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Services Trade Restrictiveness Index TFSITS meeting 19 September 2007 Are services non-tradable?? Services share of GDP, employment and trade, OECD 80 70 60 50 Share of total trade Share of GDP Share of employment 40 30 20 10 19 70 19 71 19 72 19 73 19 74 19 75 19 76 19 77 19 78 19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 0 What is a trade restrictiveness index (TRI)? • The simplest possible TRI: TRI T t i 1 1 T i i i i 1 • TRI =1 when T =0 • TRI= 0 when T =∞ • ti has to be tariff equivalent; • What should be the weights θi? Conceptual difficulties with STRI • Trade barriers are behind the border – Variable trade costs can be converted to a tariff equivalent; – Recurring fixed costs usually cannot be converted to a tariff equivalent; – Entry barriers (sunk costs) cannot be converted to a tariff equivalent; • Four modes of supply; – Complements? – Substitutes? – Independent? Why do we need services trade data to develop the STRI? • To identify trade barriers: – Services trade barriers are not always explicit; – Statistical analysis of which regulatory measures correlate systematically with trade flows – by mode; • To assess elasticities of substitution between modes; • To assign weights to the trade barriers – NB: endogeneity! Coverage • Countries – OECD Members; – BRICS? – New members? • Sectors: – Pilot phase: telecommunications, construction, business services – Ultimately all services sectors What kind of data do we need? • BOP statistics by sector and partner country, would it be possible to: – Break down the data by mode? – Break down data on Business services by sub-sector? – Separate services from building material for construction services? – Provide guidance on how to deal with trade in telecommunications? (services entering/disappearing over time, large changes in prices) – Fill in the gaps in the trade matrix? • FATS data: Sales by foreign affiliates by sector and partner countries; – NB: The ultimate owner of the MNE; – Fall-back position: firm-level data. Your advise and contributions are highly welcome! Thank you for your attention.