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Regional Liberalization of Trade in Services

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  • Park, Innwon
  • Park, Soonchan

Abstract

As the impact of trade in services on the current global financial crisis appears to overtake that of trade in goods, we propose to examine liberalization of trade in services through regional trade agreements (RTAs). The regional liberalization of trade in services is expected to generate significant welfare gains both in the services and goods sectors. However, the quantitative effect of RTAs under GATS (General Agreement on Trade in Services) Article V has not been sufficiently investigated. We attempt to fill this gap by applying a gravity regression analysis to four major services sectors—financial services, business services, communication services, and transportation services—while controlling for both country-specific and time-varying importer and exporter fixed effects. We find that (i) the RTAs under GATS Article V create services trade among members and do not divert services trade from nonmembers, but the trade-enhancing effect is sector-specific; (ii) the sector-specific trade-enhancing effect ranges from the highest in business services sector to the lowest in transportation services; (iii) the trade effect on aggregate services trade is weaker when we control for the time-varying multilateral trade resistance factor with the time-varying exporter and importer fixed effect, however, the sectoral effects show a reverse pattern; (iv) there is no anticipatory effect expected from services RTA negotiations, unlike the case of trade in goods; (v) there is a complementary relationship between goods and services imports; and (vi) the trade-enhancing effect of RTAs is stronger between developed members compared to the effect between developed and developing countries.

Suggested Citation

  • Park, Innwon & Park, Soonchan, 2010. "Regional Liberalization of Trade in Services," MPRA Paper 19758, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:19758
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    References listed on IDEAS

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    Cited by:

    1. Laurent Didier, 2018. "Do environmental provisions in regional trade agreements affect trade in services?," Economics Bulletin, AccessEcon, vol. 38(2), pages 733-750.
    2. Gani, Azmat & Clemes, Michael D., 2016. "Does the strength of the legal systems matter for trade in insurance and financial services?," Research in International Business and Finance, Elsevier, vol. 36(C), pages 511-519.
    3. Philipp Lamprecht & Sébastien Miroudot, 2020. "The value of market access and national treatment commitments in services trade agreements," The World Economy, Wiley Blackwell, vol. 43(11), pages 2880-2904, November.
    4. Socrates K. Majune & Judy K. Kaaria & Evelyne N. Kihiu, 2023. "Determinants of intra‐COMESA trade in services," African Development Review, African Development Bank, vol. 35(4), pages 416-428, December.
    5. Laurent Didier, 2020. "The Impact of Conflict on Trade in Services: A Sector-Level Analysis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(1), pages 34-48, March.
    6. Amélie Guillin, 2013. "Trade in Services and Regional Trade Agreements: Do Negotiations on Services Have to be Specific?," The World Economy, Wiley Blackwell, vol. 36(11), pages 1406-1423, November.
    7. Gani, Azmat & Clemes, Michael D., 2013. "Modeling the effect of the domestic business environment on services trade," Economic Modelling, Elsevier, vol. 35(C), pages 297-304.
    8. Lin, Qi & Lin, Xi, 2023. "Unveiling the trade and welfare effects of regional services trade agreements: A structural gravity approach," Economic Modelling, Elsevier, vol. 127(C).
    9. Chong Wha Lee & Soonchan Park, 2016. "Does Religious Similarity Matter in International Trade in Services?," The World Economy, Wiley Blackwell, vol. 39(3), pages 409-425, March.
    10. Borchert,Ingo & Di Ubaldo,Mattia, 2021. "Deep Services Trade Agreements and their Effect on Trade and Value Added," Policy Research Working Paper Series 9608, The World Bank.
    11. Laurent Didier, 2020. "Comparing the Impacts of Some North-North and North-South Trade Agreements on Trade in Services [Comparaison des impacts des accords commerciaux Nord-Nord et Nord-Sud sur le commerce des services]," Post-Print hal-03665971, HAL.

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    More about this item

    Keywords

    trade in services; regional trade agreements; gravity; GATS;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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