Impact of services barriers on effective rates of protection in agriculture and manufacturing

The paper seeks to determine how protection of services affects the effective protection of agricultural and manufacturing sectors using a set of recent estimates of services barriers in telecommunication, banking, distribution, electricity, professional services, and air and maritime transport in selected developing and transition economies. Despite data limitations that translate into an underestimation of the taxing effect of services barriers on non-services sectors, this exercise could be important from a practical point of view, given that in a number of agricultural and manufacturing sectors the sign of protection is reversed (i.e. it goes from positive protection into effective taxation). In order to obtain more realistic insights into the potential costs of services barriers on downstream using industries, it is necessary to consider more accurate services tax equivalents as well as additional estimates for all services sectors as soon as they become available

Potential Optimal Tariff Rates for Tanzania: A CGE Analysis

Computable General Equilibrium (CGE) models are usually presented as a set of simultaneous equations that describe the economic activities of consumers, producers, government, and traders in the markets for factors of production (inputs), and for goods and services (outputs). The supply and demand in each market is equilibrated by a market-clearing price. The model is called computable because simulation is used to find the prices that clear the markets for inputs and outputs. The models allow for the establishment of a direct link between economic structures as embodied in a social accounting matrix and policy changes. In this study a CGE model of Tanzania is used to endogenously determine revenue-neutral tax rates and the corresponding pareto-optimum capital adjustment that are needed to lower intermediate sales tax and import tax rates. The generic CGE model of Tanzania is presented based on the 2001 national social accounting matrix. The objective is to develop a detailed and suitable model for assessing impacts of new and potential macroeconomic policy options available for Tanzania. For illustration purposes, the model is used to endogenously determine revenue-neutral tax rate changes and the corresponding pareto optimum capital adjustment needed to lower intermediate input price by 20%, relative to import prices. The results indicate that lower tax rates will increase production for both domestic and export markets and lower price indices across the 2 board. However, total investment has to increase by more than 2% so as not to make all households at least as well-off as they were before the new taxes

Trade Policy Reforms and Rural Poverty in Nigeria

This paper examines the impact of tariff reform and currency devaluation on rural poverty and inequality in Nigeria using a computable general equilibrium framework. Specifically, it examines the rural inequality implications of a gradual phasing out of import duties (trade liberalisation) and a market determined exchange rate regime. The Study observed that trade liberalisation reduces rural real wage and rural income leading to higher labour demand with worsening inequality. Currency devaluation was observed to raise the domestic price of imports leading to better terms of trade for the urban import competing sector. Rural terms of trade also improved but this did not translate to higher par capital rural income and higher rural real wage. Rural inequality was observed to further deteriorate. Hence, the study calls attention to the fact that the policy of trade liberalisation should be complemented with appropriate macroeconomic and sectoral policies that will ensure that gains from trade are equitably distributed

Stationary-Energy Sector Greenhouse Gas Emissions Projections for Australia

This paper contains updated projections for greenhouse gas emissions from stationary energy sources in Australia. The projections were generated using MMRF-Green, a bottom-up CGE model of the economies of Australia’s six states and two territories. MMRF-Green models each region as an economy in its own right, with region-specific prices, region-specific consumers, region-specific industries, and so on. This theoretical structure is supported by a database containing explicit representations of intra-regional, inter-regional and international trade flows, and detailed information on greenhouse gas emissions by fuel, fuel-source, user and user-region. The current MMRF-Green database recognises 52 commodities produced by 46 industries. Of the 52 commodities, 26 are related to energy and transport. There are four primary sources of energy and six refinery products. The refinery products are produced by a single industry. There are six electricity industries and nine transport sectors. For each transport mode, the provision of freight services is treated separately from the provision of passenger services. Each solution of MMRF-Green produces pictures of Australia’s regions at a high level of detail for a particular year. The model can also produce a sequence of annual solutions, linked together by ensuring, for example, that the quantities of opening capital stocks in any year equal the quantities of closing stocks in the previous year. This allows the model to make forecasts at a high level of detail over periods of policy relevance (say up to 10 years). The forecasts of emissions reported in this paper have been made for the Australian Greenhouse Office (AGO), the sponsor of our work. The sponsored work involved the modelling of five scenarios. However, for the sake of brevity, in this paper we focus on just one – the “With measures” case. This scenario includes the impacts of federal and state government measures designed to reduce emissions over the medium term. These measures operate on the supply side (e.g., measures designed to improve the fuel efficiency of coal generation) and on the demand side (e.g., measures designed to improve the electricity efficiency of residential appliances). Careful modelling of these measures is the key to producing believable long-term forecasts for stationary-energy emissions

