The free movement of services within the EU

Henk L.M. Kox (), Arjan Lejour () and Raymond Michel Montizaan ()

CPB Documents from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: Intra-European trade in services is hampered by national regulatory differences for service markets. The European Commission has proposed a new directive to overcome these regulatory barriers. This document assesses the effects of this new directive on trade and investment in services.

We have developed an index for bilateral heterogeneity in product-market regulation, and apply it to the OECD Regulation Database. We show that the heterogeneity in regulation hampers bilateral service trade in the EU, and also bilateral direct investment. We investigate how the proposed EU directive could lower the intra-EU heterogeneity in product market regulation for services, and what effect this would have on bilateral trade and investment in the Internal Market for services.

We find that commercial services trade in the EU might increase by 15-30%, while the foreign direct investment stock in services might rise by 20-35%.

Keywords: EU; internal market; services; service trade; direct investment; regulatory barriers; gravity model (search for similar items in EconPapers)
JEL-codes: F13 F15 F17 F23 L5 L8 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn
Date: 2004-10
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Persistent link: http://EconPapers.repec.org/RePEc:cpb:docmnt:69

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