Determinants of services trade agreement membership
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Determinants of services trade agreement membership Peter Egger1 · Anirudh Shingal2,3,4,5
© Kiel Institute 2020
Abstract Existing literature has examined factors underlying the formation of goods trade agreements (GTA) and bilateral investment treaties but not the determinants of services trade agreement (STA) membership. This paper bridges the gap by studying the economic and political determinants of STA membership. Its main contribution lies in providing an economic explanation of unilateral services regulatory provisions, embodied in the World Bank’s Services Trade Restrictiveness Index (Borchert et al. in World Bank Econ Rev 28:162–188, 2014), and their interaction with services preferentialism. The authors find that unilateral services provisions are closely associated with economic determinants. They also find that countries’ participation in STAs is correlated with the similarity of their unilateral services trade restrictiveness, a finding not observed for “goods-only” trade agreements. While geographical and cultural determinants are found to be broadly similar for GTAs and STAs, association with economic size of partners, factor endowments and services cost shares in GDP comes through more strongly for goods-only agreements. Keywords Services trade agreements · STRI · Preferential trade liberalization · Services trade · Economic determinants of trade liberalization
The project leading to this paper has received funding from the Swiss NCCR in Trade Regulation. The data that support the findings of this study are available from the corresponding author upon reasonable request. * Anirudh Shingal [email protected] Peter Egger [email protected] 1
Department of Management, Technology, and Economics, ETH Zurich, Leonhardstr. 21, 8092 Zurich, Switzerland
2
Indian Council for Research on International Economic Relations, New Delhi, India
3
European University Institute, Fiesole, Italy
4
World Trade Institute, Bern, Switzerland
5
Centre for the Analysis of Regional Integration at Sussex, Falmer, Brighton, United Kingdom
13
Vol.:(0123456789)
P. Egger, A. Shingal
JEL Classification F10 · F13 · F15
1 Introduction More than three decades of research on trade costs and goods trade have unveiled fundamental insights into the determinants (Baier and Bergstrand 2004), the relative magnitude and nature (Eaton and Kortum 2002; Anderson and van Wincoop 2003, 2004), and the consequences of barriers to cross-border transactions of goods (Baier and Bergstrand 2001, 2007, 2009; Bergstrand et al. 2013; Egger et al. 2011). Much less is known about the drivers and impediments of services trade. What makes services trade and its impediments particularly interesting relative to goods trade are three features: first, services contribute a larger share to GDP in most developed and developing countries, while services trade is smaller than goods trade, pointing to high services trade costs; second, both the production and trade of services grow faster than those of goods; and, third, cross-border services
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