Forecasting Eye 

 

The Port of Rotterdam is one of the busiest in the world, servicing 13.7 million containers in 2017 [1], and facilitating a significant proportion of the UK’s total EU and non-EU trade.

 

The Rotterdam Effect refers to the inflation of trade statistics due to the inclusion of quasi-transit goods. Goods in pure transit leave a non-EU source country as exports heading for a final EU destination via ports like Rotterdam, whereas quasi-transit goods may follow the same route but actually clear customs in the Netherlands before onward travel within the EU customs area.

 

The recording of transit and quasi-transit goods trade could be subject to data errors in that UK exporters being surveyed may not know the final destination of their goods and thus only report the transit destination. For example a company in London may export to China via the Netherlands. However, they may not know the final destination at the time of export, and so list the Netherlands (the point of transit) as the destination. This mislabelling results in inflated UK – EU trade figures. Moreover, this also has the effect of distorting trade figures with countries within the EU.

 

In 2017 the UK reported £3 billion more in exports to the Netherlands than the Netherlands recorded as imports. Similarly, the Netherlands recorded £6 billion fewer exports to the UK than were recorded in UK imports. This asymmetry is possibly due to the Rotterdam Effect: UK exports for non-EU countries through the Netherlands have been reported as exports to the Netherlands. Likewise, non-EU exports to the UK through the Netherlands have been recorded as Netherlands exports by the UK as opposed to their true origin.

 

There has been little empirical analysis into how significant the Rotterdam Effect is for UK trade. In 2013 the UK Office of National Statistics (ONS) estimated that accounting for the Rotterdam effect could reduce exports to the EU by 4.3% and reduce imports by 4.2%. Applying these rough estimates to 2017 UK-EU trade figures, this would reduce exports to the EU by approximately £7 billion, and reduce imports by approximately £11 billion. However, Cebr would urge caution and believes more research is needed in this area.

 

The reason the UK and other countries rely on the Port of Rotterdam lies in its efficiency. The port takes advantage of large economies of scale to manage the sheer quantities of cargo imported, transited and exported. Such efficiencies are hard to emulate at lower volumes of trade.

 

Should the UK leave the EU without a deal, UK ports will either have to process extra trade volumes that would have gone through Rotterdam, or Rotterdam will have to change the way in which it processes onward trade with the UK. It will all ultimately depend on available capacity and whether this can be efficiently redeployed.

 

[1] The Port of Rotterdam, Facts and Figures.

 

 

Contact Daryn Park: dpark@cebr.com 0207 324 2850