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Article

Duration of Trade Relationships of Polish Enterprises on the Intra-Community Market: The Case of Vehicles and Automotive Parts Trade

by
Iwona Markowicz
* and
Paweł Baran
Institute of Economics and Finance, University of Szczecin, 71-101 Szczecin, Poland
*
Author to whom correspondence should be addressed.
Sustainability 2022, 14(6), 3599; https://doi.org/10.3390/su14063599
Submission received: 29 January 2022 / Revised: 16 March 2022 / Accepted: 17 March 2022 / Published: 18 March 2022
(This article belongs to the Special Issue International Trade and Foreign Direct Investment for Sustainable Development)
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Abstract

:
International trade allows for wider access to goods and services in domestic markets. It contributes to socio-economic development, and it is an important factor in raising living standards. The aim of the study is to provide a duration analysis of trade relationships of Polish enterprises on the intra-community market and determine the influence of selected factors on the length of time the relationships last. We employ survival analysis methods to study the duration of Polish enterprises on the intra-community market (the case of 87 CN chapter—vehicles and parts and accessories thereof), separately for intra-community supplies (ICS) and intra-community acquisitions (ICA). Our research covers trade relationships at a level close to individual transactions—the data unit relates to a specific domestic company, a specific product group (combined nomenclature heading), a specific direction of the transaction (ICS/ICA) and exchange with a specific country. Differences in duration curves for ICS and ICA are statistically significant, and export (ICS) relationships are more durable over time than import relationships (ICA). The most durable relationships of Polish enterprises are with business partners from countries such as the United Kingdom, France, Sweden, Spain, Portugal and the Czech Republic.

