Image credit: EG Pors

Trade: How Big is Our World?

Globalization and digital communications have made the world feel like a much smaller place. We wonder: What is the distance that the average international export good travels from source country to destination country?

A. 12,500 km
B. 8,500 km
C. 4,800 km
D. 875 km

A. 12,500 km … is not correct.

Some goods are shipped internationally over very long distances. Soybeans currently travel the farthest. This is because the location of major demand for them is far away from the place or places of production.

The average soybean moves 12,530 kilometers (7,786 miles) between source countries and destination countries.

The distance between population centers – and the concentration of population in each country – obviously has a profound impact on trade relationships. Since some countries are very large geographically, this distance calculation is based on a point for each country that reflects the population distribution within its national borders.

In reality, soybeans move even farther than the average distance between market countries, from interior farmlands to ports, along shipping routes and then finally from ports to customers.

More than half of all soybean exports to China come from Brazil, the United States and Argentina.

The 12,530 km distance soybeans travel from export country to import country is about the same as the distance from Kansas City, in the U.S. agricultural heartland, to Guangzhou, a major city in southeastern China.

This is somewhat longer than the distance either from Greece to Australia (12,303 km or 7,645 miles) or the distance between the U.S. Pacific coast (Los Angeles) and Sydney, Australia (12,100 kilometers, or 7,519 miles).

Another goods export that travels over long distances is microwave ovens. They are overwhelmingly shipped from factories in China (7,975 km or 4,955 mi) to destinations like the United States and Europe. London, for example, is 8,150 kilometers (5,064 miles) away from Beijing.

B. 8,500 km … is not correct.

If you pick any two countries at random, the average distance between their capital cities is about 8,500 kilometers (or about 5,300 miles), as the crow flies, according to data from CEPII, a French international economics research center.

This distance is slightly longer than the distance from Paris, France to Las Vegas, Nevada, United States — or the distance from Beijing, China to Seattle, Washington, United States.

By way of comparison, the Atlantic coastline of the United States, say, at Charleston, South Carolina, is nearly 6,600 kilometers (4,100 miles) away from the Atlantic coastline in Dakar, Senegal, on the West African coast. That is not much shorter than the average distance exported coal travels (6,713 km).

South America is about 3,120 kilometers (1,939 miles) away from West Africa. That is shorter than the average distance between countries making dishwashers and countries buying them (3,673 km).

The U.S. Mid-Atlantic coast (Norfolk, Virginia) is about 5,775 kilometers (3,588 miles) away from the Lisbon, Portugal on the European coast. That is nearly the average distance footwear is shipped around the world (5,829 km).

Even though language barriers are an obvious obstacle to long-distance trade, cross-language trade now accounts for 78% of global trade.

And 47% of all world trade now occurs between countries that operate on the basis of a free trade agreement with each other.

C. 4,800 km … is correct.

Adjusted for geographic distribution of the population inside any given country, the average exported good traveled between countries a distance of 4,798 kilometers (2,981 miles).

This is just a bit shorter than the distance between Boston, Massachusetts, United States and Dublin, Ireland — or a bit longer than the distance between Beijing and Mumbai.

A typical export good in terms of being shipped internationally over approximately that distance, is an automobile, which moves about the same distance as the average export good. Crude oil exports travel a similar distance as well (4,380 km).

Remarkably, the impact of distance on trade relationships is also true even for non-physical goods or services. For example, an analysis of portfolio equity stock transactions, which occur virtually and require no shipping, has shown that stock sales decline with distance between the buyers and sellers.

Globally, the average stock trading distance is a bit more than 5,400 kilometers (nearly 3,400 miles) – shorter than the average distance between countries, even after adjusting for population distribution.

D. 875 km … is not correct.

The shortest average product trading distance between countries is electricity, which travels a distance of just 875 kilometers (544 miles). This is barely 10% of the average geographic distance between any two countries in the world taken at random.

While transmission losses are a challenge in electricity shipping, electricity is actually more efficient (losing less of the generated amount) over long-distance high-voltage transmission lines than over short-distance local distribution.

Another very short international shipping distance is for milk, at 1,543 kilometers (959 miles). Milk spoils quickly and is not consumed heavily everywhere in the world.

Editor’s note: This quiz was adapted from analysis in “The Laws of Globalization and Business Applications” by Pankaj Ghemawat, Professor of Management and Strategy at New York University’s Stern School of Business (Cambridge University Press, 2016).

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