Bridging the Atlantic: A Trade Effect Assessment of Services Inclusion in a Canada-EU Trade Agreement

Sammanfattning: The spaghetti bowl of regional trade agreements has been growing rapidly the past two decades. While services trade has often been excluded from these agreements, the recent trend suggests that a shift has occurred and that policy-makers are paying more attention to services trade. As Canada and the European Union (EU) are negotiating a bilateral trade agreement, services sector inclusion is a major component. The purpose of this thesis is to determine what effects a possible trade agreement between Canada and the EU will have on bilateral trade in various services sectors. A gravity model approach is used to investigate the link between trade barriers and services trade. These findings are then related to the expected outcome of the negotiations and sector-specific trade effects are estimated. The results show that trade barriers will decrease relatively more in Canada than in the EU and that Canadian imports of EU services will increase relatively more. The most profound trade effects are found in the telecommunications and the other business services sectors.