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This paper highlights India’s unique services export led growth path. Observing that Indian business services have helped manufacturers all over the world to become more efficient and productive, it raises the question how Indian business services can do the same for local manufacturers and thus support the Make in India initiative. The paper also explores the potential for broadening the export base in services. The services sector that appears to have the largest prospect for unleashing the potential of both manufacturing and knowledge intensive business services is the telecommunications sector, particularly broadband internet services. In addition reforms in the distribution sector that enable multi-channel wholesale and retailing could facilitate the development of marketing channels for SME manufacturers both across the vast Indian market and abroad. Reforms in the logistics sector would further improve the competitiveness of local manufacturers producing time-sensitive goods including inputs to global value chains. Finally, competitiveness in knowledge-intensive services is obtained through knowledge sharing across borders. A prerequisite for broadening the export base in these sectors is openness to foreign professionals. The set of proposed recommendations emerging from this analysis underlines the importance of streamlining sector-level regulatory frameworks in all sectors to encourage foreign entry and competition, and the role that cross-cutting improvements in the trade and business environment would play to render services providers as well as down-stream manufacturers more competitive.

This paper presents new data on services trade regulation for 46 countries in 22 services sectors over 6 years (2014-2019). The data consist of qualitative information which is scored and weighted to produce composite indices. They cover market access and national treatment restrictions with respect to all GATS modes of supply, but also behind the border domestic regulation such as licensing, non-transparent regulatory procedures and competition policy. The database is updated annually. The trade restrictiveness indices (STRIs) are significantly correlated with services trade flows, but also with the performance of the sectors subject to the restrictions including logistics performance indicators, interest spreads, density of ATMs and secure servers, broadband penetration and outcomes such as legal rights and the time to resolve insolvency.

The increasingly rapid uptake of digital technologies is launching the global economy into the ‘Fourth Industrial Revolution’ and the next transformative wave of globalisation. Trade in merchandise is in long-run relative decline; trade in services, especially e services, is on a long-term relative upward trend - and associated cross-border data flows are growing exponentially. These structural shifts, and their impacts on competitiveness, are set to intensify. The G20 must assert a leadership role by signalling best practice policy and regulatory settings, including sustained openness to international trade, investment and data flows, so every nation can reap the productivity gains of the digital age. This Working Paper has been prepared as background for a short Policy Brief for the 2020 THINK20 Taskforce 1: Trade and Investment.

This policy brief sets out recommendations to achieve a new multilateral framework of trade rules in the digital arena, thereby facilitating continued digital transformation of services and growth in cross-border flows of data. The present moment is critical. Successful conclusion of World Trade Organization (WTO) negotiations on E-Commerce will support trade in digital services, underpinned by cross-border data flows, complementing the expected recovery in travel and tourism services to provide a robust basis for global economic recovery and sustainable and inclusive growth. If the talks stall and fail to complete in 2022, technological change threatens another serious blow to a global institution which is reeling and seemingly unable to manage the regulatory heterogeneity resulting from national policies that threaten to compartmentalize data governance and fragment the global digital economy.

This paper explores the potential for increased trade in services to improve economic growth prospects globally drawing on information from labour force surveys in Chile, France, India, the United Kingdom and the United States, as well as the OECD input-output database. It documents that many activities in the business services sector are tradable across international borders. Tradable business services account for a larger share of employment than manufacturing in some high-income countries. In all countries in our sample tradable business services employ mainly high to medium skilled workers who earn significantly higher wages than in manufacturing or non-tradable services. High-income countries are relatively abundant in skilled workers and therefore have comparative advantage for this sector. In the event of trade liberalisation, rich countries such as the United Kingdom and the United States would likely experience significant export growth in this sector. State-of-the-art business services are, however, essential for the competitiveness of high-to-medium technology manufacturing. Access to such services through imports would help middle income countries strengthen their comparative advantage in these manufacturing industries and move up the value chain.

