Trade Liberalization, Transportation, and the Environment

This paper is an empirical study of the consequences of European trade liberalization for international transport demand and its environmental impact. The European market is broken into nine trading blocks, and trade flow equations for 29 industries are estimated for the period 1975-1985. A simulation of the change in volumes of trade by industry and the distances trade goods must move generates an estimate of the increased transport demand in each industry. Data on the modal composition of transportation in each industry then allow an aggregation of demand across industries by transport mode-truck, train, sea, and inland waterway. The study concludes that the greatest increases will be in the demand for international transportation by sea, but that in terms of land-based transportation, there will be a large relative shift from rail to road. This will have a major adverse environmental impact which is discussed in the paper.