1. Introduction

International trade is an important factor in both enlarging GDP growth and in raising the living standards of households. There is a growing consensus about the positive links between openness to trade and economic performance. Trade serves as a conduit for the transfer of foreign technologies and know-how, which enhances domestic productivity, and increased international competition stimulates domestic companies to become more competitive [1]. The report [2] states that the global trading system has been a source of flexibility, diversification and strength during the pandemic by supporting countries’ economic recovery. According to Marchand [3], cheaper imports can reduce domestic consumer prices.
At present, the principal objectives of state policy should be the sustainable development of the country and an increase in the level of prosperity of its inhabitants. In order to achieve these goals, it is necessary to open the economy to international exchange. It contributes to an increase in national income, an inflow of foreign direct investment and modern technology. International exchange also promotes the optimal use of resources. The concept of sustainable development covers three dimensions: economic, social and environmental. Undoubtedly, international trade affects a country’s national income and influences the standard of living. Hence, it plays an increasingly important role in sustainable development. It not only stimulates growth and improves social welfare but also replenishes regional resource scarcity [4,5].
We believe that stable business relationships have an impact not only on the sustainability of the economy but also on the development of the company/industry and the well-being of employees, as well as the proper management of company resources. This is why we conduct analyses on the duration of trade relationships of Polish enterprises on the intra-community market at the individual company level. As it is the first study in this field for Polish companies, we hope it can generate interest in this topic and its further development.
With the creation of the European Union, all customs duties at the borders between community countries were eliminated. The customs union is considered to have been one of the first achievements of the EU. Member States do not apply any tariffs in intra-EU trade in goods and apply the same tariffs to goods imported into their territory from the rest of the world. Customs duties primarily serve to combat dangerous goods, illegal trade, fraud and organised crime while at the same time facilitating legitimate trade [6]. However, the collection of customs duties also requires an efficient system for collecting data relevant for numerous economic analyses. Customs controls were lifted between the six member countries of the European Economic Community as early as 1968, and the Single Administrative Document (SAD) ceased to be used for trade in goods between the Member States in 1993. This would have resulted in a loss of a source of data on trade in goods between EU countries. Therefore, on 1 January 1993, Intrastat was introduced throughout the European Single Market. It is a common system of statistics on trade in goods that fills the gap.
Subsequent international agreements, namely the Treaties of Maastricht (1992), Amsterdam (1997) and Nice (2001), have fostered the countries sometimes referred to as the ‘old Union’ to function as a community. Further countries joining the EU in 2004 (Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia), in 2007 (Bulgaria, Romania) and in 2013 (Croatia) have all gradually adjusted their legal regulations to the EU law. Adjustments were also necessary with regard to the intra-EU trade in goods and in the field of official statistics on such trade. The accession of all the individual countries to the EU has resulted in a new reporting obligation for any entity trading goods with Member States. These traders are obliged to file Intrastat declarations on intra-community supplies (ICS) and intra-community acquisitions (ICA). Implementation of the Intrastat system in EU countries has been a huge project and a success for public statistics, but there is still room for improvement [7], including better access to data or higher data quality.
The collection of statistics on intra-EU trade follows a characteristic pattern. The value and quantity of the goods are declared by both the seller (in the country of consignment) and the purchaser (in the country of acquisition). This makes it possible to identify discrepancies between mirror values (as these data are recorded in two sources simultaneously). These discrepancies are due to a variety of reasons, ranging from the obvious (errors in recording data) to methodological (introduction of statistical thresholds in countries, simplified reporting and use of different exchange rates) to intentional actions (tax fraud).
Poland became a member of the European Union in 2004. This has facilitated trade between Polish companies and counterparties in EU countries. Trade transactions, namely intra-community supplies (ICS) and intra-community acquisitions (ICA) are being registered in national Intrastat systems (in Poland, it is maintained by several Regional Revenue Offices and coordinated by Szczecin division). Transaction data for all EU countries are collected in an aggregate form in the Comext database, provided by Eurostat. This huge data resource enables research on international trade in the EU. A specificity of this database, as mentioned above, is the existence of mirror data, i.e., data on the same individual transactions are recorded in two registers in trading partner countries [8,9]. This way of reporting statistical data makes it possible to compare them and to study their quality [10,11,12,13,14,15]. As highlighted in the literature, discrepancies in the mirror data may be due to errors during data aggregation [16,17,18,19,20,21]. Some authors also express the view that trade reporting errors mainly affect developing countries [22,23,24]. This is supposed to be due to the lack of proper regulation of statistical obligations or data collection methodologies. However, as the studies show, discrepancies in data also affect country-to-country relationships in the case of large industrialised countries. Such analyses concerned, e.g., trade transactions in the relationships United States–Canada and United States–China [25]. Increasingly, tax fraud is also cited as a cause of data asymmetry. Thus, differences in data are being explained by intentional misreporting of commercial transactions (e.g., declaring under wrong HS code). Das, Meriluoto and Rice [26] analyse discrepancies in the trade data between China and New Zealand and the roles that export-tax avoidance play. Aktaş, Aldan and Özmen [27] examine the over-invoicing of imports in Turkey. Benita and Urzúa [28] analyse the accuracy of the trade statistics between the People’s Republic of China and 20 Latin American countries and trade misinvoicing. Buehn and Eichler [29] have written about the determinants of trade misinvoicing in bilateral trade with the United States. Fisman and Wei [30] have studied reported trade in goods between Hong Kong and China. They drew conclusions from analysing the relationship between the tariff schedule and the evasion gap in China. Javorcik and Narciso [8] have studied the trade gap (the discrepancy between the value of exports) reported by Germany and the value of imports from Germany reported by the importing countries. These authors found that difficulties in assessing the quality and price of goods can affect duty avoidance. In conclusion, several authors have stated that import data are often recorded with a higher quality (meaning accuracy) than export data, and it may affect the comparisons [10,12]. However, according to our previous works, the problem concerns established trade with articles of huge commodity groups to a lesser extent, as is in the case of chapter 87 [9].
Polish companies actively participate in intra-community trade in goods. Their transactions are declared in the Intrastat system. On the basis of this information, it is possible to establish the duration of trade relationships, in particular ICS and ICA transactions with counterparts from the EU Member States. Maintaining such a business involves many specific difficulties, e.g., companies have to react to changing legislation in both their home and host countries, price changes, transport costs, numerous competitors or political and economic uncertainty, e.g., Brexit [31], or lockdowns during the COVID-19 pandemic. The authors have long been interested in analysing data on turnover between EU countries. An extension of these interests is the study of the duration of a company’s presence in the EU market. Such research must be carried out in stages, including disaggregation by commodity group. This will avoid inappropriate conclusions being drawn because of the aggregation of data. Traded goods are recorded according to the commodity groups contained in the Combined Nomenclature (CN). The survey described in the article concerns Polish enterprises whose trade in goods with EU countries covers the chosen CN chapter (chapter 87—vehicles other than railway or tramway rolling stock, and parts and accessories thereof). The chapter contains heading numbers 8701–8716 (Table A1). The choice of chapter 87 for analysis results from the fact that it has a large share in Poland’s foreign trade with EU countries and provides many jobs in the country, while at the same time there are numerous, clearly differentiated groups of goods, offering both highly processed, technically advanced products and relatively simple elements. The same commodity group also plays a significant role in many other countries in the region, namely Czechia, Slovakia, Hungary, Romania, as well as in some of the most developed Member States, such as Germany, France or Italy, to name only a few (Table 1).
The impact of determinants such as type of transaction (ICS/ICA), commodity group (CN heading) and country of transaction on duration is verified. The study uses duration analysis methods that allow for the inclusion of censored observations.
The aim of this study is to conduct a duration analysis of trade relationships of Polish enterprises on the intra-community market (the case of 87 CN chapter) and to determine the influence of selected factors on the duration of such relationships (the type of transaction, commodity group, country of transaction).
The analysis of the duration of relationships in international trade is rare in the literature. Few scientific papers can be found on this topic (see Discussion). Therefore, we think that our study can provide new content to the scientific discussion. The novelty of our study is the analysis at the transaction level. Each individual item of information concerns the export or import (ICS or ICA) of a specific commodity (the CN four-digit heading) by one Polish enterprise in trade with a given aggregate country during a month. To ensure statistical confidentiality, the data have been prepared in such a way that we distinguish the transactions of each enterprise without identifying its sensitive data. This enabled us to carry out research on nearly non-aggregated data (e.g., to the level of the whole enterprise or the importing country).
We organised the manuscript as follows. In Section 2 (Materials and Methods), we present statistical data, research assumptions, hypotheses and methods to verify them. The results are described in Section 3 (Results). The stages of the study resulted from the subsequent research hypotheses. In Section 4 (Discussion), we briefly refer to the literature on the subject and present the conclusions resulting from the verification of the hypotheses.

