services to consumers in that economy.<sup>5</sup> Various domestic regulations that apply to both domestic and foreign agents are also covered insofar as they affect trade. The database focuses on economies’ Most-Favoured Nation (MFN) policies and contains only limited information on their relatively elusive applied preferential policies.<sup>6</sup> It is important to delineate the policy data covered by this database from other information that is not (yet) covered. First, the database does not include information on the existing market structure – e.g. the number of firms, their market share – across sectors and economies, which means that our policy measures capture the restrictions on entry into markets but do not capture the extent of competition among domestic and/or foreign firms. Second, we do not collect data on outcome variables such as prices or quality, although we include data on whether those variables are subject to regulation in various sectors. Third, we capture only limited information on the implementation of policies. For instance, we identify certain aspects of the process by which services providers are granted licenses, e.g. whether the requirements are publicly available or whether the regulator has been given discretion to reject authorizations even if criteria are complied with, but some features of the process remain opaque. For example, information on how discretion is exercised in practice, or on the number of license applications received versus the number of licenses granted, is not generally available; the lack of such information renders it hard to determine whether the licensing/authorization process in itself offers protection to domestic providers.

# _Economies covered in the database_

The database encompasses data on services policy and regulation in 68 economies – 41 high-income, 15 upper-middle and 12 lower-middle income economies. The selection of economies was based on two parameters: size of the economy, using Gross Domestic Product (GDP) as a basis, as well as participation in world services trade on a balance-of-payment (BoP) basis.<sup>7</sup> The full list of economies currently covered is reproduced in Annex 2 to this paper (2016 table). At the time of writing, data collection is being finalized for signatories of the Central European Free Trade Agreement (CEFTA), Jordan and Niger. Additional data on a significant number of economies in Africa are in the process of being collected or updated. These data will be incorporated in the STPD in due course.

# _Sectoral coverage_

The sectoral coverage is identical to that in the World Bank survey of 2008-2011. Apart from the continued importance of these sectors and sub-sectors for any economy – a factor that justified the World Bank's approach at the time – sticking to the same sectoral coverage in 2016 has allowed us to have a 'time' dimension in our data, and hence analyze policy developments in the last decade. However, three subsectors were added to ensure greater comparability with the sectors that overlapped with those in the OECD Services Trade Restrictiveness Regulatory (OECD STRI) database.<sup>8</sup> The database therefore covers 5 major service sectors, further disaggregated into a total of 23 subsectors, namely: financial services (commercial banking, life insurance, non-life insurance, reinsurance), telecommunications services (fixed-line, mobile, Internet), distribution services (retail, wholesale), transportation (air freight domestic, air freight international, air passenger domestic, air passenger international, rail freight, road freight, maritime freight transport, maritime auxiliary services, maritime intermediation and other), professional services (accounting, auditing, legal services on foreign law, legal services on domestic law, legal advice and representation).<sup>9</sup>

> 5 Consumers must be understood in a broad manner, encompassing both individuals and firms, depending on the service concerned.

> 6 We do not take commitments made in FTAs or other economic integration agreements covering services trade as indication of an applied preferential policy. We mean by the latter policies that in practice treat different trading partners differently. Our experience shows that in many cases, commitments under FTAs have been implemented in a non-discriminatory manner and led either to the binding of an MFN-based status quo policy or to the elimination of specific restrictions for all trading partners. See Marchetti and Roy (2009).

> 7 Data on trade through mode 3, e.g. foreign affiliates trade, are not available for all countries.

> 8 - <u>https://www.oecd.org/trade/topics/services trade/</u>

> 9 At the time of writing, policy information in additional sectors including architecture, engineering, computer, construction, tourism, and health services is being collected for the seven CEFTA Parties, Jordan, and other African economies.

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