The efficiency of trade support structures is an important determinant of global trade growth. Although logistics plays an important role in supporting commercial activities, its performance is rarely examined in trade policy research and practice. This paper investigates the effect of logistics performance on international trade, drawing on both disaggregated data on logistics performance and standard export equations that incorporate measures of logistics specificity. It finds that overall logistics performance is positively correlated with exports.
In addition to these economic benefits, international trade facilitates economic growth. It creates positive externalities, improves resource distribution, enhances manufacturing methods, and generates economies of scale. Moreover, the availability of surpluses in some countries has increased the global importance of trade. In addition, the logistics sector accounts for about 5% of total GDP in many countries, according to Shepherd’s (2011) study. As a result, logistics-related performance is critical to facilitating trade.
Global trade has increased at a rapid pace since the year 2000. As trade liberalization continues and countries grow more outward-oriented, the importance of logistics will grow. As a result, the logistics industry will increase its contribution to national production. In fact, if these logistics systems improve, the global trade market share will increase. Despite the challenges that lie ahead, these gains will lead to increased global trade. But how can these countries improve? Here are some ways to boost their logistics performance.
Imperfect markets: Developing countries often face logistic problems because their markets are poorly structured. This can cause higher costs for traders. For example, the trucking industry is a critical conduit of goods throughout the Middle East. While this is often a problem, it doesn’t have to be. Inefficient pricing practices and monopolies mean high costs for traders. This situation is especially detrimental for developing countries. The only way to increase the efficiency of international trade is to improve the logistics sector in developing countries.
Importers can improve their overall efficiency by reducing their inventory-in-transit. When shipments take a long time to reach their destination, inventory-in-transit is high. The average of 25 containers departing from the origin to the destination every day reduces the overall payment cycle by four days. The same can be said for the logistics industry as a whole. By lowering costs, they can lower their costs.
Import-export trade has grown significantly in the past two decades. The logistics services of the exporter and importer countries have a significant impact on the volume of goods traded. Poor logistics services can result in delays in customs clearance processes and limited co-ordination among countries on border procedures. This can lead to fragmented infrastructure, inefficient communication infrastructure, and expensive shipping. Poor logistics services can lead to problems in tracking and tracing consignments, inability to certify product quality, and costly shipping.
Improved global logistics are crucial for the movement of goods and services. It helps companies connect to their customers across the globe. Improving Indian industry’s infrastructure and networking systems will allow it to compete with rivals from developed countries. But the need for improved logistics is greater than ever. All countries, regardless of size, need quality logistics infrastructure to keep up with the growing international trade. And India has many potential in this field. With better logistics, India can become a global player in international markets.