Trade responses to freight rates: the case of intra latiamerican maritime trade

Abstract

This paper analyses the determinants of transport costs and trade for Uruguay’s bilateral imports over a period of six years (2000-2006) and compare the analysis with its main competitors: Argentina and Brazil. The data used are disaggregated (SITC 5 digit level) maritime trade flows. With this data set, a transport costs equation and a gravity equation of trade are estimated using linear regression analysis in a panel data framework. The results allow to quantify the effect of the explanatory variables on international maritime transport costs and imports for the three countries considered and to compare the obtained elasticities with previous cross-section analysis. The main findings are twofold. First, economies of scale in transport, port infrastructure and connectivity are important determinants of transport costs. Second, transport costs are one of the most influential determinants of imports at aggregated and at disaggregated level whereas the geographical position, measured in terms of distance to trade partners, plays a residual role.