# **INTRODUCTION**

The first international database of services trade policy was created by the World Bank in 2008, just before the Great Recession (Borchert et al., 2014). Since then the economic and political environment has changed dramatically. Global productivity growth has slowed even as technological change is accelerating; multilateral cooperation is ceding ground to a more nationalistic view of policy; and the liberalizing trend post-World War II in goods trade policy is in some cases being reversed. However, we have surprisingly little information on how services policies have evolved.

This gap in information matters because services are intimately linked with developments over the last decade. For instance, the Great Recession originated in financial markets where regulation failed to keep step with liberalization (Rajan, 2010); the emergence of new digital technologies is transforming finance, retail, communication and transport services; and the improvements in information and communication technology could be ushering in a new era of cross-border trade in services (Baldwin, 2019). Are governments reacting to these developments proactively through radical reform, defensively by imposing new restrictions, or inertially by doing nothing?

To answer this question and to facilitate the empirical analysis of policy change, the World Bank and the WTO Secretariat engaged in a major new policy data collection and quantification exercise, which resulted in a new World Bank-WTO Services Trade Policy Database (STPD). This Database updates and enhances the earlier World Bank database, and also offers an updated World Bank Services Trade Restrictions Index (STRI).<sup>3</sup> This paper describes the database as well as the construction of the STRI, reviews services trade policy patterns in 2016, and provides an overview and analysis of the evolution of services policies across economies and sectors between 2008 and 2016.

The STPD offers comparable information on services trade policies applied by 68 economies as of end-2016 in 23 subsectors across five broad sectors—financial services, telecommunications, distribution, transportation and professional services. Data were collected according to a newly developed policy classification that is consistent with both the earlier World Bank database and the current OECD STRI Regulatory Database. The STPD contains information not just on core trade policies but also on other increasingly relevant regulatory measures such as licensing conditions and restrictions on cross-border data flows, respectively.

Policy restrictiveness is quantified following an improved approach that aggregates the qualitative information within a single consistent and transparent measure (the Services Trade Restrictions Index). Data previously collected by the World Bank over 2008-2011 were adjusted to the new classification and quantified on the basis of the updated STRI methodology, thereby for the first time enabling a comparison of services trade policies over a long period of time – between 2008 and 2016 – for a large cross-section of 55 advanced and developing economies.

On the basis of that information, the paper identifies patterns of services trade policies across economies and sectors as well as secular trends in policy making over the past decade. Higher income economies are still more open on average than lower income economies in most sectors. On the face of it, services trade regimes are generally becoming more open, at least as far as explicit restrictions are concerned, in apparent contrast to recent changes in goods trade policy.<sup>4</sup> But we also see a retreat from openness in some sectors.

Taking a longer view, we can identify certain broad waves in policy reform. Higher income economies have led the way in services reform, pioneering the opening up of telecommunications and finance to foreign competition in the 1980s and 1990s. Over time, developing economies began to follow their example. Hence, the picture emerging in the 2008 database was of general openness in higher

> 3 The joint WTO-World Bank Services Trade Policy Database, as well as the updated STRI, is disseminated through the I-TIP services portal (see <u>http://i-tip.wto.org/services/default.aspx).</u>

> 4 WTO trade monitoring reports published between 2010 and 2016 have shown a substantial increase in the stock of goods related restrictive measures in the last decade, affecting a large share of world imports of merchandise. For services, available information shows that the trend has been towards further liberalization. The December 2016 WTO trade monitoring report stated that on the goods side, "the continuing increase in the stock of trade-restrictive measures recorded since 2008 remains of concern. [...] Of the 2,978 trade-restrictive measures recorded for WTO Members since 2008, only 740 had been removed by mid-October 2016. [...] In the area of trade in services, [...] Albeit with exceptions, the trend has been towards further liberalization and the strengthening and clarification of relevant regulatory requirements."

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