(Paper) Indian Institute of Foreign Trade Previous Paper -
Direction for questions 1 to 4: Read the following
passage carefully and answer the questions given at the end.
Before the internet, one of the most rapid changes to the
global economy and trade was wrought by something so blatantly useful that it is
hard to imagine a struggle to get it adopted: the shipping container. In the
early 1960s, before the standard container became ubiquitous, freight costs were
I0 per cent of the value of US imports, about the same barrier to trade as the
average official government import tariff. Yet in a journey that went halfway
round the world, half of those costs could be incurred in two ten-mile movements
through the ports at either end. The predominant ‘break-bulk’ method, where each
shipment was individually split up into loads that could be handled by a team of
dockers, was vastly complex and labour-intensive. Ships could take weeks or
months to load, as a huge variety of cargoes of different weights, shapes and
sizes had to be stacked together by hand. Indeed, one of the most unreliable
aspects of such a labour-intensive process was the labour. Ports, like mines,
were frequently seething pits of industrial unrest. Irregular work on one side
combined with what was often a tight-knit, well - organized labour community on
In 1956, loading break-bulk cargo cost $5.83 per ton. The
entrepreneurial genius who saw the possibilities for standardized container
shipping, Malcolm McLean, floated his first containerized ship in that year and
claimed to be able to shift cargo for 15.8 cents a ton. Boxes of the same size
that could be loaded by crane and neatly stacked were much faster to load.
Moreover, carrying cargo in a standard container would allow it to be shifted
between truck, train and ship without having to be repacked each time.
But between McLean’s container and the standardization of the
global market were an array of formidable obstacles. They began at home in the
US with the official Interstate Commerce Commission, which could prevent price
competition by setting rates for freight haulage by route and commodity, and the
powerful International Longshoremen's Association (ILA) labour union. More
broadly, the biggest hurdle was achieving what economists call ‘network
effects’: the benefit of a standard technology rises exponentially as more
people use it. To dominate world trade, containers had to be easily
interchangeable between different shipping lines, ports, trucks and railcars.
And to maximize efficiency, they all needed to be the same size. The adoption of
a network technology often involves overcoming the resistance of those who are
heavily invested in the old system. And while the efficiency gains are clear to
see, there are very obvious losers as well as winners. For containerization,
perhaps the most spectacular example was the demise of New York City as a port.
In the early I950s, New York handled a third of US seaborne
trade in manufactured goods. But it was woefully inefficient, even with existing
break-bulk technology: 283 piers, 98 of which were able to handle ocean-going
ships, jutted out into the river from Brooklyn and Manhattan. Trucks bound‘ for
the docks had to fiive through the crowded, narrow streets of Manhattan, wait
for an hour or two before even entering a pier, and then undergo a laborious
two-stage process in which the goods foot were fithr unloaded into a transit
shed and then loaded onto a ship. ‘Public loader’ work gangs held exclusive
rights to load and unload on a particular pier, a power in effect granted by the
ILA, which enforced its monopoly with sabotage and violence against than
competitors. The ILA fought ferociously against containerization, correctly
foreseeing that it would destroy their privileged position as bandits
controlling the mountain pass. On this occasion, bypassing them simply involved
going across the river. A container port was built in New Jersey, where a
1500-foot wharf allowed ships to dock parallel to shore and containers to be
lified on and off by crane. Between 1963 - 4 and 1975 - 6, the number of days
worked by longshoremen in Manhattan went from 1.4 million to 127,041.
1. Identify the correct statement:
(1) The freight costs accounted for around I0 percent of the value of imports in
general during early l960s, given the labour-intensive ‘break-bulk’ cargo
(2) As a result of growing adoption of containerized trade during 1969-73, while
the ocean-borne exports from South Korea in general more than doubled, the same
to the US tripled.
(3) The outbreak of the Vietnam war functioned as a major positive force towards
rapid expansion of containerization, as American imports from the country
(4) In the early days of container trade development, a major shipping firm
Matson Navigation used a 24-foot container since a bigger container was not
suitable for its trucks.
2. Identify the false statement:
(1) In the pre-containerization days, trucks bound for the
New York docks had to pass through the narrow streets, wait for an hour or two
before even entering a pier, and then undergo a laborious three-stage process
for loading onto a ship.
(2) Once satisfied with the effectiveness of containerized trade, the US
military engaged the company of Malcolm McLean to transport equipments for their
soldiers stationed in Western Europe.
(3) Cargo loading during 1960s usually took a long period, as it involved manual
handling of huge variety of cargoes of different weights, shapes and sizes.
(4) The issue of standardization of the containers created led to a debate
.between the US government and American Standards Association, but the question
was finally sorted through public subsidy programme by Federal Maritime Board.
3. The emergence of containerization technology in early
seventies resulted in:
(1) Immediate adoption of the containerized export route by
private companies, in their own accord.
(2) An instant sharp reduction in freight costs expressed as a percentage of
imports across countries.
(3) Spectacular growth in exports from the East Asian tiger economies, which
were reliant on an export-oriented growth strategy.
(4) All of the above
4. Match the following
(1) a – i; b – iv, c – ii; d - iii
(2) a – iii; b – i, c – iv; d - ii
(3) a – iv; b – i, c – ii; d - iii
(4) a – iii; b – iv, c – ii; d – i
Courtesy: Test Funda