The impact of foreign visits by heads of state and government as a tool of economic diplomacy on international trade: Turkey anaylsis

Economic diplomacy is an eclectic concept emerged by combination of diplomacy and economics, which represent two different theoretical fields. As a interdisciplinary field, it does not only aim at achieving either foreign policy objectives or economic interests, but focuses on both goals together by using various means such as diplomatic visits, foreign missions, export promotion agencies, trade missions, fairs, forums, etc. Foreign visits of state leaders attract the public's and media's attention due to their political and economic implications. While some academics and politicians assume that these visits increase the bilateral trade, part of the public take a stance against this idea considering that these are only touristic travels with high costs to the budget and nothing else. The fact that the number of these costly diplomatic visits have strongly increased over time, requires an economic analysis. Whether the foreign visits have an impact on Turkey's international trade flow has been empirically analyzed by adding explanatory and dummy variables to the export, import and total trade estimation equations. The panel dataset of this study comprises around 2000 reciprocal foreign visits of presidents and prime ministers over the period from 1990 to 2017 as well as 160 countries' macroeconomic data and a set of control variables. The empirical modelling of bilateral trade flow is based on the Gravity Model by analogy with Newton's law of gravitation; while the econometric analysis of the panel data was carried out using Poisson-Pseudo Maximum Likelihood (PPML) estimation method. According to the regression results, firstly it has been found that Turkey's bilateral trade patterns fit the baseline gravity model well. Secondly, although a positive and statistically significant correlation has been identified between the foreign visits and trade flows; this impact is not economically plausible as the rates are close to zero. The calculated rates of 0,008% for all models are far below the expectations and estimations reached by some researches for developed countries. Thus it has been concluded that the diplomatic visits by the Turkish leaders have not been used as an effective tool.