The determinants of trade agreements in services vs. goods

Since Baier and Bergstrand (2004) there has been a focus on empirically testing the economic determinants of signing a free trade agreement (FTA). However, FTAs do not imply an agreement on services; a separate economic integration (EIA) is needed. As trade in services is one of the fastest growing sectors of the global economy, it is important to pay special attention to these agreements. We use the methodology of Baier and Bergstrand (2004) to investigate differences in the determinants of signing an agreement on goods trade and services trade. In addition to the standard economic variables, we include variables for skilled/unskilled labor, and political stability. We find in general, qualitative similarities (though different magnitudes) and some robust specific differences.