Abstract:Regulatory measures constitute a significant barrier to cross-border services trade in sectors including transport, communications, business services, insurance, and recreation. However, regulation has weaker effects on trade in financial services, distribution, and construction. Entry barriers and conduct regulations have heterogeneous effects across sectors, as do particular measures such as licensing requirements, economic needs tests, restrictions on business form, and limitations on advertising. In addition, regional trade agreements (RTAs) are trade creating in communications, finance, and distribution, but have only weak effects in other sectors. Contrary to findings for goods markets, trade diversion is relatively limited for services RTAs. JEL Codes:F13; F15. Keywords:Trade in services; Non-tariff measures; Regional integration. (Figure 1).Two types of regulations need to be addressed when liberalizing services trade or negotiating services agreements. First are economy-wide regulations that are important for the whole domestic economy, which also affect the total amount of services trade. However, services are heterogeneous in nature, and as a result sector-specific regulations are at least as important from a trade perspective. Both types of regulations are comprised of many sub-levels of regulation with each of them having different effects on services trade. In principle, all these types of regulation are being negotiated in RTAs to facilitate special access to services imports and exports. Yet, RTA negotiations need to be "deep" as well as sectorally broad in order to make meaningful trade contributions.Against this background, this paper addresses the question of the extent to which regulation and regional integration in services constitute drivers of bilateral services trade. We assess this question by focusing on detailed regulations at the sector level that affect sector-specific services trade. We also include measures of trade creation and trade diversion of services RTAs, including the EU. This allows us to evaluate what types of regulation for which services sectors drive trade expansion, and whether or not negotiated RTAs play a contributing role in that process.Our paper makes three specific contributions relative to the existing literature. First, we map all available policy data to sector-specific services trade flows using nine different services sectors. The paper proceeds as follows. The next section reviews the existing gravity literature on services trade, focusing on policy variables, sectoral disaggregation, and regional integration. Section 3 presents our empirical strategy and data, and provides some preliminary non-parametric evidence on the importance of cross-sectoral heterogeneity. Section 4 discusses the results of our analysis and, finally, the last section concludes, discusses policy implications, and presents directions for future research. Literature Review 4There remains a split in the services literature between contributions dealing with regulatory policy ...
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This paper examines whether restrictive data policies impact trade in services over the internet. We have collected comparable information on a variety of policy measures that regulate data for a wide group of countries for the years 2006-2016. This information is compiled in a weighted index that assesses the restrictiveness of these countries' data policies. We distinguish between policies regulating the crossborder movement of data and policies regulating the domestic use of data. Using econometric estimations, we show that strict data policies negatively and significantly impact imports of data-intense services. Therefore, countries applying restrictive data policies, in particular with respect to the crossborder flow of data, suffer from lower levels of services traded over the internet. This negative impact is stronger for countries with better developed digital networks. The results of our analysis are significant and hold for various robustness checks.
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