The determinants of trade agreements in services vs. goods

Abstract

Since Baier and Bergstrand (2004) there has been a focus on empirically testing the economic determinants of signing a free trade agreement (FTA). However, FTAs do not imply an agreement on services; a separate economic integration (EIA) is needed. As trade in services is one of the fastest growing sectors of the global economy, it is important to pay special attention to these agreements. We use the methodology of Baier and Bergstrand (2004) to investigate di¤erences in the determinants of signing an agreement on goods trade and services trade. In addition to the standard economic variables, we include variables for skilled/unskilled labor, and political stability. We …nd in general, qualitative similarities (though di¤erent magnitudes) and some robust speci…c di¤erences.JEL classi…cation: F14, F15.

Why Do Economies Enter into Preferential Agreements on Trade in Services? Assessing the Potential for Negotiated Regulatory Convergence in Asian Services Markets

“…While our results may be Asia-specific, the goodness-of-fit of our empirical model, demonstrated by the probabilities that were predicted successfully, is in line with the results found in Baier and Bergstrand (2004) and improves on those found in Cole and Guillin (2015). Our results suggest that Asian economies with high preexisting levels of bilateral goods trade and divergent services regulatory frameworks are more likely to negotiate services agreements with each other.…”

“…The two papers closest to the analysis on offer in this paper are Baier and Bergstrand (2004), who were the first to ask this question from the perspective of agreements focusing on goods trade, and Cole and Guillin (2015), who first explored the issue for services accords without, however, considering the influence of regulation in services trade.…”

“…The papers closest to ours include Baier and Bergstrand (2004), who were the first to examine the determinants of partners' propensities to negotiate PTAs, and Cole and Guillin (2015) and Egger and Wamser (2013), who explored this issue for services accords. The latter two papers, however, did not consider regulatory convergence as a determinant for entering into negotiations.…”

“…Baier and Bergstrand (2004) found these factors to have economically and statistically significant effects on the probability of negotiating a goods agreement. In comparison, Cole and Guillin (2015) examined a dyad's propensity to negotiate a services agreement, and in their baseline specification found statistically significant evidence only for the natural trading partner hypothesis, similarity in terms of economic size, and relative factor endowment differences-both those emanating from Heckscher-Ohlin trade and those leading to less interindustry trade diversion. Egger and Wamser (2013) found the determinants of goods and services trade agreements to be similar.…”

Determinants of Services Trade Agreements: Regulatory Incidence and Convergence

“…However, the papers closest to ours are Baier and Bergstrand (2004), who were the rst to examine the determinants of partners' propensities to negotiate trade agreements in goods, and Cole and Guillin (2012) and Egger and Wamser (2013), who explored the issue inter alia for services accords. None of these papers, however, examine the role of regulation in STA formation.…”