How Does The Opening Level Of Commitments In Service RTAs Affect Manufacturing Value Added Export

Since the 1990s,economic globalization has been developing so fast that affects every country in the world.In recent 30 years,regional trade agreements(RTAs)have boomed,not only in goods but also and especially in services which soared from 1 in 1989 to 160 in 2019.Moreover,services play a vital role in global value chains.It is an input factor in manufacturing that ties up every single production sector.In international trade,services act like glue that connect every part related to import and export such as transportation and communication etc.Services industry is environment-friendly with high value-added,becoming more and more important in domestic economic development and international trade,while manufacturing is and will be the traditional footstone of domestic economy with vital importance,so will service liberalization affect value-added export?If so,what’s the effect?This paper will give answers to these questions in empirical way.With the help of I-TIP database jointly developed by WTO and the World Bank,this paper constructs an index that describes how abroad the commitments cover the services sectors when a country signs n RTS in services,referring to methods developed by Mirodout(2010)and Roy(2011)which scores each commitment,instead of simply treating RTAs as a dummy variable.The dependent variables come from OECD Trade in Value Added(TiVA)database,covering 26 countries’ domestic value added and foreign value added in manufacturing exports from 1995 to 2011.To address endogeneity arising from omitted variables and selection bias,this paper adopts fixed effects model in substitute of traditional gravity model,adding exporter-time fixed effect,importer-time fixed effect and exporter-importer bilateral fixed effect.In addition,to address the bias caused by zero trade,this paper turns to Poisson pseudo-maximum Likelihood(PPML)estimation.Taking into consideration the time for policy adjustment after entering into force the services agreements,this paper divides independent variables into different time intervals.The result of the empirical study shows that:(1)Signing a services RTA could enhance manufacturing export in domestic value added in short-time,and with the time goes by,the positive effect will get more significant;(2)After entering into force the service RTAs,it takes at least 2 years for manufacturing export to significantly increase foreign value added content;(3)The more sectors covered in the commitments,the stronger the margin effect on manufacturing value-added export will be.Then,in heterogeneous analysis,according to countries’ income level,this paper divides countries into two types:north and south,then the agreements are divided into 4 types:north-north,north-south,south-north and north-north.Results show that:(1)Only south-north agreements can significantly improve south countries’ DVA in 3 to 4 years,which means signing a services RTA will affect asymmetrically developing and developed countries,enhancing former’s DVA export;(2)After 3 or 4 years enter-into-force the services RTA,south-south agreements start to significantly improve FVA export in south country.According to the results from empirical study,this paper provides 3 advices on China’s economic modernization construction:(1)Keep an eye on multilateral service trade negotiation to get well-informed to the international services trade environment;(2)Continuously open the service market;(3)Sign new service trade agreements which covers more sectors in service industry.