Why Access to Oceanic Trade Matters
Published in Marine Policy
By J. M. Lane and Michael Pretes
Abstract
Maritime trade and access to deep-water territory are important when determining a country’s economic success. Today, as much as 75 percent of international trade takes place over water due to the fuel efficiency of seaborne freight and worldwide dependency on water as a means of transportation. Issues in economic geography such as being landlocked and maritime trade are directly related to global development patterns. A country’s ability to participate in international trade and transport goods overseas is integral in the modern global economy. Maritime dependency is the ability of a country to participate in maritime trade as determined by their geographic access to international waters and trade dependency. Access to maritime shipping and global participation in maritime trade is key to attracting global capital. This study explores the relationship between five major factors in maritime dependency and economic prosperity. Findings suggest a significant relationship between maritime dependency and gross domestic product (GDP) per capita. Results from this analysis were indexed and an Index of Maritime Dependency was created and mapped to display the geographical distribution of maritime dependency.
Introduction
Maritime trade is an essential element in the global economy. As technology has developed at a rapid pace, people have become more interconnected than ever before. This growth in technology has spurred the need for better access to goods and services. Just how important is access to navigable water, and especially oceans, for economic prosperity? Is there a relationship between the geographic aspects of maritime dependency and economic prosperity, given that today as much as 75% of worldwide trade is done over water (Heiberg, 2012)? In order to explore the geospatial relationship between maritime dependency and economic prosperity, this paper begins by developing a set of variables used to determine how exposed a country is to maritime trade. Multiple regression was used to analyze the relationship between maritime dependency and economic prosperity.
The importance of maritime trade was recognized early on by coastal states. Coastal access was instrumental in facilitating the growth of such polities as Phoenicia, Greece, Rome, Carthage, and, later, of European states as well as Arab civilization. The rise of Europe to global influence was due largely to maritime access, as ably described by the American Admiral Alfred Thayer Mahan in his classic study The Influence of Sea Power upon History, 1660-1783 (1890/1949). Mahan described the sea as a “great highway” and a “wide common,” of crucial importance because water transportation was cheaper and safer than transport by land (Mahan 1890/1949, p. 25). Mahan’s concern was mainly with sea power, and far less with the role of trade in times of peace. In this paper we attempt to quantify Mahan’s thinking on geographical position, with a focus on maritime trade.
Maritime trade has become increasingly important to the survival of the economic system. Transportation costs greatly affect the ability of a country to participate in trade. This is one reason why many landlocked countries find it difficult to send and receive foreign goods. As of 2014, domestic freight ships consume 214 British thermal units (Btu) per ton-mile, rail freight consumes 292 Btu per ton-mile, and heavy single-unit trucks consume 21,573 Btu per vehicle-mile (Davis & Boundy, 2019). These data show the magnitude of maritime shipping within a globalized world and give rationale for providing quality access to maritime shores. As energy consumption and transportation costs are concerned, maritime shipping is the cheapest form of transportation.
The purpose of this study is to explore the relationship between maritime trade dependency and economic wealth on a global scale. Multiple regression was used to determine if a relationship exists between a country’s deep-water ports, merchandise trade ratio, coastline length, coast/area ratio, liner shipping connectivity, and Gross Domestic Product per capita. Resulting variables from the best-fit model were indexed together and collectively titled the Maritime Dependency Index (MDI). Maritime dependency is defined as the ability of a given country to participate in maritime trade. The culmination of the above-mentioned factors provides insight on the ability of a country to participate in maritime trade. These factors also represent the interconnection and interdependency of countries around the world. The evaluation of maritime dependency may help provide some clues and insight on future development and growth patterns.
