MINEZ/CPB: regulation hampers trade in services
Ministerie ez
http://www.minez.nl
CENTRAAL PLANBUREAU
Subject: press release
Number: 40
Date: 7 October 2005
Regulation hampers trade in services
Differences in national regulation between EU Member States strongly restrict trade in
services. The proposal of the European Commission to stimulate the internal market in
services, the so called Services Directive, could boost trade in commercial services by
30 per cent to 60 per cent.
Researchers Henk Kox and Arjan Lejour of CPB Netherlands Bureau of Economic Policy
Analysis (CPB) draw these conclusions in CPB Discussion Paper 49, Regulatory
heterogeneity as obstacle for international services trade which is published today. This
report is a scientific deepening of previous research on the Services Directive which has
been published in CPB Document 69, The free movement of services within the EU.
Within international trade, services trade is often considered as the poor cousin.
Services contribute only 20 per cent to total exports, while the share of services in GDP
is about 70 per cent. Services are often thought to be non-tradable. The degree of
regulation contributes to the limited tradability. Services markets are more regulated
than goods markets. The difficulties in assessing the quality of services before the
purchase constitute an important reason for this difference. Governments have implemented
regulations to guarantee the quality of the provision of services, for example by
requiring minimal professional qualifications.
Differences in regulation between the exporting and importing country hamper trade. The
service exporter has to fulfil the regulation requirements of both countries. Every time
the service exporter wants to enter a new foreign market, he has to fulfil the
requirements of that country. The smaller the differences in regulation, the larger trade
in services will be. The country-specific regulations increase fixed costs, often
independent of the size of the providers. Therefore, small and medium-sized enterprises
are most hampered in their export activities.
The researchers explain the volume of trade in commercial services between EU Member
States by differences in regulation, the intensity of regulation, and other
characteristics, such as the in-between distance, and the economic size of the countries.
The authors conclude that trade could triple if the differences in regulation were to
disappear completely (resulting in identical regulation in the EU). The implementation of
the Services Directive will diminish the differences in regulation so much that trade
could increase by 30 per cent to 60 per cent. A previous study by CPB provided a lower
estimate of 15 to 35 per cent.
The researchers conclude now that the implementation of the directive implies larger trade
effects than presented in previous reports. The method to handle the trade and regulations
data, which has been used in the earlier analyses, proved to be not entirely correct.
These shortcomings have been repaired in the new analysis. As a result, the trade effects
are larger. The corrections have no consequences for the estimated effect on foreign
direct investment in services, as presented in the previous studies.
Since this subject is of topical interest CPB has revised its previous reports too. The
revised versions can be downloaded.
A quantitative assessment of the EU proposals for the Internal market for Services, CPB
Communication
The free movement of services within the EU, CPB Document 69
Publications can be ordered at:
CPB Library
PO Box 80510
2508GM The Hague
Telefax: +31-70-3383350
e-mail: library@cpb.nl
Price: 9 euro
The entire document is also available (free of charge) as a PDF-file at CPB's website
(www.cpb.nl).
For more information, contact: Arjan Lejour (tel. +31-70-3383311), Henk Kox (tel.
+31-70-3383413), or Jacqueline Timmerhuis (tel. +31-70-3383477)