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Services trade restrictiveness: construction services
OECD Experts Meeting on the Services Trade Restrictiveness Index (STRI)Paris, 2-3 July 2009
Massimo Geloso Grosso, Anna Jankowska and Frédéric GonzalesOECD Trade and Agriculture Directorate
Outline
• Characteristics of contstruction
• Review of the methodology
• Results
• Robustness checks
• Relevance for trade
• Conclusions
2
Characteristics of construction services
• Accounts for a considerable share of GDP and employment
• Establishment abroad is often a necessity for trade to take place– Requires local production– Short versus more permanent establishment
• Government procurement is an important driver of demand
• Prone to corruption
3
Identification of barriers
• Identification according to three criteria– Regulations covered by the GATS framework– Restrictions included in RTAs– Regulations identified as relevant at the 2008 OECD Experts Meeting
on Construction Services
• Main sources of information– OECD PMR– OECD FDI Regulatory Restrictiveness Index– OECD Code of Liberalisation of Capital Movements– OECD Employment Statistics database
4
Categories of measures
• Restrictions on foreign ownership and other market entry conditions
• Restrictions on the movement of people
• Discriminatory measures, standards and equivalence
• Barriers to competition
• Regulatory transparency and licensing/permit systems
5
Classification of restrictions
• STRI according to the GATS framework– Market access and national treatment– Domestic regulation and other – Modes of supply
• Establishment of firms versus their ongoing operations
• Discriminatory versus non-discriminatory measures
6
Scoring and weighting
• All variables are transformed into binary– 90% of the measures are binary
• Expert judgment forms the basis for the weighting scheme– Weights to each category of measures according to the ranking at the
Experts Meeting on Construction Services– Equal weights have been applied to measures within each category
• Other weighting schemes have been employed as robustness checks– Principal component analysis– Equal weights – Random weights
7
Aggregation
8
Equal weights
Regulations
Expert weights
Foreign ownership and market entry
Movement of people
Discriminatory measures
Regulatory transparency and licensing
Barriers to competition
STRI
22.5%15% 12.5% 10%40%
STRI for construction services
9
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
STRI
OECD average
STRI by category of restrictions
10
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
LUX
GBR
BEL
CZE
ESP
DNK ISL
AUS
JPN
SWE
NLD
PRT
NOR
ITA
USA
FRA
NZL
CHE
DEU
AUT
HUN
FIN
KOR
POL
CAN
MEX
GRC
SVK
TUR
Regulatory transparency and licensing
Barriers to competition
Discriminatory measures and standards
Restrictions to the movement of people
Restrictions on foreign ownership and other
STRI according to the GATS framework
110
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
LU
XG
BR
BE
LC
ZE
ESP
DN
KIS
LA
US
JPN
SW
EN
LD
PR
TN
OR
ITA
USA
FR
AN
ZL
CH
ED
EU
AU
TH
UN
FIN
KO
RP
OL
CA
NM
EX
GR
CSV
KT
UR
Mode 4
Mode 3
Cross-modal
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
LUX
GB
RB
ELC
ZE ESP
DN
KIS
LA
US
JPN
SWE
NLD
PRT
NO
RIT
AU
SAFR
AN
ZLC
HE
DEU
AU
TH
UN
FIN
KOR
POL
CA
NM
EXG
RC
SVK
TUR
Domestic regulation and other
Market acces and national treatment
STRI by other classifications
120
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
LUX
BE
LG
BR
CZ
EE
SPD
NK
ISL
AU
SJP
NSW
EN
LDP
RT
NO
RIT
AU
SAFR
AN
ZL
CH
ED
EU
AU
TH
UN
FIN
KOR
PO
LC
AN
ME
XG
RC
SVK
TU
R
Operations
Establishment
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
LU
XB
EL
GB
RC
ZE
ESP
DN
KIS
LA
US
JPN
SW
EN
LD
PR
TN
OR
ITA
USA
FR
AN
ZL
CH
ED
EU
AU
TH
UN
FIN
KO
RP
OL
CA
NM
EX
GR
CSV
KT
UR
Non-discriminatory
Discriminatory
Robustness checks and relevance for trade
• STRI robust to all alternative weighting schemes
• Spearman rank correlations of weighting schemes– Equal weights: 0.92– PCA weights: 0.76
• STRI correlated with FDI stocks– Entry mode– Import data for construction services
13
Conclusions
• The most important restrictions take the form of domestic regulations and other measures constraining service provision after establishment
• The STRI is robust to alternative weighting schemes
• Some evidence that it is correlated with FDI– Results are not robust
14