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Services liberalization in preferential trade arrangements : the case of Kenya

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  • Balistreri , Edward J.
  • Tarr, David G.

Abstract

Given the growing importance of commitments to foreign investors in services in regional trade agreements, it is important to develop applied general equilibrium models to assess the impacts of liberalization of barriers to multinational service providers. This paper develops a 55 sector applied general equilibrium model of Kenya with foreign direct investment and Dixit-Stiglitz productivity effects from additional varieties of imperfectly competitive goods or services, and uses the model to assess its regional and multilateral trade options, focusing on commitments to foreign investors in services. To assess the sensitivity of the results to parameter values, the model is executed 30,000 times, and results are reported as confidence intervals of the sample distributions. The analysis reveals that a 50 percent preferential reduction in the ad valorem equivalents of barriers in all business services by Kenya with its African partners would be somewhat beneficial for Kenya. If a preferential agreement with African partners is combined with an agreement with the European Union, the gains would more than triple the gains of an Africa only agreement. Multilateral reduction of services barriers, however, would yield gains about 12 times the gains of an agreement with the Africa region alone. These results suggest that preferential liberalization in the region is a valuable first step, but wider liberalization, with larger partners and liberal rules of origin or multilaterally, will yield much larger gains due to providing access to a much wider set of services providers. The largest gains would come from domestic regulatory reform in services, as this would almost triple the gains of multilateral liberalization.

Suggested Citation

  • Balistreri , Edward J. & Tarr, David G., 2011. "Services liberalization in preferential trade arrangements : the case of Kenya," Policy Research Working Paper Series 5552, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5552
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    References listed on IDEAS

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    1. Jin, Yanhong & Wang, Hua & Wheeler, David, 2010. "The impact of environmental performance rating and disclosure: an empirical analysis of perceptions by polluting firms'managers in China," Policy Research Working Paper Series 5419, The World Bank.
    2. Jin, Yanhong & Wang, Hua & Wheeler, David, 2010. "Environmental performance rating and disclosure : an empirical investigation of China's green watch program," Policy Research Working Paper Series 5420, The World Bank.
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    Citations

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    Cited by:

    1. Tarr, David G., 2013. "Putting Services and Foreign Direct Investment with Endogenous Productivity Effects in Computable General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, Elsevier.
    2. Christen, Elisabeth & Francois, Joseph & Hoekman, Bernard, 2012. "CGE modeling of market access in services," Policy Research Working Paper Series 6106, The World Bank.
    3. Balistreri, Edward J. & Jensen, Jesper & Tarr, David, 2015. "What determines whether preferential liberalization of barriers against foreign investors in services are beneficial or immizerising: Application to the case of Kenya," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 9, pages 1-134.
    4. Edward J. Balistreri & David G. Tarr & Hidemichi Yonezawa, 2015. "Deep Integration in Eastern and Southern Africa: What are the Stakes?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 24(5), pages 677-706.
    5. Jesper Jensen & David Tarr, 2014. "Deep Trade Policy Options for Armenia: The Importance of Trade Facilitation, Services and Standards Liberalization," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 19, pages 453-508 World Scientific Publishing Co. Pte. Ltd..
    6. Isabelle Rabaud, 2014. "Gains à l'échange de services pour les pays africains : mythe ou réalité ?," Working Papers halshs-01250890, HAL.
    7. World Bank, 2012. "Kazakhstan : Assessment of Costs and Benefits of the Customs," World Bank Other Operational Studies 12299, The World Bank.
    8. Christen, Elisabeth & Francois, Joseph & Hoekman, Bernard, 2013. "Computable General Equilibrium Modeling of Market Access in Services," Handbook of Computable General Equilibrium Modeling, Elsevier.
    9. Isabelle RABAUD, 2014. "Gains à l'échange de services pour les pays africains : Mythe ou réalité ?," LEO Working Papers / DR LEO 1808, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    10. World Bank, 2012. "Assessment of Costs and Benefits of the Customs Union for Kazakhstan," World Bank Other Operational Studies 2722, The World Bank.

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    Keywords

    Economic Theory&Research; Emerging Markets; Public Sector Corruption&Anticorruption Measures; Transport Economics Policy&Planning; Free Trade;

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