Bilateral Trade In Services Research Articles

Income differences in services trade partners

This article examines how differences in the income levels of trading partners influence the bilateral trade of services from 2000 to 2010. Overall, the results show that dissimilar per capita income levels across trade partners positively and significantly influence services trade. These findings hold not only when utilizing bilateral data on aggregate services trade, but also when considering bilateral services trade at the industry level. Our findings suggest that policy-makers looking to expand trade in services should foster trading relationships with partners that have dissimilar income profiles.

The Magnitude and Distance Decay of Trade in Goods and Services: New Evidence for European Countries

Using a newly assembled, consistent and disaggregated dataset (12 goods and 7 services) on internal and bilateral trade for 25 European countries, we analyse the difference between trade in goods and services. The measurement of both trade in goods and trade in services is improved over earlier research, allowing us to compare trade in goods and services in a coherent and systematic way. First, our dataset is made consistent with the domestic demand and production and the total exports and imports at the sector and product levels. Second, we explicitly control for re-exports. We find that, although goods are more often bilaterally traded than services, the volume of bilateral trade in services does not attenuate less with distance than the volume of bilateral trade in goods.

Intra-Continental and Intercontinental Service Trade in the Travel and Tourism Industry

This study investigates the features and determinants of the international travel and tourism service trade between the European, Asian and North American markets from 2000 to 2005. The evolution of bilateral service trade in each of these markets indicates that travel and tourism within continents plays an important role in 36 countries. The study first employs the Breusch–Pagan LM (Lagrange multiplier) test, the Hausman test and the Hausman–Taylor over-identification test to choose the appropriate empirical method. The empirical results reveal that the supply–pull effect from parent countries (the economic size of tourist origins) plays an important role in improving the tourism service exports of the various destinations. In addition, the home countries' exports of travel services are inelastic to the appreciation of their own currencies. Moreover, distribution infrastructures and the adjacency and RTA (ASEAN) dummies are found to have significantly positive contributions in terms of enhancing Asian tourism service exports, whereas the European Union (EU) and NAFTA discourage European and North American tourism exports, respectively.

Complementarity of Inputs across Countries in Services Trade

This article argues that trade in certain services has a specific feature that does not necessarily apply to goods. In those services, the production process ends in the country where they are eventually consumed (i.e. in the importing country). Hence, we propose that services trade must use interactively inputs from both exporting and importing countries and thus, should be affected in the same manner by their respective costs. We test our analytical framework using a macro dataset on bilateral trade in services and a specific industry dataset on Air passenger international transportation. We find results consistent with our theoretical framework: policy and non-policy factors affecting the use of inputs in both the exporting and the importing country have a symmetric impact on the bilateral flow of services between those countries.*

International Investment Patterns

We provide a systematic analysis of the bilateral factors driving portfolio equity holdings across countries. We find that bilateral equity holdings are strongly correlated with bilateral trade in goods and services. Larger bilateral positions are also associated with proxies for informational proximity.

The International Equity Holdings of Euro Area Investors

We provide a systematic analysis of bilateral, source and host factors driving portfolio equity investment by countries, using newly-released data on international equity holdings at the end of 2001. We find that bilateral equity holdings are strongly linked to bilateral trade in goods and services and are also associated with proxies for informational proximity. We further document that there exists a significant euro-area bias, with countries investing in other countries over and above the amount predicted by underlying fundamentals.

The Effects of the Services Directive on Intra-eu Trade and fdi

Résumé L’hétérogénéité des politiques menées à l’échelle internationale crée des coûts additionnels pour les firmes de services réalisant des échanges ou des investissements dans d’autres pays. Les fournisseurs de services doivent en effet se conformer à divers types de règles sur chaque marché où ils opèrent. Ces réglementations engendrent des coûts fixes d’entrée, spécifiques à chaque marché à l’export. Dans ce cadre, nous développons un nouvel indicateur d’hétérogénéité bilatérale afin de l’utiliser comme proxy dans l’évaluation de ces coûts. Nous tentons ainsi d’expliquer le commerce bilatéral de services et les ide dans le secteur des services en utilisant un modèle de gravité intégrant cet indicateur. Nous dégageons un impact négatif, hautement significatif, de ces coûts d’hétérogénéité sur ce type de commerce et d’ ide . Ces estimations sont ensuite utilisées pour évaluer l’impact potentiel de la Directive sur les services proposée en 2004 par la Commission. Plusieurs volets de cette Directive pourraient effectivement réduire les coûts d’entrée pour les fournisseurs de services. Dans nos projections, cette Directive sur les services pourrait ainsi accroître le commerce de services intra-européen de 30 à 62%, et l’investissement direct dans les services de 18 à 36%. JEL Classification: F13, F15, F17, F23, L5, L8

Does Gravity Matter in a Service Economy?

