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CGE Modeling and Analysis of Multilateral and Regional Negotiating Options

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  • Drusilla K. Brown

    (Tufts University)

  • Alan V. Deardorff

    (University of Michigan)

  • Robert M Stern

    (University of Michigan)

Abstract

We have used the Michigan Model of World Production and Trade to simulate the economic effects on the United States, Japan, and other major trading countries/regions of: the Uruguay Round of multilateral trade negotiations completed in 1993-94; a prospective new round of WTO multilateral trade negotiations; and a variety of regional/bilateral free trade agreements (FTAs) involving the United States and Japan. We estimate that the Uruguay Round negotiations increased global economic welfare by $75.1 billion annually, with gains of $12.9 billion for the United States and $15.6 billion for Japan. An assumed reduction of all post-Uruguay Round tariffs on agricultural and industrial products and of all services barriers by 33 percent in a new WTO trade round is estimated to increase world welfare by $613.0 billion, with gains of $177.3 billion for the United States and $123.7 billion for Japan. If there were global free trade with all post-Uruguay Round trade barriers completely removed, then world welfare would increase by $1.9 trillion, with gains of $537.2 billion (5.9 percent of GNP) for the United States and $374.8 billion (5.8 percent of GNP) for Japan. Elimination of APEC-member country bilateral post-Uruguay Round tariffs on agricultural and industrial products and services barriers is estimated to increase world welfare by $764.4 billion, with gains of $294.7 billion for the United States and $283.1 billion for Japan and losses of $7.0 billion for the European Union/EFTA and $1.0 billion for South Asia. Separate bilateral FTAs involving Japan with Singapore, Mexico, South Korea, and Chile and an ASEAN Plus-3 FTA involving Japan, China/Hong Kong, and South Korea would have positive, though generally small, welfare effects, but potentially disruptive sectoral employment shifts in some member countries. Depending on the agreement, there may be detrimental welfare effects on some nonmembers. The welfare gains from multilateral trade liberalization are therefore considerably greater than the gains from preferential trading arrangements and more uniformly positive for all countries.

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File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers451-475/r468.pdf
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Bibliographic Info

Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 468.

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Length: 51 Pages
Date of creation: 2001
Date of revision:
Handle: RePEc:mie:wpaper:468

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Postal: ANN ARBOR MICHIGAN 48109
Web page: http://www.fordschool.umich.edu/rsie/
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  1. Hertel, Thomas W. & Will Martin, 1999. "Would Developing Countries Gain from Inclusion of Manufactures in the WTO Negotiations?," GTAP Working Papers 397, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  2. Anne O. Krueger, 2000. "NAFTA's Effects: A Preliminary Assessment," The World Economy, Wiley Blackwell, vol. 23(6), pages 761-775, 06.
  3. W. Jill Harrison & K.R. Pearson, 1994. "Computing Solutions for Large General Equilibrium Models Using GEMPACK," Centre of Policy Studies/IMPACT Centre Working Papers ip-64, Victoria University, Centre of Policy Studies/IMPACT Centre.
  4. Brown, Drusilla K & Stern, Robert M, 2001. "Measurement and Modeling of the Economic Effects of Trade and Investment Barriers in Services," Review of International Economics, Wiley Blackwell, vol. 9(2), pages 262-86, May.
  5. Brown, Drusilla K. & Deardorff, Alan V. & Stern, Robert M., 1996. "Computational Analysis of the Economic Effects of an East Asian Preferential Trading Bloc," Journal of the Japanese and International Economies, Elsevier, vol. 10(1), pages 37-70, March.
  6. Thomas W. Hertel, 2000. "Potential gains from reducing trade barriers in manufacturing, services and agriculture," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 77-104.
  7. Bernard Hoekman, 2000. "The next round of services negotiations: identifying priorities and options," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 31-52.
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