Unpublished Paper
OPPORTUNITIES FOR THE PACIFIC ALLIANCE IN SERVICES TRADE: RESULTS OF STRUCTURAL GRAVITY ANALYSIS
Background study commissioned by World Bank, Washington
(2017)
Abstract
Four Latin American countries (Chili, Mexico, Colombia, Peru) recently took the initiative to integrate their economies via trade and investment, under the name Pacific Alliance. The present report deals with the perspectives of the Pacific Alliance (PA) for a more integrated services market. We assess the present comparative advantages and disadvantages in services trade for the Pacific Alliance countries using data from a new world services trade matrix for 1998-2015. It yields a differentiated picture by country and by services sector. The PA countries have comparative advantages in transport and tourism, but they are relatively weak in knowledge-intensive services. The report applies the Rajan and Zingales (1999) methodology for estimating the impact of imported services on manufacturing growth, using a large UNIDO-based panel data for eighty countries, sixty manufacturing industries and eleven types of services imports to test the growth impact of services imports and domestic services production of countries. We find a positive growth impact for most of eleven different services categories, mostly from producer services that can be used as production inputs in other industries, like manufacturing, mining and agriculture. The main part of the study is a structural gravity analysis to establish the role of present barriers to services trade. Building on the methodology of Anderson, Larch and Yotov (2017) the report quantifies the future gains of the Pacific Alliance agreement in mutual services trade, making use of data for the period 1998-2015, and distinguishing between free-trade area (FTA) agreements and economic integration with different 'depth' levels. The PA countries cannot influence trade-cost barriers for their exporters in other countries, but they can do something about competitiveness of exporters, and also about the structure of imports. The focus is on domestic policies that can facilitate the import of knowledge-intensive professional, technical and other business services, because of their positive impacts on productivity and overall economic growth. The report identifies policy areas that may stimulate more trade in knowledge-intensive services and use the knowledge transfers to the best national interests.
Keywords
- services,
- international economic cooperation,
- Pacifica Alliance,
- structural gravity analysis
Disciplines
Publication Date
Fall October 1, 2017
Citation Information
Henk L.M. Kox. "OPPORTUNITIES FOR THE PACIFIC ALLIANCE IN SERVICES TRADE: RESULTS OF STRUCTURAL GRAVITY ANALYSIS" Background study commissioned by World Bank, Washington (2017) Available at: http://works.bepress.com/henk_kox/74/