The Impact of Logistics Efficiency and FTAs on International Trade: The Experience of G-20 Countries

Abstract

Purpose - The purpose of this study is to analyze the impact of logistics efficiency and Free Trade Agreements (FTAs) on trade between South Korea and G-20 countries, and derive policy implications based on the analysis results. Design/Methodology/Approach - In this study, we analyze the impact of logistics efficiency and FTAs on trade using the gravity model, which is a model that explains the ‘normal’ size of trade between nations. This study adopts varying coefficient models, such as the random effects model and fixed effects model in order to more effectively analyze unobservable factors in the panel data. The results of the Hausman test suggest that a fixed effects model is appropriate. Findings - The estimated coefficient for the FTA variable is 0.124, and it is statistically significant at the 1% significance level. The estimated coefficient for the logistics efficiency variable is positive (+) and statistically significant. South Korea’s estimated logistics efficiency coefficient is 1.191, which is significant at the 10% significance level, and the estimated coefficient for the trading partner’s logistics efficiency is 0.619, which is also significant at the 10% significance level. Research Implications - In order to increase a country’s trade volume, it is necessary not only to improve its own logistics efficiency but also to enhance the logistics systems of its trading partners. Furthermore, since the implementation of FTAs is expected to have a positive impact on trade expansion, there is a need to be more proactive in pursuing FTA agreements with non-signatory countries.