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GTAP Resource #5802

"It is all in the details: A bilateral approach for modelling trade agreements at the tariff line"
by Jafari, Yaghoob, Mihaly Himics, Wolfgang Britz and Jayson Beckman

Policymakers are increasingly relying on computable general equilibrium (CGE) models to provide economy-wide impacts of trade agreements; however, these assessments often make the simplifying assumption of complete bilateral tariff elimination. But agreements typically involve partial tariff elimination for sensitive sectors—which are often differentiated at the tariff line. As such, applying a uniform tariff reduction in a CGE sector that encompasses many products could introduce bias. We propose a tariff line approach for modelling exemptions for sensitive goods in CGE models with the aim of reducing this bias. This approach is tested for the Canada–EU trade agreement, and systematically compared to standard approaches to bilateral trade liberalisation in CGE analysis. We find that more common approaches might systematically overestimate trade and welfare impacts by neglecting partial liberalisation in selected sectors and/or not considering substitution across tariff lines.

Resource Details (Export Citation) GTAP Keywords
Category: 2019 Conference Paper
Status: Published
By/In: Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie
Date: 2020
Version: 2
Created: Jafari, Y. (4/15/2019)
Updated: Jafari, Y. (3/8/2021)
Visits: 1,387
- Baseline development
- Agricultural policies
- European Union
- North America

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