Quantifying Barriers to Movement of Service Suppliers and Examining Their Effects

Abstract

The importance of services trade and "servicification" of economic activity has grown in countries overtime. However, regulatory and administrative barriers to the movement of service suppliers have meant that "Mode 4" accounted for only 2.1% of total services trade in 2005 and 2.9% in 2017. While trade costs for services have been computed in the literature, barriers specific to Mode 4 services trade have not yet been quantified. We contribute by constructing an index to quantify regulatory barriers to the movement of service suppliers, using qualitative information embedded in OECD data on services trade restrictions, and estimate its effects on the four "modes" of services supply. Results show that the Mode 4 restrictiveness index is negatively correlated with services imports in three of the four modes of services delivery that require proximity between buyers and sellers. These findings underline the need for countries to refrain from imposing prohibitive restrictions on service suppliers in the wake of Covid-19.

COVID‐19, services trade and greenfield investment in ASEAN+6

“…In their updated assessment of the economic impact of the pandemic on global trade, ADB (2020) model the increased cost of trade in services, especially aviation and outbound and inbound tourism, emanating from travel restrictions and travel bans. Complimenting this work and the analysis in Shingal (2020b) examining the relationship between regulatory barriers to Mode 4 and services trade by mode of supply, examine the impact of regulatory restrictions-implemented on health and safety grounds following the outbreak in March last year-on the movement of people across international borders on services trade costs. They hypothesise scenarios in which countries close their borders to passengers but leave freight trade open and estimate services trade costs to increase by an average of 12% of export values across sectors and countries in the medium term.…”