The Study On The Effect Of Foreign Trade To The Economic Growth In Laos

As the of economic globalization, the deepening of international division of labor and rapid growth of world economy, foreign trade presents the high-speed growth. Therefore, the influence of foreign trade on economic growth is becoming more and more important, which has become the focus of academic and practice. Since 1975, Laos mainly focused on agricultural economy instead of industrial development. This does not meet the needs of domestic production, which rely heavily on foreign imports, so the growth rate is very low. Fortunately, the Lao government policy of foreign trade began to open in 1986, leading to the development of market economy, the implementation of agricultural production, and the development of industry at the same time. From 2008 to 2013, the economic growth rate in Laos is maintained at about 8%, people’s living standards improved significantly. Laos currently still through the expansion of foreign trade, to realize the development of economy and enlarge the markets at home and abroad.Based on this research background, this paper discusses the relationship between foreign trade and economic growth from the connotation of foreign trade and economic growth respectively. Also based on the research, we seek to new trade theory research of the relationship between foreign trade and economic growth theory basis and theoretical support from absolute advantage theory, comparative advantage theory, new classical economic theory; Then, this article analyzes the present situation of foreign trade development in Laos and commodity structure based on Laos foreign trade development and the actual situation. This paper argues that Laos foreign trade can be divided into four stages:enlightenment period, boom, recession and recovery with the development of foreign trade policy. Again, this paper analysis Laos import and export commodity structure and the trend of the development of the export trade, together with the trade status with Asean, China and America.Then, this paper conducts the empirical analysis of the relationship between foreign trade and economic growth based on the theory of relationship between the two and the present situation of them. With stationary test, cointegration analysis and granger causality test, the sequence function is constructed. The empirical results show that, in the long run, Laos total trade, exports and imports go positively with gross domestic product, total trade has the greatest effect in the trade. And the influence of long-term Laos exports to GDP is greater than imports. In the short run, it is necessary to use error correction model to analyze. In the short term, Laos total trade volume to GDP is opposite bigger:the short-term trade volume increased by one percent, GDP will increase 0.0659%.Similarly, the influence of exports to GDP is positive and more significant, the influence coefficient is 0.0599, while short-term Laos import impact on GDP is negative, which can be understood as, short-term Laos squeezed the domestic enterprise in the market, hit the Laos domestic local products and local companies by importing consumer goods to some extent. Actual data show that Laos foreign trade deficit is serious since 1990-2014, the peak $784 million deficit is in 2012. In terms of import results, imported consumer goods occupies more than 30% of the share, which shows Laos weak commodity structure, this caused basic consumer goods rely on the international market, not only led to negative impact on short-term domestic enterprises survival and development, but also impact to Lao long-term competitiveness cultivation. Finally, this paper put forward four aspects to push the path of Laos foreign trade development:to speed up the industrial upgrading, optimizing the structure of foreign trade, expand domestic demand, in order to strengthen the management of foreign trade, expand diversified foreign trade, expand the international market, improve the utilization efficiency of foreign investment, strengthen the government’s policy regulation, thus promoting the Lao economic development.