Liberalization of trade in services: A CGE analysis for Argentina, Brazil and Uruguay

Chisari, Omar O. and Maquieyra, Javier and Romero, Carlos A. (2009): Liberalization of trade in services: A CGE analysis for Argentina, Brazil and Uruguay.

Abstract

In this paper we use two computable general equilibrium models to evaluate gains of liberalization of trade in services for Argentina, Brazil and Uruguay. We employ two CGE models for the calculations. For the Argentine and Uruguayan cases, we apply a model built by the authors (see Chisari (2009)) based on the MPSGE. For Brazil, our study uses the GTAP model – adapted by Rutherford (2005) that also works on an MPSGE platform. We also consider two basic cases of liberalization of trade in services: 1) mobility of goods, in which there is mobility of services across borders, as it is the traditional case of exports and imports of goods, and 2) trade presence, that is location in the domestic country of new operators with a new technology for producing services. We estimate the gains from improvements in efficiency, quality and productivity of the industries of services, due to more intense competition in the domestic market as well as from reductions in the implicit mark up on domestic services due to barriers to trade. Quality advancements lead to gains in welfare of a similar order, or even higher than expected in the case of productivity improvements. To address the case of trade presence, a latent technology is defined in situ, operative or not depending on relative prices (its market share in the overall equilibrium of the economy is endogenous). This is especially relevant for the case of telecommunications. We also observe that: 1) the economy’s specific endowment of factors will limit the expected gains of the liberalization if the latent technology is unsuitable or incompatible with them, 2) governments can face some dilemmas regarding domestic market regulations, if the liberalization of trade in financial services called for a change in regulations so that the domestic demand for government bonds were to fall.

• Item Type: MPRA Paper
• Language: English
• Keywords: Computable general equilibrium; liberalization of trade; trade in services
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; F - International Economics > F1 - Trade > F17 - Trade Forecasting and Simulation; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models

References

Balistreri E., T. Rutherford and D. Tarr (2007). “Modeling Services Liberalization: The case of Kenya”, World Bank Document, March.

Berlinski, J., M. Celani and R. Bebczuk (2008). “La Liberalización del Comercio de Servicios: Telecomunicaciones y Bancos en Argentina”, Documento de trabajo, Red MERCOSUR.

Chisari, O., A. Estache, A., G. Lambardi and C. Romero (2003). “Trade Balance Effects of Infrastructure Services Liberalization… and of Their Regulation”, Asociación Argentina de Economía Política, 2003: Anales de la XXXVIII Reunión Anual, Buenos Aires.

Chisari, O., G. Lambardi and C. Romero (2007). “Choosing the extent of private participation in public services: a computable general equilibrium perspective”, Mimeo, Instituto de Economía UADE.

Chisari O.O., C.Romero y J.Maquieyra (2008). “Evaluación de los efectos del comercio de servicio a través de un modelo de equilibrio general computado para Argentina, Brasil y Uruguay”, en J.Berlinski, Ganancias Potenciales en el Comercio de Servicios en el MERCOSUR, Red MERCOSUR, Montevideo.

Chisari, O. and others (2009). “Un Modelo de Equilibrio General Computable para la Argentina”, PNUD, Buenos Aires.

Dee, P. (2003). “Modeling the policy issues in services trade”, Économie internationale, 2003/3, N° 94-95, pp. 283-300.

Dee, P. (2004). “Services trade liberalization in South East European countries”, Australian National University, OECD Commissioned.

Dee, P. (2005). “A compendium of barriers to services trade”, The World Bank.

Dimaranan, B. (ed.) (2006). “Global Trade, Assistance, and Production: The GTAP 6 Data Base”, Center for Global Trade Analysis, Purdue University, December.

Katz, G., H. Pastori y P. Berrenechea (2004). “Construcción de una Matriz de Contabilidad Social para Uruguay para el año 2000”, Documento N° 20/04, Departamento de Economía, Universidad de la República, Diciembre.

Konan, D and K. Maskus (2006). “Quantifying the impact of Services liberalization in a developing country”, Journal of Development Economics, 81.

Konan, D. and A. Van Assche (2006). “Regulation, market Structure and Service Trade Liberalization”, CIRANO Scientific Series 2006s-18, Montreal, Septiembre.

Kume, H., G. Piani, and P. Miranda (2008). “Liberalização do Comércio de Serviços: Telecomunicações e Bancos no Brasil”, Documento de trabajo, Red MERCOSUR.

Lejour, A. and H. Rojas-Romagosa (2006). “Foreign Direct Investment in Applied General Equilibrium Models”, CPB Memorandum, Netherlands Bureau for Economic Policy analysis, December.

Markusen, J., T. Rutherford and D. Tarr (1999). “Foreign Direct Investment and the domestic market for expertise”, World bank Policy and Research Working Paper 2413, Washington DC.

Markusen, James R. and B. Strand (2006). “Trade in Business Services in General Equilibrium”, Conferencia: Globalization of services – implications for small open economies, Estocolmo, November.

Rutherford, T and V. Paltsev (2000). “GTAP in GAMS: Global Dataset for Economic Research and Illustrative Models”, Department of Economics, University of Colorado.

Rutherford, T. (1995). “Demand Theory and General Equilibrium: An Intermediate Level Introduction to MPSGE”, Department of Economics, University of Colorado.

Rutherford, T. (2005). “GTAP6inGAMS: The Dataset and Static Model”, prepared for Applied General Equilibrium Modeling for Trade Policy Analysis in Russia and the CIS, December.

Rutherford, T., D. Tarr, and O. Shepotylo (2005). “The impact on Russia of WTO accession and the Doha agenda: the importance of liberalization of barriers against direct investment in services for growth and poverty reduction” The World Bank WPS 3725.

Vaillant, M., F. Barran, and G. Balseiro (2008). “Liberalización en Servicios. El caso de Uruguay: sector financiero y telecomunicaciones”, Documento de trabajo, Red MERCOSUR.

Whalley, J. (2004). “Assessing the Benefits to Developing Countries of Liberalization in Services Trade”, The World Economy, 27(8).