3. Distance and a country’s position within shipping networks Shipping goods over a longer distance requires more
time (capital costs) and fuel (operating costs). Thus, trading partners that are further away from main
markets might expect to be also confronted with higher bilateral freight costs. As regards the impact of
distance, the traditional gravity model would suggest that countries that are further away from each other
will trade less (see, for example, Tinbergen, 1962; Pöyhönen, 1963; and Linnemann, 1966). However,
traditional gravity models ignore effective distance and connectivity as potentially described by network
structures (for example, the regular shipping liner services configuration). Limão and Venables (2001)
show, using the example of shipping costs to Baltimore, that geographic distance alone cannot
explain price differences in freight rates (figure 3.3).