GTAP Database Research Articles

INDONESIA'S POLICY OF PALM OIL EXPORTS BANNED IN THE CURRENT WORLD ENERGY CRISIS

This paper aims to determine the impact of tariff and non-tariff barriers, the ban on exports of palm oil commodities, and the energy crisis due to the Russia-Ukraine war on the Indonesian and world economies. The research was conducted because it wanted to know the impact of the policies carried out by the Indonesian government as the largest producer of palm oil in the world and whether it produced a spillover effect on the economy. The objective is to examine the policies set by the government, namely tariff or non-tariff barriers, and their impact on trade. The Indonesian government implemented a policy banning palm oil exports from reducing the sharply rising local palm oil prices and meeting domestic demand. The policy was implemented in March 2022 and required further research to analyze its impact. This study used the GTAP database analysis tool in 2011. This study includes shocks in tariff and non-tariff barriers on palm oil commodities. The shock that was included to represent the energy crisis was a ban on exports and imports to Russia and a ban on food exports in Ukraine. The study results using the GTAP analysis tool, namely the determination of the export ban on palm oil commodities, had a positive impact, namely reducing the price of domestic palm oil, but the negative impact was the level of output, and the number of workers fell. Increasing export tariffs is not effective and increases domestic palm oil prices. Government policies that are carried out must ensure that domestic palm oil has stocks that meet consumption at affordable prices. The government must implement policies that protect consumers and producers of palm oil. Policies that the government can carry out are mitigating safety nets and distributing aid directly to affected society.

The Russia-Ukraine War and Its Impact on the Food Security of Korea, China, and Japan: A CGE Approach

Purpose - In 2021, Ukraine and Russia exported 12% and 17% of global wheat, being significant grain producers and exporters. However, Russia’s invasion of Ukraine greatly impacts Ukraine’s wheat production and trade. In this regard, this study examines the impact of Russia’s invasion of Ukraine on global food security using the computable general equilibrium approach.
 Design/Methodology/Approach - We utilized the global multi-sector standard GTAP model, specifically the GTAP Database Version 11, with a base year of 2017. For this research purpose, the original 160 regions and 65 sectors of the GTAP database were aggregated into 23 regions and 24 sectors. Due to the uncertain nature of the conflict duration between Russia and Ukraine, we designed three scenarios: Slight, Medium, and Severe. Each scenario represents varying degrees of wheat production, trade disruption, and an increase in wheat production by third producers for shocks.
 Findings - The study reveals several effects: real GDP decreases for Ukraine, Russia, Turkey, India, and Georgia, while countries like Egypt, Turkey, Azerbaijan, India, Korea, and Japan experience diminished economic welfare. Russia’s invasion can affect wheat imports of countries like Turkey, India, Mongolia, and Egypt. Ukraine, Egypt, Turkey, and India registered trade surpluses, while others recorded deficits
 Research Implications - The ongoing conflict complicates assessing long-term consequences on global food security. Policymakers are advised to monitor closely, implement strategies to mitigate disruptions, and foster international collaboration to alleviate adverse effects on trade, economies, and food security, particularly of nations heavily reliant on Ukraine’s wheat exports, like Egypt, Turkey, Mongolia, Georgia, and Azerbaijan.

How Can Tariff Elimination and Trade Facilitation Affect East African Economies?

The article assesses the potential economic implications of tariff elimination and trade facilitation (TF) in the context of the African Continental Free Trade Area (AfCFTA) agreement for East Africa. Using the most recent GTAP database and computable general equilibrium model, the article provides additional evidence on the socio-economic benefits of the ongoing trade integration process. The results show that the elimination of tariffs would improve economic dynamism in most sectors of activity and household consumption. However, the elimination of tariffs alone would not be sufficient to achieve a significant level of trade integration. From a policy perspective, although a gradual implementation of tariff elimination is more beneficial for the zone, the results highlight the relevance of combining tariff elimination with complementary TF reforms. These reforms amplify the socio-economic gain from the AfCFTA. JEL Codes: F13, F14, F15, E23, C68

A double-edged sword: Chinese direct investment in Latin America

Under the ‘Belt and Road’ initiative, China has expanded its footprint in Latin America and Caribbean (LAC) and contributed to LAC FDI stock, as well as, gross fixed capital formation and GDP. Based on the firm-level Chinese investment data and GTAP database, this paper uses the computable general equilibrium model to estimate the influences of Chinese direct investment on LAC economies. Chinese ODI and the booming economy are the engines for LAC development, according to its contribution to GDP, and trade balance improvement. The rest of LAC economies, China and US benefit indirectly from Chinese investment as well. Each country gives its full play to its comparative advantages. However, it is cautious that the industries with resource endowments in LAC have expanded largely and squeezed out the production of manufactures, which makes LAC economies more dependent on the growth of Chinese economy.

