The relationship between international trade and logistics performance: A focus on the South Korean industrial sector

Abstract

Recent research highlights the complexity of the relationship between logistics performance and international trade; the efficiency of logistics plays an important role in international trade. In terms of global supply chain, logistics efficiency is the determinant of international trade flow and logistics cost reduction, is which measured by logistics performance. In general, logistics is an important measure of trade flows in the global supply chain, and it is necessary to analyze countermeasures at regional or country level, given the fundamental pillars of a country's economic development.Therefore, this study analyzes the impact of logistics performance on international trade, focusing on Korea. In addition, it identifies the factors of logistics performance that affect each commodity item from an industrial perspective. The analysis focused on Korea owing to its export-dependent economic structure and the special nature of the overseas markets. At a time when the problem of export dependence is becoming serious due to the global crisis, it is necessary to provide policy responses and insight to policy makers to improve logistics efficiency. To investigate logistics performance determinants affecting international trade, this study used logistics performance index (LPI) in gravity equation model, the basic models for analyzing trade flows.The results indicated that components of the Logistic Performance Index (LPI) are significantly relevant to international trade. In particular, the components of the LPI illustrate different influences by international trade commodity. It was also confirmed that the priorities of logistics performance factors have different effects depending on import and export items. Consequently, the estimation results suggest that to promote international trade in the global economy, improving logistics services such as international transportation, tracking and tracing, and timeliness should be prioritized.