Mongolia’s Foreign Trade: Relationship between the Transportability of Products and Distance to Target Markets

Abstract

Despite the reduction of transportation costs that occurred in the second half of the 20th century, these costs remain a significant obstacle to effective entry into the global market for landlocked countries and regions. This article investigates the relationship between the scale of transportation costs by types of products and distance to target markets using the example of the directions of trade and commodity composition of Mongolia’s exports. The principle of “relative transportability of products” is formulated and an original methodology is used to assess the distribution of Mongolia’s export products based on an analysis of their transportability by distance. It is established that exports of low-transportability mineral commodities (coal, iron ore, oil, and ores and concentrates of nonferrous metals) are almost exclusively limited to neighboring countries, primarily China. The main reason for that pattern is the high transportation costs for bulk mineral commodities, which limits the possibilities of transporting them across large distances due to the significantly decreasing cost-effectiveness. Meanwhile, more expensive Mongolian products (gold, clothing, wool, etc.) are exported to more distant countries. The spatial distribution and transportability of Mongolian exports by border crossing points with Russia and China are determined. It is established that railway transport is the predominant mode of transportation for bulk cargo. It is concluded that the highest priority direction of export specialization in Mongolia is increasing the processing depth of raw materials to semifinished or finished products, thereby significantly increasing cost-effective transportation distances and expanding the area of foreign trade.