The Hidden Economics of Being Landlocked: Why Trade Relationships Defy Conventional Measures

For Asia's landlocked developing economies, the greatest obstacle to international trade is not simply the absence of a coastline, but the complex system of transport dependencies, border restrictions, transit arrangements, and institutional relationships that determines whether goods can reach foreign markets efficiently. New research reveals that while geography continues to exert a powerful influence on exports, regional economic integration shows a particularly strong association with trade performance, raising important questions about how governments should approach market access and cross-border cooperation.

Published in the journal Economies, the study, "Trade Costs, Regional Integration, and Bilateral Exports in Asian Landlocked Developing Countries: A PPML Gravity Analysis," was conducted by Tsolmon Sodnomdavaa of Mandakh University and Naranchimeg Chimedravdan of the University of Finance and Economics, Mongolia. Examining 15 years of trade relationships, the researchers find that membership in the Eurasian Economic Union (EAEU) is consistently associated with higher bilateral exports in their structural models, even as conventional measures of logistics performance and tariff barriers produce less reliable results.

The findings challenge simplistic assumptions about trade facilitation. Better infrastructure, lower tariffs, and formal regional agreements are often considered complementary pathways toward stronger exports, yet their statistical relationships with trade are far from uniform. The research instead highlights the importance of distinguishing measurable trade patterns from the actual effects of policy interventions.

Geography Still Shapes Trade, but Distance Tells Only Part of the Story

Landlocked developing countries face trading conditions fundamentally different from those of coastal economies. Exporters frequently depend on neighboring countries for access to ports, international transport networks, and overseas markets. Every additional border crossing introduces potential administrative requirements, logistical uncertainty, and delays that can weaken competitiveness.

The researchers examine merchandise exports from 11 Asian landlocked developing countries, including Afghanistan, Armenia, Azerbaijan, Bhutan, Kazakhstan, Kyrgyzstan, Lao PDR, Mongolia, Nepal, Tajikistan, and Uzbekistan. Their analysis covers 50 major importing markets between 2010 and 2024, creating a common framework for comparing bilateral trade relationships.

Using 6,800 eligible trade observations, the study confirms that economic size and geographical separation remain central to export performance. The conventional gravity model produces positive coefficients of 1.293 for exporter GDP and 0.803 for importer GDP, while geographical distance carries a negative coefficient of −1.734. All three relationships are statistically significant.

These results reinforce an established economic relationship: larger exporting economies possess greater supply capacity, larger importing markets generate stronger demand, and distance tends to discourage trade. However, the meaning of distance becomes more complicated when exporters must navigate foreign transit systems before reaching their customers.

For landlocked economies, geographical separation interacts with border administration, corridor reliability, and transport arrangements. Consequently, two trading relationships involving comparable distances may face different operational conditions depending on the infrastructure and institutional arrangements connecting them.

The distribution of export values further illustrates the uneven nature of these trading relationships. Average bilateral exports reach approximately $216.7 million, while the median stands at just $842,000. Nearly 15% of eligible observations represent validated zero-export flows, highlighting substantial differences in the scale and existence of trading relationships.

Eurasian Integration Emerges as the Strongest Institutional Signal

The most striking finding concerns the EAEU, whose bilateral membership indicator remains positively associated with exports across the reported statistical specifications. Its persistence distinguishes the agreement from other institutional and policy indicators examined by the researchers.

In the preferred structural-gravity model, bilateral EAEU membership carries a coefficient of 0.663, equivalent to approximately 94% higher conditional expected export values. When the model includes bilateral tariffs, the coefficient declines to 0.482 but remains positive and statistically significant.

The structural specification accounts for persistent characteristics of trading pairs and economic conditions affecting individual exporters and importers over time. This makes the institutional association more demanding than one obtained through a simple comparison of trade flows between countries.

Additional tests reinforce the positive relationship. Restricting the analysis to 2013–2024 produces positive, statistically significant EAEU coefficients in structural models both with and without tariffs. Excluding individual bilateral relationships that experienced membership changes also preserves the positive association.

Nevertheless, the research identifies an important constraint: only three trading pairs provide the relevant within-pair changes in EAEU membership: Armenia–Russia, Kazakhstan–Russia, and Kyrgyzstan–Russia. Membership is not randomly assigned, and the models cannot isolate its effects from every simultaneous bilateral development.

