Services trade restrictiveness index of OECD

A study, commissioned by the Indian ministry of commerce and industry ,has found problems with the services trade restrictiveness index (STRI) of the organization for economic cooperation and development (OECD).

Key points

The study has found that the outcomes of the index are biased and counter –intuitive.

The OECD index has a large number of problems associated with it,including some significant design issues that render it impractical for use.

For example, the index seems to show the India services sector as one of the most restrictive particularly in policy areas like foreign entry despite the fact that since 1991,the one area that has seen maximum liberalization in India is foreign direct investment (FDI).

Initial Work Also Suggests That There Are Both Theoretical And Empirical Inconsistencies In The OECD Methodology.

In addition, the data seems to have been generated by rather arbitrary procedures and reflects a developed country bias.

India has approached several developing countries during the recently –concluded WTO talks in new delhi to build consensus around the new method of measuring trade restrictiveness in the services sector.

Unlike manufacturing trade which has well documented system of classification of commodities, the problem in services is that for a long time there wasn’t any way to know whether a country’s policies were restrictive. Hence, a robust and unbiased index for quantifying the restrictiveness of the services trade is needed.

Services trade restrictiveness index (STRI)

Launched in 2014, STRI ranks countries based on their services trade policies in 22 sectors such as computer services, air transport, legal services construction etc.

STRI is now available for 2018 for a total of 45 economies (36 OECD and the rest non-OECD) .the countries and sectors represent over 80 % of global trade in services.

There is also a digital that identifies, catalogues, and quantifies cross-cutting barriers that effect services traded digitally.

The STRI indices take values between zero and one, one being that most restrictive.

India’s performance in STRI 2018: India has a STRI score average in all sectors.