Services Trade Restrictiveness Index Research Articles

Examining the effects of national intellectual capital on economic growth: does digital services trade restrictiveness matter?

Purpose The moderating role of digital services trade restrictiveness to the effects of national intellectual capital on economic growth has been largely ignored in the existing literature. As such, this paper aims to examine how national intellectual capital and digital services trade restrictiveness affect economic growth. In addition, the moderating role of digital services trade restrictiveness in the relationship between national intellectual capital and economic growth is also examined. Design/methodology/approach In this study, a sample comprising 62 countries worldwide is used. The national intellectual capital for each country is computed using the index of national intellectual capital. Data pertaining to digital services trade restrictiveness are extracted from the digital services trade restrictiveness index (OECD Statistics on International Trade in Services database). To ensure the robustness of the findings, the generalized method of moments (GMM) is used in the analysis. Findings The findings of this study confirm that national intellectual capital supports economic growth. Accumulating intellectual capital at the national level plays an essential role in supporting economic growth. The authors also find evidence to confirm that digital services trade restrictiveness negatively affects economic growth, particularly for high-income and lower-middle-income countries. Interestingly, digital services trade restrictiveness deteriorates economic growth across countries globally, except for upper-middle-income countries, with a weak effect. The empirical results also confirm that the joint effects between national intellectual capital and digital services trade restrictiveness are negative and significant. As such, findings from our analysis suggest that digital services trade restrictiveness moderates the relationship between national intellectual capital and economic growth. Practical implications The findings of this study provide valuable implications for policymakers to formulate and implement policies aiming to improve national intellectual capital to support sustainable economic growth. In addition, limiting digital services trade restrictiveness across countries appears to provide both direct and indirect effects in enhancing sustainable economic growth. Originality/value To the best of the authors’ knowledge, this is the first empirical study conducted to examine the moderating role of digital services trade restrictiveness on the national intellectual capital – economic growth nexus.

The Role and Impact of Cross-Border Data Flows in International Business Digital Trade

Abstract Data is an important production factor in the era of the digital economy, and cross-border data flow is a prerequisite for digital trade. The Digital Services Trade Restrictiveness Index (DSTRI) is the basis of this paper’s research on the impact of cross-border data flow on digital trade. Firstly, cross-border data flow and digital trade are refined into cross-border data flow restrictive measures and digital service trade, and the mechanism of cross-border data flow restriction on digital service trade is investigated. Then, the impact model is constructed based on the gravity expansion model, the variable selection is carried out, the model variables are tested from the perspective of Pearson correlation and multicollinearity, and the optimal regression model is selected. Finally, baseline regression results are derived based on the model, and heterogeneity analysis and robustness tests are conducted. Cross-border data flow restrictions have a correlation coefficient of −2.176 with total digital services, and they have both negative and positive effects on the total trade in digital services. The total trade in digital services in DSTRI is negatively impacted by all policy areas of restrictions, which suggests that restrictions in any policy area can hinder the development of digital trade. When conducting the robustness test, cross-border data flow restrictions still have a significant inhibitory effect on digital services trade, which is consistent with the results of the benchmark regression, indicating that the results of the benchmark regression in this paper are reasonable and valid.

Services in the India-EU free trade agreement

This paper analyses the proposed free trade agreement (FTA) between EU and India focusing on services trade. Based on the text published by the European Union, it uses the OECD STRI simulator to calculate the preference margins implied by the agreement and next predicts the impact on services trade flows using a general equilibrium structural gravity analysis. I find that the preference margin on the Services Trade Restrictiveness Index (STRI) for Indian exports to the EU is between four and eight basis points depending on the sector, while for EU’s exports to India the preference margin is between 10 and 35 basis points. The predicted effect is more than a doubling of EU services exports to India, while India’s services exports to the EU would increase by about 50%. EU’s trade with the rest of the world would not change much, while India’s exports to the rest of the world would contract by about 3%. Real services output would not change much in the EU or India. Lifting trade restrictions in the telecommunications sector is the most important policy area for facilitating services trade. About half of the predicted export expansion is driven by reforms to domestic regulation.

The Regulatory Impact on Services Trade in Korea

Purpose – This study aims to analyze the effect of Korea's Services Trade Restrictiveness Index (STRI) and STRI Heterogeneity Index (HG) on Korea’s services trade.
 Design/Methodology/Approach – Using the Poisson Pseudo Maximum Likelihood (PPML) model, this study analyzes the impact of STRI and STRI HG provided by the OECD for 26 countries on Korea’s services trade (imports). The reason for using PPML is that first, a consistent estimator can be obtained regardless of the error term’s distribution. Second, if there is net-zero services trade in the data, sample selection bias can occur as the zero-trade data is excluded from the analysis when using ordinary least squares (OLS).
 Findings – After converting the STRI and the STRI HG into a single index through principal component analysis (PCA), results show that the STRI is not statistically significant, but the STRI HG shows a statistically significant negative (-) sign in all analysis models. This means that the greater the STRI HG with Korea's trading partners, the more negative the impact on services trade, which implies that even if the level of services restrictiveness is low, services trade volume will reduce as regulatory coherence with trading partners decreases.
 Research Implications – Whereas previous studies primarily focused on major advanced countries such as OECD nations or specific service industries, this study analyzes the impact of the services trade restrictiveness on services trade for Korea and each services sector. In addition, existing studies perform cross-sectional analyses due to data availability, whereas this study reflects changes in services restrictiveness levels over time by constructing panel data for 2014–2019.

