Mattoo, Rathindran, and Subramanian explain how the Finally, the authors provide some econometric output growth effect from liberalizing the service sectors evidence-relatively strong for the financial sector and differs from the effect from liberalizing trade in goods.less strong, but nevertheless statistically significant, for They also suggest using a policy-based rather than the telecommunications sector-that openness in services outcome-based measure of the openness of a country's influences long-run growth performance. Their estimates services regime. They construct such openness measures suggest that growth rates in countries with fully open for two key service sectors' basic telecommunications telecommunications and financial services sectors are up and financial services.to 1.5 percentage points higher than those in other countries.This paper-a product of Trade, Development Research Group-is part of a larger effort in the group to assess the implications of liberalizing trade in services. Copies of the paper are available free from the World Bank,

viii CONTRIBUTORS Handbook of Deep Trade AgreementsFor these reasons, "deep" trade agreements, as trade experts refer to this new class of agreements, are fundamentally different than the previous generation of PTAs. They aim not only to create market access between members but also to establish broader economic integration rights in goods, services, and factor markets. Deep agreements support these rights by regulating the behavior of importing and exporting governments. They frequently aim to improve efficiency and consumer or social welfare, as in the case of competition or environmental provisions. As noted by the authors in the Overview, ultimately deep trade agreements contribute to setting the rules of the game that define how economies integrate, function, and grow.The new evidence on the evolution of deep trade agreements should change the way we think about the international trade architecture. PTAs continue to play a critical role in creating market access through tariff reductions. In fact, PTAs have reduced trade-weighted average tariffs rates to less than 5 percent for more than two-thirds of countries. But what sets recent trade agreements, particularly post 2000, apart is the large increase in commitments in areas such as services, trade facilitation, investment, and movement of capital. Many of these areas are not covered in the WTO, and for those that are, PTAs often commit countries to deeper, more substantive integration of markets. Over the past two decades, PTAs have also seen an increase in regulatory requirements -the most striking and important of which is the increased emphasis on enforcement of rules and dispute settlement.Deep trade agreements are mostly driven by advanced economies, namely, the EU, the United States, and Japan. PTAs signed between advanced economies and between advanced and developing countries have deepened the most in the past 20 years. With very few exceptions, such as the Pacific Alliance, preferential trade agreements among developing countries have remained closer to the original purpose of trade agreements to grant reciprocal market access in goods. This is true also for China, whose PTAs have remained limited in scope. In this respect, while there are different approaches to deep integration in the EU, the United States, and Japan, a Chinese model has yet to emerge.The evolution in the institutions overseeing deep integration has corresponded to a broader evolution in the nature of international trade.The old world of trade was a world where production systems were national and where obstacles to trade were designed to protect domestic producers from foreign competition. By contrast, the new world is a world where production is transnational along global supply chains of goods and services and where obstacles to trade are aimed at protecting the consumer from risks. We are moving from the administration of protection -quotas, tariffs, and subsidies -to the administration of precaution -security, safety, health, and environmental sustainability. Indeed, much of...

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This paper attempts to quantify the impact of economic policy uncertainty on overall trade and trade linked to global value chains. Using new data on policy uncertainty for 18 countries and 24 years, it finds a statistically significant negative impact of policy uncertainty on overall trade growth. A 1 percent increase in uncertainty is associated with a 0.02 percentage point reduction in the growth of goods and services trade, implying that the increase in policy uncertainty since mid-2018 may have caused a 1 percentage point decline in world trade growth. The paper also finds that the impact of policy uncertainty on trade linked to global value chains is similar to overall trade. This is likely to be the result of two opposing forces: global value chains are more dependent on relation-specific investments that are sensitive to policy uncertainty, but these investments also make trade patterns sticky. More research and better data are needed to disentangle these different effects empirically.

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