Landlocked Countries
Scholars have studied the impact of geography on economic prosperity for years and several issues have risen in prominence. Landlocked countries [Fig. 1] face what seems to be an insurmountable obstacle: how to access the coast without bankrupting the private sector. A debate within the literature is to what extent the geographic location of a country affects the overall success of that country’s economy. Some scholars believe that being landlocked is highly disadvantageous for a country (Arvis, 2005; Arvis, Raballand, & Marteau, 2010, Carmignani, 2015). According to Arvis (2005), “The high logistics cost and the many developmental problems faced by the landlocked countries of the world can be attributed to their geographical fate. The importance of the transit facilitation agenda to these countries and to the countries of transit stem from these circumstances” (p. 244). The main concern is the ability of a landlocked country to reach inexpensive yet efficient transit systems and trade corridors. Carmignani (2015) found that landlockedness had a significantly negative impact on GDP per capita, but argued that the ultimate cause of economic stagnation was institutional quality. While these studies provided valuable information on underdeveloped landlocked countries, they did not provide an explanation as to how some countries such as Switzerland and Luxembourg have been able to circumvent the impediment of being landlocked.
Other authors vary in their explanations of the overall causes of low economic output. Some authors conclude that the root cause of economic stagnation in landlocked countries stem from relationships with neighboring countries, rather than any inherent landlocked geospatial position (Faye, McArthur, Sachs, & Snow, 2004; Srinivasan, 1986). This explains the economic success of such European landlocked countries as Switzerland and Austria, where neighboring countries are seen as a market, rather than as an obstacle to trade (Katzenstein, 1984; Moore, 2018). According to Raballand (2003), Switzerland, Austria, and Czech Republic have several options for trading partners, hence have more bargaining power than other landlocked countries. Some scholars have argued that being removed from the interference of main trading powers means that landlocked countries have more freedom to choose their own path (Srinivasan, 1986). Other scholars argue that there is an inverse relationship between the cost of transportation and the number of items transported (Chowdhury & Erdenebileg, 2006). Chowdhury and Erdenebileg’s analysis states that as the number of items transported from a landlocked country increases, the cost of transportation for each item decreases. According to Faye, McArthur, Sachs, and Snow (2004), the economic woes of a landlocked country can be attributed to a combination of its distance from a viable sea port and the high cost of transportation through a neighboring country.
Collier (2007) argued that landlocked developing countries find it harder to see substantial growth today because of the control that super giants such as China and India have on their natural resource trade. As he notes, throughout the past few decades, China’s role in resource exploitation in many developing nations, especially in Africa, and the subsequent loans that are given to these developing countries to build infrastructure has given the Chinese government more control over the decision-making abilities of these countries. African borders were drawn by European colonial powers at the Berlin Conference of 1884-85, resulting in many landlocked countries and microstates, which were not based on traditional national boundaries or geographic regions (such as river basins) (Carmody, 2016; Michalopoulos & Papaioannou, 2016). According to Alden and Alves (2009), these landlocked African countries have failed to see high rates of economic development due to China’s neocolonial activities on the continent, while Oloruntoba (2017) argued that limited development in these countries stems directly from European colonialism.
Landlocked countries often find it difficult to participate in the most basic forms of trade due to high overland travel costs. Authors have explored the effects of logistics cost on exchange traded goods and how this has forced many nations to withdraw from trade they might otherwise benefit (Arvis, 2005; Arvis, Raballand, & Marteau, 2010, Kashiha, Thill, & Depken II, 2016). Others have revealed that improved neighbor relations can help stimulate growth and trade (Faye, McArthur, Sachs, & Snow, 2004, Lahiri & Masjidi, 2012). While these studies have provided necessary information about water access, it is important to explore other areas that relate to maritime trade participation, economic geography, and prosperity.
Maritime Trade Access
Maritime trade has evolved throughout the twentieth and twenty-first centuries. Currently, there are more than 4500 deep-water ports worldwide [Fig. 2]. What effect do these ports have on an economy? Clott and Wilson (1998) determined that ports work as a source of tax money and job security in most port towns and cities. DeSalvo (1994) stated that the shutdown of a port would cause all local production associated with that port to cease due to the direct impact of a port on the local economy. Focusing on Chinese cities, Shan Yu and Lee (2014) found that increasing cargo flow positively correlates with economic growth in urban centers and large ports have more impact than smaller ports. Interestingly, this study determined that seaports positively impact communities in neighboring port cities as well.
