Abstract

The first tool estimates the impact on bilateral trade for 5,020 products in a partial equilibrium framework. The second quantifies the general equilibrium impact on bilateral aggregate trade, allowing estimates of trade reallocation and welfare changes. The paper uses these to estimate the impact for Armenia of tariff changes including (i) alignment with the external tariff of the Eurasian Economic Union, (ii) free trade agreements between the Eurasian Economic Union and other economies—Iran and the People’s Republic of China, and (iii) loss of beneficiary status for the European Union’s Generalised Scheme of Preferences.

Highlights

  • This paper introduces two empirical tools to quantify the impact of tariff changes on trade and welfare

  • European Union (EU) legislation provides that a country classified by the World Bank as upper middle-income for three consecutive years should stop benefitting from Generalised Scheme of Preferences (GSP) arrangements (EU 2012)

  • As it has been classified as an upper middle-income country since fiscal year 2019, eligibility ceased for Armenia on 1 January 2022 (EU 2021)

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Summary

Introduction

This paper introduces two empirical tools to quantify the impact of tariff changes on trade and welfare. The approach combines the literature on the structural gravity model (Arkolakis, Costinot, and Rodríguez-Clare 2012, hereafter ACR 2012; Head and Mayer 2014; Yotov et al 2016) with product-level bilateral trade data (CEPII 2021).. The approach combines the literature on the structural gravity model (Arkolakis, Costinot, and Rodríguez-Clare 2012, hereafter ACR 2012; Head and Mayer 2014; Yotov et al 2016) with product-level bilateral trade data (CEPII 2021).1 They can inform policy makers, business communities, or the public on the impact of policies such as bilateral trade agreements and preferential tariff schemes. This paper aims to bridge this gap by proposing practical tools rooted in the gravity literature to quantify the impact of tariff changes

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