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Landlocked or policy locked ? how services trade protection deepens economic isolation

Author:	Borchert, Ingo; Gootiiz, Batshur; Grover, Arti; Mattoo, Aaditya;	Collection Title:	Policy Research working paper ; no. WPS 5942
Country:	World;	Date Stored:	2012/01/10
Document Date:	2012/01/01	Document Type:	Policy Research Working Paper
Language:	English	Major Sector:	Industry and trade
Rel. Proj ID:	1W-Services Trade Research -- -- P110919;	Region:	The World Region
Report Number:	WPS5942	Sub Sectors:	Other domestic and international trade
SubTopics:	Public Sector Corruption & Anticorruption Measures; Transport Economics Policy & Planning; Markets and Market Access; Economic Theory & Research; ICT Policy and Strategies	Volume No:	1 of 1

Summary: A new cross-country database on services policy reveals a perverse pattern: many landlocked countries restrict trade in the very services that connect them with the rest of the world. On average, telecommunications and air-transport policies are significantly more restrictive in landlocked countries than elsewhere. The phenomenon is most starkly visible in Sub-Saharan Africa and is associated with lower levels of political accountability. This paper finds evidence that these policies lead to more concentrated market structures and more limited access to services than these countries would otherwise have, even after taking into account the influence of geography and incomes, and the possibility that policy is endogenous. Even moderate liberalization in these sectors could lead to an increase of cellular subscriptions by 7 percentage points and a 20-percent increase in the number of flights. Policies in other countries, industrial and developing alike, also limit competition in international transport services. Hence, "trade-facilitating" investments under various "aid-for-trade" initiatives are likely to earn a low return unless they are accompanied by meaningful reform in these services sectors.


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