The impacts of reforming agricultural policy support on cereal prices: a CGE modeling approach

PurposeThis paper investigates the effects of the total abolition of all forms of agricultural subsidies to producers and border tariffs on the prices of staple cereals.Design/methodology/approachThe authors use the GTAP global economy-wide model and focus on 27 countries and 8 regions. The GTAP database that is used contains information on budgetary transfers to producers and market price support such as domestic price support, tariffs, export subsidies, quotas on exports or imports and other border measures.FindingsThe removal of subsidies is estimated to significantly increase the prices of wheat and other cereal grains in Japan, paddy rice in Malaysia and Indonesia, processed rice in Malaysia and Indonesia and wheat in Brazil and India. When border tariffs are removed, cereal prices are projected to fall in several countries, but the decline is more pronounced for wheat in Kenya and Japan, other cereal grains in South Korea and all staples in Nepal.Research limitations/implicationsThe alternative scenarios on the removal of agricultural subsidies in all agricultural sectors and the elimination of border tariffs are purely speculative as the analysis ignores important political economy considerations of agricultural and food policy reforms.Practical implicationsThe findings from this study point to the importance of implementing additional policy measures to mitigate the possible negative effect of repurposing the support to agriculture and ensure the food security and welfare of those categories of buyers who heavily depend on the price of staple food for their livelihoods.Social implicationsThis study’s findings confirm that the elimination of agricultural subsidies would impact global food security directly by making staple food less affordable to the poorest and indirectly by decreasing the available household budget for other presumably more nutritious food groups. Consequently, it is expected that these price increases could make segments of the world population poorer, particularly the net-food buyers due to a decline in their real income.Originality/valueThe authors assess the impact of removing the subsidies on the economy in a comprehensive way, particularly given the recent policy focus on net zero emissions and Sustainable Development Goals that include healthy foods. The authors also consider the counter effects of tariff reduction on this, which is price-reducing.

Cutting through the value chain: the long-run effects of decoupling the East from the West

With ever-increasing political tensions between China and Russia on one side and the EU and the US on the other, it only seems a matter of time until protectionist policies cause a decoupling of global value chains. This paper uses a computable general equilibrium trade model calibrated with the latest version of the GTAP database to simulate the effect of such a decoupling–implemented by doubling non-tariff barriers–between the two blocks on trade and welfare. Imposing import barriers almost completely eliminates bilateral imports. In addition, changes in price levels lead to higher imports and lower exports of the imposing country group from and to the rest of the world. The targeted country group increases exports to the rest of the world and reduces imports. Welfare falls in all countries involved, suggesting that governments should strive to cooperate rather than turn away from each other. By imposing a trade war on Russia, the political West could inflict severe damage on the Russian economy because of the latter’s smaller relative economic size.

The Global Trade Analysis Project (GTAP) Data Base: Version 11

This paper describes the construction of the GTAP Data Base, version 11. The database reconciles different data sources at a global scale for analytical use and provides time series data on value flows, volumes, and various tax instruments. GTAP version 11 has 5 reference years (2004, 2007, 2011, 2014, and 2017), distinguishes 65 sectors in each of 141 countries and 19 aggregate regions - with individual countries accounting for 99.1% of world GDP and 96.4% of world population. The exhaustive nature of GTAP in its country and sector coverage facilitates its use in economy-wide studies of global economic issues.