Making trade work for all and harnessing popular support for openness to trade depends on consumers benefitting from lower prices and broader product variety. The present study reveals that those benefits depend on competition in services markets, in particular in telecommunication. These findings result from employing an industrial organisation framework to estimate the transmission of prices from the world market to consumers of certain services in local markets (distribution, transport, and financial services). The OECD Services Trade Restrictiveness Index (OECD STRI) is used to explore the relationship between the pass-through rate of input prices to consumer prices and policy measures that capture the openness and strength of competition in services markets. The OECD STRI in telecommunications is found to be associated with a more complete and faster pass-through of prices in all markets studied. The results also illustrate the crucial role played by the internet in allowing for price comparisons that generate competitive pressure on distributors.

This paper presents the scoring and weighting methodology for calculation of the services trade restrictiveness indices (STRIs) for 18 sectors. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The scoring system is based on binary scoring. To reconcile the complexity of services trade restrictions with binary scoring, non-binary measures are broken down to multiple thresholds; complementary measures are grouped and scored as zero only if all measures in the bundle are not restrictive. Finally in cases where one restriction renders others irrelevant, those measures that are rendered irrelevant are automatically scored one. The paper presents the general methodology that applies to the core measures found in all sectors as well as sector-specific scoring where relevant.

This paper presents the services trade restrictiveness indices (STRIs) for construction, architecture and engineering services. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The indices are calculated for 40 countries, the 34 OECD members and Brazil, China, India, Indonesia, Russia and South Africa. This report presents the first vintage of indicators for construction, architecture and engineering services and captures de jure regulations in force in 2013. The results for construction services indicate that the overall level of restrictiveness is relatively low, ranging from 0.05 to 0.32, with an average of 0.16. The more elevated levels of restriction can be largely attributed to general measures affecting all sectors of the economy. The STRI also supports the view that architecture and engineering services are less restrictively regulated than other accredited professional services, notably legal and accounting services. The average value for the STRI among the countries in the sample is 0.22 for architecture services, connoting a relatively low degree of regulatory restrictiveness; the corresponding value is only marginally lower, 0.2, for engineering services. The majority of regulations affecting trade in these sectors concern the movement of people.

This paper presents the services trade restrictiveness indices (STRIs) for the regulated professions of legal and accounting services. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The indices are calculated for 40 countries, the 34 OECD members and Brazil, China, India, Indonesia, Russia and South Africa. This report presents the first vintage of indicators for legal and accounting services and captures de jure regulations in force in 2013. The STRI supports the view that legal and accounting services are subject to a relatively high level of regulation. Restrictiveness for legal services ranges from 0.11 to 0.73, with an average of 0.31. Accounting and auditing services show an average of 0.3 and STRI values ranging from 0.13 to 1. The results provide useful policy insights, particularly in order to identify priorities for reform at the national and international levels. Notably, in the case of legal and accounting services, easing a few prominent restrictions could result in a significantly more liberal and competitive market environment.

This paper presents the services trade restrictiveness indices (STRIs) for transport and courier services. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The indices are calculated for 40 countries, the 34 OECD members and Brazil, China, India, Indonesia, Russia and South Africa. This report presents the first vintage of indicators for transport and courier services and captures de jure regulations in force in 2013. The STRI supports the view that these services are subject to very different regulatory frameworks and, in some cases, to a relatively elevated degree of regulation. Indices for air transport covering measures affecting commercial establishment and accompanying movement of natural persons are on average quite high (0.43), with little variation across countries. A preliminary assessment of restrictiveness in cross-border trade in the sector shows that, while some progress in easing restrictions has been achieved through open skies agreements, significant limitations remain in place. The maritime transport sector is moderately open with an average STRI of 0.25. Foreign equity restrictions are still quite common in the sector and contribute significantly to the index. Most other sector-specific restrictions are found in the cabotage market and in ports. In road freight transport, the results confirm that the domestic road freight transport regime has been significantly liberalised over the years, and currently commercial establishment in the sector is largely affected by horizontal measures. The overall level of restrictiveness is relatively low with an average of 0.16, but exhibits pretty large variation. With respect to rail freight, the STRI also supports the view that considerable reforms have been undertaken in the sector in the past decades. The average level of restrictiveness is moderate at 0.22, although two countries maintain a statutory state-owned monopoly, which implies that the sector is completely closed to foreign suppliers. Finally, for courier services the results show that the overall level of restrictiveness is moderate with a sample average of 0.26. There is, however, large variation in STRI indices among countries. The elevated levels of restrictiveness are found in countries where foreign equity restrictions or statutory monopolies exist.

