The Effect of WTO Membership on Service Sector Trade Liberalization

Abstract

A large portion of labor and trade in most countries is devoted to the service sector, and thus service sector impacts are crucial to a full understanding of the effects of WTO membership. The effect of WTO membership on trade volume has been subject to debate in the past, but critically, these studies have failed to examine service sector trade specifically. Conventional wisdom would seem to suggest that WTO membership should have boosted services trade, particularly after the implementation of the General Agreement on Trade in Services (GATS) in 1995. However, the relationship has yet to be rigorously tested. Here, I use data comprising 178 countries across a span ranging from 1995 until 2015 to examine the impact that WTO membership, and specifically WTO accession, has had on service sector trade levels relative to goods trade levels after the adoption of GATS. Statistical tests yield weak evidence for any significant relationship between WTO membership and service sector trade, with some possible exceptions for states that underwent many rounds of negotiations. This exception is explored further through a comparison of the WTO accessions of China and Vietnam. However, even in these extreme cases, it is difficult to find clear evidence of service sector liberalization. Overall, the findings imply that, in almost all cases, WTO rules and accessions have underemphasized service sector trade in favor of agricultural and goods trade, generating lopsided impacts to trade efficiency.