This paper analyses bilateral trade flows between the provinces of Canada and between the member states of the European Union using a gravity model. On average, distance is less a hindrance for services trade than for goods trade. Language and regulation differences hamper intra-EU trade significantly. Services trade, in contrast to goods trade, is also hampered by the level of regulation in the importing country. Services trade within Canada as a share of GDP is twice the intra-EU level, and estimates suggest that intra-EU services trade could more than double if the internal market functioned like the Canadian services market.
- NATIONAL BORDERS