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Thursday, August 03, 2006

Frictions at ports

For anyone interested in the economic benefits from globalisation, transactions costs that impede trade or invisibles or capital flows are a big issue. Brad De Long had a nice recent piece on the remarkable impact of containerisation upon the global movement of non-perishable non-fragile goods. Business Standard had a fascinating story about high port charges in India, which was followed up by an edit on the subject.

A topic which has been making waves is the security concerns that come about when a Chinese company runs an Indian port or airport. Business Standard had an interesting edit on this subject.

I have long been fascinated by the potential for using sea routes to reduce the transactions costs of shipping within India. The engineering efficiency of railways (steel-on-steel rolling friction!) matches that of shipment on the high seas, but India will likely achieve more competition in shipping than with railways, so the engineering opportunity of railways is less likely to get translated into low costs. I recently read that a significant chunk of the global sales of the giant "Panamax-size ships" is going into intra-China coastal trade.

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