Standing at 24% in 2018, India's female labour force participation is only half of the global average (48%). At the same time, India has one of the widest gender wage gaps in the world and women are less likely to be employed in the formal sector compared to men. This article focuses on how international trade affects relative wages and formal employment between men and women in India. Using the Revealed Symmetrical Comparative Advantage index, sectors of comparative advantage and disadvantage are identified and matched to Indian labour force surveys that contain information on sectoral employment and earnings. We find that sectors of comparative advantage in services have the lowest gender wage gap, with women earning 24% less than their male counterparts, while women in manufacturing earned on average 40% less than male workers. Using the Oaxaca-Blinder decomposition, we find that the total gender wage gap in sectors of comparative advantage in services are minor while it is quite substantial in manufacturing, regardless of comparative advantage status. The article concludes that services trade goes hand in hand with a smaller gender wage gap as women leverage their skills better in services than in manufacturing.

This paper studies the role of trade for the joint uptake of AI-enabled automation in manufacturing and engineering. It develops an agent-based model (ABM) where the agents are heterogeneous manufacturers and engineering firms. The ABM features two technology-related business models: engineering as a face-to-face consultancy service and engineering as automated software. The software adoption rate follows an S-shaped curve for manufacturers and a boom and bust cycle for engineers. In the early phase, shortage of engineers constrains AI uptake, while engineers become abundant when AI is fully adopted. Trade affects the cut-off productivity level at which manufacturers switch technology, the shape of the adoption rate curve, and the incentives for engineers to develop software. Bulky transactions and different productivity distributions across countries are drivers of trade in their own right.

Agent-based Simulation Modelling focuses on the agents' decision making in their individual context. The decision making details may substantially affect the simulation outcome, and therefore need to be carefully designed.

In this paper we contrast two decision making architectures: a process oriented approach in which agents generate expectations and a reinforcement-learning based architecture inspired by evolutionary game theory. We exemplify those architectures using a technology uptake model in which agents decide about adopting automation software. We find that the end result is the same with both decision making processes, but the path towards full adoption of software differs. Both sets of simulations are robust, explainable and credible. The paper ends with a discussion what is actually gained from replacing behaviour description by learning.

China’s WTO accession led to deep structural changes that are at the core of its transformation towards a modern market-based economy. In order to sustain high growth and its position in the global economy, China needs to continue with—and in some areas accelerate—structural reforms. This includes removing remaining pockets of border and behind-the-border protection, progressive reforms of the state-owned enterprise sector and agriculture, as well as rethinking of its strategy with respect to raw materials markets. Reforms of services sectors, in particular, will be key to avoid the pitfalls of middle-income transition. If China is to achieve in services trade what it has accomplished in manufacturing then it needs to reform its services sector in the same spirit as it has done with its manufacturing sector. Liberalised business services will facilitate and accelerate the process of moving up the value chain; reforms of telecommunications will foster the information economy; and, access to better and more efficient financial services will support the development process in general.

Telecommunications constitute the core of the digital economy. EU regulation of the sector aims at promoting connectivity and access to very high capacity networks. To that end, and to keep up with technical developments, the regulatory framework is revised from time to time with a view to roll back regulation as competitive markets take hold. Whether or not an activity falls under the regulatory framework for telecommunications, which is the main category under electronic communications services, makes a huge difference as the recent ECJ decision on Skype illustrates. A longer version of this brief was published in Hildegunn Kyvik Nordås (2019), Trade in telecommunications and international trade agreements, Working Paper no. 2019-01, Trade and Investment in Services Associates (TIISA).

