In trade negotiations, there is a need for capacity within developing countries to assess the impact of tariff changes. This includes not only multilateral liberalization, but also regional and unilateral trade liberalization. In past GATT rounds, this has often involved the World Bank/UNCTAD
sponsored SMART model. This is because while CGE models provide estimates of aggregate effects, national policy is made at the tariff line level.
Ultimately, trade ministries need a structured way to combine information on trade flows and trade policy for detailed product categories if they are to weigh the political forces that surround initiatives to liberalize trade.
In this paper, we outline a global simulation model (GSIM) for the analysis of global, regional, and unilateral trade policy changes. Our goal in developing the model is to provide a relatively simple, yet flexible framework for detailed analysis of trade policy in combination with the detailed tariff
and trade flow data found in datasets like TRAINS and WITS. In this sense, we share goals with the developers of the GSIM predecessor, SMART. Where we depart from earlier applications in this area is in taking advantage of available greater computational power, and in stressing global market clearing conditions rather than import markets. By focusing on global markets, we hope to facilitate the analysis of the value of collective market access concessions for exporters, in addition to the import market effects stressed by existing tools in this area.
The approach we develop is partial equilibrium, being industry focused but global in scope. By definition, partial equilibrium models do not take into account many of the factors emphasized in our elegant general equilibrium trade theory. This implies practical limitations to the approach developed here. It also implies some useful advantages. Because we focus on a very limited set of factors, the approach followed allows for relatively rapid and transparent analysis of a wide range of commercial policy issues with a minimum of data and computational requirements. In our view, as long as the limitations of the partial equilibrium approach are kept in mind, useful insights can be drawn with regard to relatively complex, multi-country trade policy changes at the industry
level. This includes interaction of multiple market access concessions across various trading partners, exporter gains, consumer surplus (importer) gains, and changes in tariff revenue.
Bron