Trade may well be termed as prime determinant of economic dynamics. Its emergence marked a sea-change in the economic behaviour of the earliest human communities when man switched over to production for market beyond his personal needs; kicking off the evolution of commercial relationships and exchange economies that, with the introduction of money as medium of exchange over centuries, matured to present-day money and market-based economies.

The medium of trade provides the life-blood to modern economies, and facilitates rational allocation of human and physical resources as well as economic output for conducting economic activity in a community. A trade deal occurs when right goods reach the right place at the right time, and at a right price.

The sources for supply of human and material resources going into production process as inputs, and locations and markets for demand of their output, seldom happen to lie in close vicinity of the site of production. It is through transportation, along with other supportive services, that requisite inter-linkage amongst locations of supply, production and ultimate demand and consumption is assured. Even a closed-economy model, i.e. without any role by the international trade, is a myth without a well-functioning and efficient transportation system. Trade and transport are umbilically linked, reinforcing each other and surviving and thriving on each other.

In the absence of efficient requisite transport system trade would be exposed to severe bottle-necks. With an efficient transport infrastructure and system, trade flows, within the national boundaries with uniform legislation related to trade regime serving the domestic markets, buyer and seller being the citizens of the same country and subject to same law, customs, traditions and ethos and sensitivities, would be a simple and smooth affair.

However, the respective situation takes a radically different turn, once the same trade flows are destined for markets abroad. This implies operating in international trade corridors.These corridors,different from domestic market parameters, refer to a business regime comprising four elements. First of all, there are commercial and financial customs and practices that define the rights and duties of the parties involved in international trade. The purpose of commercial rules and regulations is to reduce risks and uncertainties associated with international transactions.

They govern the terms of the sales-purchase contract and specify the conditions of payment, distribution of responsibilities between seller and buyer regarding transport operations and the insurance coverage. The second element concerns government requirements viz-a-viz government’s policies in the form of national laws, regulations and ratified international conventions applicable to international transactions.

These requirements are related to specific issues of national concern, such as: foreign exchange policies, import/export subsidies, market access, etc. The third element refers to structural element of major economic sectors of a country involved in international transactions, such as transport sector, telecommunication, banking and insurance as institutions representing infrastructure and equipment in the service of international trade.

The last element covers the commercial parties which provide the required services to organize the physical movement of goods from the point of origin to the point of destination, applying the commercial and financial customs and practices, and fulfilling government’ requirements related to international trade.

An efficient logistics sector is supposed to master the purpose and implications of the constituent elements of international trade corridors, both in terms of comprehension and implementation - in the exporting country, in the country of transit if any and in the country of destination, to have a smooth and satisfactory end of trade transaction cycle, starting from the exporter and ending with the consignee. This is equally applicable in case of imports when the domestic markets draw on the markets abroad for the supply of finished goods and raw materials as inputs for domestic production.

This switch-over from domestic to foreign markets marks the defining difference between trade within the national confines and the international trade. International trade has two important features which do not apply to domestic trade:

a. It involves the use of foreign standards of value and media of exchange for either or both of trading parties.

b. It is subject to different laws, customs, cultures and languages. Frictions, costs and uncertainties associated with transactions across national borders, together with differences in regulations and customs, are attached to international trade.

Further element to the complexity of the situation stems from the fact that in international markets one has to compete with counterparts from other countries as well. While serving markets abroad, it is host of other factors beyond just transportation that needs to be factored in the calculation for a success in foreign trade.

This entire situation represents the battle field for an efficient logistics sector when dealing in international trade. The movement of goods from the door of exporter to the premises of the importer abroad, its quality, reliability, services and performance of requirements attached therewith, along with the entire cost of the process covering the total supply chain is of critical importance for success in international trade.

Package of services and activities, right from the producer/seller to buyer/consumer, including transport, is the critical input for a successful trade deal, whether it is within the boundaries of a country or across the national borders. This package is called logistics. In case of foreign trade it has a far greater and predominant role as a real competitive factor that can make or mar an international trade deal.

In the professional jargon, logistics can be defined as the process of planning, implementing and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods, and related information from the point of origin to the point of consumption for the purpose of conforming to customers’ requirements. Related to transport,logistics is the integration of transport with other services,including stock management,packing and labelling of products, insurance and banking operations related to movement of goods, border formalities, resulting in improved levels of service to customers. Such improvements lead to better quality delivered products and may contribute to an increase in market share, allow a rise in market price of the respective goods, resulting in additional revenue.

The success in international trade depends on the efficiency of the implementation of the package of services and activities summed up under logistics. To achieve success, trade must offer competitive products. The urge for competitive products, in the recent decades, has resulted from changes in the structure of industrial processes and in the production methods of industrial processes. Changes in the structure of industrial processes have led to new production patterns within the same industry.