About 40% of employment in manufacturing is in services functions. This paper develops a measure of narrow outsourcing, matching services functions performed by workers inside manufacturing firms to the same services functions provided by outside suppliers. Narrow outsourcing is entered into labour demand functions where labour is broken down on business functions using OECD data combined with the 2016 releases of the World Input Output Database (WIOD). The impact of narrow offshoring on manufacturing labour demand is small on average but depends strongly on the complexity of the value chain, the policy environment and technology. Manufacturing employment is more services intensive the longer the value chain. In-house IT functions complement and support offshored IT functions, while offshored R&D functions tend to replace in-house R&D. The results are largely driven by ICT mature manufacturing sectors.

About 40% of employment in manufacturing is in services functions. This paper develops a measure of narrow outsourcing: the matching of services functions that are performed by workers who are inside manufacturing firms to the same services functions that are provided by outside suppliers. Narrow outsourcing is entered into labour demand functions where labour is classified by business functions. The impact of narrow offshoring on manufacturing labour demand is small on average but depends strongly on the complexity of the value chain, the policy environment, and ICT maturity. The IT and R&D functions are most sensitive to offshoring.

Against the backdrop of a new debate about a possible free trade agreement replacing Norway’s EEA membership, this article studies the impact of the EEA agreement on Norway’s services trade. Using the structural gravity model, it first analyses the impact of EEA on total services trade. Norway’s total services exports is estimated to be about 35 percent higher within EEA than with a hypothetical free trade agreement. The article next focuses on financial services and communications services. Compared to the hypothetical free trade agreement the EEA agreement has raised trade by about 50 percent in both sectors. Furthermore, providing the essential infrastructure for trade, the internal market for telecommunications and finance has boosted trade in all services sectors. Brexit does not change these estimates much.

About 40% of employment in manufacturing is in services functions. This paper develops a measure of narrow outsourcing, matching services functions performed by workers inside manufacturing firms to the same services functions provided by outside suppliers. The measure allows us to analyse the competition that, say, workers at the IT services desk in manufacturing firms face from outside IT suppliers. Narrow outsourcing is entered into labour demand functions where labour is broken down on business functions using OECD data combined with the 2016 releases of the World Input Output Database (WIOD). On average, a one percentage point increase in narrow local outsourcing of services reduces manufacturing employment in the same services function by between 1.5% (R&D) and 3% (transport). The impact of offshoring on manufacturing labour demand is small on average, but depends strongly on the complexity of the value chain, the policy environment and technology. Manufacturing employment is more services intensive the longer the value chain. In-house IT functions complement and support offshored IT functions, while offshored R&D functions tend to replace in-house R&D. Tentatively, technology as measured by IT maturity and the length of the value chain is more important for employment in services functions in manufacturing than is offshoring.

This paper analyses the proposed free trade agreement (FTA) between EU and India focusing on services trade. Based on the text published by the European Union, it uses the OECD STRI simulator to calculate the preference margins implied by the agreement and next predicts the impact on services trade flows using a general equilibrium structural gravity analysis. I find that the preference margin on the Services Trade Restrictiveness Index (STRI) for Indian exports to the EU is between four and eight basis points depending on the sector, while for EU's exports to India the preference margin is between 10 and 35 basis points. The predicted effect is more than a doubling of EU services exports to India, while India's services exports to the EU would increase by about 50%. EU's trade with the rest of the world would not change much, while India's exports to the rest of the world would contract by about 3%. Real services output would not change much in the EU or India. Lifting trade restrictions in the telecommunications sector is the most important policy area for facilitating services trade. About half of the predicted export expansion is driven by reforms to domestic regulation.

This article makes an empirical assessment of the relative importance of non-actionable institutional and cultural factors and actionable policy measures for services market integration, using the Nordic countries as a case study. The Nordics are an ideal case as they are perceived to be a cluster of similar countries, but they have chosen different relations to the European Union (EU) and the rest of the world. First, comparing actionable and non-actionable determinants of services trade, I find that policy-determined free trade agreements (FTAs) boost services trade by 75% and a single market by an additional 45%, while the accumulated effect of all standard non-actionable shared geographical, institutional and cultural features (sharing a land border, language, colonial past and legal origin) almost triples services trade. Having controlled for all these determinants, intra-Nordic trade in services is more than three times the predicted value. An unexplained Nordic bias of this magnitude indicates that full integration of services markets may rely on deeper institutional and cultural factors.

