Weathering the Storm : Investing in Port Infrastructure to Lower Trade Costs in East Asia

The world economic crisis of 2008
presents clear challenges to prospects for economic growth
in developing countries. This is particularly true for
emerging economies in East Asia that have relied to a great
extent over the past decade on export-led growth. What steps
to facilitate trade promise a relatively strong return on
investment for East Asia to help sustain trade and growth?
The authors examine how port infrastructure affects trade
and the role of transport costs in driving exports and
imports for the region. They find that port congestion has
significantly increased the transport costs to East Asia
from both of the United States and Japan. The analysis
suggests that cutting port congestion by 10 percent could
cut transport costs in East Asia by up to 3 percent. This
translates into a 0.3 to 0.5 percent across-the-board tariff
cut. In addition, the estimates suggest that the trade cost
reduction of investment in port infrastructure in East Asia
that translates into higher consumer welfare would far
outweigh the cost for physical expansion of the ports in the region.