# **2.2.2 Transport choices**

There are two aspects of transport choices made by shippers that increased transport costs may affect: choice of modalities and choice of transport routes and port.

# **1. Choice of modalities**

A mode of transport with lower transport costs is typically more attractive to shippers, which, in turn, increases the likelihood of the mode’s selection relative to available alternatives. By this logic, an increase in maritime transport costs could potentially result in a shift to other competing modes like road, rail, or even air transport if their costs remain unchanged. Within a long-haul international transport context, the shift from maritime to rail or air transport might benefit certain countries that see an increase in their transit traffic, in turn increasing the potential for further developments of their infrastructure. For example, the rise in transport demand from China to Europe using rail mode may provide economic benefit to Central Asian countries and the Russian Federation.

# **2. Choice of transport routes and port**

The relationship between shipping routes and transport costs has been well established in the freight transport modeling literature (Tavasszy & de Jong, 2014). Increased transport costs can make shippers reconsider their initial choice of route. Similar to modal choice, routes with lower transport costs are generally more attractive for the shippers.

In the context of international freight transport, this decision could also impact the choice of using important logistic nodes, such as ports, terminals, and distribution centers. This means that the competitive ability of a port to attract international cargo, either as a gateway or transshipment port, can be influenced by changes in the transport costs of the routes that make use of that port. Given that ports can contribute significantly to the economy of a State (ITF/OECD, 2015), changes in port throughput will impact the economic performance of a State or region.

UNCTAD (2012) suggests three strategies to reduce maritime freight rates for States, with two of these strategies focused on developing port competitiveness and porthinterland connections and one on efficient linkages between inter-continental, regional, and national shipping services. The difference in States’ policies and capacities to develop their port will inevitably bring different impacts on the transport costs from and to the individual States. Hence, even though GHG mitigation measures may be implemented uniformly at the global level, the resulting economic impact on States could be far from uniform.

# **2.2.3 Import prices of goods**

According to OECD data, transport costs vary widely between various products and countries of origin and destination (OECD, 2011). For instance, on average, 5% of the imported value of manufactured goods can be attributed to maritime transport costs, compared with 11% for agricultural goods, and 24% for industrial raw materials. Furthermore, according to UNCTAD data (UNCTAD, 2017), this variation is also reflected across different country groupings such as SIDS, LDCs, landlocked developing countries, and developed economies. For the first three country groups, international transport costs generally account for higher shares in import values of goods compared to the last country group (Figure 4).

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