How Much Do Institutions Matter for Trade? Evidence from Transition Countries

What is the effect of institutions on trade? A line of recent literature has observed an apparent positive correlation between measures of institutional quality and volume of trade. But this could be due to endogeneity of institutions, rather than causality. This study endogenizes institutions in estimating gravity equation for bilateral trade exploiting the differences in years under the governing system of communism as an instrumental variable for institutions. The longer a country had been under communism, the stronger might have been its institutions supporting the centrally-planned features of economy and thus, the weaker would have been their adaptability to market conditions. The reduced form equation estimates provide evidence for highly economically and statistically significant effect of the years under communism on the quality of current institutions. We find that institutions indeed have a beneficial effect on bilateral trade. However, the extent of their influence might have been misestimated while not having taken care of endogeneity. Overall, the results obtained via this approach shed a new light over the extent of explanatory power of exporter's and importer's institutions over trade that might be helpful in explaining the "missing" trade costs phenomenon having been increasingly gaining attention in recent literature on international trade. Moreover, the results suggest that the number of years under communism indirectly affected trade, pointing out at the largely objective reasons behind the differences in the amount of trade and economic success of countries of Central and Eastern Europe and Former Soviet Union on the one hand, and on the other hand, at the lasting comparative disadvantage of transition countries in general, in inheriting the institutions from the communist regime

Why initiatives towards LDCs should be consolidated in the DDA

On July 24, 2006, World Trade Organisation (WTO) Director­General Pascal Lamy recommended a “time­out” and the indefinite suspension of the WTO Doha Development Agenda (DDA) negotiations. At this time, the G­6 group (Australia, Brazil, India, EU, Japan and USA) was still not able to bridge their gaps on agricultural domestic support and market access, the main stumbling blocks of the Doha Round for several months. This grand bargaining has to some extent shed shadow on the supposed key issue of the current Round, namely its “development” dimension. To shed light on development dimension of the round, we assess the impact of the “20/20/20 Lamy’s compromise”, considering also the pro­Least Developed Countries (LDCs) initiatives advanced during the negotiations. Since market access is still at the heart of the negotiation process, we focus only on reduction of trade barriers for goods, keeping in mind that other issues, such as services, will bring additional gains. Also, trade facilitation as well as a potential “Aid For Trade” package would smooth adjustments for developing economies, making it possible for the poorest to reap the benefits of trade liberalisation (Decreux and Fontagné, 2006). An assessment of the gains that could be obtained from such a compromise will show that consolidating free access initiatives is key and that emerging economies would help in embarking in the scheme. To assess the impact of these , the paper introduces all these trade liberalisation components in MIRAGE, the CGE developed by the CEPII (Decreux et Valin,2007), with a dynamic path up to 2020

Bargaining for an efficient and fair allocation of emission permits to developing countries.

The paper focusses on the negotiations between the developed countries currently implementing emission permit markets versus the developing countries who want to join this market. We model the negotiations according to the ’Alternating Offers Bargaining’ model. The objective is to obtain an efficient and fair allocation of tradeable emission permits between these two players. At each period, one player proposes a feasible allocation of the goods for both players. Then the other player either ends the negotiations by accepting the proposal, or prolongs them by rejecting it. The proposal is accepted if this player considers it fair. If rejected, there is a certain probability that the next round is played and the other player making a proposal. The equilibrium concept in this model is that of a subgame perfect equilibrium

Economic and Poverty Impacts of Agricultural Price Distortions in China

Capitalizing on the most recent estimates of agricultural border protection in China and in other countries, this paper assesses the economic and poverty impact of global trade reform in China. It also examines the interplay between the trade reforms and factor market reforms aimed at improving the allocation of labor within the Chinese economy. The results suggest that trade reforms in the rest of the world, land reform and hukou reform all serve to reduce poverty, while unilateral tarde reforms result in a small poverty increase. Agricultural distortions are important factors in determining the distributional and poverty effects of trade reform packages, although their impacts on aggregate trade and welfare are small. A comprehensive reform package which bundle the reforms in commodity and factor markets together may benefit all broad household groups in China