Diversification of Indonesian Export Markets to Non-Traditional Countries

The Ukraine-Soviet Union war and the Covid-19 pandemic made the world economy experience complex problems. Indonesia was also affected, especially the decline in exports, so it needed to find new trading partners. This study aims to determine the potential diversification of Indonesia's export market to non-traditional countries, namely Turkey, Brazil, Georgia and the Russian Federation as well as 10 economic commodities. The data used in this study is secondary data. This data is obtained through the GTAP database (Global Trade Analysis Project) version 10. In this GTAP database there are input - output data from 121 countries representing 98% of world GDP. The results of this study are Brazil and Turkey can become Indonesia's trading partners, while Georgia and the Russian Federation have little opportunity to establish trade cooperation with Indonesia

Disaggregating Agro-Food Sectors in the GTAP Data Base

We discuss the construction of the GTAP-AGROFOOD database for CGE modelling which is consistent with the standard GTAP Data Base Version 10a (Aguiar et al. 2019). GTAP-AGROFOOD departs from the full detail of 141 regions, 65 products and 8 factors in GTAP, by introducing 51 additional agro-food products and sectors in lieu of 11 original GTAP agro-food products, thereby yielding a database with 105 products. Such additional detail can improve and enrich, for instance, analysis of trade, bio-economy or climate change mitigation or adaptation issues. It also eases linkage to other, more detailed data sets, such as for nutrition accounting or irrigation water use. The main data sources used are the FABIO Multi-Regional Input-Output Database (Bruckner et al. 2019) which reports on production, land, seed, feed, and food use, mainly for primary agricultural products, and market balances for dairy products from FAOSTAT. They are combined with TASTE V10a (Pelikan et al. 2020) which provides bilateral trade and tariffs revenues at the level of tariff lines. The balancing methodology which ensures consistency with the GTAP Data Base is based on the linear loss based split utility of CGEBox (Britz 2021).

Assessing Potential Economic Impacts of the EU CBAM on its Major Trading Partners

Purpose Countries around the world are focusing policy efforts on combating climate change and promoting long-term economic recovery, and major greenhouse gas emitting countries are joining the carbon neutrality declaration. To address the risk of carbon leakage, the EU introduced the CBAM(Carbon Border Adjustment Mechanism) in July 2021. The purpose of this study is to examine the potential economic effects of the CBAM on its major trading partners, including Korea, and to draw implications. Design/Methodology/Approach Using a global, multisector, computable-general-equilibrium model and GTAP database Version 10A, this paper undertakes to assess the potential economic impacts of the CBAM. The baseline scenario was set up using the World Bank’s macroeconomic data, such as real GDP, population, labor, and capital from 2015 to 2020 to calculate future estimates. Policy scenarios were established by (1) imposing 30 euros per ton of embedded emissions in the total amount of imports, (2) imposing 30 euros per ton of embedded emissions on five products covered by the CBAM in the European Commission’s July 2021 proposal, (3) imposing 30 euros per ton of CO contained in items that are subject to additional duties, and (4) lastly, the above scenarios 2 and 3 were combined to see the total effects of the CBAM. Findings Simulation results showed that in the case of Scenario 1, wherein tariffs were imposed depending on CO emissions, intra-regional trade and production increased, resulting in a significant growth in consumer welfare in the EU (approximately $12.1 billion). Except for Japan, all major trading partners decreased overall, although there were disparities in size. In particular, China (about $10.9 billion), Russia (about $ 7.1 billion), and India (about $4.2 billion) reported significant drops in consumer welfare. Korea has exported an annual average of about $53.7 billion to the EU for the past six years, with items subject to the CBAM accounting for around $4.17 billion, or 7.8% of total exports. Of these items, iron and steel with a value of about $3.65 billion, accounting for about 87.3% of the total should be a source of concern for the Korean government and the steel industry. According to findings, the steel industry’s exports to the EU are likely to drop by 0.99 percent, resulting in a loss of nearly 310 million euros in exports (about 360 million US dollars). Research Implications This study is meaningful in that it provides reference data to Korean industries that can be directly affected by the CBAM, which has already been introduced and is about to be implemented. For some export industries like the steel industry, in particular, it is necessary for the Korean government to actively support low-carbon technology innovation and accelerate the transition to a low-carbon economy.