New technology is of little use if it is not adopted, and surveys show that less than 10% of firms use Artificial Intelligence. This paper studies the uptake of AI-driven automation and its impact on employment, using a dynamic agent-based model (ABM). It simulates the adoption of automation software as well as job destruction and job creation in its wake. There are two types of agents: manufacturing firms and engineering services firms. The agents choose between two business models: consulting or automated software. From the engineering firms' point of view, the model exhibits static economies of scale in the software model and dynamic (learning by doing) economies of scale in the consultancy model. From the manufacturing firms' point of view, switching to the software model requires restructuring of production and there are network effects in switching. The ABM matches engineering and manufacturing agents and derives employment of engineers and the tasks they perform, i.e. consultancy, software development, software maintenance, or employment in manufacturing. We find that the uptake of software is gradual; slow in the first few years and then accelerates. Software is fully adopted after about 18 years in the base line run. Employment of engineers shifts from consultancy to software development and to new jobs in manufacturing. Spells of unemployment may occur if skilled jobs creation in manufacturing is slow. Finally, the model generates boom and bust cycles in the software sector.

This paper contributes to the recent debate on trade in tasks, drawing on insights from the theory of the firm as well as recent developments in trade theory. Recent empirical literature suggests that between 20 and 30 per cent of all jobs in key OECD countries could be digitised and offshored. This study offers a cluster analysis which documents that offshorable and non-offshorable tasks tend to be performed together across occupations. Therefore, when assessing the offshorability of a job, one needs to take into account all tasks being performed by the worker and the gains from fragmenting jobs versus the benefits of multi-tasked workers (taylorism versus toyotism). Furthermore, one needs to distinguish between fragmentation of production and fragmentation of jobs.

This chapter analyses the task content of goods and services and sheds light on possible structural changes following trade liberalisation. The task content of goods and services is estimated by combining information from the O∗Net database on the importance of a set of 41 tasks for a large number of occupations and information on employment by occupation and industry. The study shows that tasks that can be digitised and offshored are often complementary to tasks that cannot. Therefore, the assessment of the offshorability of a job requires that one take into account all tasks being performed. The study finds that import penetration in services has a small, but positive effect on the share of tasks related to getting and processing information being performed in the local economy. In other words, offshoring complements rather than replaces local information processing.

Specialisation or division of labour is an important source of economic growth, but the degree of division of labour is constrained by the extent of the market. Trade in tasks represents the latest turn in a virtuous cycle of deepening specialisation, expansion of the market and productivity growth. It has attracted a lot of attention in the policy debate not for its contribution to international division of labour and productivity growth, but for its possible detrimental impact on labour markets, particularly in high income countries. This paper analyses the task content of goods and services and sheds light on structural changes that take place following trade liberalisation. The task content of goods and services is estimated by combining information from the O*Net database on the importance of a set of 41 tasks for a large number of occupations and information on employment by occupation and industry. The study shows that tasks that can be digitised and offshored are often complementary to tasks that cannot. Therefore, the assessment of the offshorability of a job requires that one take into account all tasks being performed. The paper finds that import penetration in services has a small, but positive effect on the share of tasks related to getting and processing information being performed in the local economy. In other words, offshoring complements rather than replaces local information processing. As distortions in the market for intermediate inputs, including offshored tasks, have a larger negative impact the more diversified and complex the economy, possible adverse effects of offshoring on the labour market should be dealt with through social and labour market policy measures, not trade restrictions. In addition, if trade restrictions are imposed, they should be levied on imported value added, not on the total import value.

