Quantifying Services-Trade Liberalization: The Impact of Binding Commitments

35 Pages Posted: 11 Feb 2016 Last revised: 14 Jun 2017

See all articles by Dan Ciuriak

Dan Ciuriak

Ciuriak Consulting Inc.; Centre for International Governance Innovation (CIGI); C.D. Howe Institute; Asia Pacific Foundation of Canada; BKP Development Research & Consulting GmbH

Dmitry Lysenko

Nova Scotia Government

Date Written: June 2016


It has long been established in theory that uncertainty impacts on firm behaviour. However, the empirical basis for quantifying the uncertainty-reducing effects of trade agreements has not been firmly established. In this paper, we develop estimates of the effect of reducing uncertainty regarding market access on cross-border services trade by making commitments that are bound under a trade agreement. Specifically, we identify the effect of services trade restrictions on cross-border services trade, as measured by the OECD’s Services Trade Restrictiveness Index (STRI), and the separate effect of “water” in countries’ WTO bindings, as assessed by the difference between their commitments under the General Agreement on Trade in Services and their applied level of market access, as captured by their STRI scores. Using a gravity model, we find that services trade responds positively but inelastically to reductions in services trade barriers, as measured by the STRI, and that the response to actual restrictions is about twice as strong as the response to comparable reductions in uncertainty, as measured by water. Responses are highly heterogeneous across services sectors. We suggest how these results can be used provisionally to quantitatively assess the impact of trade agreements in CGE modelling frameworks, taking into account not only actual liberalization of market access terms and conditions, but also the extent of binding of those commitments.

Keywords: Services trade, bindings, GATS commitments, STRI

JEL Classification: F13, F14, F68

Suggested Citation

Ciuriak, Dan and Lysenko, Dmitry, Quantifying Services-Trade Liberalization: The Impact of Binding Commitments (June 2016). C.D. Howe Institute Technical Paper for: Better in than Out? Canada and the Trans-Pacific Partnership, 2016, Available at SSRN: https://ssrn.com/abstract=2730265 or http://dx.doi.org/10.2139/ssrn.2730265

Dan Ciuriak (Contact Author)

Ciuriak Consulting Inc. ( email )

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Centre for International Governance Innovation (CIGI) ( email )

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C.D. Howe Institute ( email )

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BKP Development Research & Consulting GmbH ( email )

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Dmitry Lysenko

Nova Scotia Government ( email )


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