Published online by Cambridge University Press: 03 May 2011
World Trade Organization
Preferential liberalization of trade in services is not a new phenomenon, but it has become a more common and prominent feature of the latest generation of bilateral preferential trade agreements (PTAs) negotiated in this decade. As of September 15, 2008, fifty-six such accords have been notified to the World Trade Organization (WTO) under Article V of the General Agreement on Trade in Service (GATS; see Table 7.1). Most of those notifications arrived after 2001 – fifty compared to six before the year 2000. In addition, many more agreements are currently being negotiated.
One might expect that countries entering these PTAs do so with the objective of eliminating barriers to trade in services, but more importantly, in the hope that the agreements will actually increase bilateral services trade between the parties. Lack of reliable data on trade in services (especially of bilateral flows) has made it almost impossible to carry out empirical studies of the determinants of bilateral services trade flows and – in particular – of the effects of PTAs on trade flows in services. However, the availability of statistics on trade in services has improved over the past year, particularly among Organization for Economic Cooperation and Development (OECD) countries. Taking those developments in the statistical field into account, the main purpose of this chapter is to provide an initial quantitative estimate of the effect of PTAs on bilateral trade in services, using the standard gravity model.