International Trade, Transportation Networks and Port Choice

Rapid increases in international trade have led to congestion in many of the worlds' ports and have raised concern over the ability of transportation networks to handle the increased volumes. Increased volumes and the resulting congestion may impact trade flow patterns by affecting choices of importers and exporters. Trade flow patterns are most certainly determined by a wide variety of factors that include the internal (intra-country) and external (inter-country) transport costs, as well as the costs of interchange (port costs). Yet, there is little evidence that documents each of these factors in the determination of trade flow patterns. As any of these factors become relatively more or less congested, there may be significant impacts not only on the network paths chosen, but also on the volume of activity. This paper develops a model of port choice and trading volumes and then estimates the impact of ocean transport rates, efficiency of U.S. ocean ports, and internal transport systems on port choice and trade volume over a sample trade flows between over 150 foreign countries and the top U.S. ports for the period from 1991 through 2003. Our estimates provide strong evidence for the importance of economic factors in port choices. Distance and transport prices are very significant factors with quite elastic responses by shipments well above one in absolute magnitude. Unlike previous studies, this paper's analysis finds a significant role for an individual's port efficiency in determining its share of activity, with estimates ranging from 0.8 to 2.0 depending on the empirical specification used.