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ABSTRACT
This study is focused on the direction and magnitude of visa policies on bilateral trade and foreign direct investment (FDI), both of which often necessitate in-person contacts. Visa restrictions hinder cross-border travel deterring potential visitors and producing an inimical effect on trade and FDI. Liberal visa policies facilitate business travels and encourage companies engaging in international trade. This article analyzes the impact of visa restrictions using gravity-type models for the period of 2000–14 on the exports and FDI of Turkey. A panel data fixed-effects model helps elucidate time-variant and country-idiosyncratic characteristics of visa policies. The estimations indicate that visa restrictions have a significant negative effect on both trade and FDI. Two-step cluster analysis is also utilized to segment countries depending on the visa-free travel their citizens enjoy employing the Henley & Partners Visa Restrictions Index. Results suggest that effects of visa restrictions are higher for countries having higher travel freedom.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes on contributor
Engin Akman is a full-time researcher and assistant professor at the Department of International Trade of Çankiri Karatekin University, Turkey. He has worked in the fields of research and development, sales and marketing, international trade and total quality management. His academic interests include international trade, corporate finance, multi-criteria decision-making, SMEs and research development in corporations.
Notes
1. Koh, “An Evaluation,” 198–202.
2. Harvard Business Review, “Managing Across Distance.”
3. Oxford Economics, “Business Travel.”
4. Denstadli et al., “Videoconferencing and Business,” 1–13.
5. Cristea, “Buyer-Seller Relationships,” 207–20.
6. The only destinations allowing completely visa-free entry are Cook Islands, Dominica, Micronesia and Niue (World Tourism Organization, “Tourism Visa Openness Report”).
7. Yasar, Lisner, and Rejesus, “Bilateral Trade Impacts,” 501–21.
8. Karaman, “The Pernicious Impact,” 1–23.
9. Kulendran and Wilson, “Is There a Relationship,” 1001–9.
10. Tsui and Fung, “Causality between Business Travel,” 395–404.
11. Van De Vijver Derudder, and Witlox, “Exploring Causality in Trade,” 142–50.
12. Oxford Economics, “Business Travel.”
13. Ching, Wong and Zhang, “Non-tariff Barriers to Trade,” 65–73.
14. Neumayer, “On the Detrimental Impact,” 901–7.
15. Song, Gartner, and Tasci, “Visa Restrictions and Their,” 397–412.
16. Yasar, Lisner, and Rejesus, “Bilateral Trade Impacts,” 501–21.
17. Disdier and Head, “The Puzzling Persistence,” 37–48.
18. Blonigen and Piger, “Determinants of Foreign Direct,” 775–812.
19. Neumayer, “On the Detrimental Impact,” 901–7.
20. Baltagi, Egger, and Pfaffermayr, “Estimating Regional Trade Agreement,” 194–208.
21. Büthe and Milner, “The Politics of Foreign,” 741–62.
22. Neumayer, “On the Detrimental Impact,” 901–7.
23. Blonigen and Piger, “Determinants of Foreign Direct,” 775–812.
24. Neumayer, “On the Detrimental Impact,” 901–7.
25. Yasar, Lisner, and Rejesus, “Bilateral Trade Impacts,” 501–21.
26. Neumayer, “On the Detrimental Impact,” 901–7.
27. Yasar, Lisner, and Rejesus, “Bilateral Trade Impacts,” 501–21.
28. United Nations, “International Trade Statistics Yearbook.”
29. Kirişçi and Kaptanoğlu, “The Politics of Trade,” 705–24.
30. Kirişçi, “The Transformation of Turkish,” 29–57.
31. In fact, Turkey was obliged to follow visa polices in line with EU visa policies (Schengen regime) due to the declaration of EU candidacy in 1999. This alignment policy compelled the country to impose visa restrictions on the Schengen’s negative list and pursued till mid-2000s. However, Turkey deviated from this policy and returned to liberal visa policies offering more countries visa exemption. There are several reasons for this policy shift: (i) though obliged to impose visas on the negative list, Turkey itself was in the negative list (ii) the unwillingness of imposing visas which may lower economic gains through tourism and trade (iii) the costs of handling visa applications and issuing consulate visas for millions of visitors (Kirişçi, “A Friendlier”).
32. Kirişçi, “The Transformation of Turkish,” 29–57.
33. —Ibid.
34. Akman, “Emerging Trade Partnership between,” 137–62.
35. MFA, “Visa Information.”
36. Yakan, “Uluslararası Seyahat ve Vize.”
37. World Bank’s alignment scheme considers Turkey among the countries of Europe and Central Asia. There are 57 countries (all European countries and former Soviet countries) in the same region with Turkey according to this study.
38. CEPII conducts studies/research and produces databases/analyses on the global economic issues and their progression. The distance measure uses city-level data to take into account the uneven distribution of the population. The distances are measured by weighting the principal city-pair distances with their respective populations.
39. Levin, Lin, and James Chu, “Unit Root Tests,” 1–24.
40. Im, Pesaran, and Shin, “Testing for Unit Roots,” 53–74.
41. Pöyhönen, “A Tentative Model,” 93–100.
42. Baltagi et al., “A Generalized Design,” 391–7.
43. Neumayer, “On the Detrimental Impact,” 901–7.
44. Bozkurt and Akman, “Financial Integration into EU,” 269–85.
45. The Henley & Partners VRI is a universal ranking of the countries according to the travel freedom that their citizens have. VRI has been calculated using the worldwide database of International Air Transport Association. Henley & Partners, a company specialized in residence and citizenship planning, has been publishing the index analyzing the visa regulations of all countries and territories in the world since 2006 and it published the tenth Anniversary Index in 2015. According to the index, there are 219 destination countries or territories in total (Countries imposing their own visa restrictions but issue passports under the authority of a governing country are considered as a destination, but not as a country). Hence, potential number of destinations is 218 excluding the citizen’s home country. The volume of passports assessed is 199. These are the 193 Member States of the United Nations, Taiwan, Kosovo, Palestinian Territory, Vatican City, Hong Kong (SAR China), Macao (SAR China).
46. Jaumotte, Lall, and Papageorgiou, “Rising Income Inequality,” 271–309.
47. Neumayer, “On the Detrimental Impact,” 901–7.
48. —Ibid.
49. Yasar, Lisner, and Rejesus, “Bilateral Trade Impacts,” 501–21.
50. Neumayer, “On the Detrimental Impact,” 901–7.
51. Yasar, Lisner, and Rejesus, “Bilateral Trade Impacts,” 501–21.
52. Neumayer, “On the Detrimental Impact,” 901–7.