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Restrictions on Trade in Professional Services

Staff research paper

This paper by Duc Nguyen-Hong was released on 16 August 2000. The paper is part of the Commission’s research into barriers to trade in services, being undertaken in a collaborative project with the University of Adelaide and the Australian National University. This study focuses on quantifying the restrictions affecting trade in legal, accountancy, architectural and engineering services. It first develops a trade restrictiveness index measure, which shows the height of the barriers applying to domestic and foreign supply of professional services in a range of economies. It then develops estimates of the effects of restrictions in an econometric analysis of engineering service firms’ price-cost margins.

Released concurrently with this paper is a related study, Restrictions on Trade in Distribution Services, which focuses on restrictions affecting wholesale and retail trade.

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A staff research paper by Duc Nguyen-Hong on Restrictions on Trade in Professional Services identifies and quantifies restrictions affecting domestic and international trade in legal, accountancy, architectural and engineering services in more than 29 economics, including Australia.

The paper also examines the price and cost effects of restrictions in engineering services.

The paper finds that:

  • legal and accountancy services are more highly restricted than engineering and architectural services in most economics studied, including Australia;
  • Indonesia, Malaysia, Turkey and Austria have the most restrictive trading regimes in the four professional service industries. Australia's trade in professional services is relatively open when measured against a majority of economies; and
  • restrictions can increase prices of engineering services by at least 15 per cent in highly restricted economies.

The paper is the latest in a stream of Commission research to measure barriers to trade in services.

Background information

Leonora Nicol, Media and Publications 02 6240 3239 / 0417 665 443

Preliminaries
Cover, Copyright, Preface, Contents, Abbreviations, Summary

1 Introduction

2 Index framework
2.1 Introduction
2.2 Some features of professional services
2.3 Measuring restrictions on trade in professional services

3 Index results
3.1 Introduction
3.2 Comparison among professions
3.3 Engineering services
3.4 Architectural services
3.5 Accountancy services
3.6 Legal services

4 Impacts of restrictions on engineering services
4.1 Introduction
4.2 Using price-cost margins data to estimate effects of restrictions
4.3 Modelling firm profitability and restrictions
4.4 Results
4.5 Impacts of restrictions on engineering services

References