Economic Impacts of FTAs on Trade in Services: Some empirics in East Asia

Author Name ISHIDO Hikari  (Chiba University)
Creation Date/NO. November 2013 13-E-091
Research Project Economic Analysis on Trade Agreements
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While so many research reports feature the positive impacts of free trade agreements (FTAs) on liberalization in the services sector, there seems to be no detailed quantitative analysis focusing exclusively on the liberalization of trade in services under the FTAs in the Association of Southeast Asian Nations (ASEAN). This paper makes a first-step analysis on the impact of ASEAN-related FTAs on the Mode 3 (commercial presence)-based trade in services. The first section analyzes the aggregate survey results, featuring the support functions of service firms for manufacturing activities as well as the possible impacts of "intangibility," "scale economy," and "network effect" on the service firms' foreign commercial presence. Then, utilizing a newly constructed firm-level database matched with the Hoekman Index (for measuring the degree of service sector liberalization) through Mode 3 (commercial presence), standard qualitative regression analyses were conducted. Overall, the results reveal some positive correlations between the degree of service trade liberalization in the host country and service firms' commercial presence in that country, hence a policy suggestion to promote service trade liberalization further possibly under the proposed Regional Comprehensive Economic Partnership (RCEP).