The Importance of Maritime
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The Importance of Maritime Let us take a step back and think for a second: look around you. What do you see? Ninety percent of the products around you were transported from factory to market via a maritime body i.e. water. Maritime transportation or ocean transportation, as some would call it, is the cheapest mode of transportation when moving products from one side of the globe to the other side. Over the years, the cost per ton via seaway has continued to decline. This is due to a practice called economy of scale. In simply terms, economy of scale is paying less for purchasing more. In a more complex term, is the cost gained when production is increased. For instance, if you ship one container from China to the US, you will pay an estimated cost of $8,500 on a smaller container vessel. However, when you ship that same container on a bigger container vessel, you may pay less. In maritime terms, economies of scale simply means that the cost per unit declines as vessels get larger. This practice makes it easily for companies to get their products from the factory to the market in a cost effective way. Adversely, this practice also gives way to outsourcing – when companies seek to produce products in regions that have low labor cost. Maritime transportation is not only important to a country’s economy because it is a low cost mode of transportation. This industry is also the core of international trade. Take for instance, the economics term of comparative advantage. This theory was proposed in 1817 by David Ricardo, an English Economics and Politician. He argued that countries should focus on producing products for which they have low opportunity cost in producing and trade with other nations. It is kind of like not been a Jack of all trade rather, it is like been the master of one. He explained that countries should focus on the products that they will produce more effectively and efficiently as compared to other countries. For instance, the US and china both have the means and capability to produce steels. However, producing steels in the US may be more expensive as compared to producing the same amount of steels in China. Similarly, China has the means and capability to produce electrical machinery but not as compared to the US. In this case, Ricardo would argue that instead of the US and China both producing steels and electrical machinery to make the demand in their individual countries, China should focus on producing steels while the US will focus on producing electrical machinery. China will import electrical machinery from the US and the US will import steels from China. While this theory may only exist in a perfect world, it is practiced to a certain degree in globalization. No country is self-reliance in all section of its economy. Let me point out that a country may be self-sufficient in a particular section like agriculture or energy but it will depend on other countries for healthcare, manufactured goods, etc. This is where maritime comes into play. Download 12.76 Kb. Share with your friends:
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