Cross-Regional Comparison of Trade Integration: The Case of Services

Date: March 2013
Type: Papers and Briefs
Subject:
Series: Regional Economic Integration Working Papers
Author: Hamanaka, Shintaro

Description

In this paper, the level of services trade integration in Asia is examined and compared to Europe and North America. The main empirical findings of this paper are that:

  • the regional bias of services trade in Asia is as high or higher than in Europe and North America;
  • in Asia, the regional bias of services trade is higher than that of goods trade, which is in sharp contrast to Europe and North America, where the regional bias of goods trade is higher than that of services trade; and
  • while Asia’s regional bias of goods trade shows a declining trend, that of services trade remains high, although in the future its decline is expected.

Asia’s relatively high-level of regional bias of services trade can be explained by the following factors:

  • a relatively high prevalence of a shared language (Chinese), which is essential to services trade, but not to goods trade; and
  • the archipelagic nature of the region, which inhibits goods trade more than services trade.

In contrast, for example, major European countries share land borders with their neighbors and they speak different languages.

Conclusions

In order to deepen Asia’s services trade integration, two policies are necessary. First, effective regional services agreements are critical to enhancing the level of integration. Second, policies to increase the trade of crisis-resilient services, such as professional services and insurance, as opposed to crisis-vulnerable services, such as transport and travel, are necessary.

Contents

  • Abstract
  • Introduction
  • Regional Bias of Trade
  • Review on Determinants of Trade: Goods and Services Compared
  • Predicting the Regional Bias of Services Trade in Three Regions
  • Services Trade Data Availability
  • Actual Regional Bias of Services Trade in Asia
  • Further Discussions on the Determinants of Services Trade in Asia
  • Summary and Policy Implications
  • References