Trade

The Influence of Number of Time Zones on Trading

With the goal of abolishing seasonal clock changes, national and European politicians want to avoid Europe becoming a "patchwork quilt" of different time zones. There is concern that the number of time zones has a negative effect on trade between countries  [Euro19, Scha19]. However, analysis of the available literature shows that concerns of this type are unfounded.

Before we turn to the topic of time zone differences and trade, it is important to mention that the greatest factor influencing the formation of trade relationships is not time, but rather geographical distance. In general, trade between countries decreases with increasing geographical distance. It is therefore not surprising that Germany's largest trading partners are the European countries. Trade with the European countries accounts for around 66% of exports and 72% of imports. Immediate neighbors such as France, the Netherlands, Austria, Poland and Belgium are examples that demonstrate the importance of geographical proximity for the development of trade relations  [Oec:00].

However, different types of trade are affected differently by geographical distance.

Exports

Where did Germany export to in 2018.png

Imports

Where did Germany import from in 2018.pn
legend_trade.PNG

Figura 1: Mapa das exportações  e importações  alemãs em 2018 [Thea00] .

In the service sector, for example, advances in information technologies and the associated electronic and digital infrastructure make it possible to digitally cover geographical distances. This therefore has only a minor impact on the service sector. The geographical distance is also irrelevant for services in the field of transport and tourism  [Naka18].

Now back to the problem of time zones:  

In addition to the influence of geographical distance, economists consider the effect on the economy if trading partners belong to different time zones. This can be both good and bad for businesses. Economists differentiate between that Continuity effect and the Synchronization effect  [Naka18].  

The continuity effect describes the ability to produce beyond working hours (e.g. 9:00 a.m. to 5:00 p.m.) by “continuing” the process at a different location in a different time zone. A well-known example that illustrates the continuity effect is the US and Indian software industries, where engineers in India who belong to a subsidiary, a branch, or a partner company continue the programming process initiated by the American engineer or vice versa. This shortens the lead time until the product is shipped. The continuity effect has a positive effect on trade  [Naka18].

The synchronization effect, on the other hand, concerns a reduction in contact between different commercial units due to a delay in duty times (9:00 a.m. in location A corresponds to 5:00 p.m. in location B), which makes their internal processes less efficient or affects communication with international customers. The synchronization effect has a negative impact on trading  [Naka18].

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The bottom line that these effects have on trade is difficult to quantify or even generalize. On one hand, the influences are very different depending on the trade sector, type of industry, and of course the location and time zone of a country. Second, economists do not agree on the magnitude of the individual effects [BrFe19, EgLa13, Toma13]. In general, however, services seem to benefit more from the existence of time zones [Dett14, Toma13, Chri17] while industrial goods suffer losses [Toma13, Chri17].

Nonetheless, the present analyzes can appease those still concerned within Europe about the choice of time zones. For one thing, studies show that both positive and negative effects of time zone differences only become significant if the differences between the time zones are equal to or greater than 4-5 hours [Chri17, Toma13]. Some authors even assume that only a time difference of 9 hours leads to significant effects  [Dett14]. Second, the dimensions of these effects on trade, be it in profit or loss, are relatively small [BrFe19, Chri17, Dett14, EgLa13, Toma13]. For example, an estimate for the United States assumes that an hourly increase in the time zone difference would reduce trade by about $ 60 million, a loss of just 0.0025% [Toma13].

 

The economies of the United States and the European Union can be compared in many ways. Both have the largest individual markets in the world and are crossed by several time zones. Within the European Union, the maximum time zone difference is two hours, well below the 4 or 5 hours at which continuity or synchronization effects become significant at the earliest. In addition, gains or losses on the order of 0.0025% do not compensate for the negative economic impact of people living in the wrong time zone, such as DST.

Conclusion: There are no studies that indicate or even prove a significant negative effect of time zone differences within Europe.  

Special Effects of DST on Trade

Some believe that the summer time benefits certain economic sectors (golf, retail) [Mich18, FaNW16]. Still others believe that standard time has a positive impact on other areas (agriculture, theater, cinema, television, streaming services, personnel and business services) [Bria13, FaNW16]. However, no reliable numerical values for these statements can be found in the available literature.

A study commissioned by the European Union to a private company in 1999 is noteworthy to mention [ReVa99], which initially seems to show that the commercial leisure sector (tourism, restaurants, travel, etc.) experiences a gain of 3% during the summer with DST [ArNe08, ReVa99]. However, the reliability of this result must be treated with extreme caution. The study authors themselves consider it to be “impossible to base conclusions about this sector on clear and concrete evidence, since most of the material used comes from the opinions, premonitions and assumptions of those working in this sector” [JaSA14, ReVa99]. Because the fact still is that companies and operations, consulted in the study, have never been active during a summer without DST.

In addition, a study published in 2009 does not prove this gain. It shows that around a third (33%) of leisure providers surveyed using similar methods in Perth, Australia believe that DST is detrimental to their business, only 15% think DST is beneficial, and the the rest (the majority) are indifferent to DST [AlOg09]. However, if this estimate of 3% growth for the European Union was taken as justified, this would mean a profit of 1268 million euros for Germany for the 7-month DST (based on the 2018 values from the "Atlas of Economic Complexity " for travel and tourism). This would correspond to an increase in trade of only 0.066%  [Thea00] .

 

So far there have been no studies on the effects of a year-round DST on the commercial leisure sector (e.g. whether it would reduce or increase winter tourism).