Services trade within Canada and the European Union; what do they have in common?
AbstractThis paper explains bilateral services trade using a gravity equation and compares the results with trade in goods. We analyse bilateral trade between the provinces of Canada and between the member states of the European Union. We conclude that the gravity equation explains the variability in services trade very well: market size of the exporting and importing regions and distance are the most important explanatory variables. On average, distance is a less hindrance for services trade than for goods trade. Differences in languages and the regulation of product markets hamper services and goods trade in Europe significantly. Trade in services is also hampered by regulation in the importing country, but this is not true for goods. Services trade within Canada is twice as high as within Europe measured as share of GDP. Tentative estimates suggest that intra-EU services trade could be much higher if the internal market would function like the Canadian services market.
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Bibliographic InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 42.
Date of creation: Dec 2004
Date of revision:
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- L8 - Industrial Organization - - Industry Studies: Services
- L5 - Industrial Organization - - Regulation and Industrial Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-13 (All new papers)
- NEP-BEC-2005-08-13 (Business Economics)
- NEP-INT-2005-08-13 (International Trade)
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