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Rules of thumb for evaluating preferential trading arrangements : evidence from computable general equilibrium assessments

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  • Glenn W. Harrison
  • Thomas F. Rutherford
  • Tarr,David

Abstract

Most interesting results on the welfare effects of regional arrangements are ambiguous at a theoretical level. Many questions only have quantitative answers that are specific to the particular structural features of the economy and the policy considered. So, to determine the impact of prospective regional arrangements governments often rely on a quantitative evaluation. Usually at the request of client governments of the World Bank, the authors have implemented many computable general equilibrium (CGE) models to inform policymakers. The authors summarize the main conclusions drawn from these studies. The principal conclusions are: 1) Countries excluded from a preferential trade arrangement almost always lose. 2) Market access is a key determinant of the net benefits of a preferential trade arrangement. 3) With a free trade agreement (FTA) the external tariff can be lowered such that a poor FTA becomes attractive. 4) For Southern countries, North-South agreements offer a beneficial increase in competition in their home markets, and involve little increase in the supply price of Northern country sales in Southern countries. 5) Multilateral trade liberalization results in significantly larger gains to the world than the network of regional arrangements. 6) For individual countries without high protection,"additive regionalism"will likely result in substantially larger gains than unilateral trade liberalization. 7) Tax replacement requirements reduce the set of desirable regional arrangements. 8) Trade taxes are often an inefficient source of tax revenue. 9) Trade liberalization should be expected to be pro-poor in developing countries, but results will be diverse at the household level so safety nets are important. 10) Dynamic effects to reverse conclusions regarding regionalism are not expected.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3149.

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Date of creation: 01 Oct 2003
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Handle: RePEc:wbk:wbrwps:3149

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Keywords: Environmental Economics&Policies; Payment Systems&Infrastructure; Economic Theory&Research; Trade Policy; Rules of Origin; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Trade and Regional Integration; Environmental Economics&Policies; Economic Theory&Research; Trade Policy;

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References

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  1. Harrison, Glenn W. & Rutherford, Thomas F. & Tarr, David G., 2001. "Chile's regional arrangements and the Free Trade Agreement of the Americas : the importance of market access," Policy Research Working Paper Series 2634, The World Bank.
  2. Harrison, Glenn W. & Rutherford, Thomas F. & Tarr,David & Gurgel, Angelo, 2003. "Regional, multilateral, and unilateral trade policies on MERCOSUR for growth and poverty reduction in Brazil," Policy Research Working Paper Series 3051, The World Bank.
  3. Coe, David T & Helpman, Elhanan & Hoffmaister, Alexander, 1995. "North-South R&D Spillovers," CEPR Discussion Papers 1133, C.E.P.R. Discussion Papers.
  4. Harrison, Glenn W. & Rutherford, Thomas F. & Tarr, David G., 2003. "Trade liberalization, poverty and efficient equity," Journal of Development Economics, Elsevier, vol. 71(1), pages 97-128, June.
  5. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(493), pages F22-F49, 02.
  6. Rutherford, Thomas F. & Rutstrom, E. Elisabet & Tarr, David, 1997. "Morocco's free trade agreement with the EU: A quantitative assessment," Economic Modelling, Elsevier, vol. 14(2), pages 237-269, April.
  7. Harrison, Glenn W. & Rutherford, Thomas F. & Tarr, David G., 1996. "Economic implications for Turkey of a customs union with the European Union," Policy Research Working Paper Series 1599, The World Bank.
  8. Glenn W Harrison & Thomas F Rutherford & David G Tarr, 1997. "Opciones de Política Comercial para Chile: Una Evaluación Cuantitativa," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 34(102), pages 101-137.
  9. Rutherford, Thomas F. & Tarr, David G., 2002. "Trade liberalization, product variety and growth in a small open economy: a quantitative assessment," Journal of International Economics, Elsevier, vol. 56(2), pages 247-272, March.
  10. Riedel, James, 1988. "The Demand for LDC Exports of Manufactures: Estimates from Hong Kong," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 98(389), pages 138-48, March.
  11. Harrison, Glenn W & Rutherford, Thomas F & Tarr, David G, 1993. "Trade Reform in the Partially Liberalized Economy of Turkey," World Bank Economic Review, World Bank Group, World Bank Group, vol. 7(2), pages 191-217, May.
  12. Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2002. "Trade Policy Options for Chile: The Importance of Market Access," World Bank Economic Review, World Bank Group, World Bank Group, vol. 16(1), pages 49-79, June.
  13. Harrison, Glenn W & Rutherford, Thomas F & Tarr, David G, 1997. "Quantifying the Uruguay Round," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(444), pages 1405-30, September.
  14. Jesper Jensen & David Tarr, 2003. "Trade, Exchange Rate, and Energy Pricing Reform in Iran: Potentially Large Efficiency Effects and Gains to the Poor," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 7(4), pages 543-562, November.
  15. Ferdinand Bakoup & David Tarr, 2000. "The Economic Effects of Integration in the Central African Economic and Monetary Community: Some General Equilibrium Estimates for Cameroon," African Development Review, African Development Bank, vol. 12(2), pages 161-190.
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Citations

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Cited by:
  1. Waschik, Robert, 2009. "The effects of free trade areas on non-members: Modelling Kemp-Vanek admissibility," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 648-663, September.
  2. Rafael Cornejo & Jaime Granados, 2006. "Convergence in the Americas: Some Lessons from the DR-CAFTA process," IDB Publications 9247, Inter-American Development Bank.
  3. Jaime MELO DE, 2005. "Regionalism and Developing Countries: A Primer," Working Papers 200510, CERDI.
  4. Kokko, Ari & Mathä, Thomas & Gustavsson Tingvall, Patrik, 2006. "Regional Integration And Trade Diversion In Europe," EIJS Working Paper Series, The European Institute of Japanese Studies 231, The European Institute of Japanese Studies.
  5. Jayatilleke S. Bandara & Wusheng Yu, 2007. "Agricultural trade liberalization in the Asia-Pacific region with specific reference to preferential trade agreements - scenario and impact analysis," STUDIES IN TRADE AND INVESTMENT, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), in: Studies in Trade and Investment - AGRICULTURAL TRADE - PLANTING THE SEEDS OF REGIONAL LIBERALIZATION IN ASIA, volume 60, pages 131-162 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

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