Shingal, Anirudh --- "Do negotiated agreements foster trade in services? Evidence from PTAs" [2014] ELECD 334; in Sauvé, Pierre; Shingal, Anirudh (eds), "The Preferential Liberalization of Trade in Services" (Edward Elgar Publishing, 2014) 68

Book Title: The Preferential Liberalization of Trade in Services

Editor(s): Sauvé, Pierre; Shingal, Anirudh

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781782548959

Section: Chapter 3

Section Title: Do negotiated agreements foster trade in services? Evidence from PTAs

Author(s): Shingal, Anirudh

Number of pages: 31

Abstract/Description:

With an increasing number of preferential trade agreements (PTAs) covering trade in services, this chapter explores the empirical impact of PTAs on services trade. To the best of our knowledge, this is the first attempt in the literature that endogenizes the impact of services preferentialism in estimating trade effects and also looks at anticipation effects. The chapter also adds to the literature by distilling the trade effects of PTAs into those emanating from services and "goods only" agreements and further confirms complementarities between the two. The results suggest a trade effect of 15% from having a services accord alone, while the total incremental impact of a "goods only" agreement is found to be 7.6%. The services trade effect increases to 59.7% once anticipation effects of services accords are included and such analysis also suggests that services agreements seem to have a significant "announcement or signalling effect". Key words: Services trade, PTAs, gravity model, endogeneity, North-South agreements JEL Classification: F10, F13, F15 Of the 83 Preferential Trade Agreements (PTAs) notified to the WTO in the period before 2000, only ten (12%) were notified to the WTO as services agreements. In the years since 2000 on the other hand, 60% of the additional 176 notified-PTAs have covered trade in services. Clearly then, more and more trading partners are negotiating services provisions in PTAs which suggests both the growing importance of services trade in general and the need to institutionalize such trade between countries. The obvious question then is how effective these agreements have been in fostering services trade. Economic literature is replete with theoretical models and empirical analyses documenting the impact of PTAs on trade between partner countries. Most of this work, however, has looked at trade in merchandise goods only. An important reason for this has been the lack of availability of bilateral services trade data. This lacuna has, however, been filled with the publication of the OECD's database on bilateral services trade; since its publication Grünfeld and Moxnes (2003), Kimura (2003), Kimura and Lee (2004, 2006), Lejour and Verheijden (2004), Mirza and Nicoletti (2004), Kox and Lejour (2005), Lennon (2006) and Walsh (2006) have used this dataset to assess determinants of bilateral services trade using the gravity framework.