Other authors found similar results in Europe. According to Bottasso Conti, Ferrari, and Tei (2014), ports positively impact local development and have a spillover effect into neighboring economies in Europe. Chang, Shin, and Lee (2014) found similar results in South Africa, stating that the port sector significantly impacts the domestic economy and employment across the country. Focusing on the Pearl River Delta, Yangtze River Delta, and the Bohai Rim Economic Zone in China, Chen (2019) concluded that the clustering of port infrastructure in these regions has attracted foreign direct investment, created jobs, promoted consumption, and stimulated economic development. Lane (2020) found that foreign-trade zones clustering near ports in the Southeastern United States had a significant impact on spatial development patterns on the county level. On a global scale, Munim and Schramm (2018) concluded that high quality port infrastructure and improved logistical performance had a positive impact on the national economy of the 91 countries included in this study.
The classic study of maritime access and sea power is that of the American Admiral Alfred Thayer Mahan (1890/1949). Mahan identified six factors that affect sea power: geographical position, physical conformation, extent of territory, population, national character, and government. By geographical position Mahan was largely referring to coastal access as well as a state’s geographical position with respect to other, especially potentially rival or enemy, states. Physical conformation refers to the nature of the coastline, including the number and quality of harbors. As to extent of territory, Mahan argued that it is not the size of a country, but the ability to defend it. By population and national character Mahan noted that a population must be of sufficient size to populate a navy, and of an outward looking and sea-oriented character. Its government must also be supportive of maritime goals. Though Mahan’s work was largely concerned with sea power and the military role of the oceans, some of his observations, such as those on geographical position, have an application to maritime trade as well. Mahan’s thoughts on sea power and security have been extended and amplified by more recent scholars, including Grygiel (2012) and Germond (2015).
There is a growing awareness of the impact of geographic distance on market interaction. Tinbergen (1962) offered one of the first analyses of geographic location and international trade when he formulated the gravity model of trade. This model determined that economies of great scale tend to attract other economies and countries that are closer to one another tend to trade with each other. In recent years, other scholars have detailed the importance of understanding geographic proximity of trade patterns in order to make international trade more effective. Hall and Jacobs (2010) based their study on the gravity model of trade and suggested that the impacts of proximity are insurmountable when determining trade relations. However, Boschma (2005) argued that too little and too much proximity can have a negative impact on innovation and development. This paper also discussed differences amongst geographical, institutional, social, organizational, and cognitive proximity as a force for growth. Shaw and Gilly (2000) agreed with this assessment, arguing that geographical, organizational, cognitive, and social proximity are important dynamics when explaining economic development and exchange relationships between economic actors.
Understanding the idea of economic gravity, Frankel and Romer (1999) found that as distance declined between trading partners, interaction grew. Others determined that distances between countries are inversely proportionate to trade and income (Irwin & Terviö 2002). Robinson (2002) concluded that maritime port proximity should be maximized in order to increase capital and trade flows. Access to water provides an avenue for institutions to participate in trade. Christiansen, Fagerholt, Nygreen, and Ronen (2006) developed a strategic plan for shipping in maritime trade after discovering that seaborne transportation of goods and materials had increased by 67% since 1980. Even in an era with expanding technological innovation, the world still depends on maritime travel for the transportation of commodities over great distances.
Other scholars determined that with all things being equal, lateral trade flows and distance to other markets explained as much as 70% of the variation in median income (Redding & Venables, 2004). According to Overman, Redding, and Venables (2003), “the evidence surveyed here strongly suggests the importance of geography in determining international economic interactions, in influencing cross-country income distribution, and in shaping the structure of production across space” (p. 34) Other scholars found that as traded goods move farther from the source, the cost of transporting those goods increases exponentially and impacts trade volumes between the two trading partners (Limao & Venables, 2001). Hoffman and Kumar (2013) later determined that new technology has helped to reduce the number of crew members on board ocean liners, thereby reducing the overall cost of maritime transportation.
These scholars have provided profound insight on the study of international trade. Involvement in international trade is pivotal today in order to remain relevant in the world economy. By participating in trade, lesser developed countries gain access to goods that they would otherwise not be able to produce at home. They also participate in the creation of goods that would otherwise be too expensive to produce in other countries. Because most of these goods are transported in cargo ships and tankers over international waterways (Heiberg, 2012), the study of maritime trade is critical when establishing sound policy advice for lesser developed countries.