The Services Trade Restrictiveness Index: Applications in Quantitative Assessments of Trade Agreements

The Services Trade Restrictiveness Index: Applications in Quantitative Assessments of Trade Agreements

Legal services global market: current state and development prospects

The article answers the question: what are the distinctive features of the global legal services market in the context of globalization, as well as what place and role it occupies in international trade and trade policy? The study is divided into 3 parts. The first part structures the main theoretical aspects concerning the legal services world market: the concept and classification of legal services, forms and methods of international trade in legal services. The second part analyzes the market indicators of the global legal services market, characterizes the main problems and trends in its development. The place and role of Russia in the global legal services market are revealed. The third part deals with the foreign trade policy issues, mechanisms for protecting the internal market. Special attention is paid to the analysis of the Services Trade Restrictiveness Index for legal services. The mechanism of countries foreign trade policies influence on the British legal services sector is illustrated in the context of Brexit.

On the sensitivity of trade costs to services trade restrictions†

AbstractServices constitute a significant part of GDP and overall trade in modern economies, but little is known about the magnitude of its obstacles. Great effort has been made to establish measures of services trade frictions on the part of the Organization of Economic Cooperation and Development (OECD) and the World Bank. A customary way of using these measures is to employ them in log‐linear regressions to gauge their effect on services trade flows. This may be problematic to the extent that these measures do not capture ad valorem (tariff type price increasing) trade costs. Hence, it is natural to believe that available services trade cost measures may have a nonlinear impact on services trade flows. The present paper documents that this is the case, using nonparametric estimates to quantify the direct impact of important trade cost measures captured by the Services Trade Restrictiveness Index of the OECD on cross‐border services transaction costs and trade.

Digital Trade Enablers and Barriers in the European Union

The purpose of this paper is to research the indicators of digital development in the EU that are preconditions for development of digital trade and also to confront them with the barriers for cross-border digital trade. Thy hypothesis is that countries differ in the digital society development that can be burden in their participation in digital trade activities. The preconditions are measured by comparing indicators/indexes that regards the e-commerce and/or to digital trade (i.e. B2C e-commerce index;Network readiness index, internet users, etc.) while the barriers are measured by Digital trade restrictiveness index and Digital Services Trade Restrictiveness Index. The analysis is focused to EU member states which are divided on two groups: EU14 (EU-15 - UK) and EU13 (new member states). The main findings indicate the EU member states are very heterogeneous due to the ICT development, and also, unexpectedly, some of the EU members put high restrictions for carrying out digital trade. The Netherlands, Sweden, Finland, Denmark and Germany are the best performers in digital society development. At the same time, France and Germany are the most restrictive EU members. For the efficient exploitation of the ICT in conducting the trade activities, the EU should overcome the differences in regulatory framework of the member states but also it should: promote the investments in adequate infrastructure and skills and help businesses to be present on the digital platforms.

Services trade in the ASEAN region and participation in GVCs

This paper documents the importance of trade in services for global value chain participation in the ASEAN region. Using newly created data on GVCs as well as a new database on the services trade restrictiveness index to connect international trade policies in services to participation in GVCs, we show that restrictions on trade in services are detrimental for backward participation in GVCs and that such restrictions are harmful to ASEAN members when compared to other countries in the data set. Also, we show that services trade restrictions are especially detrimental to ASEAN countries when such backward integration is connected to forward participation, hence, central positions in GVCs. Restrictions on trade in services slow down the upgrading of value chain positions, which calls for policy actions to follow up trade liberalization in industrial products with a new round of lower restrictions on services trade.

Services Trade Policies and Economic Integration: New Evidence for Developing Countries

AbstractThis paper applies machine learning to recreate to a high degree of accuracy the OECD's Services Trade Restrictiveness Index (STRI) to provide quantitative evidence on the restrictiveness of services policies in 2016 for a sample of developing countries, using regulatory data collected by the World Bank and WTO. Resulting estimates are used to extend the OECD STRI approach to 23 additional countries, producing what we term a Services Policy Index (SPI). Converting the SPI to ad valorem equivalent terms shows that services policies are typically much more restrictive than tariffs on imports of goods, in particular in professional services and telecommunications. The SPI has strong explanatory power for bilateral trade in services at the sectoral level, as well as for aggregate goods and services trade.

