An Analysis of the Impact of Non-Tariff Barriers on Greek Ports' Trade Flows
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Erasmus University Rotterdam MSc in Maritime Economics and Logistics 2012/2013 An analysis of the impact of non-tariff barriers on Greek ports’ trade flows by Filippos Vavakis copyright @ Filippos Vavakis Acknowledgements The overall procedure of conducting researches and writing research papers normally requires dedication, motivation and hard work on behalf of the author. After finishing the current research and paper, I am able of realizing that the overall process was a really challenging one. As a matter of fact, the current research paper couldn’t have been finished without the aid of some persons. Consequently I would like to thank them for their contribution on my work, which lifted a lot of weight from my shoulders and limited my anxiety. Starting with, I would like to thank God for keeping me healthy and in good shape, as well as for helping me to overcome all the difficulties appeared during the various steps of this research. It is worth referring that a lot of steps of the research conducted from May to August required some extra inspiration and a lot of work needed to be done. Although a lot of people may believe that it is a personal issue, I am sure that my belief to God helped me to fulfill the requirements of the current thesis paper. I would like also to thank my supervisor Dr. Koen Berden for his willingness to help me in the current research paper, as well as for his willingness to take over the responsibility of my thesis project. It must be mentioned that he facilitated my work a lot by offering me the basic guidelines of the research and the paper layout. Furthermore, I owe many thanks to Mr. Achim Vogt, who was the first one who introduced me to the world of my basic methodological tool of GSIM (Global Simulation Model). I must not also forget Mr. Joey van Elswijk, who dedicated a lot of personal time in order to read my paper more than once. His suggestions, remarks and corrections proved out to be issues of crucial significance, which allowed me to improve the quality of the research paper. Last but certainly not least, I must not forget to thank my family, who provided me a lot of support during the overall research procedure. My parents, my grandparents and my brother spent a lot of time with me, whereas they tolerated me by offering me a lot of support, especially during the long nights I spent writing. All in all, this research paper concludes a year in MEL, which offered me a lot of chances, experience, knowledge over the maritime economics and logistics and friends. It is obvious that I would like to publicly express my thanks to the overall class of the MEL 2012-13, Board and Professors (especially the unforgettable Prof. Dr. E. van Asperen) for sharing a lot of time together. I strongly believe that I will never forget all the simple things I learnt and lived during the year 2012-13. I am hoping that this year will be one more step in my academic career. i Abstract Non-tariff barriers (NTB’s) and Non-tariff measures (NTM’s) constitute a really significant chapter of the international economics’ theory. According to the theory, NTB’s are considered to cause deviations from the ideal scenario of laissez-faire and trade liberalization among different countries. However, the recognition, estimation and identification of NTB’s of the Greek economy are a rather difficult process, as a lot of individual characteristics must be taken into consideration. Generally speaking, seaborne trade covers an extremely large part of both worldwide and Greek international trade. The exchange of trade flows to/from the Greek ports certifies the importance of Greek ports as trade and transport flows’ gateways. That’s why the Greek ports can be considered as connecting points of Greece with the countries abroad. For the sake of this analysis, the author has distinguished the following categories of NTB’s; government intervention on seaborne trade (incl. taxes, subsidies, quotas), restrictive practices in shipping (incl. maritime employment and environmentally friendly shipping), technical barriers to trade, road and maritime transport, retail and distribution costs and time costs (incl. congestion). The Global Simulation Model (GSIM) is used to assess the impact of NTB’s to Greek trade flows, as well as to the micro-economic performance of Greece. Given the fact that the ports are the gateways of Greece with the outside world, it is obvious that these effects on Greek international seaborne trade also affect the Greek port and maritime industry. Two different scenarios are analyzed; the current scenario (2008-2011) and the future one. After describing each scenario in an analytical way, the NTB’s tariff equivalents are calculated and inserted in indexes. The current model will be also adjusted so as to provide outcomes for four different categories of cargo (Containers, Dry Bulk, Liquid Bulk and Ro-Ro). According to the outcomes of the GSIM model, the initial hypothesis that the Greek ports’ throughput value will incur positive rates of growth comes true. It must be also referred that all the largest Greek ports can incur significant rates of export value growth above 10%. Since the removal of NTB’s increases competition by offering better prices and freight rates for the consumer, it can be easily referred that the consumer surplus increases, whereas the producer surplus remains stable. As a a fact, the ports of Heraklion and Piraeus appear significant exports’ value growth. These ports could have been benefitted by the relatively larger containerization shares. On the other hand, the ports of Patras, Volos and Igoumenitsa appear the largest growth rates of cargo volumes, although they are based on subsidies to increase their income. Last but definitely not least, the Greek ports appear significant perspectives for developing and increasing their trade and transport flows. Despite the existence of growth in both Containers and Ro-Ro, Greeks appear huge competitive advantage in carrying liquid and dry bulk cargo, probably because of their tradition in bulk shipping, oil and gas carriage. In order to achieve this target, the Greek ports could move towards more efficient practices in shipping. Characteristic examples of these practices include public-private partnerships, corporatization of port authorities, labor efficiency practices and investments in infrastructure. ii Table of Contents Acknowledgements ................................................................................................... i Abstract .................................................................................................................... ii Table of Contents ..................................................................................................... iii List of Tables ............................................................................................................ v List of Figures .......................................................................................................... vii List of Abbreviations ............................................................................................... viii 1. Introduction ........................................................................................................ 1 2. Identification of Non-Tariff Barriers .................................................................. 4 2.1. Definitions, Explanations and Overview of the NTB’s sub-categories ............. 4 2.2. Government intervention in seaborne trade ................................................... 6 2.2.1. Basic concepts, general overview and introduction on interventionism in shipping ............................................................................................................. 6 2.2.2. Quotas on Greek products....................................................................... 7 2.2.3. Variable Import Levies and Subsidies on Greek products ........................ 8 2.2.4. Greek taxation system ............................................................................. 9 2.3. Restrictive practices in shipping ................................................................... 10 2.4. Technical Barriers to Trade .......................................................................... 11 2.5. Transport Costs ........................................................................................... 12 2.6. Time inefficiencies and their identification as a trade barrier ........................ 16 3. The Data and the Model ................................................................................... 18 3.1. Description of the Global Simulation Model (GSIM) ..................................... 18 3.2. Assumptions ................................................................................................ 20 3.2.1. Assumptions on the value of cargo flows ............................................... 20 3.2.2. Assumptions on the calculation of transport and time costs ................... 23 3.2.3. Assumptions on the calculation of freight rates, technical barriers to trade and elasticities ................................................................................................. 26 3.3. Methodology, NTB’s equivalent and Description of scenarios ...................... 29 4. Quantification of Non-Tariff Barriers .............................................................. 32 4.1. Introduction to estimations ........................................................................... 32 4.2. Reasoning for choosing the current model of