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Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route

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  • Francois, Joseph F.
  • Rojas-Romagosa, Hugo

Abstract

A consequence of melting Arctic ice caps is the commercial viability of the Northern Sea Route, connecting North-East Asia with North-Western Europe. This will represent a sizeable reduction in shipping distances and a decrease in the average transportation days by around one-third compared to the currently used Southern Sea Route. We examine the economic impact of the opening of the Northern Sea Route. This includes a remarkable shift of bilateral trade flows between Asia and Europe, diversion of trade within Europe, heavy shipping traffic in the Arctic, and a substantial drop in traffic through Suez. These global trade changes are reflected in real income effects for the countries involved and moderate labour displacement for specific industries. The estimated redirection of trade has also major geopolitical implications: the reorganisation of global supply chains within Europe and between Europe and Asia, and the highlighted political interest and environmental pressure on the Arctic.

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  • Francois, Joseph F. & Rojas-Romagosa, Hugo, 2013. "Melting Ice Caps and the Economic Impact of Opening the Northern Sea Route," Conference papers 332392, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332392
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    Keywords

    International Relations/Trade; Research Methods/ Statistical Methods;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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