Policy Barriers to International Trade in Services: Evidence from a New Database

Abstract

Surprisingly little is known about policies that affect international trade in services. Previous analyses have focused on policy commitments made by countries in international agreements, but in many cases, these commitments do not reflect actual policy. This paper describes a new initiative to collect comparable information on trade policies for services from 103 countries across a range of service sectors and relevant modes of service delivery. The resulting database reveals interesting policy patterns. Although public monopolies are now rare and few services markets are completely closed, we observe numerous "second-generation" restrictions on entry, ownership, and operations. Even in instances in which there is little explicit discrimination against foreign providers, market access is often unpredictable because the allocation of new licenses remains opaque and highly discretionary in many countries. Across regions, some of the fastest-growing countries in Asia and the oil-rich Gulf states have restrictive policies in services, whereas some of the poorest countries are remarkably open. Across sectors, professional and transportation services are among the most protected industries in both industrial and developing countries, whereas retail, telecommunications, and even finance tend to be more open. JEL codes: F13, F14, L80 Compared to the vast empirical literature on policies affecting trade in goods, empirical analysis of trade policy for services remains in its infancy. A major constraint has been inadequate data on policies affecting services trade, particularly

Trade volume and economic growth in the MENA region: Goods or services?

“…Brochert et al (2012) compare the Service Trade Restrictiveness Index (STRI) between 103 countries and for 5 service sectors (Fig. 4).…”

“…This paper explores the effects of trade in goods and trade in services on the economic performance of Middle East and North Africa (MENA) countries. Although the region has made some progress in liberalizing goods trade, it is considered as one of the most restrictive regions in service trade, with relatively high values for the Services Trade Restrictiveness Index (Brochert et al, 2012), revealing serious competitiveness issues. Indeed, inefficient services, provided mostly by the public sector, and the high cost of key backbone services such as transport, telecommunications, storage and distribution are important factors that raise the cost of MENA exports (both services and manufacturing), while also impeding trade expansion in the MENA region.…”

“…Note: (i) Trade the sum of exports and imports divided by the value of GDP, all in current U.S. dollars. (ii) LAC: Latin America & Caribbean; NA: North America; EAP: East Asia & Pacific; SA: South Asia; SSA: Sub-Saharan Africa; ECA: Europe & Central Asia; MENA: Middle East & North Africa.Source :Brochert et al (2012).…”

Liberalizing Trade in Services: Lessons from Regional and WTO Negotiations

“…The policy commitments (bindings) made in the GATS during the Uruguay Round are on average 2.3 times more restrictive than currently applied policies -i.e., countries could more than double their trade barriers without violating their commitments (Gootiiz and Mattoo, 2009). Borchert, Gootiiz and Mattoo (2012) analyze available public information on the services offers by 62 WTO members that had been put on the table through 2008 and conclude they would improve on existing GATS commitments by only about 10 percent. As a result, GATS commitments on average would remain twice as restrictive as actual policies, implying great scope for WTO members to increase the restrictiveness of prevailing policies if they desire to.…”

“…The rise in services trade has been supported by falling barriers to trade and investment as well as technological advances, both of which have lowered trade costs for services. However, recent World Bank research documents that barriers to trade in services in both high-income and developing countries remain high, and that emerging markets have barriers that are on average substantially higher than OECD countries (Borchert, Gootiiz & Mattoo 2012). This helps explain why services are on the negotiating table in the WTO and in an increasing number of preferential trade agreements (PTAs).…”