The Effect of Transport and Logistics on Trade Facilitation and Trade: A PLS-SEM Approach

Abstract

Abstract Trade facilitation promotes increased opportunities to participate in international trade. Current research has mainly analyzed the impacts of tariff-related and trade barriers. Nevertheless, as trade policies shift toward removing non-tariff barriers, studies addressing core elements become relevant, requiring a more systemic view at a simultaneous level. The study proposes that transportation infrastructure (i.e., roads, seaports, railroads, and airports) and logistics are core elements supporting trade facilitation efforts at the local level. The study provides empirical evidence on the direct and indirect effects among transportation infrastructure, logistics, trade facilitation, and trade. Partial least squares–structural equation modeling is the main empirical method employed to examine the interrelationship of the quality of transportation infrastructure, logistics, trade facilitation, and trade using a sample of 80 countries for the years 2012, 2014, and 2016. There is a large direct effect of transportation infrastructure on trade facilitation and a vast direct effect on logistics. Logistics has a small direct effect on trade facilitation. I also conduct mediation analyses, which show that logistics has a larger effect on trade via trade facilitation than transportation infrastructure quality has. These findings suggest that trade facilitation implementation might not be enough to tackle current challenges and ongoing economic development. Governments should prioritize the integration of logistics stakeholders in the public sector to optimize the benefits of global networks. Thus, the significance of transportation infrastructure and logistics in trade should not be neglected, as the private sector (i.e., logistics providers) play a large and relevant role in practice.