This paper first portraits Swedish services exporters and services MNEs; second it analyses the determinants of services exports and affiliate sales; and third it studies the choice of mode of entering a foreign market. Emanating from a heterogeneous firm internationalization model, the main contribution of the paper is to explore the interaction between firm characteristics and foreign market characteristics, particularly policy-induced services trade barriers, in shaping services trade and investment patterns. Exploiting a large and very detailed firm-level dataset for the 2008-2013 period, the descriptive analysis finds that most exporting firms export one or two products to a few, most often other Nordic countries. Still, firms that export to 25 or more markets account for more than 80% of total export value. Furthermore, firms that export to 20 countries export more than 60% to their main destination country. Similar patterns are found for affiliate sales. Using a gravity approach we then study the determinants of the extensive and intensive margin of exports and affiliate sales in pooled as well as sector level regressions. We find that trade costs, both natural and policy-induced have the largest impact on the extensive margin of trade, suggesting that trade costs facing services exporters are mainly in the form of fixed entry costs. This is further supported by the finding that incumbency is the most important determinant of future exports and affiliate sales, and incumbents tend to be protected and thrive behind trade barriers.

This article analyses the services trade impact of recognition of professional qualifications using a unique database compiled by the European Commission. It observes that there is large variation in the number of regulated professions across the EU. The number of recognitions is small relative to total employment in regulated professions. Nevertheless, a robust positive relationship between services trade and recognition of qualifications is found. Recognition stimulates two-way trade between the source and the host country, suggesting that arms-length exports as well as cross-border outsourcing take place. Recognitions in health and education professions are most strongly related to services trade.

Services have been considered non-tradable and therefore outside the scope of trade policy-making until quite recently. A logical consequence is that explicit policy barriers to cross-border trade in services are rare. What segments markets for tradable services is therefore largely in the realm of domestic regulation. Both the General Agreement on Trade in Services (GATS) and a number of regional trade agreements (RTAs) aim at developing disciplines on domestic regulation. GATS Article VI states that disciplines on qualification requirements and procedures, technical standards and licensing requirements shall be established to ensure that regulation is not more burdensome than necessary to ensure the quality of the service. Such disciplines are, however, yet to be established, but a reference paper on pro-competitive domestic regulation in telecommunications has been included in a number of World Trade Organization (WTO) members' GATS schedules of commitments, and some RTAs have quite detailed disciplines on domestic regulation in this sector. The region where services market integration runs the deepest is the European Union. The Treaty of Rome of 1957 had already granted full market access for the signatories through cross-border trade as well as the movement of capital and labour, while the Internal Market Act aimed at removing barriers to the implementation of the letter as well as the intention of the Treaty of Rome. Nevertheless, domestic regulation turned out to be a formidable obstacle to the integration of services markets. In the words of the European Commission, 'a decade after the envisaged completion of the internal market, there is still a huge gap between the vision of an integrated European Union economy and the reality as experienced by European citizens and providers'. Hence, a Services Directive aiming at lowering regulatory barriers to trade was introduced in 2006. Against this backdrop, this chapter will focus on empirical work on the European Union and the telecommunications sector.

Frankel and Romer (1999) proposed an instrument variable for trade intensity to robustly assess the causal impact of international trade on standards of living. The instrument is based on OLS estimates of the gravity equation and has been widely used in the literature. In this note I show that the instrument is unrelated to income in the mid-2000s. Re-estimating the gravity equation using PPML, I show that the resulting instrument is strongly related to GDP per capita, but weakly correlated with trade, suggesting that what is captured may be a direct link between geography and income.

Frankel and Romer (1999), hereafter FR, proposed an instrument variable for trade intensity to assess robustly the causal impact of international trade on income per person. They generated the instrument by estimating a gravity equation with only exogenous, geography-related explanatory variables on a cross-section from 1985 using ordinary least squares (OLS). This paper revisits the FR study using a new estimation strategy, the Poisson maximum likelihood estimator (PPML), for creating the instrument for 1985. Next, I repeat the IV regressions for 2005 using both OLS and PPML for estimating the instruments. I find that the IV regressions are sensitive to the period, the sample size and the estimation strategy on which the instrument is estimated. OLS based instruments are not significant in IV regressions for 2005, while PPML-based instruments are statistically and economically significant and robust to time, but do not convincingly pass tests for weak instruments.

