Do Digital Trade Rules Matter? Empirical Evidence from TAPED

Abstract

This study aims to examine (1) the impact of digital trade rules on digital services exports, (2) the heterogeneity of this impact in different trade categories, (3) the impact of digital trade rules on the growth of services exports through reducing trade costs, and (4) whether this impact is different in national income levels. In order to test the hypotheses, this study uses panel data from the TAPED database encompassing 143 economies between 2005 and 2019, employing a differences-in-differences model as the analytical framework. Our empirical results yield several key findings. Firstly, digital trade rules have a significant role in promoting the export of digital services. Secondly, the impact of trade rules on different types of trade and national income levels is significantly different. Thirdly, the mechanism analysis results show that trade costs have an intermediary role, and digital trade rules can promote the export of digital services by reducing trade costs. Finally, compared to “high-income countries”, the establishment of digital trade rules brings greater benefits to the digital services trade of low- and middle-income countries. Digital trade has brought significant changes to globalization development. Few studies address the role of digital trade rules in regulating the development of digital trade, and some researchers suggest reconstructing the global trade rules to meet the growth of digital trade. Nevertheless, research on how digital trade rules affect digital services exports is still sparse. This study contributes to the literature by revealing the importance of digital trade rules and provides a reference to promote institutional openness in the field of digital trade.