4.4 International Freight Productivity Improvements
New Zealand is a long way from anywhere. The nearest country (of more than a million people) is Australia, more than 2,000km away and with port-to-port shipping times of approximately 3 days. As such, freight costs make a higher contribution to the costs of both imports and exports than they do for countries that are closer or better physically connected to their markets. However, this also means improvements in freight productivity, such as better ports or faster ships, may be more beneficial for New Zealand than for elsewhere. A productivity improvement in the freight sector may also have significant effects on the whole New Zealand economy as it benefits all sectors that import or export.
This scenario looks at three possibilities: more efficient export processes in New Zealand ports, more efficient import and export processes in New Zealand, and more efficient processes on all international shipping routes. The first two possibilities are most likely to occur through improvements in port processes. Ports are not specifically defined in GTAP, but sea shipping routes are, so these are used to model the increased import and export processes for all three possibilities. As shipping costs are proportional to the distance between trading partners, but port costs are not, this will not produce exactly the same results as improvements in port processes. Benefits from longer trading distances will be overestimated and shorter trading distances underestimated. In each case, a 10% productivity improvement is applied to the sea shipping routes in question.
Unlike the other scenarios, this scenario is modelled using GTAP. GTAP is used as it can distinguish freight effects in more detail, partly because it is a multi-regional global model with a database that includes bilateral trade patterns.
