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The paradox of “preferences”: regional trade agreements and trade costs in services

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  • Miroudot, Sebastien
  • Shepherd, Ben

Abstract

Abstract This paper analyzes the relationship between regional trade integration and trade costs in services industries. The empirical analysis relies, on the one hand, on a dataset of theory-consistent bilateral trade costs calculated for 55 countries over the period 1999-2009 and, on the other hand, on an analysis of services commitments in 66 regional trade agreements to which these countries are parties. Despite the proliferation of services RTAs in the past decade, we find that trade costs are only slightly lower due to the impact of these agreements. In addition, we find that the trade cost reductions that do take place tend to happen before the agreement is signed. This mechanism is consistent with countries using services RTAs as a way of “locking in” reforms. Finally, we find that the preferential margin of services RTAs is quite thin: members and non-members both see slightly lower trade costs when an RTA is signed. We discuss the possible explanations for these findings in terms of the nature of services RTAs and their relationship with regulatory reform in signatory countries. Based on these results, we argue that regionalism in the case of services seems relatively non-discriminatory and does not lead to substantial trade preferences.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41090.

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Date of creation: 06 Sep 2012
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Handle: RePEc:pra:mprapa:41090

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Keywords: Trade policy; Trade in services; Regional trade agreements; services trade liberalization;

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References

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  1. Jean-Pierre Chauffour & Jean-Christophe Maur, 2011. "Preferential Trade Agreement Policies for Development : A Handbook," World Bank Publications, The World Bank, number 2329, August.
  2. Head, Keith & Ries, John, 2008. "FDI as an outcome of the market for corporate control: Theory and evidence," Journal of International Economics, Elsevier, Elsevier, vol. 74(1), pages 2-20, January.
  3. Marie-France Houde & Akshay Kolse-Patil & Sébastien Miroudot, 2007. "The Interaction between Investment and Services Chapters in Selected Regional trade Agreements," OECD Trade Policy Papers 55, OECD Publishing.
  4. Cecília Hornok, 2011. "Gravity or Dummies? The Limits of Identification in Gravity Estimations," CeFiG Working Papers, Center for Firms in the Global Economy 15, Center for Firms in the Global Economy, revised 26 Sep 2011.
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  6. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, American Economic Association, vol. 98(4), pages 1707-21, September.
  7. Bergstrand, Jeffrey H. & Egger, Peter, 2007. "A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises," Journal of International Economics, Elsevier, Elsevier, vol. 73(2), pages 278-308, November.
  8. Christian Gormsen, 2012. "The Declining Barriers to Foreign Direct Investments and How to See Them," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00676508, HAL.
  9. Nuno Limao, 2006. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," American Economic Review, American Economic Association, American Economic Association, vol. 96(3), pages 896-914, June.
  10. Fink, Carsten & Nikomborirak, Deunden, 2007. "Rules of origin in services : a case study of five ASEAN countries," Policy Research Working Paper Series 4130, The World Bank.
  11. Sébastien Miroudot & Jehan Sauvage & Marie Sudreau, 2010. "Multilateralising Regionalism: How Preferential Are Services Commitments in Regional Trade Agreements?," OECD Trade Policy Papers 106, OECD Publishing.
  12. Keith Walsh, 2006. "Trade in Services: Does Gravity Hold? A Gravity Model Approach to Estimating Barriers to Services Trade," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp183, IIIS.
  13. Kleinert, Jörn & Toubal, Farid, 2007. "Gravity for FDI," Tübinger Diskussionsbeiträge 313, University of Tübingen, School of Business and Economics.
  14. Miroudot, Sébastien & Sauvage, Jehan & Shepherd, Ben, 2012. "Trade costs and productivity in services sectors," Economics Letters, Elsevier, Elsevier, vol. 114(1), pages 36-38.
  15. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, American Economic Association, vol. 93(1), pages 170-192, March.
  16. Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, 01.
  17. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
  18. Shingal, Anirudh & Sauvé, Pierre, 2011. "Reflections on the Preferential Liberalization of Services Trade," MPRA Paper 32816, University Library of Munich, Germany.
  19. Pomfret, Richard & Sourdin, Patricia, 2009. "Have Asian trade agreements reduced trade costs?," Journal of Asian Economics, Elsevier, Elsevier, vol. 20(3), pages 255-268, May.
  20. Fink, Carsten & Molinuevo, Martín, 2008. "East Asian preferential trade agreements in services: liberalization content and WTO rules," World Trade Review, Cambridge University Press, Cambridge University Press, vol. 7(04), pages 641-673, October.
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Cited by:
  1. Bernard Hoekman, 2014. "Sustaining multilateral trade cooperation in a multipolar world economy," The Review of International Organizations, Springer, Springer, vol. 9(2), pages 241-260, June.
  2. Bernard Hoekman, 2013. "Sustaining Multilateral Trade Cooperation in a Multipolar World Economy," RSCAS Working Papers, European University Institute 2013/86, European University Institute.

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