The Development of Transportation Technology and its Impact on International Trade - Essay Example

The physical separateness between the countries has become a thing of past, with the entire world turning into a single market or even global village, mainly because of the advances in transportation. Firms all over the world or specifically in the Western countries as part of globalization wanted to do business and showcase its products in newer and developing markets, profiting them as well as benefiting the local people. This urge of enter new markets to sell their products and importantly to get the raw materials to manufacture the products from time immemorial only lead to the invention and development various transportation modes and technologies. So, this paper will discuss how the development of various trade related transportation technologies is positively impacting and proliferating international trade. The Development of Transportation Technology and its impact on International Trade Introduction Countries or any geographical territories or any organizational entities will do business with others, in order to fulfill their needs, to get profits and also to develop their economies, thereby leading to international trade. International trading will be initiated when a country or its organization has a product, which may be needed or being used in some other country. Thus, international trading provides opportunities for various countries in the world, to acquire products or items, which they may not be able to affordably manufacture themselves. This form of international trade provides the end customer with a wide range of products and services, thereby improving their standard of living and comforts. However, the key factor or kind of ‘bridge’, which aids this international trade or even a domestic trade, is the transportation modes. With geographical territories or potential markets spread out in various corners of the world, the physical distance has to be covered to reach the product to the intended consumer. These physical distances, which may not by manually covered by humans, can be covered only with the use of transportation modes ranging from land transport vehicles, ships, aircrafts, etc. Although, earliest modes of mechanical transportation like ships were developed to explore new territories, the fact is, the ships were maximally used in those days mainly by merchants for trading. Then in the course of history, as technology got developed, the transportation modes also became more advanced, further developing international trade. Literature Review Advancements in transportation technology has aptly ‘fueled’ development of international trade, transforming the lives of people all over the world optimally. As Claval (2009, pg.9) stated, “The new facilities of transport and communication allowed for a rapid transformation of the horizons of expectation of ordinary people all over the World”. This perspective about transportation’s role was supported by Stiglitz (2002, pg.9) as well; who stated that transportation has led to closer integration of the countries and peoples of the world, “breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders”. This role of transportation is very true because the ‘footprint’ or even a ‘wheel mark’ of transportation around the world has brought about various optimal changes, including in International trade. This fact was validated by Vossos (2011) who stated “Transportation of goods is one of the most important issues of international trade, as the speed of delivery and preservation of products' quality are major success factors for companies”. The key aspect, which optimizes this role of transportation, is the newer form of technologies in the transportation sector, and that includes the earliest form, starting from wheels to current day supersonic engines. As Vossos (2011) further states, “the term "transportation technology" refers to all advancements since the invention of the wheel.” Although, ships have been aiding a lot in international trade from early times, the invention and development of rail transport and other forms of land transport also turned out to be key agent for international trade. This fact was aptly pointed out by Mukherjee and Sachdeva (2004), Railways is an integral part of transport network, and it plays a crucial role in facilitating trade, as an efficient railway system reduces the cost of transportation and thereby enhances trade, including both international as well as domestic trade. With more technologies being developed in the train transportation sector, which speeds up as well as secures transportation, more companies are using it for developing their trade. However, the effective technological innovation in the sector of air transportation has promoted and is still promoting International trade. As Hummel (2007, pg.137) states, with the aviation sector undergoing rapid technological changes, “including improvements in avionics, wing design, materials, and most importantly the adoption of jet engines”, the resultant advanced cargo airplanes “have made it possible to transport goods between continents in a matter of hour”. Although, airplanes offers faster means of transport, ships still plays the role of the largest transporter of products, and thus, proliferating international trade maximally. Ships have also evolved sizably from the early days due to incorporation of advanced technologies. As stated by Hinkelman (2005), one of the key technological innovation in the shipping industry is the entry of tamper proof, perishable goods protecting containers. These containers with apt refrigeration system and other safeguards protects the products during the long traveling part, and aptly reaches the customers, thus aiding in the development of international trade. This feature of shipping technologies was supported by Wang et al., who stated that a key characteristic of many food and agricultural products is perishability, requiring refrigeration and prompt delivery to the consumers, and this where the adoption of modern technologies plays a supporting role, facilitating more trade. Babic, Ivakovic and Prusa (2008, pg.266) further adds to this point by stating how because of the technological developments in transportation, “global firms have been steadily reducing their number of national warehouses, consolidating them into regional distribution centres that serve a much wider geographical area.” Discussion Among the different modes of transportation, land based international trade using land transports occupies a sizable portion, leading to various technological developments in that sector. The fact is, roughly 23 percent of international trade by value takes place between countries through land border, with the technological developments in that sector further aiding that process. This proportion of international trade through land has been nearly constant over recent decades, although it varies from continents to continents. “For Africa, the Middle East, and Asia, between 1 and 5 percent of trade by value is with land-neighboring countries; for Latin America, trade with land neighbors is 10 to 20 percent of the whole, and for Europe and North America it is 25–35 percent of trade.” (Hummel 2007, pg.132). When one focuses on the international trade in North America, particularly between United States and Latin American countries, land based trade utilizing surface transport modes like railways, trucks and even pipelines occupy the major share. With such high