Detailed Trade Policy Simulations Using a Global General Equilibrium Model

Abstract

For the majority of studies using global general equilibrium models, the sectoral detail provided by the GTAP Data Base would be sufficient. However, analyses aimed at supporting trade negotiations or detailed trade policy regulations often require modeling at the tariff linear Harmonized System (HS) level. We bridge this gap by providing an automated data and model workflow that allows GTAP-based analyses at the HS level. In this paper, we illustrate and explain the use of this workflow by first carrying out a data procedure where we redefine GTAP sectors related to the auto industry — though the workflow is flexible enough to redefine or disaggregate any GTAP sector into its HS associated components. Then, we use an extended standard GTAP version 7 (GTAP-HS) model to carry out explicit modeling of the additional HS-level detail. Both data and model workflow that accompany this paper are available as supplementary materials. This new framework facilitates simulations of trade policy at the HS level, thereby allowing researchers to capture more nuances on the trade side. This is especially important when tariffs are highly differentiated across the HS components, which is the case for the automotive sector—tariffs may be relatively low on auto parts (intermediate goods), but higher on assembled vehicles (final goods)