Macroeconomic Aspects of Transport Costs

Low transport costs help sales and procurement markets to expand. Enlarging those markets allows exploiting economies of scale, an advantage that also applies to small businesses which focus on the large-scale production of single components and special products. In the past, vertical division of labour encouraged the development of supply networks, which in recent decades benefited road transport of goods. Lower transport costs promote not just vertical division of labour but also the development of spatial agglomerations. The transport costs burdening an economy depend essentially on its geographical location and transport situation. Locations at sea ports enjoy a cost-effective edge when it comes to direct overseas links. Ocean-going ships, inland waterway operators, railways and lorry transport have relative shipping rates vis-à-vis each other of 1 : 10 : 17.5 : 25. Transporting a container across 9,000 km from Rotterdam to New York costs 25 percent less than transporting it across 1,200 km from Rotterdam to Vienna using the Rhine-Main-Danube waterway. Liberalisation of international goods transport in the course of creating the EU single market accelerated competition within the transport industry. This in turn promoted progress and ensured rapid implementation and utilisation of rationalisation potentials. Over the past 15 years, shipping rates declined compared to goods prices. The decline was particularly sharp in air freight rates. The Schengen Agreement facilitated cross-border goods transport by road within the EU. By doing away with the many hours of waiting at borders, it generated a productivity leap for road transporters. The railways lost their price lead in overland transport already back in the 1970s and have been forced to align their prices to road transport rates. Since the late 1980s, transport policies have been increasingly reflecting environmental concerns. Infrastructure expansions are made with a view to improving the rail system so as to strengthen the more "environmentally friendly" rail transport against road transport. In Austria, investment into federal roads has been showing a trend towards decline since 1983, even though road traffic as such continues to grow. Since 1988, more investment has been directed towards the rail than the road. If these trends in road building and traffic flows continue, bottlenecks in road transport will necessarily build up, which in turn would mean substantial cost increases for goods transport by road. By its transport policy, the European Union wants to internalise the external costs of traffic. Such a course would make goods transport by road significantly more expensive. Exporters in land-locked countries would find their competitiveness increasingly dependent on the supply of rail transport. If the quality and productivity of rail transport cannot be improved accordingly, inland production facilities would lose ground in competing against plants in the proximity of sea ports.