Trade in Services in the European Union

Services dominate in creation of value added in national economies, especially in developed countries and they have growing trend in developing (emerging) economies. They cover four modes of trade (according to GATS), that makes their calculation complex and a part of services is hidden in the value of production/trade of manufactured goods. Their importance in foreign trade, despite the increasing trend, is still three times smaller that the value of trade in goods, but also it is under-valuated. This paper explains specific characteristics of services foreign trade, provides analysis of structure of services trade but also pointed the limitation of wider trade expansion (i.e. liberalization of trade). The analysis employ statistical tools and secondary data and covers the EU member states. The EU is very important player in the global arena and it is net exporter of services, where richer member states are oriented to the other business sector while the Central, East and South members are focused to travel. The EU members mainly traded between them selves. Services trade faced higher barriers in cross-border trade. OECD measures these restriction by Services Trade Restrictiveness Index. EU common market provides better condition for the intra- EEA trade in services even the protection differs between countries and it is more liberal for computer and telecom sectors while in accounting services and legal services the protection is high due to national legislations.

Determinants of services trade agreement membership

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.

Firm heterogeneity in services trade: Micro‐level evidence from eight OECD countries

AbstractThis paper shows that smaller and less productive firms, as well as first‐time exporters, are overproportionally affected by services trade barriers using micro‐data from Belgium, Finland, Germany, Italy, Japan, Sweden, the United Kingdom and the United States. For these firms, both the propensity to export and export volumes to less restrictive destinations are significantly higher than to more restrictive destinations. In contrast, policy barriers measured by the OECD Services Trade Restrictiveness Index (STRI) do not affect export decisions of the largest, most productive and experience services firms. The pattern holds for two major modes of supply, cross‐border services exports and foreign affiliate sales of services firms. The findings are consistent with firm sorting mechanisms in trade models with heterogeneous firms and hysteresis of export participation in the presence of sunk export costs.

The Effect of Binding Commitments on Services Trade

AbstractIt has long been established in theory that uncertainty impacts on firm behaviour. However, the empirical basis for quantifying the uncertainty-reducing effects of trade agreements has not been firmly established. In this paper, we develop estimates of the effect of reducing uncertainty regarding regulation of foreign services markets by making commitments that are bound under a trade agreement. Specifically, we identify the effect on services trade of services trade restrictions, as measured by the OECD's Services Trade Restrictiveness Index (STRI), and the separate effect of ‘water’ in binding commitments, as assessed by the difference between countries’ commitments under the General Agreement on Trade in Services (GATS) or free trade agreements (FTAs) and applied levels of market access, as captured by STRI scores. Using a gravity model, we find that services trade responds positively but inelastically to reductions in services trade barriers, as measured by the STRI and, in our preferred regression, the response to actual restrictions is more than twice – specifically 2.4 times – as strong as the response to comparable reductions in uncertainty, as measured by water. Moving from GATS commitments to FTA commitments leads to a 4.7% increase in services trade because of the reduction in uncertainty.

The labour market effects of applied service regimes and service sector reforms

AbstractThis article offers novel insights into the modal and sectoral characteristics of trade in services that may exert an influence on the redistributive properties of liberalization in service trade and investment. It uses descriptive statistics, and econometric analysis to examine the labour market effects of unilateral service regimes, drawing on data from the OECD's Services Trade Restrictiveness Index for a sample of 44 OECD and non‐OECD countries and 22 sectors over the period 2014–16. Whereas the findings suggest that the unilateral liberalization of services is not associated with net labour displacement effects, the authors call for empirical evidence, based on improved data sources, for a fuller understanding of this issue.

BREXIT perspectives: financial market dynamics, welfare aspects and problems from slower growth

In this analysis, BREXIT is considered with regard to the main consequences for financial markets; and real economic implications are taken into account while policy options are also highlighted. The role of the interest elasticity of the demand for money is emphasized for both welfare analysis of BREXIT and overshooting – assuming that that elasticity will fall post-BREXIT. Key insights emerge from aspects related to Dornbusch-type exchange rate overshooting problems and insights from the Branson model: This medium-term perspective is used to derive some short-term and long-term BREXIT implications. As regards overall welfare effects, the BREXIT welfare effect related to a lower holding of real money balances – due to a lower gross domestic product post-BREXIT in the long run – is rather high, so that adding this to the HM Treasury finding of a 10% income loss from BREXIT suggests that the long run welfare loss of the UK could be high. Moreover, the quality of financial market integration in the EU countries is highlighted: For the first time, financial services trade restrictiveness indices are empirically analyzed. This leads – on the basis of a restrictiveness index regarding international financial services and additional information about prudential supervision quality – to an assessment of the quality of financial markets. Policy conclusions take into account the new protectionist challenges and use insights from the Welfens enhanced growth model with trade and foreign direct investment.

