Logistics As The Backbone Of International Trade

Most advanced economies are also considered as the leaders in global trade logistics. They pursue logistics-related reforms and investments, build infrastructure, facilitate transportation and trade, or develop new and modern services. But in spite of the progress, the 6th edition of Connecting to Compete shows a different picture

When it comes to logistics performance, high income countries are 48% higher than low income countries. Caroline Freund, director of World Bank Group’s Macroeconomics, Trade and Investment Global Practices, explains that logistics is the backbone of all international trades. When logistics is good it can reduce trade costs but supply chains are only as strong as their weakest link. Developing countries that make the effort to get their logistics right has to improve infrastructure, customs, skills and regulations.

Dominant players in the supply chain which are usually the high income countries rank highest in logistics performance. Countries that rank lowest in performance are the low income, isolated or fragile countries experiencing conflicts and unrest. However, in the lower and middle income group countries, there are large economies like India and Indonesia and emerging economies like Vietnam and Cote d’Ivoire that standout as the top performers.

Among the worldwide performers, Germany has the highest LPI. Aggregate results from emerging Europe for 2012 to 2018 are mixed with nine countries making it to the top 50. Because international trade is becoming more dispersed due to global value chains, good logistics becomes more important than ever.

According to Christina Wiederer, economist with the World Bank Group’s Macroeconomics, Trade and Investment Global Practices, even a small disruption to the supply chain can rapidly spread to other countries and regions. Connecting to Compete and Logistics Performances Index are the tools that can help governments benchmark they progress on trade logistics. The key criteria will include quality of trade-related infrastructure, logistics competence and quality, prices of international shipments and the frequency with which shipment arrive at the destination on time.

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