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The Handbook of Service Industries

Edited by John R. Bryson and Peter W. Daniels

Service activities are now acknowledged as key players in economic development, societal change and public policy worldwide. This exciting Handbook not only contributes to ongoing conceptual debates about the nature of service-led economies and societies; it also pushes back the frontiers of current critical thinking about the role of service activities in urban and regional development and the important research agendas that remain to be addressed.
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Chapter 13: Empirical Analysis of Barriers to International Services Transactions and the Consequences of Liberalization

Alan V. Deardorff and Robert M. Stern


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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