Considering the importance of international trade, access to maritime trade, and geographic proximity to markets, this study focuses on the impact of maritime dependency on economic development across the world. Few scholars have compared the number of ports, merchandise trade ratio (dependence on trade), coastline length, coast/area ratio, and shipping liner connectivity to GDP per capita. The creation of a Maritime Dependency Index from the results in this analysis will allow the academic community to evaluate historical changes to global maritime trade dependency.
Materials and Methods
There are as many as 195 self-governing institutions and 72 dependent territories throughout the world (The World Factbook, 2017). Data were collected from the Central Intelligence Agency’s (CIA) World Factbook, World Bank, United Nations Conference on Trade and Development (UNCTAD), and the World Port Source. All data included in this analysis were compiled from 2016 demographics (Barki & Délèze-Black, 2017; The World Bank, 2018a, 2018b; The World Factbook, 2017; Waters, 2018). Data were compiled using Microsoft Excel and results were calculated using IBM SPSS Statistics Version 26. Due to a lack of port data from Waters (2018) and shipping liner connectivity data from Barki and Délèze-Black (2017), 129 countries were included in the analysis [Fig. 3] Unfortunately, this excluded landlocked countries from this analysis. A serious lack in data can present problems in global evaluations, especially when considering maritime trade access to landlocked countries. For this reason, data will be compiled in the future to better evaluate the maritime dependency of landlocked countries.
The most effective way to measure the relationship between one dependent and several independent variables is multiple regression. Multiple regression explores the nature and strength of the relationship between multiple independent variables and a single dependent variable. According to Gomez and Jones, (2010), “regression describes the co-variation of two variables measured on an interval/ratio scale. A simple regression means there is only one independent variable” (p. 301). However, in the case of multiple independent variables “an interval/ratio scale can be related to many independent variables simultaneously by expressing it as a linear function of several variables” (p. 304). The resulting equation created by the model can be used to estimate and predict future results.
The factors included in this study indicate how geospatially positioned a country is within the world of maritime trade. By using multiple regression to compare the number of ports, merchandise trade ratio, coastline length, coast/area ratio, and shipping liner connectivity score to gross domestic product (GDP) per capita, this paper will be able to effectively describe the relationship between these factors and economic development. The following formula was used in this analysis:
y=β_0+β_1 x_1+β_2 x_2+⋯β_(n-1) x_(i-1)+β_n x_i+Σ_i
where β_0 is the intercept, β_n is the coefficient estimate slope for variable x_i, and Σ_i is the error term.
Variables included in this analysis provide a description of a country’s ability to participate in maritime trade. Some variables such as coast/area ratio and coastline length are geographic features that promote better access to maritime trade. Other factors such as number of ports and liner shipping connectivity provide evidence of infrastructure and current activity within maritime trade, while merchandise trade ratio reveals a country’s dependence on trade as a percentage of total production.
Coast/area ratio is determined by dividing the total coastline length in meters by the area of landmass in kilometers squared (m/km^2 ). A country with a high coast/area ratio has easier access to coastal areas, making participation in trade more easily obtainable. For the purpose of this study, coastline length is measured in total kilometers. Analysis is confined to the study of maritime coastline. Larger coastline lengths allow countries to build more ports and increase shipping across greater distances. For that reason, the number of deep-water ports per country were also included in this analysis
Deep-water ports are considered important infrastructure and directly relate to the ability of a country to participate in maritime trade. Deep-water ports are defined by water depth of at least 30 feet deep at the docking area (Dasgupta, 2011). This depth allows for the docking of large vessels ocean-going vessels. Small shallow ports were excluded in order to limit the number of ports to those that transport goods between countries. Merchandise trade is calculated by adding imports to exports and dividing by the country’s GDP of the same year ((imports+exports)/GDP) (The World Bank, 2018b). The liner connectivity index is a database including connections of liner services between deep-water ports. This index does not include indirect connections through third parties, instead it only contains direct connections between participant countries (Fugazza & Hoffman, 2017).
These independent variables were compared to GDP purchasing power parity (PPP) per capita. The GDP PPP “is the sum of all goods and services produces in the country valued at prices prevailing in the United States” (The World Factbook, 2017). This allows for an easy and comprehensive comparison of economies across different exchange rates. GDP per capita takes the total GDP in a given year and divides it by the number of citizens of that same year.
