Global Trade Analysis Modeling and applications Baitor THOMAS W. HERTEL Pardue University CAMBRIDGE () UStversrry PRESSabled byte ee Sysco te Unies of Cantige The Fit Buta, Tampingen Set Cantge C82 IRF 40 West 2 Stet, New Yo NY HOU 21, USA. 10 Sto Ron, Osble Malboume 316, Asia © Came Unverty Pes 1957 st pd 197 Pit prec eon pid 198 Library of Conarers Caton Pabicton Dot (lalate ass mong wd mle te by Ths W. Hert rk tom te Gl Trade Anes rt (GTAP [elit Maes mds. 2 ners econo aos — athena moles 3G Tre Ani Project Heel, Thomas W (Ths Ware 1953-T Gkbl Trade Atl oe. 2-620 os-aas ‘cag rect os book is avalible fam be Bris iby ISBN 0521 $613 Shack ‘ranstered to ig ring 20041 dedicate this book 10 my wife, Adrieta, whose enthusiastic support ofthis effort has been essential 0 is success, and 1 my children, Alexander and Sarah, who have generously shared their father's time with a third child, named GTAP,Contents Acknowledgments List of contibutors Foreword by Alan A. Powell Introduction and overview Introduction Thomas W. Hertel, Structure of GTAP framework Structure of GTAP Thomas W. Herel and Marinos B. Tsigas ‘Overview of the GTAP data base Mark Gehihar, Denice Gray, Thomas W. Hert, Karen M. Huf, Elena lanchovichina, Bradley J. McDonald, Robert McDougall, Marinos E.Tsigas, and Randall Wile GTAP behavioral parameters Karen M. Huff, Kevin Hanslow, Thomas W. Hert, ‘and Marinos E. Tega ‘Agreation and computation of equilibrium elasticities Thomas W. Herel, D. Kent Lanclos, Kenneth R. Pearson, and Padina V. Swaminathan Implementing GTAP using the GEMPACK software Kenneth R. Pearson age is ” 6 9w 4 Contents Applications of GTAP Developing country expansion and relative wages in indasril counties Robert McDougall and Rod Tyers ‘An evaluation ofthe Cains Group strategies for agriculture in the Urvguay Round Donald MacLaren Free trade in the Pacific Rim: On what basis? Linda M. Young and Karen M. Huff ‘Evaluating the benefis of abolishing the MFA in the Uruguay Round package Yongzheng Yang, Will Martin, and Koji Yonagishima Global climate change and agriculture Marinos E. Tsigas, George B. Frisvold, and Betsey Kun Environmental policy modeling Carlo Perrot and Randall Wigle ‘Multimarket effects of agricultural research with technological spillovers George B. Frisvold Evaluation of GTAP Historical analysis of growth and trade patterns in the Pacific Rim: An evaluation of the GTAP framework ‘Mark Gehthar| Implications for Global Trade Analysis Thomas W. Hertel Glossary of GTAP notation Padma V. Swaminathan Index 1 212 as 253 280 05 a 30) 364 m 307Acknowledgments ‘Asthe mos visible manifestation ofthe ist yeas ofthe Global Trade Analysis Projet (GTAP), this book owes is existence to many helping hands. At the {po this listcomes Jady Conner, who has played many diferent roles during the inception of GTAP including: overseing the day-to-day flow of paper land people; organizing travel, receptions, dinners, and short cours logistics; fs well as preparing tis manuscript, She has offered generous hospitality a8 well as moral support ta the projets staf and visitors, and this has been an Jimportant ingredient in keeping things going through the dificult times. Taspitation for GTAP derived from my 1990-1991 sabbatical year with the Impact Projet in Melbourne, Australia, Our stayin Melbourne was hosted by Alan Powell and Ken Pearson, who were most generous with thir time fad support. Alan's work with Impact demonstrated tome that applied general ‘equilibrium analysis could indeed have a lasting effect on public policy. His [Buldance in getting GTAP off on the right fot was invaluable. The collabora- tive relationship with Ken Pearson that emerged from this sabbatical has proven most frat, forming the bass for operationalizing the GTAP model Ken has proven to be an essential ingredient ia the highly successful short, ‘While the Impact Project provided the inspiration for GTAP, the ides would not have goten off the ground without afi foundation upon which to build "The Austalan Industry Commission's SALTER Project provided this starting point. Through the support of Philippa Dee and John Zeitsch, we were able fo avoid duplicating the most cosly components of that projet. Robert MeDougal, who provided rch of the technical direction forthe SALTER. Project, became an informal advisor and offered critical advice and guidance long the way. Without his input we would have been in dep trouble. Indeed, his work has proven so valuable that we have hired him as GTAP deputy ai-x Acknowledgments Otter agencies also stepped in and provided critical suppor for GTAP in its early stages. The USDA's Economie Research Service has devoted considerable resources to development ofthe bilateral rae database underpin ring GTAP. In this egard, the continuing suppor and encouragement of Jerry ‘Sharples and Mathew Shane, a8 well a many of thee colleagues, are greatly appreciated. The staff ofthe Intemational Economies Division of the World ‘Bank in patcular Will Martin, David Tar, and Alan Winters, have provided timely suppor to GTAP. also thank Wally Tyner, and the Department of Agricultural Economics at Purdue University, fot having the vision and confidence to support GTAP When it was merely a concept. The department has proven tobe an excellent environment for developing this project. The cureat GTAP staf, including ‘Martina Brockmeier, Betina Dimaranan, Karen Huff, Elena Tanchovichin, Jennifer Stevens, and Padma Swaminathan, as well a stodensin my graduate ‘course, have done an outstanding jb of replicating the applications inthis book. Their suggestions have considerably improved the