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This paper studies the trade effects of COVID‐19 using monthly disaggregated trade data for 28 countries and multiple trading partners from the beginning of the pandemic to June 2020. Regression results based on a sector‐level gravity model show that the negative trade effects induced by COVID‐19 shocks varied widely across sectors. Sectors more amenable to remote work contracted less throughout the pandemic. Importantly, participation in global value chains increased traders’ vulnerability to shocks suffered by trading partners, but it also reduced their vulnerability to domestic shocks.

This paper investigates the impact of global value chain participation on productivity, using data on trade in value added from the World Input-Output Database. The results based on a panel estimation covering 13 sectors in 40 countries over 15 years suggest that participation in global value chains is a significant driver of labor productivity. Backward participation in global value chains, that is, the use of imported inputs to produce for exports, emerges as particularly important. An increase by 10 percent in the level of global value chain participation increased average productivity by close to 1.7 percent.

This paper presents evidence on the determinants of cross-border mergers and acquisitions in services sectors. It develops a stylized model of mergers and acquisitions that predicts that the incidence of merger and acquisition deals depends, inter alia, on the target economy's size, industrial structure and investment policies, as well as on bilateral transactions costs. These predictions are examined with bilateral merger and acquisition flow data and detailed information on policy barriers from a new database of restrictions on services investment. The analysis finds that: (1) geographical factors affect mergers and acquisitions in services and manufacturing similarly but cultural factors affect mergers and acquisitions in services more than in manufacturing. (2) Controlling for these bilateral factors, restrictive investment policies reduce the probability of merger and acquisition inflows but this negative effect is mitigated in countries with relatively large shares of manufacturing and (to a lesser extent) services in gross domestic product. The same results hold for the number of merger and acquisition deals received. These findings suggest that the impact of policy is state-dependent and related to the composition of gross domestic product in the target economy.

Can regionalism do what multilateralism has so far failed to do—promote greater openness of services markets? Although previous research has pointed to the wider and deeper legal commitments under regional agreements as proof that it can, no previous study has assessed the impact of such agreements on applied policies. This paper focuses on the Association of Southeast Asian Nations (ASEAN), where regional integration of services markets has been linked to thriving regional supply chains. Drawing on surveys conducted in 2008 and 2012 of applied policies in the key services sectors of ASEAN countries, the paper assesses the impact of the ASEAN Framework Agreement on Services (AFAS) and the ambitious ASEAN Economic Community Blueprint, which envisaged integrated services markets by 2015. The analysis finds that over this period, ASEAN did not integrate faster internally than vis-a-vis the rest of the world: policies applied to trade with other ASEAN countries were virtually the same as those applied to trade with rest of the world. Moreover, the recent commitments scheduled under AFAS did not produce significant liberalization and, in a few instances, services trade policy actually became more restrictive. The two exceptions are in areas that are not on the multilateral negotiating agenda: steps have been taken toward creating regional open skies in air transport, and a few mutual recognition agreements have been negotiated in professional services. These findings suggest that regional negotiations add the most value when they are focused on areas that are not being addressed multilaterally.

Poor connectivity is conventionally blamed on difficult geography and low income. But economic isolation could also result from policy choices in key ‘linking’ services such as air transportation and telecommunications. A new database on applied services trade policies reveals that many countries restrict trade in the very services that connect them with the rest of the world. We present evidence that restrictive policies lead to more concentrated market structures and limited access to services, even after taking into account the influence of geography and income. Moving from an intermediate level of restrictiveness to an open regime could lead to a 20 percentage point increase in cellular teledensity in the telecommunications sector and to a 25 per cent increase in flight connections per airline in the aviation sector, respectively.

Studies on innovation and international trade have traditionally focused on manufacturing because neither was seen as important for services. Moreover, the few existing studies on services focus only on industrial countries, even though in many developing countries services are already the largest sector in the economy and an important determinant of overall productivity growth. Using a recent firm-level innovation survey for Chile to compare the manufacturing and ‘tradable’ services sector, this paper reveals some novel patterns. First, even though services firms have on average a much lower propensity to export than manufacturing firms, services exports are less dominated by large firms and tend to be more skill intensive than manufacturing exports. Second, services firms appear to be as innovative as – and in some cases more innovative than – manufacturing firms, in terms of both inputs and outputs of ‘technological’ innovative activity, even though services innovations more often take a ‘non-technological’ form. Third, services exporters (like manufacturing exporters) tend to be significantly more innovative than non-exporters, with a wider gap for innovations close to the global technological frontier. These findings suggest that the growing faith in services as a source of both trade and innovative dynamism may not be misplaced.

Singapore is an interesting example of how the pattern of foreign investment changes with economic development. The authors analyze inbound and outbound investment between Singapore and a sample of industrialized and developing countries over the period 1984-2003. They find that Singapore's two-way investment with industrialized nations has shifted into skill-seeking activities over the period, while Singapore's investments in developing countries have increased sharply and become concentrated in labor-seeking activities. Singapore's increasing skill abundance relative to all countries in the sample accounted for 41 percent of average inbound stocks during the period, that is, US$18 billion annually; the corresponding figure for outbound stocks was 40 percent, that is, US$5.51 billion annually.