2. Materials and Methods

The statistical data used in the survey were extracted from the Intrastat register and obtained from the Polish National Revenue Administration. These are statistical data, which are obligatorily reported by all companies trading with EU countries (exports and imports). The data used are time series of aggregated monthly data containing values of trade transactions during the period 1 January 2008–31 August 2020. All transactions recorded for all companies trading goods from 87 CN chapters with EU countries were examined. The time series under study are 152 months in length. Each record (row in the data) relates to one enterprise, one transaction type (ICS or ICA), one CN heading and trade with one country. Based on preliminary data analysis, we determined:
  • The longest possible (arbitrarily chosen) break in the occurrence of transactions in a given record that does not interrupt the continuous functioning of the business in the market concerned (defined by transaction type, CN heading and counterpart country). Both preliminary data analysis and our previous experience with similar data reveal the existence of a frequent lack of continuity in the exports/imports into/out of the country of the product group in question for each month of the period considered. Of course, the lack of transactions in a given month does not mean the cessation of the analysed activity. The trade in goods with counterparties from a given country does not have to be systematic, in the sense that it takes place, for example, three times a month. Transactions may take place irregularly, i.e., they may be frequent in some months, infrequent in others and sometimes do not take place at all. Therefore, a break in transactions does not mean the end of the observation unit. However, it is necessary to determine the maximum length of this break. The study adopted two possibilities: 6 and 12 months (based on analytical experience).
  • Complete observations, i.e., transaction series for which the duration is known. The study assumed that the lack of transactions for more than 6 (or 12 in the second variant) months, i.e., exceeding the maximum length of the ‘break’, means the end of activity on a given market. This is the event that ends the observation for a given record.
  • Censored observations, i.e., transaction series for which the duration is unknown. If no break in transactions exceeded the assumed maximum length, then the event terminating the observation did not occur. Only the time to the end of the survey is then known.
The hypotheses put forward in this paper are based on the authors’ own research (draft) and scientific and professional experience, as well as on a small number of literature examples. The research results clearly show that the duration of business relationships is short, and that trade relationships are far more fragile than previously thought, which confirms the results of previous studies [33,34,35,36,37]. The authors pose questions such as: what is the duration of trade relationships, do they exchange products over a long or a short period of time? Many studies show that international trade relations are much more impermanent than we previously thought [33,34,35,36,37,38].
A reference of our results to the literature results is included in the Discussion section.
The duration of trade relationships is also relevant from a resource management perspective. Resource management in an enterprise is a combination of many factors. The management process is a deliberate procedure in which desired results are sought from a limited set of resources. Resources may include, for example, human skills, production resources and managerial capabilities. These are all important elements for our research on relationship sustainability. The purpose of enterprise resource management is, among other things, to reduce operating costs. It includes labour management, planning and scheduling and supply chain management. Efficiency in enterprise management is an important factor in achieving and maintaining a competitive advantage [39]. This is due to the increasing importance of knowledge as a source of enterprise competitiveness. The dynamic development of human resource management issues indicates that it is extremely important for the functioning of enterprises in a changing environment. Economic activity is not possible without the participation of the human factor [40]. Thus, from the perspective of enterprise resource management, the realisation of business relationships in the long term is conducive to the better utilisation of resources and lower operating costs. Therefore, the authors conclude that durable trading relationships are more beneficial to firms.
The following hypotheses were posed in the study:
Hypothesis 1 (H1).
The differences in duration of trade relationships of Polish enterprisesbetween exporters to the EU (shipping intra-community supplies, ICS) and importers from the EU (accepting intra-community acquisitions, ICA)are statistically significant.
Increased competition in the market due to the ease of trade cooperation with companies from other countries may influence greater care for buyers of goods. Therefore, we believe that export relationships are more durable than import relationships.
For a successful trade relationship to grow, it is essential to maintain the quality of goods and also to be willing to incur increased costs (i.e., by cutting the margin). It is clear that the exporters can influence both these factors to some extent, while importers can only look for another supplier if conditions on quality or price are not met. Bernard et al. [41] highlight such links between increased costs, the quality of goods and the success of exporting firms.
Hypothesis 2 (H2).
Adopting a 6-month and a 12-month allowable break in transactions results in a statistically significant difference in the duration of trade relationships for ICS and ICA.
We believe that the mere assumption of the occurrence of an allowable break in monthly aggregated transactions is obvious, but it is the length of this break that may be important. Based on the research experience of trade transactions of Polish enterprises with EU countries in general and with the analysed group of goods in particular, the Authors have tentatively adopted two lengths of an allowable break in transactions: 6 and 12 months. We also assumed that the results of the analysis would indicate differences in duration for these set breaks in transactions.
Hypothesis 3 (H3).
The differences in duration oftrade relationships between ICS and ICA in individual commodity subgroups (CN headings) are statistically significant.
We believe that if the differences in the duration of trade relationships for ICS and ICA in a commodity group (CN chapter 87) are significant, the significance of the differences will also be confirmed in the commodity subgroups (headings CN).
Hypothesis 4 (H4).
The differences in the duration of trade relationships between ICS and ICA with individual countries are statistically significant.
We assume that the differences in the duration of trade contacts for the export and import of goods for individual direction–countries relations are statistically significant, at least for some of the countries of counterparties of Polish enterprises.
In the research, we use the duration (survival) analysis method. These methods are used to analyse the duration of different phenomena and are used in many fields of science, especially in socio-economic sciences [42,43]. The advantage of these methods is that they can use incomplete information. The duration of each unit observation is observed. Some will experience the final event, and some will not. Censored observations are those observed until the end of the observation period, and we do not know their duration. However, these units should not be removed from the analysis as knowing their duration until the end of the observation period is very important in the duration analysis. The basis for the duration analysis is the survival function S(t) defined as [44]:
S ( t ) = P ( t > T ) = 1 − F ( t )
where T = duration of the trade relationship (in months) and F(t) = cumulative distribution function of the random variable T.
As a non-parametric estimator, we use the Kaplan–Meier formula, defined as [45]:
S ^ ( t i ) = ∏ j = 1 i ( 1 − d j n j )   dla   i = 1 ,   2 ,   … , k ,  
where ti = the point in time when at least one event occurs, t 1 < t 2 < … < t k , t 0 = 0 (the month in which at least one trade relationship was terminated), di = number of events in time ti (the number of non-censored trade relationships), ni = number of units observed in time ti, n i = n i − 1 − d i − 1 − z i − 1 , (the number of all observed trade relationships) and zi = number of censored observations in time ti (the number of censored trade relationships).
We will estimate the duration curves as follows: (1) in total terms, (2) taking into account the allowed break in transactions of 6 or 12 months, (3) by commodity subgroups (CN headings) and (4) by counterparty country. We will compare such duration curves, i.e., verify the null hypothesis of the form: H 0 :   S 1 ( t ) = S 2 ( t ) . To verify this hypothesis, we will use the Gehan-Wilcoxon test [46].

