The Impact Of Regional Service Trade Agreements And Commitments Depth On Service Offshoring

Since the Doha round began in 2001,the multilateral trade negotiations on services,intellectual property rights and dispute settlement have been repeatedly frustrated,and the rise of new trade protectionism,especially the blatant challenge of the trump administration to the WTO dispute settlement mechanism,countries all over the world have gradually weakened their confidence in the multilateral trading system of WTO,and have turned to regional economic integration cooperation through the conclusion of Regional Trade agreement(RTA)with the aims to maximize foreign economic benefit.Since the 21 st century,the number of RTAs concluded by countries all over the world has increased dramatically,and more and more attention has been paid to the negotiation of service issues.By the year of 2020,341 RTAs have entered into force for the WTO filing,and 173 RTAs belong to the service trade agreement.With the continuous emergence of regional services trade agreements(RSTA for short),the scale of global service offshoring has been expanding from US $85.2 billion in 2010 to US $246.7 billion in 2018,with an average growth rate of about 25%.At present,with the arrival of digital economy and the new industrial revolution,service outsourcing has become an important engine for countries to transform the economic development mode,optimize industrial structure,develop digital economy and achieve innovative growth(Xiuhong Ma,2018).Therefore,it is of great practical significance to study the relationship between regional service trade agreements and service offshoring.Are the regional service trade agreements conducive to the development of service offshoring? How much is the specific impact? What is the underlying mechanism between them? These problems need to be analyzed in theory and evidence.Based on the continuous emergence of regional service trade agreements and the importance of developing service outsourcing,this paper discusses the impact of regional service trade agreements and its commitments depth on bilateral service offshoring by combining theoretical analysis and empirical test.In the part of theoretical analysis,this paper constructs the general equilibrium model of service offshoring in North-South countries,and theoretically discusses the unique influence mechanism of regional service trade agreements on service offshoring.In the part of empirical test,this paper uses the bilateral industry level panel data of China,India,Philippines,Ireland,Russia,Canada,Mexico,Brazil with more than 170 other countries from the year 1995 to 2012,and adapts the gravity model to evaluate the effect of regional service trade agreements and commitments depth on service offshoring and its domestic value added.At the same time,for the service trade agreements signed by China,this paper evaluates the specific effect of China's five free trade zones,including ASEAN,New Zealand,Peru,Pakistan and Chile,using the synthetic control method which is applicable to case studies.The main findings of this study are as follows:(1)Regional service trade agreements promote the development of service offshoring by reducing the fixed costs,such as the costs for search matching,quality supervision and contract management caused by service trade barriers and incomplete contracts.At the same time,the deeper the commitments of RSTA is,the greater the marginal promotion effect on service offshoring is.(2)RSAT and its commitments depth have significantly promoted the amount and added value of service offshoring.RSTA can increase the undertaking amount and domestic value added of service offshoring by20.32% and 27.00% on average.Besides,the total amount and domestic value added of service offshoring will be improved by at least 3.14% and 11.91% with the full freedom commitment for 1 additional service sector or 15 sub-sectors in the RSTA.In addition,compared with the amount of service offshoring,the promotion effect of RSTA and commitments depth on domestic added value is greater.(3)For the FTA concluded by China,the RSTA has increased China's service offshoring by an average of 570 million US dollars,with a growth rate of 32.03%.Among them,China-New Zealand and China-Pakistan FTAs have the greatest promotion effect with growth rates of more than 70%,the following are China-ASEAN and China-Chile FTAs with the growth rate of more than 25%,while the least is China-Peru FTA with the growth rate of 20%.(4)From the perspective of multi-period dynamic effect,the promotion effect of RSTA on the amount of service offshoring will last about 9 years,but the impact on the domestic added value of service offshoring is more long-term.After the implementation about 15 yeas,RSTA still has a significant promoting effect on the domestic value added of service offshoring.In addition to the above main results,this paper also analyzes the heterogeneous effect from different angles and levels including the types of commitments(such as full commitment,partial commitment,unbound),the commitments depth of market access and national treatment,the commitments depth of cross-border supply and presence of natural person,the commitments depth of host-countries and undertaking economies,the "GATS" characteristics of RSTA,the business types of service offshoring(such as ITO,BPO,KPO),the embodied form of domestic value-added(such as final services,intermediate services,re-export services,returned home services),and the economic development level of members(such as South-South,South-North,North-North).In addition,this paper uses the selective bias index and instrumental variable method(IV)to explore the endogenous problems that may be caused by missing variables and reverse causality,and adapts a variety of methods to verify the robustness of the results,such as changing fixed effect types,introducing lag variables,replacing variable measures,using PPML,PSM-DID and sensitivity analysis.The marginal contributions of this study are mainly manifested in the following three aspects.First,the topic is relatively new.This paper analyzes the factors influencing service offshoring from the perspective of regional institutional arrangements,and compares the effect of RSTA on the amount of service offshoring and domestic added value which further enriches the literature on the relationship between regional trade agreements and service offshoring.Second,this paper does not limit the measurement of RSTA to dummy variables,but further constructs the commitments depth index according to full commitment,partial commitment and unbound for two restrictive measures,92 service sub-sectors and 2 kinds of service trade modes under 162 service commitment schedules in accordance with the improved frequency calculation method of Miroudot et al.(2010).Thirdly,the mechanism is relatively new.This paper analyzes the characteristics of RSTA based on the unique features of services.The mechanism is that RSTA can help to reduce the fixed costs caused by service trade barriers and incomplete contracts,thus promoting the service offshoring.In addition,this paper evaluates the multi-period dynamic effects for the first time.Generally speaking,this study supplements the literature on the relationship between regional service trade agreements and service offshoring.At present,with the globalization of service driven by digital economy,the strategic position of service outsourcing in the open economy of various countries is becoming more and more significant.It has become the core of trade strategic competition,trade rule competition and trade interest competition,and is also the key factor to reshape the new version of global trade map in the future(Xiaohong Wang,2020).At the beginning of 2020,eight departments including the Ministry of Commerce of China had issued guidance on promoting the high-quality development of service outsourcing.RSTA and its commitments depth can reduce the trade barriers and institutional constraints of the service offshoring from the institutional level among countries.At the same time,the regional trade network dominated by regional free trade agreements is becoming a new round of global promotion.International economic and trade rules have shifted from "border" rules to "after border" measures.In response to the new round of global economic and trade rules,the 2019 central economic work conference of China had proposed to actively participate in the reform of global governance and accelerate the negotiation of multilateral and bilateral free trade agreements,which will continue to strengthen the role of RSTA on service offshoring.Therefore,in addition to expanding the relationship between RSTA and service offshoring theoretically,this study also provides empirical analysis and policy reference for China to actively participate in the construction of regional economic integration so as to promote the high-quality development of service offshoring.In a word,this study has both theoretical and practical significance.