The Impact of Services Trade Restrictiveness on Trade Flows

This paper uses newly released OECD data on services trade restrictions (STRI) to analyse the relationship between services trade restrictions, cross-border trade in services and trade in downstream manufactured goods. A standard gravity model is enhanced by the STRI indices in a cross-section regression analysis. Services trade restrictions are negatively associated with both imports and exports of services. The surprisingly strong effect on services exports is probably explained by a negative relationship between the STRIs and sector performance indices. Consequently, services suppliers are less competitive abroad. A negative relationship is also found between the STRI indices and exports, imports and intra-industry trade in manufactured goods. The statistical significance and the elasticities vary across services and goods sectors in ways that intuitively make sense.