Why have containers boosted trade so much?

AT FIRST glance they may just appear to be humble metal boxes. But containers—uniform boxes that can be easily moved between lorry, train and ship—have reshaped global trade over the past few decades. Why have containers boosted trade so much?

Uniform metal containers were invented by Malcom McLean, an American trucking magnate, in 1956. Before then goods were shipped as they had been for centuries. Crammed in to the hold of a ship, loose cargo in wooden crates would be loaded and unloaded by vast crews of dockworkers. The process was unwieldy, unreliable and so slow that ships often spent longer docked than they did at sea. Theft of transported goods was rampant: as an old joke put it, dock workers used to earn “$20 a day and all the Scotch you could carry home.”

Containers changed this in several ways. The price of everything fell, starting with the cost of loading and unloading. When Mr McLean looked at the costs of his first container ship, he found that it cost $0.16 per tonne to load compared with $5.83 per tonne for loose cargo. Between 1965 and 1970 the amount of capital locked up per tonne of inventory in transit between Hamburg to Sydney fell by half. Because containers were packed and sealed at the factory, losses to theft plummeted, which in turn drastically reduced insurance costs. More could also be loaded: in 1965 dock labour could move only 1.7 tonnes per hour onto a cargo ship; five years later they could load 30 tonnes in an hour. As a consequence, ships could get bigger and more efficient while still spending less time in port. As containers made inland distribution by train and lorry easier, ports became bigger and fewer in number. (In 1965 there were 11 loading ports in Europe; by 1970 there were three.) This, along with increased productivity, meant fewer dockworkers were needed, undermining their bargaining power and reducing the number of strikes.

For many years it was thought to be impossible to quantify the value of containerisation, because the advent of the metal box coincided with a global reduction in trade barriers as a result of European integration and the work of the General Agreement on Tariffs and Trade (GATT), the predecessor of the World Trade Organisation (WTO). But a paper published in 2013 cleverly disentangled the impact of trade deals from that of containers. Looking at 22 industrialised countries, it found that containerisation was associated with a 320% increase in bilateral trade over the first five years and 790% over 20 years. A bilateral free-trade agreement, by contrast, boosted trade by 45% over 20 years, and membership of GATT raised it by 285%. In other words, containers have boosted globalisation more than all trade agreements in the past 50 years put together. Not bad for a simple box.

Editor’s note (October 13th 2021): This piece has been updated since it was first published.

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