Relative Prices for Transportation Goods and Services

Relative Prices for Transportation Goods and Services

The United States had relatively lower prices for transportation goods and services in 20001 than did 11 out of 24 Organization for Economic Cooperation and Development (OECD) countries (figure 12-1). However, the nation’s top two overall merchandise trade partners, Canada and Mexico, had lower relative prices in 2000 than did the United States. Prices in Japan and the United Kingdom—both major U.S. trade partners—were much higher than in the United States. Many of the OECD countries that had less expensive transportation goods and services than the United States have developing and transitional economies.

Further analytical research is needed to clarify transportation’s contribution to America’s global competitiveness. One theory is that Americans’ incomes would go further if transportation consumer goods and services were relatively cheaper than in other countries. Because transportation goods and services are a major input of business production, relatively lower transportation prices might also result in relatively lower production costs. Furthermore, it could be expected that an inexpensive and efficient transportation system would stimulate market expansion and result in more specialization, faster distribution, and lower production costs.

The comparisons here may indicate how domestic U.S. transportation industries, goods, and services fare against their foreign counterparts. The relative price for a good or service traded between two countries is the price for that commodity in one country divided by the price for the same commodity in another country, with the prices for the goods and services in both countries expressed in a common currency. However, relative prices alone do not reveal why transportation is more expensive in one country than another. Nor do they justify making transportation relatively cheaper than it is. They also do not reveal the quality or reliability of the transportation or fully take into account differences in geospatial factors between countries.

1 The most recent year for which comparable international data were available at the time this report was prepared.