EMANES Working Paper No 63

In recent years, deep trade agreements spread around the world and go beyond tariff reductions. We aim to test whether the depth of agreements foster trade in services. To do so, we use a structural gravity type model and build new indicators of the depth of agreements based on the number of articles that are legally enforceable and that are related to trade in services. We show that, while only the deepest trade agreement raise trade in services, the quality of institution determines how deep agreements a ect both the intensive (measured by the quantity of trade) and extensive margins of trade (measured by the number of service sectors exports and the share of the highest service exported by a country). This result is more pronounced for some service provisions and is robust after we control for the endogeneity of deep trade agreements. Finally, our results also hold for MENA countries that we examine as an example of an emerging region that has a comparative advantage in services but whose most of the trade agreements are rather shallow.



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