Anirudh Shingal

Why Do Economies Enter into Preferential Agreements on Trade in Services? Assessing the Potential for Negotiated Regulatory Convergence in Asian Services Markets

More than one-third of the World Trade Organization-notified services trade agreements that were in effect between January 2008 and August 2015 involved at least one South or Southeast Asian trading partner. Drawing on Baier and Bergstrands (2004) determinants of preferential trade agreements and using the World Banks database on the restrictiveness of domestic services regimes (Borchert, Gootiiz, and Mattoo 2012), we examine the potential for negotiated regulatory convergence in Asian services markets. Our results suggest that Asian economies with high levels of preexisting bilateral merchandise trade and wide differences in services regulatory frameworks are more likely candidates for services trade agreement formation. Such results lend support to the hypothesis that the heightened “servicification” of production generates demand for the lowered services input costs resulting from negotiated market openings.

How Much do Agreements Matter for Services Trade

With an increasing number of Preferential Trade Agreements (PTAs) covering trade in services, we explore the impact of PTAs on services trade. To the best of our knowledge, this is the first paper in this literature that endogenizes the impact of preferentialism in estimating the trade effect. We also add to this literature by distilling the trade effect of PTAs into that emanating from services and “goods only” agreements and further confirm complementarities between the two. Moreover, we study these relationships disaggregated by the economic status of the partner countries and by the reciprocity of commitments. Our results suggest trade effects of 11.6 – 12.7% from having a services accord alone. They also reveal that the underlying services trade between countries has been driven as much by IRS as by factor differences and that asymmetric trade alliance between North-South partners has been successful in fostering inter-industry trade.

Services Procurement Under the WTO’s Agreement on Government Procurement: Whither Market Access?

This paper studies the government procurement of services from foreign suppliers by conducting a statistical analysis of data submitted by Japan and Switzerland to the WTOs Committee on Government Procurement. Using several metrics, the paper examines whether the WTOs Agreement on Government Procurement (GPA) has led to greater market access for foreign suppliers in services procurement. Our results indicate that despite the GPA, the proportions of services contracts awarded to foreigners have declined over time for both countries and that in the absence of this decline, the value of services contracts awarded to foreign firms would have been more than 15 times higher in the case of Japan and nearly 68 times more in the case of Switzerland. We also find that for the same services categories, the Japanese government is not purchasing as much from abroad as its private sector is importing from the rest of the world, a finding that further points to the home-bias in that governments public purchase decisions.

Econometric Analyses of Home Bias in Government Procurement

The extent of discrimination in government procurement and its impact on economic efficiency has attracted both theoretical and analytical work, but little econometric evidence. We bridge this gap by building a new sector-level dataset on domestic and foreign purchases by Japanese and Swiss governments over 1990–2003 to undertake “new” econometric analyses. Unlike previous work, we explain home-bias using variables inspired by the political economy, trade-macroeconomic and procurement literatures. We also provide “new” econometric evidence for previous theoretical predictions. Our results reveal the importance of domestic-foreign productivity differences in governments’ cross-border purchases and also support previous theoretical predictions. However, Membership of the World Trade Organizationss Agreement on Government Procurement is not found to increase market access.

Natural hedging of exchange rate risk : The role of imported input prices

Using disaggregated quarterly trade data for Switzerland over 2004-2011, we study exchange rate pass through (ERPT) into imported intermediate input prices and its role in the price setting behaviour of exporters. We explicitly include disaggregated proxies for imported input prices in our analyses to investigate whether Swiss ex-porters may have “naturally hedged” exchange rate risks by sourcing inputs from abroad, especially during periods of strong CHF appreciation. Our results indicate high ERPT into imported input prices in all sectors and strong sectoral ERPT heterogeneity on the export side in both the short and long-run. They also suggest the use of “natural hedging” as an effective strategy to reduce exchange rate risks. Significantly however, Swiss exporters may not have adjusted export pricing practice in response to a strong CHF in the wake of the Euro crisis, which questions central bank intervention during that period.

Services growth and convergence: Getting India’s states together

India’s success story in services is well documented at the national level, but similar literature does not exist for India’s states. In this paper, we bridge this gap in research by looking at India’s services growth at the sub-national level and in doing so, also challenge existing literature by arguing that this growth has positive implications for income distribution. The first interesting finding is that even as per capita income is not converging across India’s states, per capita services are and we provide evidence for this both in terms of traditional measures of sigma- and beta-convergence and more recent panel unit root tests. Secondly, not only is external demand an important determinant of services value added at the state level, but this demand also emanates from all over the country rather than being concentrated in the neighbouring or richer states. This suggests that the benefits from services growth are being distributed more widely than may be perceived.

Natural Hedging of Exchange Rate Risk: The Role of Imported Input Prices

SummaryIn this paper, we estimate ERPT into imported input prices and export prices using disaggregated quarterly trade data for Switzerland over 2004–2011. We find evidence for high pass-through rates into imported input prices. This demonstrates the effectiveness of natural hedging. On the export side, ERPT exhibits substantial sectoral heterogeneity and changes in imported input costs are not transmitted to foreign consumers in most cases. This suggests the use of cheaper imported inputs to offset adverse effects of currency appreciation on export profit margins.

Revisiting the Trade Effects of Services Agreements

The proliferation of services trade agreements and improved availability of data on bilateral services trade flows has resulted in a growing literature on the theoretical and empirical assessment of services trade effects. In this paper, we revisit the trade effects of services agreements using an updated database on bilateral services trade flows from the OECD and based on recent developments in the estimation of structural gravity models. Our results suggest a services trade effect of 13.7% at the intensive margin, with significantly higher estimates for intra-EU trade. However, the trade effect becomes weakly significant when the estimation includes zero trade flows. Incorporation of anticipation effects in the analyses accentuates the average treatment effect significantly (and monotonically with time) but only at the intensive margin.

Granting preferential market access in services sequentially versus jointly with goods

While most trade agreements were about goods up until 2000, many countries have been and are now adopting services provisions. They do so by adding them to prior goods-only agreements or by concluding new agreements jointly for goods and services. This paper shows that high unilateral services trade costs deter the likelihood of joint preferential liberalization of goods and services.

Determinants of Services Trade Agreements: Regulatory Incidence and Convergence

Given the rise of services preferentialism in the last decade and the importance of domestic regulation for services trade, this paper examines the role of regulatory incidence and convergence as determinants of services trade agreements (STAs). Our results suggest that regulation is an important determinant of STA membership. They also suggest that geography, common institutions and pre-existing trade matter more than economic size and factor endowments for addressing regulatory incidence and convergence in services negotiations. Finally, we find that countries displaying greater regulatory convergence and less restrictive regulation are also more likely candidates for reciprocal services liberalization.