Service Trade Restrictions of the EEA Countries: A Multivariate Data Analysis for the European Business Services

This study uses a multidimensional approach to condense the information available in widely used service trade policy indicators and to describe the service trade restrictiveness of the European Economic Area (EEA) countries in five business service sectors (computer services and the four professional services) in a comparative way. Specifically, the study provides a multivariate data analysis of the sub-indices of the original OECD service trade restrictiveness index (STRI) applying to third countries without a Preferential Trade Agreement (PTA) and the same sub-indices of the OECD intra-EEA STRI. Additionally, the OECD FDI regulatory restrictiveness index is included in the analysis. The multivariate data analysis includes a correlation analysis, principal component analysis, and a cluster analysis. Briefly summarised, the following results are obtained: The correlation analysis shows that business services sectors of those EEA countries that are highly protected against third countries are also relatively highly protected against other EEA countries. Furthermore, there is a complementarity of the restrictions on foreign entry and movement of people with regard to their impact on trade of skilled labour-intensive professional services. The principal component analysis identifies for all business service sectors the overall service trade restrictiveness in the sector under consideration as the most important latent factor that accounts for between 35% (architecture services) and 45% (legal services) of the total variance of the included indicators. Finally, for each business service sector, the cluster analysis identifies clusters of countries that are among themselves relatively homogeneous in terms of their service trade restrictions. This allows deriving cluster-specific policy recommendations.