Rules of Thumb for Evaluating Preferential Trading Arrangements : Evidence from Computable General Equilibrium Assessments
Most interesting results on the welfare effects of regional arrangements are ambiguous at a theoretical level. Many questions only have quantitative answers that are specific to the particular structural features of the economy and the policy consi...
Main Authors: | , , |
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Format: | Policy Research Working Paper |
Language: | English en_US |
Published: |
World Bank, Washington, DC
2014
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Subjects: | |
Online Access: | http://documents.worldbank.org/curated/en/2003/10/2819736/rules-thumb-evaluating-preferential-trading-arrangements-evidence-computable-general-equilibrium-assessments http://hdl.handle.net/10986/18041 |
Summary: | Most interesting results on the welfare
effects of regional arrangements are ambiguous at a
theoretical level. Many questions only have quantitative
answers that are specific to the particular structural
features of the economy and the policy considered. So, to
determine the impact of prospective regional arrangements
governments often rely on a quantitative evaluation. Usually
at the request of client governments of the World Bank, the
authors have implemented many computable general equilibrium
(CGE) models to inform policymakers. The authors summarize
the main conclusions drawn from these studies. The principal
conclusions are: 1) Countries excluded from a preferential
trade arrangement almost always lose. 2) Market access is a
key determinant of the net benefits of a preferential trade
arrangement. 3) With a free trade agreement (FTA) the
external tariff can be lowered such that a poor FTA becomes
attractive. 4) For Southern countries, North-South
agreements offer a beneficial increase in competition in
their home markets, and involve little increase in the
supply price of Northern country sales in Southern
countries. 5) Multilateral trade liberalization results in
significantly larger gains to the world than the network of
regional arrangements. 6) For individual countries without
high protection, "additive regionalism" will
likely result in substantially larger gains than unilateral
trade liberalization. 7) Tax replacement requirements reduce
the set of desirable regional arrangements. 8) Trade taxes
are often an inefficient source of tax revenue. 9) Trade
liberalization should be expected to be pro-poor in
developing countries, but results will be diverse at the
household level so safety nets are important. 10) Dynamic
effects to reverse conclusions regarding regionalism are not expected. |
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