3. Results

Duration analysis was performed on a set of 90,334 observations being trade relationships of Polish enterprises on the intra-community market (Table 2). These were aggregated transactions with goods included in CN chapter 87. Among those ICA prevailed; 52,096 transaction rows were recorded (57.7%). The number of complete observations reached 78,944 (87.4%).
The results presented here refer to the subsequent stages of the study. In the first stage, the duration curves for ICS and ICA were estimated with a 6-month long allowable break in transactions (Figure 1). Polish exporters have been found to have more durable relationships over time (ICS)m and import relationships are characterised by a shorter duration. In addition, complete observations, i.e., series completed within the time window under consideration, are significantly more prevalent in the latter group. Differences between the duration curves for ICS and ICA are statistically significant (χ2 = 1813, p < 0.01). Of all export relationships that started during the period January 2008–August 2020, 38% survived 1 year, 29% survived 2 years, and 18% lasted for over 5 years. Among import relationships, these shares were lower, at, respectively: 25%, 17% and 9%.
The second stage of our research involved consideration of the length of the allowable break in trade transactions. We asked whether extending this period from 6 to 12 months would significantly change the results. It turned out that in the case of ICS, the differences in duration curves are statistically insignificant (p > 0.1). In the case of ICA, the significance of the differences was confirmed (p < 0.01), but differences are only apparent in the initial course of curves. We decided to adopt an acceptable break in transactions of 6 months.
Stage three of the study was determining the Kaplan–Meier estimator for ICS and ICA broken down by commodity group (CN heading). There are 16 subgroups in chapter 87. The duration curves for six of them are presented in Figure 2. We drew the following conclusions from this part of the analysis: (1) differences in duration curves for ICS and ICA are statistically significant (p < 0.01) except for two commodity groups (8705, special purpose motor vehicles and 8706, chassis fitted with engines; it should be added that these are very small samples), (2) the curve for ICS runs higher (relationships more stable over time) than the curve for ICA, with two exceptions: 8701, tractors, 8710, tanks (where import transactions are more durable), (3) curves for ICS and ICA fall slowest for heading 8708, parts and accessories of the motor vehicles. Heading 8708 is the most important commodity group for Polish companies trading in the EU. Transactions with these goods represent 30% of the transactions within chapter 87 (35% in ICS and 29% in ICA). Among all trade ICS relationships within that heading, 53% of them were still ongoing after one year, 43% after 2 years and as many as 30% after 5 years. In the case of the ICA, these figures are, respectively: 41%, 31% and 18%. Thus, the most durable trade relationships of Polish enterprises in the EU are related to exports of automotive parts. The second quantitatively important commodity subgroup is 8716, trailers and semi-trailers (18% of transactions). Shares of relationships still lasting after 1, 2 and 5 years are as follows: ICS; 34%, 25% and 15%, ICA; 24%, 16% and 8%.
The fourth part of the study addressed the duration of trade relationships broken down by the country of transactions. Polish businesses traded goods, from chapter 87 of CN, with all EU countries. Transactions with the following countries prevailed: Germany (25%), the Netherlands (8%), France (7%), Czech Republic (6%), Belgium (5%) and Italy (5%). The duration curves for the six selected countries are depicted in Figure 3. Conclusions are as follows: (1) differences in duration curves for ICS and ICA are statistically significant (p < 0.01 for 23 countries; p < 0.05 for 2 countries) except for two countries (Malta and Portugal), (2) the curve for ICS is placed above (trade relationships are more durable) the curve for ICA, (3) curves for ICS and ICA drop the most slowly (percentage of valid trade relationships after 1, 2 and 5 years in brackets) for trade relationships with the following countries: the UK (ICS, 44%, 34%, 22%; ICA, 28%, 19%, 10%), France (ICS, 43%, 34%, 23%; ICA, 31%, 22%, 12%), Sweden (ICS, 44%, 34%, 21%; ICA, 27%, 20%, 11%), Spain (ICS, 43%, 34%, 23%; ICA, 32%, 24%, 15%), Portugal (ICS, 43%, 31%, 20%; ICA, 39%, 31%, 21%), Czech Republic (ICS, 41%, 31%, 20%; ICA, 27%, 18%, 10%).

