Trade Effects of Services Trade Liberalization in the EU

Abstract

This paper gives a quantitative assessment of possible trade and welfare effects resulting from different trade liberalization scenarios within the EU. First, we econometrically estimate the existing services trade barriers in the EU (inside the EU and with respect to the third countries). Then we run simulations to estimate effects of the currently achieved liberalization of cross-border trade in services inside the EU, and of the elimination of the remaining trade barriers. The simulations are based on the GTAP model, a computable general equilibrium model. We use the GTAP database V7 (pre-release, benchmarked to 2004) and own estimates of protection in the services sector. Our findings point towards larger gains from more comprehensive cuts in trade barriers. We further observe a reinforcement of specialization patterns, with the new members intensifying their position as EuropeÕs manufacturing base and the old members specializing increasingly in services.trade restrictions, trade liberalization, computable general equilibrium modelling, services trade.