The valued performance of the multiple regression model within a given set was evaluated using Akaike Information Criterion (AIC) (Crawley, 2015). At the current scale, the sample sizes were large enough and no null values were present, so no adjustments were made to the AIC score. This data was compiled in order of validity. Coefficient estimates and standard errors were compiled and compared to show the significance of each model. Determination coefficients (R^2 values) were also included to demonstrate the amount of variation explained in each model.
After completing the multiple regression model, data from the best-fit model were indexed as a percentage of the maximum value obtained (Index Value=(Actual Value)/(Maximum Value)). GDP per capita, number of deep-water ports, merchandise trade ratio, and liner shipping connectivity indices were calculated separately by taking each country’s value and dividing by the maximum value of each category. The final index number was determined by calculating the mean value of all four categorical indices. The Human Development Index was used as a model for the Maritime Dependency Index and similar methods were used to determine the final index scores. This paper used similar rationale as the Human Development Index for applying non-weighted indices in the final composite index. According to Haq (2003), weights are not recommended in the Human Development Index because there is insufficient rationale for discriminating amongst each variable. Other authors have suggested the use of factor analysis (Noble, Wright, Smith, & Dibben, 2006) or principal component analysis (Lai, 2003) as alternatives to non-weighted indices. However, for the purpose of simplicity and inadequate evidence for applying weights, this study constructed a non-weighted composite index.
Results and Discussion
Multiple Regression
All independent variables (number of ports, merchandise trade, coast/area ratio, coastline length, and liner shipping connectivity) were included in the original model and were compared with GDP per capita. The best-fit model was determined by comparing AIC score and the model with the lowest value was chosen as the best-fit model. Results from the multiple regression model reveal a significant relationship between the dependent variable and three of the original five independent variables [Table 1]. These results show a confidence level of at least 95% (α = 0.05). The resulting best-fit model reveals a significant relationship between the factors included (p-value < 0.0001) and the r-squared analysis explained 27 percent of the variation within the model (R2 = 0.27). Slope coefficient estimates for ports, merchandise trade, and liner shipping connectivity were all positive (Ports = 80.63; Merchandise Trade = 155.96; Liner Shipping Connectivity = 129.98) [Table 2]. The following formula represents the best-fit model:
ŷ=4342.57+80.63χ_1+155.96χ_2+129.98χ_3
where ŷ is the projected values for GDP per capita, χ_1represents an individual value for number of deep-water ports, χ_2 represents an individual value for merchandise trade ratio, and χ_3 represents an individual value for shipping liner connectivity index. According to this equation, when the number of ports increase by one, GDP per capita increases by $80.63. When the merchandise trade ratio increases by one percentage point, GDP per capita increases by $155.95. Finally, as the liner shipping connectivity index increases by one, GDP per capita increases by $129.98.
Table 1
Model averaged parameter estimates of maritime dependency and gross domestic product per capita, from 129 countries.
Table 2
Slope and Standard Error coefficient estimated for maritime dependency and gross domestic product per capita, from 129 countries.
While these results show a significant and positive relationship between GDP per capita, number of deep-water ports, merchandise trade ratio, and shipping liner connectivity, regression is just a tool used for describing a relationship and predicting future outcomes. Therefore, these results do not describe a cause-and-effect relationship. Additionally, linear regression assumes a constant linear relationship, which is not usually the case regarding income. Easterlin (2005) argues that diminishing returns occurs when “a $1000 increase in real income becomes progressively smaller the higher the initial level of income” (p. 243). A similar effect is apparent when considering maritime dependency.
After analyzing regression results, variables were placed in scatterplots and quadratic fit lines were used to analyze diminishing returns. The port quadratic scatterplot reveals a plateau effect after the 200 mark. Countries with less than 200 ports have a slope coefficient of 148.91 and countries with greater than 200 ports have a slope coefficient of 49.24. Interestingly, the merchandise trade ratio quadratic plot reveals increasing returns for countries with ratios higher than 150. Countries with a ratio less than 150 have a slope coefficient of 99.35 and countries greater than 150 have a slope coefficient of 166.595. Finally, the shipping liner connectivity quadratic scatterplot shows diminishing returns for countries with a connectivity higher 75. Countries with a connectivity score of less than 75 have a slope coefficient of 273.08 and countries greater than 75 have a slope coefficient of -232.93. These results provide some clarification to the problems within global linear regression models, which overlook nonlinear relationships that may exist between variables.