4. Discussion

There has been a discussion in the literature on data quality in foreign trade for many years [8,10,14,17,18,19,20]. This discussion concerns different scopes of the problem. The problem can be defined as irregularities of data on the value of trade transactions between countries. The specificity of the data in question is their mirror character. Data on the same transaction are recorded in two sources and this fact makes them comparable. The discrepancies between these data, i.e., their asymmetry, are evidenced by numerous studies. They address issues such as causes of discrepancies, methodology for measuring data quality, overall and aggregated analysis, bilateral and multi-country relationships, total transactions and selected commodity groups. Our research also contributes to this discussion [47,48]. We have focused primarily on survey methodology, selecting appropriate data quality indicators and determining the extent to which they are useful.
Our current research concerns the duration of trade relationships. Our field of interest is whether the trade relationships of Polish enterprises with EU counterparties are of a permanent nature or whether they are rather sporadic transactions, possibly recorded due to an error in data.
The discussion on the concept of comparative advantage and patterns of country specialisation in international trade is extending currently. Until now, many related studies have focused on the national level, and few have targeted the industry [49]. The approach of the specialisation of trade changes significantly due to the changes that have occurred in international trade over the last twenty years [50]. The development of GVCs, i.e., the full range of activities (design, production, marketing, distribution and support to the final consumer, etc.), carried out by multiple companies and employees in different countries, is very important [51,52]. Contemporary research includes all three layers: industry, country and organisational/company levels. We are trying to further develop research on the last level.
Contemporary research focuses on individual companies and products rather than on countries and industries. Ghironi [53] discusses the main components and results of a research program at the intersection of international trade and open economy macroeconomics that has been developing since the early 2000s. According to Ghironi, the program closes the gap between the two fields by incorporating Krugman–Melitz trade microfoundations and producer dynamics in the benchmark dynamic macro model under uncertainty. International trade analysis has long acknowledged the role of producer decisions to enter domestic and foreign markets in shaping trade patterns. According to Porter [54], a nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. Companies gain advantages against the world’s best competitors because of pressure and challenge.
The literature underscores the role of multilateral free trade agreements, such as the EU, but also the RCEP (Regional Comprehensive Economic Partnership) [55,56]. International trade is expected to give rise to pervasive economic and structural transformation effects not only for member states, but also for outside countries. According to Jung [55] and Bernard and Jensen [57], exporting firms are more productive than non-exporting domestic firms. The liberalisation of international trade leads to greater opportunities for exports and growth of companies. Access to final goods, but also to intermediate goods, is increasing in individual countries [58]. Other authors also mention higher prices and higher quality of exported goods. Successful exporters employ more skilled workers and pay higher wages [41]. The importance of global value chains (GVCs) in economies is also highlighted, opening new possibilities to increase both their exports’ quantity and quality, acquire advanced production technologies and improve the overall economic performance [59].
In 2019, 65.4% of EU enterprises engaged in trade were only importers, 24.0% were two-way traders, and 10.6% were only exporters [60]. It is the two-way traders that accounted for an overwhelming share of the EU’s total trade in value terms. Importers are of interest to policymakers insofar as they facilitate access to new goods and services, whereas exporters are of interest due to their potential for job creation. In Poland, among the enterprises involved in intra-community trade, as much 51% of them are importers, 20% are exporters, while 29% of them are two-way traders. The literature on international trade examines the role of exports and imports as productivity shifters for developing countries as well [61].
A growing share of two-way traders, but also the growing phenomenon of intra-industry trade (a country simultaneously imports and exports similar types of goods or services), contradicts the sometimes assumed paradigm of national specialisation in favour of a two-way exchange of goods from the same commodity groups [62]. In the literature, the index introduced by Grubel and Lloyd (GL index) is a commonly used indicator of intra-industry trade intensity and one of the measures of international competitiveness [63].
Among the publications dealing with the analysis of foreign trade data, there are many that primarily consider commodity groups [8,64,65,66].
Moreover, our study focuses on a product, or more precisely a commodity group. We studied 16 headings in chapter 87 of the CN. We planned to confirm the four hypotheses stated in Section 2.
The hypotheses presented in this paper are based on the authors’ own research and experience, as well as on a small number of literature examples. Besedeš and Prusa [33,34] pose vital questions: when countries trade, how long do their trade relationships last, are they exchanging products over long or short periods of time? These authors found that international trade relationships are far more fragile than we previously thought (the median duration of exporting a product to the United States, of two to four years).
Nitsch [35] described a short duration of trade relationships of Germany. The majority of trade relationships exist for just a few, often only one to three, years. Furthermore, Hess and Person [36] found a short duration of UE trade relations (import to the EU15 countries from 140 exporters). The median duration of EU imports is merely one year. According to Hess and Person, short trade durations are the result of a process in which countries are shifting suppliers or ceasing to import the product altogether. According to Pu and Li [37], from the perspective of the whole manufacturing industry, the median of countries is 1–2 years (10 countries). Esteve-Perez et al. [67] found that the median export survival time of Spain from 1997 to 2006 was 2 years. Straume [38], who adopted a method similar to the one we used for trade in one product group (salmon exports from Norway), disaggregated by an individual firm and importing country, shows that the median country-to-country relationship is significantly longer than for data disaggregated to the firm-to-country level (6 years vs. 2 years) and that large firm relationships and relationships between geographically closer partners last longer in the market.
We used monthly data from a market with a relatively low entry threshold and a huge purchasers’ base, which influenced the results. Our research shows that the median duration of trade relationships of Polish enterprises on the intra-community market (87 CN chapter) is 7–8 months for ICS and 3–4 months for ICA.
The results seem to confirm three of our hypotheses. Namely:
Hypothesis 1 (H1).
The differences in duration of trade relationships of Polish enterprisesbetween exporters to the EU (shipping intra-community supplies, ICS) and importers from the EU (accepting intra-community acquisitions, ICA)are statistically significant.
Differences in the duration of trade relationships of Polish enterprises between ICS and ICA are statistically significant. It turned out that more durable trade relationships involve Polish exporters (ICS). The longer duration of export relationships may be influenced by greater care for foreign counterparties—buyers of goods. This care means maintaining the appropriate quality of goods, as well as bearing increased costs. Such links between increased costs, quality of goods and success of exporting firms are highlighted in other studies (e.g., [41]).
