Research findings demonstrate that ambitious efforts to ease barriers to trade in services could yield substantial benefits by reducing trade costs for firms that provide services across borders and enhancing productivity in manufacturing.1

Figure 5 presents the trade costs implications of a hypothetical scenario where countries would reduce their STRI index by half compared to the best performer in each sector.

Trade cost reductions would accrue across all countries but would be highest in emerging-market economies. The average trade costs reductions for OECD countries are estimated at -13%, while for non-OECD economies the benefits would be in the range of a -22% reduction. The highest potential benefits would be for Thailand (-31%), India (-27%), and Indonesia (-27%).

Service suppliers in sectors such as financial services and air transport would benefit most from lowering trade barriers. For instance, services trade costs for providers of commercial banking services could decline by 20% to 37% in the medium to long term (Table 2). Due to the pivotal role of logistics services in the development of global value chains, further liberalising reforms in the logistics sectors could lead to high trade cost reductions. Logistics services are not among the most restricted sectors but barriers that exist can substantially affect logistics companies’ ability to provide services and thus present high costs. For instance, burdensome customs and border processes can present uncertainties on scheduled deliveries or restrictive policies on certain types of logistics activities (e.g. cargo handling, customs mediation, or storage) can affect the ability of suppliers to offer integrated logistics solutions. Even the lowest estimations of logistics customs brokerage services (between 4% and 10%) could represent substantial savings for businesses.

Regulatory information in the STRI database can be broken down in different categories or clusters. This allows, among others, to better understand the extent of barriers that concern market access and national treatment and compare it to barriers occurring behind the border due to domestic regulations. The 2023 STRI shows that, on average, close to two-thirds of all barriers affect market access and national treatment highlighting that continued international efforts are needed to promote open services markets (Figure 6). At the same time, behind the border barriers are significant as well, highlighting the importance of advancing the implementation of the landmark Reference Paper on Services Domestic Regulations concluded at the WTO in 2021. Previous joint OECD-WTO research found that the ambitious implementation of the disciplines included could lead to substantial trade cost savings particularly in financial and business services (Box 2).

The full benefits of liberalisation efforts materialise in the medium to long term, as production and investment decisions need to adjust to new regulations. New research suggests that an ambitious policy reform corresponding to a decrease in a country’s STRI by 0.05 (equivalent of 5 percentage points) is associated with nearly a 10% increase in cross-border services trade in the short term, and the benefits of services reform can lead to a 20-50% increase in trade values in the medium to long term, depending on the sector (Benz et al., 2023[5]).

New analysis also demonstrates that lower trade barriers in upstream services sectors can have a positive effect on economic performance along the supply chain, in terms of increased productivity of domestic manufacturing sectors (Benz et al., 2023[5]). Figure 8 shows that an air transport services sector reform scenario reducing a country’s STRI by 0.05 (the equivalent of an ambitious reform) is estimated to increase downstream manufacturing productivity by 8.4% across the 17 manufacturing industries on average. Reforms of similar magnitude in telecommunications and financial services are associated with 6.5% and 2.3% productivity increases, respectively. Brazil, for instance, has implemented liberalising policies in its commercial banking sector in 2021-22 (Annex A), resulting in a 0.08 reduction in its STRI for the sector.