Regional Economic Integration, Logistics Performance and Bilateral Trade: Empirical Evidence from Vietnam

Abstract

In the age of flourishing regional economic integration, export-oriented economies tend to be more easily approached which is synonymous with subsequent increases in bilateral trade volume. Nations have paid much attention to determining the key drivers of export growth. In accordance with technological advancements of transportation and logistics industries, international trade has been dramatically affected by this trend. Thus, this research exploits an integration- and logistics-driven Gravity Model of trade as the analytical framework by including measurement of logistics performance and regional economic integration into the fixed effect and random effect estimation. A panel data set of Vietnam and its importing partners is selected as sample for the analysis. Findings confirm the validity of Trade Gravity Model. However, geographic disadvantages significantly seem to exist which could be simultaneously mitigated by either trade openness or logistics performance as they statistically appear to be conducive to trade flows. This implicitly indicates the active role of trade and logistics policies in the contemporary period. Most strikingly, from the perspective of the exporting country, trade agreements signed by a trading block to which the exporting country is a party and a single economy might facilitate “intra-block” competition for foreign markets, which ultimately hampers the export growth of each individual member, pecifically in trading relations with importing countries of improved logistics performance.