Hypothesis 2 (H2).
Adopting a 6-month and a 12-month allowable break in transactions results in a statistically significant difference in the duration of trade relationships for ICS and ICA.
We posed the question of whether extending the allowable break in trades from 6 to 12 months significantly affects the position of duration curves. The results showed that for ICS, the differences are statistically insignificant (p > 0.1). In the case of ICA, the significance of the differences was confirmed (p < 0.01), but the differences are visible only in the initial course of the curves. Thus, we concluded that increasing the interval does not affect the results of the study.
Hypothesis 3 (H3).
The differences in duration oftrade relationships between ICS and ICA in individual commodity subgroups (CN headings) are statistically significant.
We found that the differences in duration curves for ICS and ICA are statistically significant (p < 0.01), export transactions (ICS) are more durable over time than import transactions (ICA), and the most durable relationships are recorded among exporters of goods from heading 8708, parts and accessories of motor vehicles.
Hypothesis 4 (H4).
The differences in the duration of trade relationships between ICS and ICA with individual countries are statistically significant.
We found that the differences in the duration curves for ICS and ICA for individual countries are statistically significant, trade relationships are more durable over time for the export of goods, the most durable relationships are for the following countries: the United Kingdom, France, Sweden, Spain, Portugal and the Czech Republic.
To date, there has been little analysis of the duration of relationships in international trade. An example is the study of the duration of US import relationships [34]. The author focuses on investigating the duration of relationships with regard to the value of initial purchases. Their result is that the smaller the initial purchase, the shorter the relationship lasts. Long-lasting relationships with large values are a minority. The paper concluded that the median relationship is observed to last just one year. In our study, only 38% of the relationships survived one year. Most of the findings presented in the literature refer to relationships at the product or single firm level [33,35,36,37,68]. We, on the other hand, study trade relationships as individual transactions involving a given firm and a given product together. This is similar to [38]; however, we use monthly data while the author of [38] used yearly aggregated data. The results presented in this paper fill a research gap in this area, we drew conclusions from an analysis of frequent data on a low level of aggregation, and we confirmed that in this use-case, the duration (median) is smaller than one could expect. As we stated above, analyses cannot be carried out in a highly aggregated form but should rather cover separate commodity groups on a heading level. Our research plans include investigating further CN chapters broken down by heading. We also plan to apply more advanced methods of duration analysis, including Cox models and logistic regression. After that, a multiple-state events approach will be used with an emphasis on recurrent events to more precisely address breaks in transaction series.
The results of our research and those of the research presented in the literature may influence the decisions of practitioners, researchers and decision-makers. We have found that it is probably more difficult to maintain import relationships than export relationships (a note that might be important for practitioners). Perhaps a part of the explanation is the fact that exporters are more motivated to keep their relationships, and they have tools (working on quality, lowering the margin) to encourage their partners to prolong the relationship. Hence, even if there is a break in trade, we can advise that the original trade relationship should not be abandoned (especially in imports), as it will most probably be hard to re-establish [49]. Often, rather than diversifying, maintaining an existing trade relationship is more important to further development of the trade [69]. According to Pu and Li [37], the formulation of a branch-related trade policy should be formulated differently from other sectors. Research by Monarch and Schmidt-Eisenlohr [70] indicates that in the short run, shocks on entry have the strongest effects on countries that are shifted toward relationships of short duration (e.g., China). Deep trade agreements are found to increase goods and services trade (hence the prediction is that United Kingdom–European Union trade declines) [71]. According to Fugazza and Molina [72], the duration of trade relationships increases with the region’s level of development, and the size of exports also matters—the larger the transaction, the higher the probability of survival. Thus, markets/industries may differ in the duration of trade relationships.
In our study, we examined a selection of possible factors that influence the duration of trade relationships. These were: trade direction (we show that export relationships last significantly longer than import relationships in the industry under examination), CN heading within the chosen CN chapter (auto parts trade being the most durable business), country to/from which Polish businesses were trading vehicles and their parts (business relationships of those firms that cooperated with partners from distant countries lasted on average longer than relationships with partners from neighbouring countries, which probably can be explained with different entry costs).
Among the other potential causes for the specific duration of the trade relationships, we find the following in the literature: products differentiation (differentiated products are traded longer than homogeneous goods) [33], higher initial export value and the size of subsequent shipments [35,38], exporter characteristics, including the sector in which it operates, its product type and the structure of the market (the duration of export relations is longer for products obtained from huge companies and from large economies, as well as for goods with high trade value and a low elasticity of substitution) [35,37,38]. Another important factor is the destination [67], and in particular, the distance between trading partners (a longer distance increases the hazard that trade flows die) [36]. Transportation costs [38], tariff rates (trade relationships from which low or no tariffs are involved are more likely to survive) [73], as well as the seller’s margin (intensive margin has a significant effect on export growth and further spreads the duration of trade relationships) [74], are also reported as factors affecting the sustainability of trade relationships. There are also studies indicating that being involved (embedded) in a client-vendor network also affects the duration of a company’s foreign activities [75]. We plan to address those factors in our future work. It is worth noting that our results, presented above, contradict those for the duration of trade relations with neighbouring countries. This is probably related to the specificity of the industry, and we will refer to this primarily in subsequent studies.
We are also aware of the limitations of our research. They concern the determination of the length of the interruption of transactions by a company, as well as comparing the results of the duration analysis of trade relations for some of the groups of goods (due to different values of transactions, different volumes, e.g., within a year, different directions of exports and imports). Our research concerned the trade of vehicles and automotive parts. It is not a very dynamic market (in terms of volatility, entry threshold or the liquidity of assets). Our conclusions are industry/product specific and may be different from what could be obtained for other types of markets/industries/products. However, we plan further research to resolve questions that have been raised during our present study.

