DP5135 Market Structure in Services and Market Access in Goods

Author(s): Joseph Francois , Ian Wooton

Publication Date: July 2005

Keyword(s): market access , services trade , trade liberalization , trade and competition , GATS , strategic competition policy

JEL(s): F12 , F13 , F23

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP5135.asp

We examine interaction between goods trade and market power in domestic trade and distribution sectors. Theory suggests a linkage between service-sector competition and goods trade, one supported by econometrics involving imports of 22 OECD countries vis-à-vis 69 exporters. This points to linkages between market access conditions for goods and the structure of the service sector. Competition in services affects the volume of goods trade. Additionally, because of interaction between tariffs and competition, the market structure of the domestic service sector becomes increasingly important as tariffs are reduced. Also, empirically service competition apparently matters most for exporters in smaller, poorer countries.