market power at any point in chain may affect the terms of trade – for example, shipping or airline “cartels.” Thus, market structure matters. Consumer prices are a function of tariffs and transport/shipper margins that depend on domestic costs and competition: _pc_ = _(1+t) (pp + s)_ . If _t_ falls as a result of trade liberalization, shippers may capture part of the benefits, so that _pc_ falls less. Their simulations involve an assessment of relative gains, given variations in market structure in the shipping sector. In Africa, for example, their experiments suggest that monopoly in shipping implies that, with tariff reductions in export markets, the resulting welfare gains are only 50 percent of those realized if the shipping lines are competitive.

Fink, Mattoo and Neagu (2001) is an empirical analysis of the impact of maritime liner arrangements and private restrictive practices, as well as formal government policies that restrict the ability of foreign providers to supply shipping services and barriers to competition in the provision of port services on transport prices for goods shipped to the US from developing countries.<sup>47</sup> They conclude that private anticompetitive practices appear to have a larger effect on prices than government policies that restrict foreign competition, although the latter are also a statistically significant factor affecting prices. Port-related excess costs due to limitations on competition in port services account for one-third of the total potential gain from liberalization.<sup>48</sup> _Telecommunications_ Fink, Mattoo and Rathindran (2003) focus on the impact of policy reform in basic telecommunications on sectoral performance using a panel data set for 86 developing countries across Africa, Asia, the Middle East, Latin America and the Caribbean over the period 1985 to 1999. Telecommunications services have historically been provided through government monopolies and been an important source of state revenue. As a result of changes in telecommunications technologies the “natural monopoly” argument for state ownership or control has been eroded, and many countries now allow competition, but often restrictions are maintained on ownership and access to networks. Fink et al. analyze the impact of specific policy changes relating to ownership and competition on sectoral performance, as well as whether the sequence in which reforms are implemented affects performance. They find that both privatization and competition lead to significant improvements in performance, but that a comprehensive reform program, involving both of these policies supported by an independent

> 46 Doove et al. (2001) analyze the impact of policies on prices of bilateral air transport routes. See Table 2.

> 47 They focus only on international shipping and thus capture only part of the impact of policies on transport costs. Estimates of the price-increasing effect of the US Jones Act (which restricts maritime cabotage between US ports to US flag vessels) range from 100 to 300 percent of the average world price (Francois, et al., 1996).

> 48 In a subsequent paper, Clark et al (2004), using the dataset developed by Fink et al. (2001) augmented with surveybased indicators of perceptions of port efficiency, conclude that port inefficiency-related costs account for a larger share of the total costs – and thus the potential gain from reform.

30