Regional Trade Agreements and Trade Costs in Services

This paper analyses the relationship between regional trade integration and trade costs in servicesindustries. The empirical analysis relies, on the one hand, on a dataset of theory-consistentbilateral trade costs calculated for 61 countries over the period 2000-2011 and, on the otherhand, on an analysis of services commitments in 66 regional trade agreements to which thesecountries are parties. Despite the proliferation of services RTAs in the past decade, we do notfind significantly lower bilateral trade costs among countries having signed such agreements.Several possible explanations are discussed. First, the gaps in services trade data and the difficultyto account for all modes of supply could influence our results. Second, the nature ofservices trade liberalisation makes it difficult to discriminate between domestic and foreignservice providers (thus not impacting the relative costs they face). Third, there is no clear evidencethat countries signing services RTAs do intend to create actual preferences for companiesin partner countries. Services RTAs are about preferential “bindings”. Regionalism in the caseof services seems non-discriminatory and does not lead to trade preferences.