Trade liberalization of IT products and domestic value-added ratio of service exports: A quasi-natural experiment based on the ITA expansion

Trade in services is rapidly expanding its influence around the world and has become an important link for economic cooperation and structural change among countries. Countries are increasingly integrated into the service global value chain (GVC), and how to absorb trade gains more efficiently in the process of exporting services has become the focus of their attention. The expansion of the Information Technology Agreement (ITA-2) promotes trade liberalization of information technology (IT) products among participating countries, which could impact service value chains. The theoretical analysis of this paper shows that the trade liberalization of IT products was conducive to increasing the domestic value-added ratio (DVAR) of service exports. The improvement in productivity and the localization of information service procurement constituted the specific mechanism of this connection. Based on the quasi-natural experiment of ITA-2, this paper employs empirical analysis of data from 74 countries (or regions) between 2009 and 2020 to validate the theoretical hypothesis. The heterogeneity analysis reveals that the policy effects were significant in low- and middle-income countries and Asian and European countries. Sectors including transportation, professional activities and education etc. were affected by the policy. The moderating effect reveals that the ICT development level and downstreamness of the value chain of countries positively moderated the policy effect. The research in this paper can provide a reference for developing countries to explore how to occupy a favourable position in the distribution of service GVC by opening up to the outside world.