This paper estimates gravity equations for bilateral services trade in a sample of 28 countries. It finds that the standard gravity variables of economic size and geographic proximity are significant factors in services trade. It also reveals positive effects of linguistic ties on services trade. There is evidence of a positive link between regional trade arrangements and services trade. Much of that effect appears to reflect the impact of bilateral goods trade on services trade. This implies that efforts to enhance goods trade—bilateral or multilateral—should lead to more services trade as well.

The Gravity Equation in International Trade in Services

The main purpose of this paper is to assess the impact of various factors on bilateral services trade, relative to that on bilateral goods trade. To accomplish this purpose, using the standard gravity model, we ran regressions on bilateral services trade and goods trade between 10 OECD member countries and other economies (including OECD member and nonmember countries) for the years 1999 and 2000. One main and interesting result is that services trade is better predicted by gravity equations than goods trade. Another interesting result is that there is a complementary relationship between goods exports and services imports.

International Investment Patterns

We provide a systematic analysis of bilateral, source and host factors driving portfolio equity investment across countries, using newly released data on international equity holdings at the end of 2001. We develop a model that links bilateral equity holdings to bilateral trade in goods and services and find that the data strongly support such a correlation. Larger bilateral positions are also associated with proxies for informational proximity. We further document that the scale of aggregate foreign equity asset and liability holdings is larger for richer countries and countries with more developed stock markets.

What is So Special about Trade in Services?

This article argues that trade in services has a specific feature that does not apply to trade in goods. As the traded service is partly produced where it is consumed (i.e. in the importing country), we propose that it must use interactively inputs from both the exporting and importing countries. The modelling of the specificity of traded services is inspired from the O-ring production function presented in Kremer (1993). We then test our analytical framework using a new OECD dataset on bilateral trade in services. We find that policy and non-policy factors affecting the use of inputs in the exporting or importing country indeed have a similar impact on the same flow of traded service between those countries. This finding may contribute to explain why bilateral commerce in tradable-services is typically weaker than bilateral trade in goods.

International Investment Patterns

We provide a systematic analysis of bilateral, source and host factors driving portfolio equity investment across countries, using newly released data on international equity holdings at the end of 2001. We develop a model that links bilateral equity holdings to bilateral trade in goods and services and find that the data strongly support such a correlation. Larger bilateral positions are also associated with proxies for informational proximity. We further document that the scale of aggregate foreign equity asset and liability holdings is larger for richer countries and countries with more developed stock markets.

International Investment Patterns

The paper provides a systematic analysis of bilateral, source and host factors driving portfolio equity investment across countries, using newly-released data on international equity holdings at the end of 2001. It develops a model that links bilateral equity holdings to bilateral trade in goods and services and finds that the data strongly support such a correlation. Larger bilateral positions are also associated with proxies for informational proximity. It further documents that the scale of aggregate foreign equity asset and liability holdings is larger for richer countries and countries with more developed stock markets.

The India–Singapore Comprehensive Economic Co‑operation Agreement (CECA):: A Good Beginning Towards an Enduring Economic Relationship