Firms that engage in international trade are on average larger, more productive and more often foreign owned than firms that service the local economy only. Nevertheless, there are vast opportunities for services SMEs to engage in international trade.

It takes substantial scale to service international markets. But in the digital economy the additional cost of adding a new customer can be tiny and even start-up services firms can enter international markets – being born global. Music, films, computer software, computer games and the like are often produced for the global market by young SMEs. Most services markets rely on the physical world in addition to the digital economy, however. For these, services start-ups can leverage their reach through participation in international value chains.

An alternative way for services SMEs to participate in international trade is by franchises with multinational, often manufacturing firms. The franchisors provide a trade mark, know-how, and sometimes credit. SMEs may also engage in international trade by using foreign Internet platforms to connect with local customers to whom they deliver the service offline.

Although the opportunities are many, and it has been argued that the 21st century belongs to the micro multinational, the challenges and obstacles are also numerous. First, it is always more difficult for SMEs to absorb burdensome regulations and redtape than larger firms. Second, staying power requires keeping abreast with rapidly changing technology and consumer tastes, which require significant human and financial resources.

Firms are born small, and a few are also born global. The vast majority of services firms that manage to survive in international markets grow rapidly to reach a sustainable scale. Some grow organically, some integrate into international networks and many are acquired by larger firms.

Policy should first and foremost remove unnecessary obstacles to entrepreneurship, and barriers to enter foreign markets. Reforms related to domestic regulation that would particularly benefit start-ups and SMEs are minimizing the burden of licensing requirements, and harmonizing with trading partners where possible; refrain from stigmatising going bankrupt; ensure competitive and well-functioning telecommunications and financial markets, including for venture capital; refrain from protecting incumbents against start-ups that use disruptive technologies; and protect intellectual property rights.

The most important trade policy measures would be to ease the flow of natural persons providing services across borders, remove barriers to establishing branches and representative offices; allow data to flow freely across borders; allow cross-border crowd funding; and make copyright and related rights suitable for the digital economy.

Government support for SMEs’ services exports through explicit or implicit subsidies are not recommended. There is no evidence that such policies would improve welfare, stimulate employment generation or productivity, while there is some evidence that such policies would waste resources and become an obstacle to scaling up.

This paper presents indices of regulatory heterogeneity based on the rich information in the STRI regulatory database. The indices are built from assessing – for each country pair and each measure – whether or not the countries have the same regulation. For each country pair and each sector, the indices reflect the (weighted) share of measures for which the two countries have different regulation. Estimates of the relationship between regulatory heterogeneity and trade shows that on average a reduction in the regulatory heterogeneity by 0.05 points is associated with 2.5% higher services exports and that the impact is larger the lower the level of trade restring regulation. The trade costs associated with the average score on the regulatory heterogeneity index (0.26) amounts to an ad valorem equivalent trade cost of between 20 and 75% at low levels of the STRI. Regulation has become slightly more similar from 2014 to 2015 in telecommunications. For the other sectors, countries have become slightly less similar over the same period.

This paper analyses the relationship between time for exports and imports, logistics services and international trade. Time is found not only to reduce trade volumes but, more importantly, lengthy procedures for exports and imports reduce the probability that firms will enter export markets for time-sensitive products at all. Furthermore, a broader range of products are becoming time-sensitive following the proliferation of modern supply chain management in manufacturing as well as retailing. Labour-intensive products such as clothing and consumer electronics are increasingly time-sensitive and many developing countries urgently need to shorten lead time in order to stay competitive in these sectors. The report argues that reforms to this effect can be implemented at relatively low cost, and in low-income countries.