end-product. The index to this volume was prepared by Elena Tanchovichina, with special assistance from Prashant Dave, inally extend a general thank you to members ofthe network of GTAP users who have given unselfishly of thei data, ideas, me, and energie in ‘order to make this ida a realityContributors George B. Fisvold ERSIUSDA, ‘Washington, DC USA Mark Gebthar ERSJUSDA, ‘Washington, DC USA Denice Gray ERS/USDA Washington, DC USA Kevin Hanslow ABARE Canberra ‘sustain ‘Thomas W. Herel, Director Global Trade Analysis Projct Purdue Universiy West Lafayette, IN USA ‘Karen M, Huff Purdue University West Lafayete, IN USA lena lanchovichina Purdue University ‘West Lafayete, IN USA Betsey Kuhn ERS/USDA| Washington, DC USA, D. Kent Lanclos Department of Agricultural Beonomies University of Idaho Moscow, ID USA Donald MacLaren ‘The University of Melbourne Melbourne Australia Bradley J. MeDonald GATT Geneva Switzerland Robert McDougall Deputy Director Global Trade Analysis Project West Lafayet, IN USA ‘wilt Martin International Economies Division ‘The World Bank ‘Washington, DC USA,wii Contributors Kenneth R. Pearson Cente of Policy Studies and Impact Project Monash University Clayton, Victoria ‘Avstalia Carlo Peroni Deparment of Economics Univesity of Western Ontario London, Ontario Canada Alan A. Powell Department of Econometrics ‘Monash University Director (1975-1993) of Impact Project 00, Victoria Padma V. Swaminathan Purdve University West Lafayeue, IN USA ‘Marinos B. Tsgas ERSJUSDA, ‘Washington, DC USA Rod Tyers Department of Economies ‘Australian National University Canberra ‘tralia Randall Wigle Department of Economies ‘wilfid Laurier University ‘Waterloo, Ontario. Canade Koji Yanagishima Intemational Economies Division ‘The World Banke Washington, DC USA, Yongzheng Yang National Center for Development ‘Studies ‘Australian National University Cantera Astalia ep ‘Montana State University Bozeman, MT USA,Foreword Economics, perhaps more than any oer area of social inquiry, aspires tothe statu ofa seience. Like astronomers, we economists acknowledge that out inability to conduct contlled experiments pus us ata disadvantage. But instead of minimizing this disability all oo often we have accentuated it by failing to implement those straightforward measures that are taken a8 routine inthe piysical sciences, In particular ~ and a5 was forcefully pointed out by Dewald, Thursby, and Anderson inthe American Economic Review (AER) ‘oe September 1986 ~ we have not even taken te standard precautions needed to ensure that our work can be replicated independently by others. ‘What is requited to ensue replicability? The editors ofthe AER, inthe issue refered to above, announced that it was ther poly t "publish papers only where the data sed inthe analysis are clearly and precisely documented, are readily available to any researcher for purposes of replication, and where ‘ete of the computations sufficient to permit replication are provided” (p. ‘In the case of applied general equilibrium (AGE) work, this ean amount to a tll oer. ‘To take just one well-known example ~the Australian ORANI model listing ofthe model's database and parameter file runs o 646 pages (Kenderes fand Strzlecki 1991), The equations of the model itself their interpretation ‘and illustrative simulations are documented in a 372-page monograph (Dixon, Parmenter, Sutton, and Vincent 1982), and in a joural literature oo vo ous to ite her, ‘Given tht a practical AGE. model involves @ very heavy investment of intellectual effort snd data-gamering, it would be amazin if economists did hot recognize the potential for economies af scale and scope. The realization Of such economies requires the proprietor of 2 mode! building effort to see ‘ost ofthe models core ingredients ~ such ats standard or default equation Tistng, database, and parameter file - as public goods. Around such publiclyxy Foreword (or semipoblicly available tools we would expecta community of modelers to develop. Yet sich has tended tobe the exception rather than the rle ‘The Global Trade Analysis Project (GTAP) is such an exceptional venture. [At the outset ofthe projet its founder and director, Tom Herel, decided that the issues involved labal trade are too important, nd the resources available to support research too few, for current opportunites to be squandered by ‘engaging inthe wrong sr of replication while fling oatend tothe perequ- Ses liste oor for the right sor of replication. By the “wrong sort of replication I mean unnecessary duplication: tht is, wo oF more individuals ‘or groups making separate demands on research resources to produce esen- tially the same product, be it a database, «parameter fie, ora core mode "Most of te resistance to sharing resources in AGE modeling canbe traced to jst wo sources: (1) funding ditficuties and (2) the academic imperative, a common, open-access research facility is to be erated, how does one elie enough cooperation among. the potential clientele t0 ensure that attempted freeing does not sink the initiative? IF academic recognition, promotion, and tenure seem to be more avaiable to “loners” who keep the ressarch cards very close to their vests, how can a community of modelers ) General Equilibrio Modeling and Economic Policy Analysis. Cambridge, Powell, A.A and R. Snape (1992) "The Cotton of Aplied General Equiliteim IMPACT Project General Paper No. ‘Vincent D. (1990) "Appied General Equirium Modeling inte Avian Industries “Atsiance Commision: Paspecves ofa Paley Analst" In L- Bergan, D. Sergenson, nd. Zalal (eds), General Egullviom Modeling and Economie Policy Anales Cambridge, MA Blackwell