Trade and welfare effects of trade liberalization in communication services between Singapore and the EAEU

_ Yuri Kofner, non-residential research fellow, Skolkovo Institute for Emerging Market Studies, editor-in-chief  analytical media “Eurasian Studies”. Munich. 15 March 2020.

 In October 2019 the Eurasian Economic Union (EAEU) inked a free trade agreement together with a “Framework Agreement on Comprehensive Economic Cooperation” with the Republic of Singapore. Since the Eurasian Economic Commission (EEC) has the supranational authority to conduct negotiations on trade in goods, but neither on trade in services, nor on foreign direct investments, this framework agreement sets the “horizontal” legal structure for conducting bilateral trade negotiations on “vertical” bilateral agreements between Singapore and the EAEU member states in these key areas. Within this framework, Armenia and Singapore already singed a bilateral “Agreement on Trade in Services and Investment”.

Model

Using a partial equilibrium model, the purpose of this article is to estimate the trade and welfare effects, if all the five EAEU member states (Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia) sign and implement bilateral agreements on trade facilitation in services and investment with the  Republic of Singapore.

As a case study the author will look at the effects of trade liberalization in the communication services sector, which is defined as a 20 percent mutual reduction in non-tariff barriers in this sector as a result of a hypothetical singing and implementation of bilateral agreements on trade facilitation in services and investment between the EAEU member states and the  Republic of Singapore.

For the simulation in this article the author used the following input data: 1. Bilateral data for trade in communication services from 2012 for four parties (EAEU, Singapore, China and the “rest of the world”) taken from the OECD Statistics and UN Comtrade databases using the EBOPS 2020 classification. For the bilateral trade flows imports were preferred. 2. Ad-valorem equivalents of non-tariff measures (AVEs of NTMs) for each party taken from (Fontagné et al. 2016). 3. Import elasticities taken from (Ghodsi et al. 2016). The export supply (1.5) and substitution (5) elasticities were taken as constants across all sectors and regions.

Results

The singing and implementation of bilateral agreements on trade facilitation in services and investment between the EAEU member states and the Republic of Singapore would increase total Singaporean exports of communication services to the Eurasian Economic Union by 41 percent (USD 9.5 mln) and increase Eurasian exports to Singapore of communication services by 18.3 percent (USD 1.7 mln). The gross welfare effect (producer surplus + consumer surplus) would be USD 1.9 mln for the Republic of Singapore and USD 3,4 mln for the EAEU. According to the simulation results, Eurasian companies offering communication services would not experience economic losses from opening the EAEU market for Sinaporian competitors in this sector. The same is true vice versa.

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