The impact of international students in the United States on innovative activity is estimated using a model of idea generation. Results indicate that the presence of foreign graduate students has a significant and positive impact on both future patent applications and future patents awarded to university and non-university institutions. Our central estimates suggest that a 10% increase in the number of foreign graduate students would raise patent applications by 4.5%, university patent grants by 6.8% and non-university patent grants by 5.0%. Thus, reductions in foreign graduate students from visa restrictions could significantly reduce US innovative activity. Increases in skilled immigration also have a positive, but smaller, impact on patenting.

Regional agreements on standards have been largely ignored by economists and unconditionally blessed by multilateral trade rules. The authors find, theoretically and empirically, that such agreements increase trade between participating countries but not necessarily with the rest of the world. Adopting a common standard in a region-that is, harmonization-boosts exports of excluded industrial countries to the region. But it reduces exports of excluded developing countries, possibly because developing country firms are hurt more by an increase in the stringency of standards and benefit less from economies of scale in integrated markets. Mutual recognition agreements are more uniformly trade promoting unless they contain restrictive rules of origin, in which case intra-regional trade increases at the expense of trade with other, especially developing, countries. The authors propose a modification of international trade rules to strike a better balance between the interests of integrating and excluded countries.

This paper discusses what could be done to expand services trade and investment through a multilateral agreement in the WTO. A distinction is made between market access liberalization and the regulatory preconditions for benefiting from market opening. We argue that prospects for multilateral services liberalization would be enhanced by making national treatment the objective of WTO services negotiations. Moreover, if complemented by assistance to strengthen regulatory capacity in developing countries, the WTO could become more relevant in promoting not just services liberalization but, more importantly, domestic reforms of services policies.

The dynamism of air traffic markets in the Middle East obscures the persistence of restrictions on international competition. But how important are such restrictions for passenger traffic? This paper uses detailed data on worldwide passenger aviation to estimate the effect of air transport policy on international air traffic. The policy variable is a quantitative measure of the commitments under international agreements. The paper analyses, for the first time, not only bilateral agreements, but also plurilateral agreements such as the one among Arab states. The analysis finds that more liberal policy is associated with greater passenger traffic between countries. Higher traffic levels appear to be driven by larger numbers of city-pairs being served, as well as by more passengers traveling along given routes. To demonstrate the quantitative implication of the estimates, two liberalization scenarios in the Middle East are evaluated. Deepening the plurilateral agreement among Arab states would lead to a 30 per cent increase in intra-regional passenger traffic. Widening the agreement to include Turkey would generate significantly larger gains because current policy vis-à-vis Turkey is much more restrictive. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions http://olabout.wiley.com/WileyCDA/Section/id-820227.html

This paper assesses the quantitative importance of electronic commerce in trade and tariff revenue, in light of the WTO decision on ‘duty-free cyberspace’. Electronic commerce is likely to boost international trade in software, digitizable media products (music, books) and many services sectors significantly. However, despite the growing importance of electronic commerce for trade, tariff revenue loss from duty-free electronic commerce is unlikely to be significant.

Developing countries need to ensure that multilateral rules and commitments on trade in services contribute to economically rational policy-making. This paper shows that their reluctant participation in past negotiations, and assumption of defensive positions, have not been conducive to the achievement of this goal. The next round of services negotiations requires a change in negotiating strategies. Rather than resist the liberalisation of domestic markets and seek a dilution of multilateral rules, they need to push aggressively for (i) liberalisation of domestic services markets, emphasising competition more than a change of ownership, (ii) development of improved rules for domestic regulations that encourage economic efficiency in remedying market failures and pursuing social goals, and (iii) effective liberalisation of foreign services markets by the elimination of both explicit restrictions and implicit regulatory barriers. At the same time, developed countries need to rise to the challenge of eliminating the barriers they maintain to exports from developing countries, so that we may witness not a bitter round of grudging concessions, but a virtuous cycle of mutually beneficial liberalisation. * This paper is a condensed version of Mattoo (1999), which has a more comprehensive discussion of developing country interests and references to the literature. Thanks go to Carsten Fink, Randeep Rathindran, and Arvind Subramanian for contributions to this paper, to Bernard Hoekman, Marcelo Olarreaga, Arvind Panagariya for insightful comments, and to Malina Savova for valuable research assistance. The views expressed are personal and should not be attributed to the World Bank.

World trade in services amounted to $2170 billion in 1997, of which 40 per cent was cross-border consumption. Though service trade liberalization is hard to model, sectoral and general equilibrium analyses indicate the scope for major welfare gains. Reforms in services will be driven by domestic agendas, but they can be supported and complemented by commitments to GATS disciplines. Developing country commitments in the GATS, as well as commitments in their areas of interest, are limited. Incentives are needed in the next WTO trade round to encourage commitment to a more balanced and comprehensive coverage. The trade inhibiting effect of domestic regulation requires particular attention. Copyright © 2000 John Wiley & Sons, Ltd.

This paper argues that eco-labeling could lead to an adverse effect on the environment. In every society there are some consumers who are concerned about environmental problems and others who are not. Labeling may stimulate concern for the environment and increase the demand for environment-friendly products. However, it is precisely this consequence of labeling that can lead to perverse results. In certain plausible cases, the differentiation of products due to labeling may lead to increased sales of products made by both environment-friendly and environment-unfriendly methods. An empirical test is suggested to establish when labeling can be usefully introduced. Copyright 1994 by WWZ and Helbing & Lichtenhahn Verlag AG