DoWTO+ commitments in services trade agreements reflect a quest for optimal regulatory convergence? Evidence from Asia

Abstract

Literature examining WTO+ commitments in services trade agreements (STAs) has not considered the role of services regulation. We bridge this gap using a sample of 15 South/South‐East Asian countries, given the burgeoning trend of Asian economies towards services preferentialism and the largely WTO+ nature of their preferential services commitments. Our empirical findings suggest that Asian trading dyads with regulatory frameworks that are more similar and more trade restrictive tend to undertake higher levels of WTO+ commitments in their STAs. There is also evidence in our results, including by modes of supply, for WTO+ commitments in Asian STAs being driven by goods trade complementarities, alluding to supply chain dynamics in the region. Such results support the hypothesis that the heightened “servicification” of production generates a demand to lower services input costs arising from regulatory incidence and heterogeneity.

Mode 4 restrictiveness and services trade

“…In fact, regulatory heterogeneity has been found to account for 21 percent of total trade costs in services along with trade policy barriers (WTO, 2019 ). Regulatory incidence and heterogeneity have also been shown to be significant determinants of countries’ propensities to negotiate preferential services trade agreements (Egger & Shingal, 2021 ) and of their deeper commitments in such agreements relative to their WTO GATS commitments (Shingal et al, 2018 ).…”

“…Trade costs for services, for intermediate vs final services, and for disaggregated services sectors, have been computed “top-down” by Miroudot et al ( 2013 ) and Miroudot and Shepherd ( 2016 ) using the theory-based methodology of Novy ( 2013 ) as well as estimated in a structural gravity framework (WTO, 2019 ). Measures of regulatory impediments to services trade - the services trade restrictiveness indices (STRI) put together independently by the World Bank and the OECD - have also been used to examine the effects of regulatory incidence and heterogeneity on services trade, investment, integration into global value chains, and the membership and depth of of preferential trade agreements (Kox & Nordås, 2007 , 2009 ; Nordås, 2016 ; Miroudot & Cadestin, 2017 ; Nordås & Rouzet, 2017 ; Rouzet & Spinelli, 2016 ; Rouzet et al, 2017 ; Andrenelli et al, 2018 ; Shingal et al, 2018 ; Benz & Jaax, 2020 ; Egger & Shingal, 2021 ). However, the effect of barriers specific to Mode 4 services trade has not yet been quantified.…”

The Impact of COVID-19 on Commonwealth Services Trade

“…Existing literature has already demonstrated the adverse effects of regulatory incidence and heterogeneity in regulation on services trade (Kox and Nordås, 2007;Nordås, 2016;Nordås and Rouzet, 2017;Rouzet et al 2017), especially that delivered by commercial presence (Kox and Nordås, 2009;Andrenelli et al, 2018;De Backer et al, 2018) and on services value added in GVCs (Miroudot and Cadestin, 2017). Regulatory incidence and heterogeneity have also been shown to be significant determinants of countries' propensities to negotiate preferential services trade agreements (Sauvé and Shingal, 2016;Egger and Shingal, 2018) and of their deeper commitments in such agreements relative to their WTO GATS commitments (Shingal et al, 2018).…”

Quantifying Barriers to Movement of Service Suppliers and Examining Their Effects

“…Trade costs for services, for intermediate vs final services, and for disaggregated services sectors, have been computed "top-down" by Miroudot et al (2013) and Miroudot and Shepherd (2016) using the theory-based methodology of Novy (2013) as well as estimated in a structural gravity framework (WTO, 2019). Measures of regulatory impediments to services trade -the services trade restrictiveness indices (STRI) put together independently by the World Bank and the OECD -have also been used to examine the effects of regulatory incidence and heterogeneity on services trade, investment, integration into global value chains, and the membership and depth of of preferenatial trade agreements Nordås, 2007, 2009;Nordås, 2016;Miroudot and Cadestin, 2017;Nordas and Rouzet, 2017;Rouzet and Spinelli, 2016;Rouzet et al 2017;Andrenelli et al 2018;Shingal et al 2018;Egger and Shingal, 2020). However, barriers specific to Mode 4 services trade have not yet been quantified.…”

“…In fact, regulatory heterogeneity has been found to account for 21 percent of total trade costs in services along with trade policy barriers (WTO, 2019). Regulatory incidence and heterogeneity have also been shown to be significant determinants of countries' propensities to negotiate preferential services trade agreements (Egger and Shingal, 2020) and of their deeper commitments in such agreements relative to their WTO GATS commitments (Shingal et al 2018).…”