Abstract
Quantitative analysis of the effects of trading agreements is important to answer the question, whether the gains from trade exceeds its costs. The ability to analyse such effects is essential for policymakers and other stakeholders who are at different stages of the policymaking process. Using a computable general equilibrium framework, this chapter introduces the quantitative analysis of the effects of regional trade agreements focusing on Sri Lanka as a case. Among the key modelling approaches available to analyse such effects, the standard Global Trade Analysis Project (GTAP) model is discussed with the required GTAP package and stepwise procedure of policy experiments. The chapter uses the simplest version available to carry out basic level policy experiments, the 3 × 3 model, to run simulations on various trade liberalization scenarios. Extracting and interpreting results of the GTAP outputs are discussed to provide meaningful insights on trade policy-related reforms, strategies, and recommendations.
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Notes
- 1.
Economic impacts include changes in employment and wages, productivity, competition, etc.
- 2.
Distance created through trade barriers, colonial ties, customs unions, common borders, quality of economic and political institutions of two partners, languages, ethnicities, religions, and so on.
References
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Recommended Readings
Hertel TW (ed) (1997) Global trade analysis: modeling and applications. Cambridge University Press, Cambridge
Policy Documents
Use the Following Links
National Policy Frameworke: Vistas of Prosperity and Splendour - http://www.doc.gov.lk/images/pdf/NationalPolicyframeworkEN/FinalDovVer02-English.pdf
Overview of South Asian Free Trade Area (SAFTA) - http://www.doc.gov.lk/index.php?option=com_content&view=article&id=32&Itemid=157&lang=en#
Policy and Regulation Documents - https://www.srilankabusiness.com/buyers/policy-regulations/policy-and-regulation-documents.html
Sri Lanka's Trade Policy - http://slembassyusa.org/new/trade/sri-lanka-s-trade-policy.html
Empirical Applications in Sri Lanka
Dissanayake S, Asafu-Adjaye J, Mahadevan R (2017) Addressing climate change cause and effect on land cover and land use in South Asia. Land Use Policy 67:352–366
Dissanayake S, Mahadevan R, Asafu-Adjaye J (2018) How efficient are market-based instruments in mitigating climate change in small emitter south Asian economies? Econ Model 75:169–180
Dissanayake S, Mahadevan R, Asafu-Adjaye J (2019) Is there a role for trade liberalization in mitigating the impacts of climate change on agriculture? Econ Anal Policy 62:307–324
Fernando S, Bandara JS, Smith C, Pham T (2015) SLCGE-Tourism: a computable general equilibrium model of the Sri Lankan economy for tourism policy analysis. Griffith Business School discussion papers. Economics 6:33
Gilbert J (2008) Trade policy, poverty and income distribution in computable general equilibrium models: an application to the South Asia free trade agreement. Macao Regional Knowledge Hub working papers 14
Perera MS (2009) The south Asian free trade area: an analysis of policy options for Sri Lanka. J Econ Integr 24:530–562
Perera S, Siriwardana M, Mounter S (2018) Implications of the trade facilitation agreement (TFA) for the Sri Lankan economy. Sri Lankan J Agric Econ 19:75–103
Empirical Applications in Other Developing Countries
Liu CK, Kuo NF, Hseu JS (2005) Effects of tariff liberalization on the global forest sector: application of the GTAP model. Int For Rev 7(3):218–226
Minor P, Tsigas M (2008) Impacts of better trade facilitation in developing countries: analysis with a new gtap database for the value of time in trade. 11th Annual Conference on Global Economic Analysis, Helsinki, Finland. Purdue University, Indiana. Global Trade Analysis Project (GTAP). https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=2762
Ouraich I, Dudu H, Tyner WE, Cakmak E (2014) Could free trade alleviate effects of climate change? A worldwide analysis with emphasis on Morocco and Turkey (No. 2014/100). WIDER working paper
Strutt A, Anderson K (2000) Estimating environmental effects of trade agreements with global CGE models: a GTAP application to Indonesia. Assessing the Environmental Effects of Trade Liberalisation Agreements: Methodologies: [trade, Environment] 235
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Dissanayake, S. (2022). General Equilibrium Analysis of Regional Trade Agreements. In: Weerahewa, J., Jacque, A. (eds) Agricultural Policy Analysis. Springer, Singapore. https://doi.org/10.1007/978-981-16-3284-6_8
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DOI: https://doi.org/10.1007/978-981-16-3284-6_8
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