REGULATORY BARRIERS TO

TRADE IN SERVICES: A NEW

DATABASE AND COMPOSITE

INDICESSebastian Benz, Janos Ferencz and Hildegunn Kyvik Nordås

• Trade policy analysis requires data on trade and trade restrictions

• The Australia Productivity Commission developed trade restrictiveness indices in the late 1990s:– A cross-section based on information from the

mid 1990s– 8 sectors 35-135 countries

• Borchert et al (2012) cross-section covering 103 countries in 2008; partial updates

Background/predecessors

• Covers 22 sectors, 44 countries and four years

• Annual updates• Extension of country coverage:

– Malaysia and Thailand (2018)– Four more (2019)

OECD STRI – the first time series of trade restrictions

• The measures:– Organised under five policy areas– Consistency across sectors versus capturing sector

specificity:• A core set of measures common to all sectors• Sector-specific measures in e.g. telecommunications,

financial services, transport, professional services• The information

– De jure – gathered from laws, regulations, decrees etc.

– Covers MFN (and behind the border regulations)• https://sim.oecd.org/

The database

Sector MeasureAll Foreign equity restrictionsAll Labour market tests for ICT, ISS and CSS Tele Interconnection is mandatedTele Number portability is requiredBanking Interest rates are regulatedBanking Restrictions on raising capital domestically for foreign owned banksLegal Nationality or citizenship is required for license to practiceLegal Commercial association between licensed lawyers and other

professionals is prohibited

Examples of measures

• Binary scoring combined with thresholds, hierarchies and complementarities to capture complexities

• Weights based on expert surveys (30-50 experts per sector)

• One-to-one relationship between qualitative data and indices - replicable

• Regulatory heterogeneity indicators • http://stats.oecd.org/

From qualitative data to indicators: scoring and weighting

The STRIs for telecommunications, 2017

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

DN

KIR

LU

SALU

XLV

AAU

TPR

TD

EU GR

CSV

KSV

NG

BRSW

EN

LD CZE

LTU

FRA

HU

NAU

SPO

LJP

NES

PIT

ABE

LN

ZL EST

FIN

MEX

TUR

CHE

CRI

CHL

COL

KO

RZA

FIS

RBR

ACA

NN

OR

ISL

CHN

RU

SIN

DID

N

Restrictions on foreign entry Restrictions to the movement of people Other discriminatory measures

Barriers to competition Regulatory transparency Average

STRI 2014

STRI commercial banking, 2017

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

LVAIR

LESP

KORDEU

CZESVN

DNKGBR

NZLAUS

FRANLD IT

ACAN

ESTLTU

LUXSWE

PRTJPN

CHLSVK

FIN AUTUSA

GRCCRI

POLBEL

HUN ISRTUR

NORCHE

ZAFCOL

RUSMEX ISL

CHNBRA

IDN

IND

Restrictions on foreign entry Restrictions to the movement of people Other discriminatory measures

Barriers to competition Regulatory transparency Average

STRI 2014

STRI legal services

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

LVAAUS

CHLCAN

CRISWE

GBRFIN COL

MEXUSA

ITA

IRL

RUSNZL

DEUNLD

CZEDNK

NORBEL

BRAZAF

ESPISR

AUTCHE

KORLTU

PRTCHN

SVKSVN

ESTGRC ISL

JPNFRA

TURHUN

IDN

IND

LUXPOL

Restrictions on foreign entry Restrictions to the movement of people Other discriminatory measures

Barriers to competition Regulatory transparency Average

STRI 2014

Changes from 2016 to 2017

-0.15-0.1

-0.050

0.050.1

0.150.2

0.250.3

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pict

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Tele

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Com

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Bro

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Rai

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ight

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Frei

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Stor

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Air

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Mar

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nspo

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Cou

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ervi

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Acc

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serv

ices

Com

mer

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ban

king

Insu

ranc

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Lega

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Con

stru

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Engi

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ing

serv

ices

Arc

hite

ctur

e se

rvic

es

Digital network Transport and distribution supply chain Market bridging andsupporting services

Physicalinfrastructure

services

Cumulative trade liberalisations (2016 to 2017) Cumulative trade restrictions (2016 to 2017)

Regulatory heterogeneity indicators

Legal services Telecommunications Commercial BankingDEU NLD 0.153 GRC ESP 0.119 CZE SVN 0.114CAN USA 0.156 CZE SVK 0.123 LVA LTU 0.118NLD NZL 0.167 SVK SVN 0.123 CZE SVK 0.132

CHN POL 0.514 CHN ISR 0.555 IDN ITA 0.563

CHN SVK 0.515 IND CAN 0.560 IDN CZE 0.563

CHN FRA 0.530 IDN ISR 0.562 IDN LUX 0.605

BaselineWith interaction

termsBilateral

STRILn distance -0.633*** -0.524*** -0.521***Ln exporter GDP 0.680***Ln importer GDP 0.671***Exporter STRI -4.001*** -4.067**Importer STRI -3.109*** -4.243***FTA -0.166 -1.306* 0.243*Common land border -0.163 0.204* 0.178

Common language 0.777*** 0.335** 0.406***

Common colonial history 0.111 0.094 0.08Same country 0.460* 0.368** 0.408**Exporter STRI * FTA 7.173**

Importer STR *FTA 1.033Bilateral STRI -3.270**Year fixed effects Yes Yes YesCountry fixed effects No Yes YesPseudo R2 0.832 0.927 0.925N 3548 3548 3548

How well do the STRIs explain services trade? Gravity

STRI sector Performance indicator Coeff,STRI

Cargo handling Logistics performance -1.138***Banking ATM density -1.467**Banking Interest spread 5.013**Telecommunications Broadband density -1.783***Telecommunications Secure server density -2.335***Legal Legal rights -3.878***Legal Time for insolvency 0.897***

Why the impact on exports?

Control for GDP and GDP per capita

• The STRI database and indicators a rich source of information on de jure trade policy in force

• Comparable across countries and over time – and to some extent across sectors

• Time series – will continue to be updated every year

• Limitations: – Does not capture preferences

• An intra-EU STRI database is in the pipeline• “Water” in the GATS and RTAs

– May underestimate restrictiveness when rule of law is weak

Summing up

STRI Suite of Tools

Regulatory database

Compare countries

Policy simulator

Country and sector notes

Research papers

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