5. Conclusions

The 2030 Agenda for Sustainable Development of the United Nations defines international trade as an engine for inclusive economic growth and poverty reduction, which contributes to the promotion of sustainable development [76]. We believe that stable trade relations affect the sustainable development of a country but also the development of a firm/industry. The literature review shows that the stability and duration of relations in international trade depend on the type of commodity/industry. Therefore, the research results achieved and the conclusions reached vary significantly. It is believed that the division of labour and fragmentation of supply chains have led to the globalisation of production and shipping of commodities and services. The result is enhanced international cooperation [77] up to a very high level of integration. In the case of international oil trade, for example, the results indicate an evolution towards a stable, orderly and integrated system [78]. Other results show that the net export growth has a positive effect on the economic performance of the wood processing industry of Czechia and Slovakia, but only if the growth in imports is lower than in exports [79]. According to Besedeš and Prusa [33], the probability of a trade link interruption of a homogenous product is higher than that of a heterogeneous product.
All this makes our results even more interesting. We have confirmed some of the conclusions present in the literature. We have positively verified three of the four research hypotheses. In the commodity markets we studied (cars and automotive parts), export relationships tend to last longer than import relationships, and the duration of most trade relationships is short (median is less than 1 year). The markets of different commodity groups within the analysed CN chapter are characterised by different durability of trade relationships, with the highest duration in car parts trade (these are presumably relationships of subcontractors with car manufacturing and servicing companies). We have identified the countries with which trade in this product group is most sustainable. One of our results, trade relations with distant countries are more likely to survive than with neighbouring countries, contradicts the results of other studies and requires further research. We believe that this result is due to the specific nature of the industry. We have also identified commodity markets (at CN heading level) and countries that offer a greater chance of long-term trade relations in the industry under study. This result may be of particular interest to business practitioners.

Author Contributions

Conceptualisation, I.M. and P.B.; methodology, I.M. and P.B.; software, I.M. and P.B.; validation, I.M. and P.B.; formal analysis, I.M. and P.B.; investigation, I.M. and P.B.; resources, I.M. and P.B.; data curation, I.M. and P.B.; writing—original draft preparation, I.M. and P.B.; writing—review and editing, I.M. and P.B.; visualisation, I.M. and P.B.; supervision, I.M. and P.B.; project administration, I.M. and P.B.; funding acquisition, I.M. and P.B. All authors have read and agreed to the published version of the manuscript.

