A practical guide to trade policy analysis

Abstract

Overview - Trade flows and trade policies need to be properly quantified to describe, compare or follow the evolution of policies between sectors or countries or over time. This is essential to ensure that policy choices are made with an appropriate knowledge of the real conditions. - This practical guide introduces the main techniques of trade and trade policy data analysis. It shows how to develop the main indices used to analyse trade flows, tariff structures and non-tariff measures. It presents the databases needed to construct these indices as well as the challenges faced in collecting and processing these data, such as measurement errors or aggregation bias. - Gravity models are a means to understanding the determinants and patterns of trade and assessing the trade effects of certain trade policies, such as WTO accession or the signing of preferential trade agreements. The appropriate specification of the model and estimation method is crucial for reliable results. This practical guide guides you in making the right choice. - Trade policies generally have diverse effects across economic sectors and ultimately individuals. The welfare impact of trade policies is therefore an important concern for policy-makers. - This practical guide provides an overview of how applied partial and general equilibrium models can be used to assess the impact of policy reforms such as tariff reductions. The aim is to provide the reader with an understanding of how these models work, what they can and cannot do, and what is required to make them operational. - In particular, the practical guide offers a hands-on introduction on how to use the most common partial equilibrium models and how to estimate the distributional effects of trade policies on welfare, in particular on inequality and poverty