The Role of Trade Facilitation on Global Production Networked Trade of RCEP Countries

Abstract

Purpose - This paper aims to analyze the impact of trade facilitation on export trade of parts and components and final goods in RCEP countries by using various trade facilitation measures such as logistics performance, enabling trade, freedom to trade, and trade infrastructure. Design/methodology/approach - The empirical analysis was carried out by using the 4-year interval data of the 2010-2016 period for 63 trading partners in RCEP countries, and by applying the gravity model considering trade costs. Findings - Empirical findings are as follows: (1) Exporters’ overall trade facilitation measures have a stronger effect on promoting parts and components than on final goods trade, but importers’ trade facilitation as seen in logistics performance and trade infrastructure has a stronger effect on final goods than parts and components. (2) Trade facilitation measures in the sub-sector of logistics performance and trade infrastructure have various effects on the parts and components and final goods trade according to the characteristics of each sub-sector with variable effects depending on the level of logistics performance and the production location of trading partners. Research implications or Originality - The results imply that countries importing parts and components to assemble final goods will be at a disadvantage if there is networked trade with exporters with inefficient logistics system and trade infrastructure. It is suggested that these countries need to establish trade and logistics policies in consideration of characteristics such as logistics efficiency and production location of trading partners in order to practice ‘just-in-time’ production and have networked trade.