This paper investigates the impact of trade barriers on the services trade and firms’ mode of supply, using Brexit as a case study. It focuses on four modes of service supply as defined by the WTO—cross-border (Mode 1), consumption abroad (Mode 2), commercial presence (Mode 3), and the presence of a natural person (Mode 4). The paper uses detailed data on UK firms to estimate how they substitute between these modes, particularly after the Brexit referendum in 2016. UK firms increasingly relied on local affiliates (Mode 3) to serve the EU market, protecting their exports but reducing domestic employment. This paper contributes to understanding trade restrictions in services, highlighting how firms’ mode choices can mitigate trade barriers.
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- Pages
- 69
- Published in
- Germany
Table of Contents
- Magli should we stay or should we go.pdf 1
- Introduction 4
- Data 8
- A simple model of firm's Mode choice 11
- Firm Level Mode Choice 14
- Brexit and Services Trade, initial evidence 17
- Brexit and Services Trade, econometric analysis 23
- Robustness Checks 27
- Imports 30
- Heterogeneity and implications of Mode Choice 32
- Impact of Mode substitution on total trade 37
- Impact of Mode substitution on employment and turnover 39
- Conclusions 42
- Data Construction 48
- Stylised Facts on Services Mode of Supply 52
- Additional Results 56