dependency on land based transportation for international trade, there has to be optimal developments in technology in that sector. If viewed from another perspective, it can be said that due to the technological developments in land transport modes, firms have started using it sizably to further improve their international trade, as proven by the above facts. Technology has maximally optimized the functioning and the efficiency of land transport vehicles. From high-powered and at the same time fuel-efficient engines to various tracking devices incorporated to these land vehicles, all these technologies have aided international trade. One of the main advantages of land transportation, when compared to sea and air transportation, is it allows maximum flexibility for the firms. That is, land transport vehicles carrying firms’ products and other raw materials can reach every nook and corner of various countries. Although, land vehicles cannot traverse long distances on the lines of ships and aircrafts, it can reach places that will not be accessible by the other modes. To further this flexibility, highly maneuverable vehicles are developed using technologies. The longer wheelbase of bigger trucks means reduced maneuverability, however on the positive side, technology has an answer in the form of four-wheel or even all-wheel steering, which allows steering each wheel, thereby allowing the trucks carrying products maneuverability in small areas, as well as in difficult terrains. (McCullough 2002). In addition, technologies like Global Positioning Systems (GPS), Radio frequency identification Device, etc, can allow the firms to guide and send products to unknown but key international territories, as well as track them during the transportation process. GPS technology with the aid of satellites can show and guide the land transport vehicles to their destinations, while RFID help the firms to track them. The famous American bike brand, Harley Davidson incorporated RFID, while transporting its bikes to other countries and even inside United States. After the finished product or motorcycle leaves the manufacturing or assembly unit with RFID tag attached, bikes will be tracked with the help of Harley Davidson’s service centers and distributors. (Wisconsin Technology Network). The Bulk cargoes constitute the majority of international trade when measured in terms of weight, and so these commodities like oil and petroleum products, iron ore, coal, and grains are shipped almost exclusively via ocean cargo. (Hummel 2007). Development of effective technologies in this sector furthered international trading. Newer engine and propeller technologies have made Ocean based transport liners faster, even while allowing the liners to become larger. With firms exporting larger consignment of products, the shipping companies had to go for larger ships, particularly 10000 TEU capacity vehicles. With new technological developments in engine designs, including the option to add four cylinders to create 16 cylinder units, single engine vessels of up to 10,000 TEU are now being built. (unescap.org). “Hanjin Shipping took delivery of its first container ship with a capacity of 10,000 20-foot equivalent containers units.” (Leach 2010). In addition, ships as well as the shipping processes are becoming faster because of the advent of containerization. “Containerized shipping is thought by many specialists to be one of the most important transportation revolutions in the twentieth century” (Hummel 2007, pg.141). Nowadays, containers are equipped with all the safeguards, particularly the refrigeration system. This refrigeration system allows these containers to carry large amount of perishable goods for long distance, without any risks. “The adoption of modern technologies has facilitated trade of many high-value agricultural products in recent years. Examples of such technologies include: Developments in refrigeration, controlled atmosphere (CA) and humidity control that reduce spoilage” (Wang et al.). Many firms are entering foreign firms and carrying out international trade, mainly because of this advantage. In addition, technologies like Digital wireless sensor telemetry technology are also aiding the firms to proliferate their international trade because it provides information on the cargo en route, the speed at which it is moving, and the temperature of its environment. (Vossos 2011) In the current times, air based transportation are also aiding the firms to airlift its products to maximal countries of the world, without any impediments, thereby promoting international trade even further. In the past 40 years, air shipments have grown to represent a third of the value of U.S. imports and more than half of U.S. exports with countries outside North America. (Hummel 2007). Although data regarding air shipment in other countries’ share of transportation is not broadly available for, the increased U.S. and its firms dependence on aircrafts does not seem to be an anomaly. The firms are depending on air based transportations mainly because of its quicker speed and reach. These two advantages have been brought on by various technologies starting from efficient jet engines to crafts with refrigeration facilities, large capacity carrying aircrafts, etc. “Jet engines are faster, more fuel efficient and reliable, and require much less maintenance compared to the piston engines they replaced.” (Hummel 2007, pg.137). Apart from these technologies, the above mentioned GPS technologies and RFID is also used as part of air cargo transportation for effective monitoring. “Both GPS and RFID technologies are seen as emerging technologies for improving the tracking of air cargo in the supply chain” (Elias 2007, pg.25). With air based transportation being prominently used in international trading nowadays, many more new technologies are in the anvil in the near future. Conclusion From the above analysis it is clear that advancements in transportation technologies are aiding the firms to carry out international trade in an optimal manner. Various technologies in each segment of transportation, that is, land, sea and air, are accentuating international trade all over the world. This can be clearly seen, when one focuses on the international trade data for the past 50 years, as during this period only transportation technologies made its impression. From 1950 –2004, world trade grew at a rapid average rate of 5.9 percent per annum, with the annual growth rate of manufacturing trade was even faster, at 7.2 percent, and one prominent possible explanation for the rise in international trade is the increase in transportation technologies. (Hummel 2007). With technology improving transportation and communication, firms particularly Multinational Companies can carry out their operations in foreign countries or even sell their products, without being physically present there. Thus, international trade is being mainly run by various forms of transportation. The firms, for their part, apart from optimally utilizing transportation technologies, are even pushing the transportation companies and other entities to come up with technological innovations. So, many are of the view, that many more newer technologies will be developed for the transportation sector, leading to further proliferation of international trade. References Babic, D., Ivakovic, M and Prusa, P 2008, Benefits of Logistics Centres Categorization, Scientific Papers of the University of Pardubice. 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