Maritime Dependency Index
Maritime trade accounts for most international trade today and without quality ports to dock and distribute these goods, countries would find it difficult to prosper (Helmick, 2008). Findings from this study reveal that deep-water ports, merchandise trade ratios, and shipping liner connectivity have a significant impact on GDP per capita in countries across the world. Due to the significance of these findings, the dependent variable (GDP per capita) and independent variables (number of deep-water ports, merchandise trade ratio, and shipping liner connectivity) were indexed and these values were averaged to create a composite Maritime Dependency Index. After indexing the variables, each country was given a rank according to its composite index value. In the initial model presented in this paper, each variable was given equal weight. Because the design of this index is based on methods used to create the Human Development Index and there is insufficient rationale for discriminating amongst variables, weights were not applied to the Maritime Dependency Index.
These results were compiled into a table, joined with a world map vector file, and shaded according to natural breaks using ArcMap GIS software [Fig. 4]. The United States, Hong Kong, and Singapore rank at the top, while Guinea-Bissau, Comoros, and the Democratic Republic of the Congo rank at the bottom of the index [Table 3]. Some countries standout as deviant cases. For example, Indonesia ranks 42nd in Maritime Dependency, yet it has 154 ports. This is largely due to its GDP per capita of $11,612, merchandise trade ratio of 30.09, and shipping liner connectivity of 29.62. According to Boddin (2016), between 1995 and 2011, Indonesia ranked behind Brazil, China, India, Mexico, and Turkey (other newly industrialized countries) in exports and imports but ranked third amongst these countries in total output, as many of its goods are consumed domestically. This can have a major impact on its merchandise trade ratio, as it measures total trade as a percentage of GDP. Dutch colonialism has had a lasting impact on domestic economic growth as well. Yazid (2014) concluded that “the social and political chaos in the first decade after independence in 1949 influenced the economic situation in Indonesia” and “most of the basic facilities and economic foundations developed by the Dutch during the colonial period were destroyed during the independence struggle after the war” (p. 83). Infrastructure development has been a major concern for Indonesia while countries such as the United States already have built infrastructure in place.
Other deviant cases such as India have similar reasons for ranking low on the Maritime Dependency Index. India currently has 76 deep-water ports, ranking 18th worldwide, and a shipping liner connectivity score of 58.17, ranking 21st worldwide. However, it ranks 45th on the Maritime Dependency Index. India’s index score was heavily weighted by its GDP per capita of $6,527 in 2016 (ranking 92nd) and merchandise trade ratio of 27.57 (ranking 118th). India’s relatively low GDP per capita is due in part to the legacy of colonialism. Gupta (2019) argued that its belated independence from Britain and its concentration in the tertiary sector dominated by foreign firms has kept individual income low compared to its European and North American counterparts. Additionally, in 2016, India’s population was approximately 1.325 billion (The World Bank, 2020b) and 72.43 percent of its products were consumed domestically. Its large population and land area of approximately 3.29 million square kilometers (The World Factbook, 2017) has had an impact on India’s merchandise trade ratio.
Brazil is another example where the legacy of colonialism, population, and landmass play a major role in its Maritime Dependency Index rank. Ranking 54th on the Maritime Dependency Index, Brazil has 81 ports and a shipping liner connectivity of score of 38.89. However, in 2016, it had a GDP per capita of $15,128 and a merchandise trade ratio of 18.3. Between 1995 and 2011, Brazil lagged behind other newly industrialized countries such as China, India, and Turkey in exports, imports and total output but still remained a major producer within this group of countries (Boddin, 2016). This is due in part to its lag in economic development in the 19th century during the Industrial Revolution and post-independence. According to Barros (2015), the era after independence gave countries like the United Kingdom, United States, Canada, Australia and New Zealand a head start over Brazil. This article also concluded that highly educated immigrants from Europe gave the United States, Australia, and New Zealand the human capital needed to develop between the 18th and 19th centuries. This has had a major impact on GDP per capita in Brazil to this day. Additionally, population and landmass play a major role in Brazil’s position on the Maritime Dependency Index. As of 2016, Brazil had a population of approximately 206.2 million (The World Bank, 2020a) and controlled 8.52 million square kilometers of territory (The World Factbook, 2017), both of which may explain why it consumed approximately 81.7 percent of its products domestically.
