Trade Preferences and Bilateral Trade in Goods and Services: A Structural Approach

Peter Egger, Mario Larch and Kevin Staub

No 9051, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The large reduction in tariff rates worldwide under several rounds of the GATT is commonly credited with being one of the most notable economic policy accomplishments since World War II. However, the remarkable progress towards free trade of goods is unparalleled in trade with services where liberalization agreements are much harder to achieve and cross-border transactions are impeded by far tighter barriers than for the exchange of goods. In any case, the question as to how trade policy affects services trade is complex for various reasons. First, services transactions are much harder to measure than goods transactions and acceptable data on service trade have only recently become available, mostly for trade of OECD countries. Second, neither production nor trade of goods and services are independent; often they are even inseparable. Thus, achievements towards liberalizing cross-border trade of goods should have an impact on services and, by the same token, the lack of liberalization of services trade should be responsible for there being less goods trade than possible. We provide a general equilibrium comparative static estimate of the trade and welfare effects of trade policy measures towards goods and services trade.

Keywords: Goods trade; Gravity equation; Services trade; Structural estimation (search for similar items in EconPapers)
JEL-codes: F10 F12 F13 (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (67)

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