# **CONCLUSION**

Even as international trade in services has grown in importance, the systematic analysis of services trade policy has been inhibited by the dearth of internationally comparable data over time. The Services Trade Policy Database, developed jointly by the World Bank and the WTO with substantial inputs from the OECD, contributes to filling this gap. It provides comparable information on services trade policies for more than 68 economies on five key service sectors and, for 55 of those, at two points in time (2008-11 and 2016). While the rich policy information is the backbone of the Database, the qualitative information has been quantified to obtain Services Trade Restrictions Indices (STRI), building on the methodology previously used by the World Bank. A key methodological improvement is the aggregation of different applied policy measures on the basis of a Constant Elasticity of Substitution (CES) functional form, which offers a parsimonious, flexible and transparent way of calibrating the marginal contribution to restrictiveness of an additional trade policy measure.

Building on the policy data and the new STRI, the technical details of which are discussed in-depth in Borchert et al. (2019), the main contribution of this paper is to provide a response to two questions. First, what is the current pattern of services trade policy? Second, how has services trade policy evolved after the 2008-09 financial crisis?

Today, most economies covered by our analysis are fairly open to services trade (i.e. STRI value below 50), and none is highly restrictive at the overall economy level. Higher income economies are still more open on average than lower income economies in most sectors. Interestingly, some of the most restrictive policies today are enforced in some of the fastest-growing economies of Asia, the Middle East and Northern Africa.

Looking across sectors, distribution and telecommunications services appear as the most open, on account of the openness of wholesale distribution (compared to retail) and the continued regulatory reform of the telecommunication sector over the last 25 years. At the other extreme, professional services appear as the most restricted, due in particular to stringent requirements on licensing and qualifications, in particular for auditing services and legal services on host country law. In terms of policy restrictiveness, financial and transport services appear in between these extremes.

Our analysis reveals a broad trend towards further liberalization of services trade between 2008 and 2016, across economies as well as sectors. Yet the aforementioned variation in liberalization 'intensity' across sectors suggests that reform comes in waves. Beginning in the 1990s, high income economies led the way by opening telecommunications, distribution and finance to foreign competition. Middle-income economies followed. Much of the current level of openness in those sectors in most middle-income and higher income economies had therefore been achieved by 2008. This may explain the relatively low 'action' witnessed in the level of restrictiveness of these groups of economies in these sectors. In that context, low-income economies covered in our analysis appeared as laggards back in 2008, but caught up afterwards, recording significant liberalization of financial and telecommunication services. Hence, the picture emerging in 2016 is of policy convergence in telecommunication and finance driven by liberalization in the previously more restrictive economies.

A second wave of policy reform may currently be unfolding in sectors such as transport and professional services. Indeed, data show that high-income economies have broken new ground by reforming their trade policies in these sectors, where protection had hitherto been deeply entrenched. The picture today is still one of policy divergence in these sectors, with developed economies leading the way of regulatory reform.

But there is a catch. While markets in services, e.g. finance and telecommunications, are increasingly free from explicit restrictions on entry and ownership, they are increasingly subject to greater regulatory scrutiny (e.g. economic needs tests, FDI screening), especially in higher income economies. This raises several questions for future analysis. Does this type of measure reflect "learning-by-liberalizing", in that lessons have been learned on the need to complement openness with more stringent prudential regulation? Do they reflect a shift analogous to the reversal of openness in goods trade policy, ostensibly on security grounds, but possibly in response to the increased competitiveness of developing economies’ services firms? And do they signal a trend towards _de jure_ openness but _de facto_ discretionary policy, in particular at the point-of-entry stage (e.g. through FDI)? These policy trends deserve further analysis.

The availability of these data, and of additional data when the STPD is expanded to cover more economies and sectors, allows for further research on the effect of trade policy on services trade flows. Three specific strands of research are pursued in a companion (forthcoming) paper (Borchert 30