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New Database Reveals Global Pattern of Services Trade Restrictions

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Some of the fastest-growing countries in Asia and the oil-rich Gulf states have the most restrictive policies in the services trade, while some of the poorest countries in the world, such as Rwanda and Senegal, are remarkably open in the area.  These patterns emerge from a new Services Trade Restrictions Database created by staff in the Trade and International Integration Team of the Development Economics Research Group.

Across sectors, transportation and professional services, such as accounting and law, are among the most protected in developed and developing countries alike. Meanwhile, retail, telecommunications and finance, such as banking and insurance, tend to be more open.

The restrictions affect the flow of investments and access to services, according to our analysis. In particular, limits on foreign acquisitions, discrimination in licensing, restrictions on the repatriation of earnings, and lack of legal recourse significantly hurt foreign investment. Compared with "open" policy regimes, they collectively reduced the expected value of foreign investment in a typical services sector by $2.2 billion in the period 2003-2009.

Source:  Borchert, Gootiiz and Mattoo (2012a)

In addition, restrictive bilateral agreements in air transport limit access to services:  the number of flights is up to one-fifth lower to-and-from countries with more restrictive policies, which include many landlocked countries. 
The Services Trade Restrictions Database offers data on services-trade policies in 103 countries, including 79 developing countries. It focuses on 18 services sectors from within 5 broad industries (financial, telecommunications, retailing, transportation and professional services), and the key modes of delivery (cross-border, commercial presence or FDI, and people moving).

The database comes as policy makers, researchers and trade negotiators still grapple with the lack of information about an area that has become increasingly important. More than 50 percent of GDP in most countries – 80 percent in the U.S. and EU – originates from services. The U.S. and EU account for more than 60 percent of world services exports, but in the last decade, the service exports of India, China and Brazil and other developing countries grew by more than 15 percent a year.

As countries focus more on how to boost productivity, services-policy reform is seen as a priority from Europe to South East Asia, but with surprisingly little empirical evidence on how such reform is best designed. Countries also have been negotiating to cut down on policy barriers but with only limited knowledge of what these barriers actually are.

A database on this scale is inevitably imperfect.  But even in its present form we see the Database as playing an important role: in advancing policy reform by facilitating the analysis of services policies;  in informing international negotiations by providing data on actual policies; and in provoking dialogue and refinements by making information on policies publicly available.  Thus, we see this database as providing not a definitive picture of services trade policy, but a first approximation which will through feedback from various interested parties evolve into a collectively created public good – along the lines of a “wiki-database.”

Country-level STRI and per-capita income
Source:  Borchert, Gootiiz and Mattoo (2012b)

STRI by sector and region


Source:  Borchert, Gootiiz and Mattoo (2012b)

Guide to the database:
Overview of findings: 


Aaditya Mattoo

Chief Economist, East Asia and Pacific Region, World Bank

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