1. “THE EFFECT OF TRANSPORTATION COSTAND
ENVIRONMENTAL STANDARD ON THE LOCATION OF
INDUSTRYAND THE FLOW OF INTERNATIONAL
TRADE”
DEPARTMENT OF ECONOMICS AND MANAGEMENT
VAVUNIYA CAMPUS OF THE UNIVERSITY OF JAFFNA
SRI LANKA
Presented by:
Mr.N.RAGULAN
(2008/Bs/20)

2. COST OF TRANSPORTATION
Costs of transportation include freight charges, warehousing cost,
Cost of loading and unloading ,insurance premiums, and interest charges
while goods are in transit.
In other words we can simple say transport or logistics cost to include all
the costs of transferring goods from one location to another.
Two ways of analyzing transportation cost
• General equilibrium analysis
• Partial equilibrium analysis

3. • General equilibrium analysis
which utilizes the nations production frontier or offer curve and expresses
transport cost in terms of relative commodity price.
• Partial equilibrium analysis
A more straightforward method is to analyze the absolute or money cost of
transport with partial equilibrium analysis .this holds constant the rate Of
exchange between two currencies ,the level of income and everything else in
the nation.

4. LOCATION OF INDUSTRY
Transportation cost also affect international trade by influencing the
location of the production and industry. industries can be classified as
• Resource oriented industries
• Market oriented industries
• Footloose industries

5. Resource oriented industries
Resource oriented industries are those that tend to locate near the source of
the raw materials used by the industry.
Eg:-mining industries
Market oriented industries
Market oriented industries, on the other hand, are those that locate near the
markets for product of the industry. These are the industries that produce
goods that become heavier or transport during the production process
Eg:- soft-drink companies
Footloose industries
Footloose industries are hose producing goods that face neither substantial
have high value-to-weight ratios and o be highly mobile, or footloose .

6. ENVIRONMENT
STANDARDS
Environmental standards refers to the levels of air pollution, water
pollution, thermal pollution and the pollution resulting from garbage
disposal that a nation allows.
An environmental standard is a policy guideline that regulates the effect
of human activity upon the environment. Standards may specify a
desired state

7. ENVIRONMENT
STANDARDS CON……
Environmental standards are a set of quality conditions that are adhered
or maintained for a particular environmental component and function.
The different environmental activities have different concerns and
therefore different standards.
Emission standard
Fair-trade certification

8. EMISSION STANDARDS
Emission standards are requirements that set specific limits to the
amount of pollutants that can be released into the environment. Many
emissions standards focus on regulating pollutants released by
automobiles (motor cars) and other powered vehicles but they can also
regulate emissions from industry, power plants, small equipment such as
lawn mowers and diesel generators.

9. FAIR-TRADE
CERTIFICATION
Fair-trade certification is a product certification system that allows
people to identify products that meet agreed environmental, labor, and
developmental standards. Overseen by a standard-setting body, Fair-
trade International (FLO), and a certification body, FLO-CERT, the
system involves independent auditing of producers to ensure the agreed
standards are met.

10. ENVIRONMENT
STANDARDS

11. TRADE AND
ENVIRONMENT
Environmental pollution can lead to serious trade problems
because the price of traded goods and services often does not
fully reflect social environmental cost. A nation with lower
environmental standards can in effect use the environment as a
resource endowment or as a factor of production in attracting
polluting firms from abroad and achieving a comparative
advantage in polluting goods and service.
For example :-
U.S following a strong antipollution environment laws there for
some industry lost in the in U.S as a result of that firms migrating
to Mexico to take the advantage much more lax environment
laws and lower clean up cost.

12. TRADE AND
ENVIRONMENT CON….
Through this example you can understand how a nation can use
environmental policies motivated by protection to seek to offset the cost
advantage that other countries might enjoy because of lower
environmental standards and to impose its own environmental
preferences on another nation.

13. CURRENT SITUATION
A world bank study by “Patrick low”(2002)
He indicated that during the past two decades polluting or dirty
industries and their exports have expanded faster than clean industries
and their exports in poor developing countries than in rich developed
countries.
MovingEuropean countries Asian countries
Eg- china

15. Thank you