The estimated 94% difference must therefore not be interpreted as an export increase caused by EAEU membership. It represents a conditional statistical association, rather than a measured return from joining the bloc.

Another qualification emerges from the tariff-augmented pair-fixed-effects model, where the EAEU coefficient remains positive but fails to reach the conventional 5% statistical-significance threshold. The positive direction is more consistent than statistical significance across every specification.

The findings nevertheless support closer examination of how regional institutions interact with cross-border trading conditions. Preferential access, common procedures, and predictable transit arrangements offer potential channels through which integration could influence exports, although the study does not establish their individual contributions.

Why Logistics Rankings and Tariff Measures Give Incomplete Answers

A second important finding concerns the limitations of widely used measures of trade costs. The World Bank's Logistics Performance Index, despite capturing several dimensions of logistics quality, does not demonstrate a statistically significant independent positive association with bilateral exports once persistent trading-pair characteristics are controlled for.

The result does not establish that improvements in transport infrastructure or border efficiency are ineffective. Instead, it exposes the difficulty of using a broad national indicator to explain changes in specific international trading relationships.

The index incorporates assessments of customs performance, infrastructure, shipping arrangements, logistics competence, tracking capabilities, and timeliness. However, observations are available only periodically, requiring the researchers to carry forward the latest available values when constructing their annual dataset.

Such measurements may not capture operational changes at individual border crossings or along specific freight corridors. Their association with broader national development conditions also complicates efforts to identify an independent relationship with exports.

Tariff estimates present another challenge. Although the principal tariff-augmented models generally produce negative coefficients, none reaches statistical significance at the 5% level. A structural sensitivity test covering 2013–2024 even produces a small positive, statistically insignificant coefficient.

The analysis uses bilateral effectively applied simple-average tariffs, but these measures cannot fully represent differences in product composition or the actual tariff exposure of individual export sectors. Furthermore, tariff availability reduces the number of usable observations, making comparisons between models sensitive to changing sample coverage.

Results for the Asia-Pacific Trade Agreement reinforce the need for caution. Its membership indicator is positively associated with exports in pair-fixed-effects models, but the relationship disappears when the analysis incorporates the more demanding structural controls.

Together, these findings demonstrate that conclusions about trade institutions and barriers depend considerably on measurement choices and statistical design. Indicators that appear influential in simpler comparisons may offer limited independent explanatory power once broader economic conditions are considered.

The Policy Challenge: Turning Regional Access Into Measurable Trade Gains

For policymakers, the research points toward a trade-development agenda that considers physical connectivity and institutional cooperation together. Reliable transit corridors, predictable border procedures, interoperable customs systems, and workable regional arrangements remain relevant priorities for countries whose exporters depend on neighboring territories.

The study does not calculate the economic returns from these interventions or establish which reforms would generate the greatest export gains. Its findings instead support more targeted measurement of the mechanisms through which trade costs arise and regional arrangements operate.

This distinction is particularly relevant for governments and development institutions assessing infrastructure investments and regional trade commitments. Aggregate logistics rankings may provide useful context, but they cannot substitute for information on corridor-level transport costs, border-processing times, freight connectivity, and the reliability of transit procedures.

The researchers also identify substantial limitations in geographical coverage. Although the selected 50 importing markets represent 86.92% of reported world exports across the available exporter-year records, coverage varies significantly between countries, from 38.5% for Uzbekistan to 99.7% for Mongolia.

The dataset cannot represent every export destination equally. Turkmenistan is also excluded because comparable direct-reporter trade information could not be recovered. These constraints limit how far the results can be generalized across Asia's landlocked economies.

Further research could improve the evidence by incorporating additional importing markets, product-level tariffs, corridor-specific logistics measurements, and trade outcomes adjusted for commodity-price and exchange-rate movements. More detailed investigation of regional integration would also help distinguish the effects of formal membership from accompanying economic and institutional changes.

The wider development significance extends beyond the observed EAEU relationship. Sustainable economic growth, infrastructure development, and international partnerships are closely connected to the difficulties landlocked economies face in reaching foreign markets, making the study relevant to the policy concerns reflected in SDGs 8, 9, and 17.

For landlocked developing economies, effective trade policy requires more than negotiating access to foreign markets. It requires understanding the practical conditions under which that access becomes usable, reliable, and commercially meaningful.