Introduction The past decade has witnessed a significant expansion in bilateral economic relations between Singapore and India. Thus, while the total bilateral merchandise trade between the two countries trebled during 1991-2002, reaching US$4.20 billion, the bilateral services trade increased by 40 per cent from 1998 to US$0.74 billion in 2000. These trade flows have also been accompanied by increasing volume of foreign investments, with Singapore emerging as the eighth largest foreign investor in India as of 2002 (Joint Study Group [JSG] 2003). These investments have covered a wide range of sectors from telecommunications, electrical equipments, electronics, health care, and real estate, to port development, trade logistics, tourism, and transportation. These economic linkages have been further strengthened by the development of institutional links particularly between the trade, investment, and tourism promotion agencies of the two countries. (1) With increasing economic and institutional linkages between Singapore and India, it has been recognized by the policy-makers from both sides that there needs to be a sustained effort to concretize this relationship. Thus, during the visit of the Indian Prime Minister Shri Atal Bihari Vajpayee to Singapore in April 2002, it was proposed that a JSG be set up to explore the areas of mutual economic co-operation. This was believed to be the first step for both countries to seriously consider a closer economic partnership through a Regional Trade Agreement (RTA). The JSG has since completed its report and during the recent visit of the Singapore Prime Minister Goh Chok Tong to India in April 2003, a declaration of intent to conclude a Comprehensive Economic Co-operation Agreement (CECA) between India and Singapore within a time span of twelve to eighteen months has been signed. It is important to note that this visit took place under the shadow of an outbreak of the Severe Acute Respiratory Syndrome (SARS) in several countries across Asia, signifying willingness of both countries to forge an enduring long-term relationship. It has been agreed that the recommendations of the JSG report on the India-Singapore CECA, released during PM Goh's visit to India, could serve as a basis for detailed negotiations. This declaration thus represents another step forward in operationalizing India's Look East Policy. Upon signing, the CECA with India would represent the first such bilateral arrangement that Singapore has entered into with a developing country, and India's first such agreement with a high-income, affluent country, and thus assumes significance. It is important to note that India already has a functional Free Trade Agreement (FTA) with Sri Lanka and is in the process of negotiating such arrangements with Thailand, Brazil, and Chile. Thus, India's experience with such agreements with two members of ASEAN--Singapore and Thailand--can be expected to ease negotiations for a prospective ASEAN-India Free Trade Agreement. This article analyses the recommendations of the JSG report in the context of the proposed India-Singapore CECA and its implications for India-Singapore economic relations. It analyses some key recommendations of the JSG report and implications of the proposed CECA for regionalism in Asia. The article concludes with some cautionary notes on the CECA. Key Recommendations of the JSG Report on India-Singapore CECA and Its Implications (2) The JSG Report on India-Singapore CECA has recommended that the CECA be an FTA-plus arrangement. This implies that negotiations would go beyond tariff reduction on merchandise trade into other areas of trade negotiations, viz., services, investments, standards, and movement of natural persons. Specifically, the JSG has recommended that the CECA should be an integrated package of agreements comprising of the following major components, each of whom is individually discussed below: FTA on Merchandise and Services Trade The JSG report has recommended that the FTA, being part of the CECA, would be comprehensive and would not be limited to tariff reductions in merchandise trade. …

Promoting trade in airline services

With recent developments in the airline industry, trade concepts (e.g. the nationality of the airline) are becoming increasingly difficult to define. However, definitions are needed primarily when trade is to be restricted, and the appropriate definition depends on the objectives of the aviation policy. Trade generally enhances overall welfare, though individual countries can lose out from it. Current arrangements considerably restrict other than bilateral trade in airline services — this suggests that there may be significant gains from more open trade. Aviation policies, like other trade policies, reflect a balance between consumer, tourism, airline company and employee interests. This balance is changing in a number of countries, with the move towards open skies bilateral agreements and domestic deregulation reflecting a greater weight being put on consumer interests. Notwithstanding this, most countries are still hesitant about moves towards freer trade. They support trade when it involves greater market access for their own carriers, but oppose it when it involves their carriers losing market share. In this respect, aviation policies are similar to policies towards other sectors. The bilateral system of agreements is consistent with greater freedom of trade, though it makes some aspects of trade liberalisation difficult to achieve. Some regional agreements, especially that in Europe, have been successful in achieving trade liberalisation. Significantly, these have included airline services with other sectors, enabling trade offs between sectors.

Bilateral free trade in services

Bilateral free trade in services

The Canada-US free trade agreement: Impact on telecommunications

On 1 January 1989 the Canada-US Free Trade Agreement came into effect. It seeks to address bilateral trade in services and thereby recognizes the enormous growth of the service sector in Canada-US trade in recent years. This article describes the content and focus of the Agreement. The prevailing wisdom is that the Agreement will have little direct impact on telecommunications, but this article explains why this reflects too narrow a perspective.