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The Political Economy of Services Trade Agreements

Fiorini, Matteo; Lebrand, Mathilde
Authors registered in the RePEc Author Service: Matteo Fiorini and Mathilde Lebrand

No ECO2016/05, Economics Working Papers from European University Institute

Abstract: This paper studies the determinants of liberalization commitments in the context of trade in services used as intermediate inputs. Compared to goods, services inputs are mostly complementary to other factors of production and non-tradable. We build a theoretical trade policy framework in which (i) foreign investment as a way to contest a market for non-tradable services can be restricted by the government and (ii) the role of services as complementary inputs explains unilateral commitment to services trade liberalization. Commitment helps governments to avoid political pressures that would result in protectionist measures leading downstream producers to inefficiently reduce their production. In addition we provide new results on the influence of lobbying by both national firms and foreign multinationals. We discuss how the bargaining power of the government, the size of national services sectors and the difference in valuation between national and foreign contributions affect the willingness of the government to sign a services trade agreement.

Keywords: Services Trade; Trade Agreements; FDI; Lobby (search for similar items in EconPapers)
JEL-codes: D43 F13 F21 L80 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-int, nep-mac and nep-pol
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