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Growth, globalization, and gains from the Uruguay Round

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  • Hertel, Thomas W.
  • Bach, Christian F.
  • Dimaranan, Betina
  • Martin, Will

Abstract

Emphasizing the importance of evaluating the Uruguay Round in the context of a changing world economy, the authors base their projections on a model that incorporates certain economic shifts: 1) that the center of economic gravity will shift toward the South and toward Asia (a shift that is already under way and shows no signs of abating), and 2) that the pattern of comparative advantage will continue to change, with the East Asian economies gaining comparative advantage in the production of physical and human-capital-intensive products. The authors argue that these changes in the global economy significantly affect their analysis of the Uruguay round reforms, for two reasons. First, with the global distribution of trade and production shifting toward Asia, the deeper Uruguay Round cuts inthat region become more important, giving rise to a 17 percent increase in the proportionate welfare gain after implementation of tariff cuts. Second, without the Round, almost all of the bilateral quotas associated with the Multifibre Arrangement (MFA) would have become more binding and the resulting distortion would have been significantly greater. In this analysis, the global gain from MFA reform is 60 percent greater than it would have been without taking into account the effects of growth. Of course, procedures for implementation of the MFA reforms are more complex than they have conveyed for purposes of analysis. In practice, one must also consider the impact of accel quota growth under the Agreement on Textiles and Clothing. But even when the Agreement on Textiles and Clothing is implemented over the period for which projections were made, quota rents rise for many bilateral flows. This is a consequence both of shifts in comparative advantage toward the supplying countries and of simultaneous cuts in tariffs on textiles and clothing. The projections approach used here may be viewed as a logical extension of the growing econometric literature seeking to explain the determinants of economic growth through regression analysis. By offering a bridge between econometric evidence and computable general equilibrium modeling, the authors hope to combine the two approaches to help shed light on the interaction between trade reform and economic growth.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1614.

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Date of creation: 31 May 1996
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Handle: RePEc:wbk:wbrwps:1614

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Keywords: Payment Systems&Infrastructure; Economic Theory&Research; Environmental Economics&Policies; Export Competitiveness; Globalization and Financial Integration; Environmental Economics&Policies; Trade and Regional Integration; Achieving Shared Growth; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT;

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  1. Barro, Robert J. & Lee, Jong-Wha, 1993. "International comparisons of educational attainment," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 363-394, December.
  2. Francois, Joseph & Martin, Will, 1995. "Multilateral Trade Rules and the Expected Cost of Protection," CEPR Discussion Papers 1214, C.E.P.R. Discussion Papers.
  3. Kala Krishna & Refik Erzan & Ling Hui Tan, 1991. "Rent Sharing in the Multi-Fibre Arrangement: Theory and Evidence from US Apparel Imports from Hong Kong," NBER Working Papers 3673, National Bureau of Economic Research, Inc.
  4. Harrison, Glenn W & Rutherford, Thomas F & Tarr, David G, 1997. "Quantifying the Uruguay Round," Economic Journal, Royal Economic Society, vol. 107(444), pages 1405-30, September.
  5. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 961-99, October.
  6. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  7. Francois, Joseph & McDonald, Brad & Nordström, Håkan, 1994. "The Uruguay Round: A Global General Equilibrium Assessment," CEPR Discussion Papers 1067, C.E.P.R. Discussion Papers.
  8. Martin, Will & Warr, Peter G, 1993. "Explaining the Relative Decline of Agriculture: A Supply-Side Analysis for Indonesia," World Bank Economic Review, World Bank Group, vol. 7(3), pages 381-401, September.
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Cited by:
  1. Pan, Suwen & Welch, Mark & Mohanty, Samarendu & Fadiga, Mohamadou L., 2006. "Sino-U.S. and Sino-E.U. Textile Safeguard Agreements: Comparing the Effects to Free Market Conditions," 2006 Annual meeting, July 23-26, Long Beach, CA 21117, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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