Measuring Bilateral Trade In Services:

A note on the data collected and estimated for the Services Trade Restrictiveness Index

Trade and Agriculture Directorate WPTGS / Paris / 24.09.2008

Services Trade Restrictiveness Index project

• 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

OECD Trade & Agriculture Directorate

2

STRI 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

3

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

4

BOP services trade – conceptual issues

• Balance of payments data and GATS modes of

supply Sector (EBOPS)

Transportation (205) Travel (236) Communications services (245) Construction services (249) Insurance services (253) Financial services (260) Computer and information services (262) Royalties and license fees (266) Other business services (268) Personal, cultural, and recreational services (287)

Predominant mode(s) of supply

1 (most of) and 2 2 1 3 and 4 1 1 1 and 4 1 1 and 4 1 and 4 • Product Classification (EBOPS) in BOP data vs.

Industrial Classification (ISIC) in FATS and FDI data

OECD Trade & Agriculture Directorate

5

BOP 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

6

BOP services trade - coverage issues

•

Limited 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

7

Imports allocated to partners as a share of total

Country Australia Austria Belgium Czech Republic Denmark Finland France Italy Japan Netherlands Norway Poland Portugal Slovak Republic Sweden United States

82.3

99.6

96.6

72.8

99.7

92.5

97.6

97.6

86.6

99.8

94.1

95.6

96.7

98.5

92.3

63.8

Total trade (200) Telecom munications (247)

12.1

19.8

12.6

26.5

25.3

18.8

11.9

9.5

7.2

24.4

67.4

20.1

9.8

23.5

8.8

58.6

35.3

25.0

89.1

29.6

2.4

13.8

0.9

2.2

30.5

-

Construction (249) Computer and information (262)

50.1

6.7

27.3

12.1

34.7

20.7

44.0

20.4

96.3

20.3

37.5

16.5

12.5

14.9

34.0

-

Other business (268)

75.5

26.1

22.2

10.1

44.8

28.0

28.3

24.1

93.1

29.7

26.4

21.5

32.4

14.2

44.2

OECD Trade & Agriculture Directorate

8

FDI 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

9

Bilateral 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

10

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

11

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

12

Discussion

• –

Short-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?

OECD Trade & Agriculture Directorate

13