Measuring Bilateral Trade In Services: Measuring Bilateral Trade In Services: A note on the data collected and estimated for the A note on the data collected and estimated for the

Services Trade Restrictiveness IndexServices Trade Restrictiveness Index

WPTGS / Paris / 24.09.2008

Trade and Agriculture Directorate

OECD Trade & Agriculture Directorate 2

•Aims at quantifying barriers to trade in services

– One index capturing all trade-restrictive measures

– Developed by sector and according to the four GATS modes of supply

•Three pilot sectors: telecommunications, construction, business services

•Research identifying trade barriers and market entry costs requires bilateral data disaggregated by sector

Services Trade Restrictiveness Index projectServices Trade Restrictiveness Index project

OECD Trade & Agriculture Directorate 3

STRI methodologySTRI methodology

•Bottom-up approach

– Observation of explicit policies that restrict trade in services

– Qualitative information (regulations) to which scores and weights are assigned

– Weighting methodology:• Expert judgement

• Statistical analysis

• Econometric methods

•Top-down approach

– An indirect measure inferring the existence of trade barriers from discrepancies between observed trade performance and what would be expected in a free trade regime.

• Differences between domestic and world market prices

• Discrepancies between observed trade flows and expected free-trade flows

… that’s where we need accurate bilateral trade data!

OECD Trade & Agriculture Directorate 4

Three derived datasets (bilateral by sector)Three derived datasets (bilateral by sector)

•BOP data

– OECD TiSP database and UN service trade statistics (for accession countries and enhanced engagement countries)

•FDI stocks

– Estimates based on OECD FDI data

•FATS statistics (sales)

– Based on OECD data (Globalisation Indicators)

OECD Trade & Agriculture Directorate 5

BOP services trade – conceptual issuesBOP services trade – conceptual issues

Sector (EBOPS)Predominant

mode(s) of supplyTransportation (205) 1 (most of) and 2 Travel (236) 2Communications services (245) 1Construction services (249) 3 and 4Insurance services (253) 1Financial services (260) 1Computer and information services (262) 1 and 4Royalties and license fees (266) 1Other business services (268) 1 and 4Personal, cultural, and recreational services (287) 1 and 4

•Balance of payments data and GATS modes of supply

• Product Classification (EBOPS) in BOP data vs. Industrial Classification (ISIC) in FATS and FDI data

OECD Trade & Agriculture Directorate 6

BOP Data used in the STRI ProjectBOP Data used in the STRI Project

•Primary datasource:

– OECD International Trade in Services by Partner Country Database (TiSP)

•Data obtained following the request made within the Trade Committee

•Complementary data from UN Service Trade Statistics Database

– Extension for OECD accession and enhanced engagement countries

– Adding partner countries for Members not included in OECD TiSP database (?)

•No use of mirror data or estimates

OECD Trade & Agriculture Directorate 7

BOP services trade - coverage issuesBOP services trade - coverage issues•L

imited coverage of bilateral data in terms of sectors and years. Countries with no bilateral data on

– Telecommunications imports (11): Australia, Canada, Germany, Iceland, Japan, Korea, Mexico, New Zealand, Switzerland, Turkey, United Kingdom

– Construction imports (9): Canada, Germany, Iceland, Korea, Mexico, New Zealand, Switzerland, Turkey, United States

– Other Business Services imports (7): Canada, Germany, Iceland, Mexico, Switzerland, Turkey, United

States

•When bilateral data are available:

– the number of allocated partner countries is rather small (23)

– reported partner flows do not add up to the sector total

OECD Trade & Agriculture Directorate 8

Imports allocated to partners as a share of totalImports allocated to partners as a share of total

CountryTotal trade

(200)

Telecom-munications

(247)

Construction (249)

Computer and information

(262)

Other business

(268)Australia 82.3 - - 50.1 75.5Austria 99.6 12.1 20.1 6.7 26.1Belgium 96.6 19.8 9.8 27.3 22.2Czech Republic 72.8 12.6 23.5 12.1 10.1Denmark 99.7 26.5 8.8 34.7 44.8Finland 92.5 25.3 58.6 20.7 28.0France 97.6 - 35.3 44.0 28.3Italy 97.6 18.8 25.0 20.4 24.1Japan 86.6 - 89.1 96.3 93.1Netherlands 99.8 - 29.6 20.3 29.7Norway 94.1 11.9 2.4 37.5 26.4Poland 95.6 9.5 13.8 16.5 21.5Portugal 96.7 - 0.9 12.5 32.4Slovak Republic 98.5 7.2 2.2 14.9 14.2Sweden 92.3 24.4 30.5 34.0 44.2United States 63.8 67.4 - - -

OECD Trade & Agriculture Directorate 9

FDI stocks and FATS sales: measuring mode 3FDI stocks and FATS sales: measuring mode 3

•FATS sales as preferred measure, however available for less countries than FDI stocks

•Industry classification for FDI/FATS vs. product classification for BOP services trade

•Limited availability of bilateral by sector data for both FDI stocks and FATS sales

OECD Trade & Agriculture Directorate 10

Bilateral FDI stocks/FATS sales by sectorBilateral FDI stocks/FATS sales by sector

•Using hard data whenever available

•Estimation of bilateral FDI stocks (or FATS sales) by sector using three 2-dimensional matrices:

– Bilateral stocks between countries

– Inward and outward stocks by industry and country

•Fill in gaps in 2-dimensional matrices

•Constraint required for optimisation: total stocks (or sales) have to be equal in the bilateral, inward and outward matrices

OECD Trade & Agriculture Directorate 11

Firm-level data: how can they help?Firm-level data: how can they help?

•Several issues in using firm-level data to fill in gaps in macro data:

– Coverage: datasets available to OECD contain only a sample of companies

– Definition of variables (e.g. “value added”)

– Identification of sectors and activities of firms

– Identification of the ultimate owner

•Micro data can be useful to do some analysis at the firm level.

OECD Trade & Agriculture Directorate 12

Data on the Mode 4 (presence of natural persons )Data on the Mode 4 (presence of natural persons )

•EBOPS components in BOP statistics are not broken down by mode of supply

•Compensation of employees and workers’ remittances are inadequate proxies

•Migration and visa statistics indicating the number of people moving under mode 4

•Data collection for mode 4 should focus on the value of service sold by contractual service suppliers

OECD Trade & Agriculture Directorate 13

DiscussionDiscussion•S

hort-term

– Can existing coverage of BOP data be improved by countries? Can some of the gaps be filled in bilateral data by service sector for past years?

•Long-term

– To what extent will countries be able to better distinguish between modes of supply in BOP data? For example, according to the simplified allocation recommended in the revised MSITS Chapter 5.

– How could BOP and FATS data be made more comparable or compatible? Could BOP data be broken down according to the ISIC classification?

– What are the prospects for improving data on mode 4? How should the value of services sold by a contractual service supplier be measured? Is the proper identification of mode 4 in BOP statistics possible and hence an option?