Over the time these processes have been broken down into a number of separate and complementary tasks. These tasks have been assigned to industries which are becoming more and more specialized in a limited number of very specific activities. This specialization accrues economic advantages through mass production of standardized components and competition. The new organization of industrial processes results in locational shifts from original to new industrial sites within the same country or in other countries, contributing to dispersal of economic activities as is the case with a great number of multinationals.

Such changes have contributed to stock-reducing, flexible, diverse, rapid and tailor-made transport with reduction in shipment size and increases in shipment frequency. “Just-in-time” is the strategy for the supply of raw materials for modern production, with focus on trade-off costs between inventory and transportation.On the other hand, there has occurred a revolution in logistics practices in developed economies, promoting “inventory postponement” strategy aiming at maximizing a competitive advantage at a reasonable logistical expenditure. Sought is optimal logistics solution which is more important to the enterprise than the transport optimum. It may have higher transport costs which may be more than offset by greater gains for the entire logistics system.

Logistics costs constitute a substantial part of the market price of products. Developed and progressive economies have focused their efforts and energies to develop cost-efficient logistic solutions resulting in efficient transport logistics services. There have been regular efforts to reduce logistics costs. The ultimate goal is to speed up in terms of time and to save in terms of money to optimize the contribution of logistics to the trade and economy. The USA, the leading world economy producing one-third of the global output, has paid particular attention to this vital segment of the economy. According to published data, over the period 1982-93, the increase in total logistics costs has been slower than the increase in GDP, resulting in a substantial reduction of the share of logistics costs in GDP. In 1982, with GDP at $3.15 trillion, total logistics costs stood at $ 515 billion, i.e. 16.35 per cent of GDP; in 1993 with GDP at $ 6.37 trillion, total logistics costs stood at $ 670 billion, i.e. 10.52 per cent of GDP. Presently, with a GDP at $11 trillion, national logistics costs in the USA hover around $1 trillion. In case of developing countries, with inherent inadequacies and inefficiencies, the proportion of logistics costs to GDP is supposed to be higher; hence the need to strive for an efficient and cost-effective logistics sector.

Sony of Japan, in order to maintain its competitive edge, developed its Central Distribution Centre (CDC) at Singapore, at an investment of more than $200 million. Home electric and electronic appliances produced by 5 plants in diverse countries are sent to Singapore CDC where they are stored, packaged and consolidated into containers for shipment by sea. The CDC at Singapore serves as Sony’s Asian export distribution centre. It reaps substantial savings in investment. If each factory has a warehouse, the total monthly expenses would amount to about $12.7 million. By having a CDC in Singapore, the cost incurred is only $8.6 million, a substantial saving of $ 4.1 million per month. Other benefits include a 50 per cent reduction in lead time and savings in manpower and transportation costs.

The law of comparative advantage, formulated some 180 years back by David Ricardo, on the emergence of international trade, may be billed as outstanding contribution to economic classics. However contemporary international trade owes its viability to the competitive advantage and edge as indicated in the ultimate market price of a product obtaining in the markets abroad ‘reflecting much more than the comparative advantage in cost of production under Ricardo model . This vindicates the creative and critical role of logistics sector in a modern economy. Pakistan has yet to throw up world-class players in this field.

The geographical location of Pakistan, providing shortest and relatively cheap accessibility to its modern and state-of-the-art seaports for a number of land-locked countries of Central Asia and Western China, planned to register economic development explosion in the years ahead, for their trade with other countries by sea, offers uniquely immense potential for players in the logistics sector.

The National Logistics Cell stated to have already initiated action and leading forwarding companies by joining hands with other players in international transportation, can successfully tap this segment as well, in addition to providing “one-stop-shop vision” full range of logistics services to our trade with other countries. Transport and logistics have emerged in the recent decades as a highly organized and globally competitive player on world economic landscape.

For the year 2001, Danzas reported a 10.4 per cent gain in net sales, to $8.1 billion, a figure that appears to place the forwarding unit of Federal German Post at the top of the world’s list of freight forwarders by revenue. Kuehne & Nagel,a leading German logistics multinational, earned $5 billion in overall revenue; Panalpina, another giant in logistics, raised its net revenue to $3.2 billion. DHL, a unit of the Federal German Post and dealing in express business, saw profit more than double to $ 156.6 million. All this is indicative of the magnitudes and stakes involved in logistics at global level.

Pakistan’s freight forwarding and logistics industry may draw some insightful lessons and provide impetus to assert itself in the coming years once the regulations of the WTO become operative to impact the international trade flows.