Quantifying the Impact of Deep Trade Agreements on Services Trade

This paper studies the impact of deep trade agreements (DTAs) on services trade. Using detailed information on the industry‐level services trade and the content of the trade agreement over the period 2000 to 2019, the empirical analysis shows that services trade between partners that sign an agreement with the highest depth increases by 29.3%. We find significant heterogeneity in the DTAs' effects on services trade across industries. Furthermore, we find, in general, DTAs divert services trade away from non‐member countries. However, there is supportive evidence of negative trade diversion effects in some service industries. These findings may have important consequences for quantifying the welfare impacts of DTAs.