each other of regulatory changes, and signify to each other when important changes in the regulatory system are likely to occur. This option however surely has a limited impact in terms of reducing international trade costs and will always require an engagement between the exporting and importing country. On the other hand, trade in services is also facilitated when the exporting country decides to unilaterally remove self-inflicted trade costs generated by burdensome regulatory procedures, obscure regulatory rules or by institutionally weak regulators as previously discussed. While cooperation is desirable, it is not necessary, and the trade facilitation agenda can be a complementary option for the country.

In sum, what can be said about trade costs in services is that they are generally made up of three components, which can be reduced by either the exporting or importing country or both, namely through **(1)** reducing or eliminating formal (explicit) barriers to trade as captured by market access and national treatment restrictions, which in fact can be discriminatory or non-discriminatory; **(2)** by taking actions to lower the costs for firms of complying with whatever regulatory processes and procedures that apply to providing services across borders, which also includes the quality of national regulators; and finally **(3)** through the regulatory collaboration of countries to attenuate the prevalence of regulatory heterogeneity across countries for given sectors or services activities. The latter two aspects only are related to the TFiS agenda whereas the former aspect is excluded from it.<sup>7</sup>

# **3. Empirical Analysis**

The empirical section has two objectives. It will first review the empirical counterparts of the potential measures appropriate for TFiS as discussed above. Second, it will use the most relevant measures in the econometric assessment to estimate the extent to which each of the empirical indicators that capture the specific TFiS measure forms a significant trade cost determinant for trade in services.

# **3.1 Empirical Counterparts of TFiS Measures**

Several existing data sources record relevant variables for our discussion, which together provide sufficient coverage for testing the significance of potential TFiS measures. The variables are a mix of country-broad and sector-specific measures – all recorded in publicly available international databases and freely accessible. In addition, the previous section also emphasized that various mode-specific measures are important for the concept of TFiS. This section therefore also takes into account the categorization of variables specific for all the four modes separately to the extent possible and will discuss them when applicable.

# **_Country-broad measures_**

> 7 Note furthermore that what is excluded in addition when discussing potential TFiS measures are all infrastructurerelated measures relevant for services trade such as human capital, skills and digital networks. The literature on trade facilitation in goods also makes this distinction between a “narrow” and “broader” set of constraints related to trade facilitation. As the reader might be aware, this paper focuses on a narrow set of TFiS measures.

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