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What import restrictions matter for service trade?

April 2015

CEPII trade seminars

This presentation summarizes the key findings of a Microeconomix / CEPII research supported by the European Commission entitled: What import restrictions matter for service trade?

This study is the first attempt to use very rich databases from the World Bank to estimate the effects of discrete import restrictions on bilateral services flows and to propose equivalents in terms of customs tariffs. This research surveys three distinct services sectors: Banking, Insurance and Other Business Services (such as legal, accounting or engineering services). We combine unpublished data on bilateral services trade, kindly provided by the World Trade Organization (WTO), with a unique database recently published by the World Bank (WB) on qualitative information on restrictions to trade in services across nations and sectors.

We enhance the existing literature in several ways. As concerning our measure of trade restrictiveness for the cross border supply, we start from qualitative data on discriminatory barriers and we avoid the standard approach, which transforms qualitative information into a unique restrictiveness index. Instead, we keep the discrete nature of trade impediments and create, for each combination of sector-importer, a variable that evaluates discrete levels of restrictiveness (from totally open to completely close).

In this way we are able to track the effect of specific import restrictions in place. We also highlight their non-linear impact on services flows, identify threshold effects and show the trade stimulating effect of minor restrictions over a restriction-free environment. Last, we derive some equivalents of the import restrictions in terms of customs tariffs.

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