Funding

The work is a part of a project financed within the framework of the program of the Minister of Science and Higher Education under the name “Regional Excellence Initiative” in the years 2019–2022; project number 001/RID/2018/19; the amount of financing PLN 10,684,000.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

The statistical data were obtained as an excerpt from Intrastat database provided by the Polish National Revenue Administration and is available for re-use upon request from that source only.

Conflicts of Interest

The authors declare no conflict of interest.

Appendix A

Table
Table A1. Chapter 87, vehicles other than railway or tramway rolling stock, and parts and accessories thereof.
Table A1. Chapter 87, vehicles other than railway or tramway rolling stock, and parts and accessories thereof.
CN CodeDescription
8701Tractors
8702Motor vehicles for the transport of ten or more persons, including the driver
8703Motor cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702), including station wagons and racing cars
8704Motor vehicles for the transport of goods
8705Special purpose motor vehicles, other than those principally designed for the transport of persons or goods (for example, breakdown lorries, crane lorries, fire fighting vehicles, concrete-mixer lorries, road sweeper lorries, spraying lorries, mobile workshops, mobile radiological units)
8706Chassis fitted with engines, for the motor vehicles of headings 8701 to 8705
8707Bodies (including cabs), for the motor vehicles of headings 8701 to 8705
8708Parts and accessories of the motor vehicles of headings 8701 to 8705
8709Works trucks, self-propelled, not fitted with lifting or handling equipment, of the type used in factories, warehouses, dock areas or airports for short distance transport of goods; tractors of the type used on railway station platforms; parts of the foregoing vehicles
8710Tanks and other armoured fighting vehicles, motorised, whether or not fitted with weapons, and parts of such vehicles
8711Motorcycles (including mopeds) and cycles fitted with an auxiliary motor, with or without side-cars; side-cars
8712Bicycles and other cycles (including delivery tricycles), not motorised
8713Carriages for disabled persons, whether or not motorised or otherwise mechanically propelled
8714Parts and accessories of vehicles of headings 8711 to 8713
8715Baby carriages and parts thereof
8716Trailers and semi-trailers; other vehicles, not mechanically propelled; parts thereof
Source: [80].

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Figure 1. Kaplan–Meier estimator for ICS and ICA.
Figure 1. Kaplan–Meier estimator for ICS and ICA.
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Figure 2. Kaplan–Meier estimator for ICS and ICA by CN headings (selected headings: 8701, tractors; 8702, motor vehicles for the transport of ten or more persons; 8703, motor cars and other motor vehicles principally designed for the transport of persons; 8707, bodies; and 8708, parts and accessories of the motor vehicles; 8709, works trucks).
Figure 2. Kaplan–Meier estimator for ICS and ICA by CN headings (selected headings: 8701, tractors; 8702, motor vehicles for the transport of ten or more persons; 8703, motor cars and other motor vehicles principally designed for the transport of persons; 8707, bodies; and 8708, parts and accessories of the motor vehicles; 8709, works trucks).
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Figure 3. Kaplan–Meier estimator for ICS and ICA by country of transaction (selected countries: CZ, Czech Republic; DE, Germany; ES, Spain; FR, France; GB, United Kingdom; IT, Italy).
Figure 3. Kaplan–Meier estimator for ICS and ICA by country of transaction (selected countries: CZ, Czech Republic; DE, Germany; ES, Spain; FR, France; GB, United Kingdom; IT, Italy).
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Table
Table 1. Exports of goods from chapter 87 in selected EU Member States in 2019.
Table 1. Exports of goods from chapter 87 in selected EU Member States in 2019.
CountryExports Value in EUR BlnShare of ExportsChapter 87 Rank
Poland27.0411.4%2
Czech Republic36.0320.4%1
Hungary17.5316.3%3
Romania11.6817.2%2
Slovakia25.6332.1%1
France47.149.7%3
Germany220.2917.3%2
Italy37.268.0%2
Source: [32].
Table
Table 2. The number of trade relationships analysed (chapter 87 CN).
Table 2. The number of trade relationships analysed (chapter 87 CN).
ObservationsCompleteCensoredTotal
ICS30,960727838,238
ICA47,98441,11252,096
Total78,94411,39090,334
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Markowicz, I.; Baran, P. Duration of Trade Relationships of Polish Enterprises on the Intra-Community Market: The Case of Vehicles and Automotive Parts Trade. Sustainability 2022, 14, 3599. https://doi.org/10.3390/su14063599

AMA Style

Markowicz I, Baran P. Duration of Trade Relationships of Polish Enterprises on the Intra-Community Market: The Case of Vehicles and Automotive Parts Trade. Sustainability. 2022; 14(6):3599. https://doi.org/10.3390/su14063599

Chicago/Turabian Style

Markowicz, Iwona, and Paweł Baran. 2022. "Duration of Trade Relationships of Polish Enterprises on the Intra-Community Market: The Case of Vehicles and Automotive Parts Trade" Sustainability 14, no. 6: 3599. https://doi.org/10.3390/su14063599

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