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GTAP Resource #1514

"A Systematic Evaluation of Services Trade Barriers: The Case of Thailand"
by Dee, Philippa

Thailand is one of many countries that maintains significant barriers to trade in services. It maintains restrictions on foreign direct investment in many sectors, which impinge on the ability of foreign firms to deliver services via commercial presence. There are also sector-specific restrictions in key services industries — telecommunications, finance, air passenger transport (a key input to tourism), maritime transport, and professional services — many of which not only restrict foreign firms, but also the entry and operations of new domestic firms. Such trade restrictions, which protect incumbents and dampen competitive pressures, are likely to hold back the productivity growth of Thaland’s services industries. They are also likely to impose a significant cost burden on the rest of the Thai economy.
The paper does the following.
• It makes use of existing estimates of the first round price or cost impacts of services trade barriers in seven different services sectors in Thailand, estimates made primarily by the Australian National University and the Australian Productivity Commission.
• Uses these in a newly developed CGE model of the Thai economy, based on version 5 of the GTAP database, but with a treatment of trade delivered via commercial presence (using FDI data from UNCTAD and USITC), to demonstrate the welfare effects of various ‘what if’ scenarios involving partial and full removal of restrictive regulations in some or all services sectors.
The paper also examines the extent of the adjustment costs likely to be incurred in the process.
The paper uses the results of these modelling scenarios to draw conclusions about the sectoral priorities for services trade liberalisation in Thailand, as well as a ranking of adjustment costs. The modelling results show that it would be dangerous to draw conclusions about sectoral priorities just from the height of the initial trade barriers. Also critical is the relative sizes of the affected sectors, and whether the trade barriers are rent-creating or cost-escalating.
The paper also examines how the priorities (and adjustment costs) might change if the liberalisation were to be carried out in a multisectoral (beyond just services) or multilateral context. Even more than for goods trade, the main effects of services trade liberalisation come from unilateral action. Adding additional sectors or additional countries makes very little difference to the results. The paper discusses the characteristics of services trade barriers that contribute to this result

Resource Details (Export Citation) GTAP Keywords
Category: 2004 Conference Paper
Status: Published
By/In: Presented at the 7th Annual Conference on Global Economic Analysis, Washington DC, USA
Date: 2004
Created: Dee, P. (5/2/2004)
Updated: Dee, P. (5/2/2004)
Visits: 3,681
No keywords have been specified.

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