The impact of trade liberalization in telecommunications services: The case of APEC countries

This paper examines the impact of liberalizing the telecommunications services sector on investment and output in the Asia-Pacific Economic Cooperation (APEC) countries by estimating a system of four structural equations that takes into account the causal relationship between national income and telecommunications infrastructure. The degree of openness to trade in telecommunications is represented by a carefully constructed index that reflects a country’s trade and investment policy in terms of market access, national treatment and regulatory principles. One interesting finding from the empirical analysis is that the effects of trade liberalization depend on the risk rating of a country. In countries with relatively high risk ratings liberalization reduces investment in telecommunications.

► The effects of trade liberalization in telecommunications depend on the risk rating of a country. ► Low-risk countries tend to have much larger effect on output as compared to high-risk countries. ► Telecommunications investment is much less responsive to price in low-risk countries. ► High-risk countries tend to show reduction in investment, and thus output after liberalization. ► The Agreement on Basic Telecommunications does not seem to have significant effect on investment.