Data discussed thus far provide context for a world dependent on maritime trade for global development. The Maritime Dependency Index is an attempt to provide statistical evidence that a significant relationship exists between global development patterns and a country’s ability to participate in maritime trade. In order to better understand the relationship between economic development and maritime dependency, future studies are needed using longitudinal data to further analyze the validity of the Maritime Dependency Index.
Conclusions
In this study, multiple regression was used as a tool to analyze impact of five independent variables on GDP per capita. A total of 129 countries were included in the analysis and results reveal that GDP per capita is significantly dependent on the number of ports, merchandise trade ratio, and shipping liner connectivity. The remaining independent variables have been collectively termed maritime dependency. While there may not be a cause and effect relationship between these factors, this study has shown a clear relationship between maritime dependency and prosperity: as maritime dependency increases, GDP per capita increases. The dependent variable and three independent variables included in the best-fit mode were indexed as a ratio to the highest value in each category and presented on a scale between 0 and 1. Values from each category were averaged and together and a Maritime Dependency Index score was tabulated for each country. Results from this index place United States, Hong Kong, Singapore, United Kingdom, and China at the top of the Maritime Dependency Index [Table 3].
Location is an important aspect of any geographic study. In the study of international trade, an emphasis has been placed in the importance of economic policy. While this is an important aspect of international trade and prosperity, location has a profound impact on the ability of a country to participate in the international market. The results of this analysis show just how important deep-water ports, trade as a percentage of GDP, and shipping liner connectivity are to a given economy. Of these three independent variables, deep-water ports had the most significant relationship with GDP per capita. According to DeSalvo (1994), “in the absence of the local port, local users of noncomparable imports would have to pay higher prices for imports since they would enter through alternative ports, thereby incurring higher inland transportation costs.” In order for countries to import products that cannot easily be produced domestically or export products at a competitive value, ports and access to oceanic waters are necessary functions of a successful institution.
International trade is often seen as a competition, a zero-sum game between competing interests. This overlooks the underlying result of international trade: prosperity. If everyone has access to deep-water ports and maritime trade, the cost of transporting materials throughout the world decreases. If the cost of transportation decreases, then profits increase, and prices decrease. This allows people to have access to goods from around the world and helps to elevate the economic output of countries participating in trade. As various Liberalist scholars have argued, the key here is state preferences, rather than capacities (see, e.g., Doyle, 1986; Jahn, 2011; Shiraev, 2014). Policy choices therefore become more important than limitations imposed by geography and resource endowments.
The next step in the study of maritime dependency is to perform a longitudinal index so that changes in maritime dependency can be tracked throughout the past few decades. The resulting index can be used evaluate the evolution of maritime trade for each country and develop infrastructure improvement plans for developing countries. The current Maritime Dependency Index is a preliminary model that will need some reconfiguring to provide the best measurements for maritime trade access in the future.
With as much as 75% of international travel and trade still taking place over international waterways, it is easy to see why it is important for a country to be located near deep-water (Heiberg, 2012). A more geographic analysis shows that while a few landlocked countries have benefited from technological advances by participating in banking and money markets abroad, access to navigable oceanic waterways is still necessary for most of the world. This study has shown that as the ability of a country to participate in maritime trade increases, GDP per capita increases. Maritime dependency reflects this idea and shows that there is a direct relationship between location and economic success.
Limitations
Due to a lack in data between variables, results analyzed in this study are limited by the number of observations and the year at which the study was conducted. For this reason, generalization outside of the 129 countries included in this study is not recommended. While a major portion of this study was dedicated to discussing landlocked countries, few of these countries were included in this analysis due to this lack in data. In order to investigate the validity of the quantitative results of this study, future analyses are recommended to further evaluate the impact of maritime dependency on economic prosperity.
Appendix
Table 3
Maritime Dependency Index and its components
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