The Effect of Logistics Performance between Countries on International Trade: A Focus on Korea’s Trade Partners and FTA Countries

Abstract

Purpose - This study is to compare and analyze the impact of logistics performance between Korea’s trade partners and FTA signatory countries in international trade. Design/Methodology/Approach - This study conducted a panel analysis applying a gravity model to analyze the impact relationship between international trade and logistics performance. The panel data was composed by combining 110 trade partners considering whether the biennial data of the Logistics Performance Index (2007-2018) and statistical data used in the analysis match. Findings - Both GDP per capita and population were statistically significant in the increase in exports and imports. It showed the same conclusion as previous studies that export and import demand are determined by income level and market size. However, logistics performance in export growth improved in FTA signatory countries more than in trade partners, while logistics performance in import growth showed the opposite trend. Furthermore, international shipment and timeliness are logistical achievements that contribute in common to the exports and imports of trade partners and FTA signatories. Regardless of the trade partners and FTA signatories, we have confirmed that the cost-cutting and time reduction of raw material transportation are important factors contributing to the expansion of exports and imports. Research Implications - This study confirmed that the conclusion of an FTA has a great effect on logistics performance. In particular, in terms of export growth, customs improved further after signing an FTA, and tracking and tracing were new factors influencing export performance. Therefore, Korea should enhance its trade competitiveness by signing FTAs to effectively utilize supply chains in the region.