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GTAP Resource #6927

"The Trade Effects of a Potential Agreement on Services Domestic Regulation"
by So, Yu Roger and Eddy Bekkers

In this paper, we project the expected impact of the implementation of a Joint Statement Initiative on Services Domestic Regulation (SDR). We proceed in three steps. First, we estimate a structural gravity model on a new SDR index created by staffs at the WTO. This index assigns country- and sector-specific scores on the extent to which SDR-related disciplines have already been implemented prior to the conclusion of the agreement. Relying on recent empirical development in the structural gravity literature, we adopt services trade data from the BaTIS dataset as well as construct domestic consumption of services using output data from the OECD and UNSD databases. The SDR index is identified through interaction with a border dummy.

In the second step, we calculate a range of projected reductions in AVE trade costs associated with the implementation of the disciplines included in the SDR Agreement. The calculations are based on the gravity coefficients estimated in the first step under different specifications and the projected changes in SDR Index scores.

In the third step, we employ the WTO Global Trade Model to make projections on the trade and income effects of the SDR Agreement. Its recursive dynamic feature further allows us to track the aggregate impacts of the SDR over time. The AVE trade costs reduction acquired from the second step is implemented in the CGE model as shocks to the iceberg trade cost.

Finally, by assuming an implementation period of 10 years, our simulations project that by 2032, there will be a modest increase in global real income and export. Moreover, our country-level analysis points to the distributional effects of the SDR as there are winners and losers between and within countries. Finally, we have developed various hypothetical scenarios to highlight the full potential of SDR. We found that further gains can be realised by widening the participation of the agreement to include more developing countries.

Resource Details (Export Citation) GTAP Keywords
Category: 2023 Conference Paper
Status: Not published
By/In: Presented during the 26th Annual Conference on Global Economic Analysis (Bordeaux, France)
Date: 2023
Created: So, Y. (4/14/2023)
Updated: So, Y. (4/14/2023)
Visits: 278
- Multilateral trade negotiations
- Non-Tariff measures in services
- Trade in services

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