The contribution of this paper to the literature is to make an empirical assessment of the relative importance of non-actionable institutional and cultural factors and actionable policy measures for services market integration, using the Nordic countries as a case study. It finds that intra-Nordic trade in services is about 2.5 times larger than predicted from the gravity model. This may not be surprising since the Nordics are perceived as a cluster of similar countries, but a detailed analysis of the Nordics’ policy framework, trade agreements, institutional and cultural factors concludes that these cannot explain the intra-Nordic bias. An unexplained “Nordicness” factor of this magnitude indicates that integration of services markets may rely on deeper institutional and cultural factors that do not readily lend themselves to trade negotiations. Conversely, trade agreements may yield the largest benefits among countries that share common cultural and institutional features.

This paper presents the services trade restrictiveness indices (STRIs) for telecommunications. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The indices are calculated for 40 countries, the 34 OECD members and Brazil, China, India, Indonesia, Russia and South Africa. The STRIs capture de jure restrictions. This report presents the first vintage of indicators for telecommunications and captures regulations in force in 2013. The scores range between 0.06 and 0.61, with a sample average of 0.22. Barriers to competition, reflecting inadequate regulation of incumbents with significant market power, and state ownership in some countries make the largest contribution to the index value, followed by restrictions on foreign entry. The paper presents the list of measures included in the indices, the scoring and weighting system for calculating the indices and an analysis of the results.

This paper presents the services trade restrictiveness indices (STRIs) for computer services. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The indices are calculated for 40 countries, the 34 OECD members and Brazil, China, India, Indonesia, Russia and South Africa. The STRIs capture de jure restrictions. This report presents the first vintage of indicators for computer services and captures regulations in force in 2013. The scores range between 0.08 and 0.34, with a sample average of 0.18. Explicit barriers to trade in computer services are rare, but the sector is subject to a number of economy-wide restrictions facing all sectors. Among these, restrictions on movement of people (mode 4 in GATS terminology) make the largest contribution to the index value, followed by regulatory transparency issues. The paper presents the list of measures included in the indices, the scoring and weighting system for calculating the indices and an analysis of the results.

This study analyses the relationships between competitiveness in manufacturing and the quality of key supporting services. Three indicators of competitiveness are considered: the degree of product differentiation, unit prices obtained in export markets and the duration of trade. The density of telecoms networks and the reliability of electricity supply stand out as the most crucial for competitive manufacturing. In addition the ease at which contracts can be enforced and the time it takes to export and import goods are strongly related to competitiveness. Our methodology allows us to go beyond a one size fits all policy analysis. Interestingly, we find that in low-income countries, the impact of services quality and policy on competitiveness is highest in low-technology industries; in middle-income countries it is highest in medium-technology sectors and in high-income countries the impact is highest in medium-high and high-technology industries. This suggests that better services contribute to moving up the value chain in industries where a country already has technological capacity and comparative advantage, but better services alone may not stimulate product differentiation in sectors where a country is far from the competitive edge – at least not in the short run. Policy reforms needed are to simplify procedures for contract enforcement, liberalisation of FDI, strengthen pro-competitive regulation of network services, and eliminate tariffs. It is concluded that new ways of doing business where manufacturers build relationships with customers and compete on the basis of products they are willing to pay a premium for has the potential to become an important driving force for growth after the great recession, provided that adequate support from competitive services markets is in place.

This paper presents the services trade restrictiveness indices (STRIs) for motion pictures, television and broadcasting and sound recording. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The indices are calculated for 40 countries, the 34 OECD members and Brazil, China, India, Indonesia, Russia and South Africa. The STRIs capture de jure restrictions. This report presents the first vintage of indicators for audio-visual services and captures regulations in force in 2013. The scores range between 0.06 and 0.72 for motion pictures, 0.07 to 0.78 for television and broadcasting, and between 0.05 and 0.37 for sound recording. The sample averages are 0.18 for motion pictures, 0.28 for television and broadcasting and 0.16 for sound recording. Limitations on foreign entry, including foreign equity limits contribute to about two thirds of the index values in television and broadcasting. In motion pictures screen quotas contribute to the indices in many of the countries with scores above average. Sound recording, i.e. music, is the most open of the three audio-visual services sectors where limitations on movement of people account for more than 40% of the index value. The paper presents the list of measures included in the indices, the scoring and weighting system for calculating the indices and an analysis of the results.