elasticity should come as no surprise since the role of the services-sectors in trade facilitation is important.<sup>9</sup> It is notable that for all the trade facilitation indicators that are paired (that is, are estimated for both exporters and importers), the coefficient for exporters exceeds that for importers. There are several reasons why this might be the case. First, in the sample of countries, there are 30 developed countries (North) and 45 developing countries (South). Thus, the sample is weighted toward developing countries where the elasticity of improvement in trade facilitation indicators is likely to be higher than for the developed countries whose trade facilitation indicators are already high. Second, the pattern of trade in general is South-North (even if the value of trade North-North is larger). So, the estimated coefficients would tend to pick up the higher elasticity of trade from the South to the North.

To further investigate this issue, as well as to shed light on the potential for capacity building in the area of trade facilitation in the south, we examined the gravity model using several sub-sets of the 75 countries bilateral trade. Specifically, we reestimated the gravity model on south-to-north trade and on south-to-south trade. Table 4 presents the results for the trade facilitation indicators for two sub-panels. Also repeated in the table for convenience are the values of the coefficients from the full panel.

Comparing across the three panels, several points emerge. In the South-to-North panel, many of the variables added to the gravity model for the North (as importer) are not significant -- tariffs, port efficiency, the customs environment, and (nearly) the regulatory environment. The lack of significance on tariffs suggests that tariffs are not a major impediment to South-to-North trade. The fact that the trade facilitation indicators are nearer to global best in the North means that the other variables in the gravity model (such as GDP) dominate in estimation. On the other hand, the service sector infrastructure indicator has a higher coefficient than in the full sample for both importer and exporter, corroborating work cited earlier on the benefits of more Webhosts and lower telecommunications costs for trade. The high coefficient on regulatory environment in the exporting country (South) would support a focus on capacity building in this area in the South.

Second, compare the South-to-South panel with the other two samples. Tariffs are once again significant, suggesting that south-to-south trade is more affected by tariffs than is south-to-north trade. Regulatory environment appears to be very important for both directions of trade. Looking at all the indicators, the coefficient estimated on the exporter is larger than the full sample and larger than for the importer in the restricted sample, suggesting that trade facilitation efforts and capacity building could play a complementary role in export promotion in the south.

> 9 Other research investigates the relative magnitude of service sector liberalization compared to manufactures and agricultural liberalization in the context of the Uruguay round and the Doha Agenda. Several researchers conclude that liberalization of services trade would yield at least as large an increase in GDP than does liberalization of manufactures trade, and much larger than liberalization of agriculture trade.   See the discussion and sources in Mann, Rosen and APEC (2001, 2002), pages 33-35.

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