Services Trade Policies and Economic Integration: New Evidence for Developing Countries

This paper provides the first quantitative evidence on the restrictiveness of services policies in 2016 for a sample of developing countries, based on recently released regulatory data collected by the World Bank and WTO. We use machine learning to recreate to a high degree of accuracy the OECD’s Services Trade Restrictiveness Index (STRI), which takes account of nonlinearities and dependencies across measures. We use the resulting estimates to extend the OECD STRI approach to 23 additional countries, producing what we term a Services Policy Index (SPI). Converting the SPI to ad valorem equivalent terms shows that services policies are typically much more restrictive than tariffs on imports of goods, in particular in professional services and telecommunications. Developing countries tend to have higher services trade restrictions, but less so than has been found in research using data for the late 2000s. We show that the SPI has strong explanatory power for bilateral trade in services at the sectoral level, as well as for aggregate goods and services trade.

On the Efficiency of Market Regulation in the Air Transport Industry - Using Services Trade Restrictiveness Index -

On the Efficiency of Market Regulation in the Air Transport Industry - Using Services Trade Restrictiveness Index -

Service Trade Liberalization And Economic Growth

This paper empirically examines the relationship between services trade liberalization and economic growth. Services trade currently comprises approximately 20 percent of total world trade, with more than half of the world’s labor force employed in service sectors. The possibility that reducing barriers can enhance global production is increasingly receiving attention. The impact of liberalization on growth is empirically assessed by including services trade restrictiveness as the key variable of interest in cross-sectional estimations of a global production function. Income dummies were interacted with levels of services trade restrictiveness to discern variations of influence across countries at different income levels. Services trade restrictiveness is captured using a World Bank index for a pooled cross-section of countries. Robustness of results are evaluated using a similar services trade restrictiveness index recently constructed by the OECD for member countries. The results suggest that services trade liberalization has a positive impact on a country’s per capita GDP. This benefit of service liberalization is larger in countries with greater services export values. In addition, service liberalization in low income countries has a greater impact on per capita income levels than does service liberalization in high income countries. While positive and statistically significant, the scale of the effect appears small. The robustness of the results were tested using an alternate measure of services trade restrictiveness for OECD countries. These robustness results validated the benchmark results and also suggested, for high income countries, the liberalization of services trade may have a non-linear influence on per capita income growth. These findings underscore the importance of including service trade liberalization as a part of trade policy discussions and development agendas, as liberalization of services restrictions may stimulate growth in per capita income and highlights that removing the barriers to services trade can positively impact income levels, especially in low-income countries. Currently, policies surrounding services trade liberalization largely occur at the bilateral agreement level. However, as knowledge grows about the possible benefits of services trade liberalization, movement towards multilateral recommendations may be optimal.

Evaluating the Impact of FTAs on FDI: A Text-Based Approach

The literature on the impact of bilateral investment treaties (BITs) on foreign direct investment (FDI) has had difficulty establishing a robust effect of BITs on FDI flows. This conclusion extends to FDI chapters in free trade agreements (FTAs), which feature the same substantive content as BITs. The lack of an empirically identifiable effect may reflect econometric difficulties, a minimal role of BITs/FTAs in corporate FDI decisions, or the lack of liberalizing content in the treaties. We consider the latter issue by mapping the legal commitments in FTAs onto the OECD’s Foreign Direct Investment Restrictiveness (FDIR) Index, while drawing on the Mode 3 component of the OECD’s Services Trade Restrictiveness Index (STRI) to enable greater granularity of treatment of the measures in FTAs. The modified index, which we label the FDI-RI to distinguish it from the FDIR, has the same broad policy areas and the same weighting scheme as the FDIR but the measures under each horizontal policy area (i.e., policies that apply to FDI in general without distinguishing sectors) that are covered in more detail by the STRI have been disaggregated into measures that correspond to those in the STRI. The FDI-RI thus covers both goods and services on a consistent basis, but with greater detail for goods sectors than available under the FDIR. Importantly, we take into account the impact of FTA measures in improving upon each party’s bindings under the General Agreement on Trade in Services (GATS). In principle, empirically quantified NTBs reflect both applied restrictions and uncertainty. We identify uncertainty with “water” in the bound commitments and construct a composite NTB that reflects applied measures and water. This approach allows a determination of whether and how much FTAs liberalize investment by either reducing applied barriers, decreasing uncertainty, or both. Given measures of tax equivalents for non-tariff measures affecting investment, this approach also allows the calculation of a tax equivalent shock for use in quantitative models. We comment on the impact of FDI liberalization in the Trans-Pacific Partnership (TPP) Agreement using this approach.