Edited by John R. Bryson and Peter W. Daniels
Chapter 13: Empirical Analysis of Barriers to International Services Transactions and the Consequences of Liberalization
13 Empirical analysis of barriers to international service transactions and the consequences of liberalization* Alan V. Deardorﬀ and Robert M. Stern Introduction Barriers to trade interfere with the ability of ﬁrms from one country to compete with ﬁrms from another. This is true of trade in goods, where a tariﬀ or nontariﬀ barrier (NTB) typically drives a wedge between the price of the good on the world market and its domestic price. This wedge, or ‘tariﬀ equivalent’, provides a convenient and often observable measurement of the size of the impediment. In the case of services, however, no such simple measurement is often observable. It remains true, though, that the concept of a tariﬀ equivalent – now thought of as the equivalent tax on foreign suppliers in their competition with domestic suppliers – is a useful way of quantifying a barrier to trade even though it may be much harder to observe. Both the role of barriers to trade in services and the possible meaning of a tariﬀ equivalent can be better understood in the context of each of the standard four ‘modes of supply’ that arise for traded services and are shown in Table 13.1 for 1997. The four modes of supply are: ● ● ● ● Mode 1 – services that are traded internationally across borders; Mode 2 – services that require the consumer to be in the location of the producer; Mode 3 – services that require commercial presence in the form of foreign direct investment (FDI); and Mode 4 – services that require the temporary cross-border movement...
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