural resources in the world. Availability of coal, oil, etc.Availability of coal, oil, etc.

Inability to produce the commodity due to climaticInability to produce the commodity due to climaticconditions.conditions.

Tropical fruits cant be be produced in Temperate climate.Tropical fruits cant be be produced in Temperate climate.

(mango orchard in Norway?)(mango orchard in Norway?)

Lack of production facility in Importing country.Lack of production facility in Importing country. Automobiles in Bangladesh.Automobiles in Bangladesh.

Availability vs Cost of extraction ; Coal deposits in UKvs Australia

High Cost of Production?


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Theory of Absolute Advantage Adam Smith: Wealth of Nations (1776).Adam Smith: Wealth of Nations (1776).

Exporting country has a commodity in exportable surplusExporting country has a commodity in exportable surplus& importing country is deficit of the same.& importing country is deficit of the same.

Banana is surplus in West IndiesBanana is surplus in West Indies Coffee is surplus in BrazilCoffee is surplus in Brazil

Both these are deficit in Europe.Both these are deficit in Europe.

Capability of one country to produce more of a productCapability of one country to produce more of a product

with the same amount of input than another country.with the same amount of input than another country. Produce only goods where you are most efficient, tradeProduce only goods where you are most efficient, trade

for those where you are not efficient.for those where you are not efficient.

Assumes there is an absolute advantage balance amongAssumes there is an absolute advantage balance amongnations.nations.


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Absolute Advantage

Geological factors

Climatic factors


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Theory of Comparative Advantage

David Ricardo: Principles of Political Economy (1817).David Ricardo: Principles of Political Economy (1817).

Factors of production (Land, Labour, Capital & Enterprise)Factors of production (Land, Labour, Capital & Enterprise)create comparative advantage.create comparative advantage.

Land : Climatic & Geological factorsLand : Climatic & Geological factors

Labour : Low wages in exporting country.Labour : Low wages in exporting country.

Capital : Manufacturing facility in exporting country.Capital : Manufacturing facility in exporting country.

Enterprise : Business automation & efficiency in exporting country.Enterprise : Business automation & efficiency in exporting country.

Short term changes in climate & their result in demand &supply conditions.

Political factors viz. Customs Duty on Imports, Export Subsidy

Role of Exchange Rates


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Extensions ofthe Ricardian Model

A country will import even if it is more efficient in theA country will import even if it is more efficient in the

production than its trading partner.production than its trading partner.

Immobile resources:Immobile resources:

Resources do not always move easily from one economic activity to another.Resources do not always move easily from one economic activity to another.

Diminishing returns:Diminishing returns: Different goods use resources in different proportions.Different goods use resources in different proportions.

More a country produces, at some point, will require more resourcesMore a country produces, at some point, will require more resources

(diminishing returns to specialization).(diminishing returns to specialization).

Free trade might increase a countrys stock of resources (asFree trade might increase a countrys stock of resources (as

labour and capital arrives from abroad), and increase thelabour and capital arrives from abroad), and increase the

efficiency of resource utilization.efficiency of resource utilization.


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Trade Patterns

Trading between European nations & theTrading between European nations & thecountries under their rule.countries under their rule.

Agricultural & Dairy products from Australia, NewAgricultural & Dairy products from Australia, New

Zealand to Europe.Zealand to Europe.

Cotton, Jute, Tea from India.Cotton, Jute, Tea from India.

Political developments have their influencePolitical developments have their influenceon the trade pattern.on the trade pattern.

Suez canal closures due to Middle East tensions haveSuez canal closures due to Middle East tensions have

led to the development of Cape Size tankers.led to the development of Cape Size tankers.


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Transportation by Sea

7.4 Billion Tons of goods were loaded(4.23 % growth in 2006)

Traffic was 30,686 Billion Ton Miles(5.5 % growth)

As per UNCTAD Review of MaritimeAs per UNCTAD Review of MaritimeTransport, during 2006,Transport, during 2006,


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5 Major Bulks

30%

Minor Bulk &

General Cargo30%

Crude Oil, Gas &Petroleum

Products

40%

World Seaborne Traffic - 2006

Total Traffic : 30,686 Billion Ton Miles

Iron Ore

Coal

Grains

Bauxite / Alumina

Phosphate

Steel

Forest Products

Sugar

Rice

Tapioca

Oil meals

Fertilizers

Minerals & ores

Container cargo


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Cargo classification

Basic Raw materials(Iron Ore, Bauxite, Cotton, Forest products, Cotton, etc.)

Construction materials(Steel, Cement, Timber, Glass, etc.)

Industrial capital goods & inputs

(Machinery, Steel, chemicals, etc.)Bulk consumption items

(Grains, Meat, Fruits, etc.)

Energy related : Petroleum products, Coal

Other items

(Miscellaneous Manufactured items, Automobiles, etc.)


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World Seaborne Trade by Country Groups

Details available in Page 141


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World Shipping Fleet as on 1.1.2007( Percentage distribution ofDeadweight )

Open Regi yT nsi i n

countries

1%

Developed

countries

19%

DC Asi &

Oceania

23%

DC America

2%

DC Africa1%

Details available in Pages 149 - 153

Total Fleet : 1, 042, 328, 000 DWT

PanamaLiberia Bahamas

Marshall IslandsMalta

CyprusAntigua & Barbuda

BermudaSt. Vincent & G.


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DWT : Dead Weight Ton

Dead Weight Tonnes is a measure of the cargo-carrying capacity of a

ship and refers to the total weight of the cargo that a ship can carry

when loaded down to its load line. DWT includes the weight of the

fuel, stores, water ballast, fresh water, crew, passenger and other

baggage.


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World Shipping Fleet as on 1.1.2007( Percentage distribution of Gross Tonnage )

Open Regi try

1%

Tran ition

co ntrie

2%

Developed

co ntrie

22%

D A ia

Oceania

22%

D America

2%

D A rica1%

Details available in Pages 143 - 147

Total Fleet : 721,130, 000 GT


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GT : Gross Ton & NT : Net Ton

Gross Ton is a marine term equal to 100 cubic feet.

GT is used to describe the size of vessel.

Gross tonnage indicates the internal volume of a vessel, including

cargo holds and other areas.

NT (Net tonnage) is the commercially useful internal capacity of the

ship, that is, Gross Tonnage less the crew quarters, engine rooms,

and so on.

GT & NT were previously known as GRT & NRT.

R stands for Registered

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