The Potential Economic Effects of a Korea-GCC FTA

Purpose-Currently, the Korean government has not officially taken a position on the Korea-GCC FTA negotiations due to the Middle East s complicated political and economic situation. However, this study attempts to analyze the potential economic effects of an FTA between Korea and GCC member countries, taking into account the possibility of a resumption in the future. Design/Methodology/Approach-Using a global, multisector, computable-general-equilibrium (GTAP) model and GTAP database Version 10A (the most recent), this paper undertakes the identification of the economic impacts of a Korea-GCC FTA. The baseline scenario was designed using the World Bank s macroeconomic data, such as real GDP, population, labor, and capital from 2015 to 2019 to calculate future estimates. Policy scenarios were established by a (1) 90% reduction in tariffs on goods, (2) a 50% reduction in ad valorem tariff equivalents on services, (3) a 0.15% increase in TFP (total factor productivity), and (4) lastly, the above three scenarios were combined to see the effects of a Korea-GCC FTA. Findings Simulation results showed that real GDP in Korea (0.11%) and GCC member countries (0.13% ~ 0.46%) increased, indicating that a Korea-GCC FTA would have a positive impact on economic growth on both sides. The impact on welfare also reveals similar results to GDP, showing the largest increase in Korea (about USD 2.2 billion), followed by Saudi Arabia and UAE (about USD 2 billion and USD 1.6 billion, respectively). When looking at the effect of Korea s exports by industry, exports of automobiles and parts increased the most (about USD 1.5 billion), followed by the electronics (about USD 1.19 billion), machinery (about USD 1.05 billion), steel (about USD 1 billion), and petrochemical (about USD 420 million) industries, suggesting that overall exports are expected to increase in Korea s manufacturing industry. In the case of the petrochemical industry, exports to countries other than GCC member countries are expected to increase by approximately USD 3.9 billion, which is the largest benefit. Research Implications-This study suggests the justification and necessity of an FTA. Overall, positive effects will be expected in terms of real GDP, welfare, exports, and imports. In addition, if Korea and GCC member countries sign an FTA, exports of Korea s major manufacturing sectors will increase, and GCC member countries will see an increase in oil (crude oil) and gas exports, creating a win-win situation. As the industrial structure between the two sides is complementary, a synergy effect can be expected, and an FTA with GCC countries rich in natural resources such as oil and gas can enhance energy security.

Global trade network and CH4 emission outsourcing

The intensifying globalization contributes to the anthropogenic methane (CH4) emissions outsourcing, a strong greenhouse gas and harmful air pollutant, through the increasingly complex global trade network. However, the CH4 flow patterns embodied in global traded goods and services have not been interpreted from the perspective of a complex network. In this paper, we integrate global CH4 emission inventory from the EDGAR (the Emission Database for Global Atmospheric Research) databases, global multi-regional input-output model from the GTAP database, and complex network analysis to reveal the structural characteristics of the global CH4 flow network (GCFN). In the GCFN, more than one quarter of the global anthropogenic CH4 emissions in 2014 are associated with international trade. The top 20 economies contribute to about 70% of the total embodied CH4 emission flows. The GCFNs mainly consist of tripartite patterns centered on China, the USA and Russia. Some emerging countries, such as Thailand and Brazil, also exhibit dominated positions in different kinds of GCFNs. Moreover, the core-periphery structure of the GCFN confirms the existence of a few hub economies associated with a large amount of CH4 emissions. The results emphasize the multinational cooperation on global CH4 emission mitigation, and well-focused mitigation policies should be implemented on some key economies.

What impact are subsidies and trade barriers abroad having on Australasian and Brazilian agriculture?*

This paper provides new estimates of the extent and economic effects of agricultural policies that provide domestic support or import protection to farmers in countries that compete in the global marketplace with unsubsidised farmers. Analyses earlier this century found that import market access barriers accounted for more than 90 per cent of the global welfare cost of all assistance to farmers, with domestic support measures providing as little as 5 per cent. Since then the share contributed by domestic support has grown greatly in some high‐income and emerging economies, thanks to policy re‐instrumentation. Using the latest version of the GTAP model and database of the global economy, this paper estimates the economic effects of direct farmer subsidies, and of the producer subsidy and consumer tax equivalents of farm trade policies, on farmers in three lightly assisting countries. The estimates adjusted for country size suggest the effects on agricultural exports, net farm income and national economic welfare of such policies are far more adverse for Australia, Brazil and especially New Zealand than for the rest of the world, and that domestic supports abroad are much more important contributors to those losses now than they were at the start of this century.

ADAPTATIONS AND MITIGATION POLICIES TO CLIMATE CHANGE: A DYNAMIC CGE-WE MODEL

Recently, South Asian countries have committed their mitigation targets to the United Nations Framework Convention on Climate Change. This study examines the effectiveness of these efforts by developing a dynamic computable general equilibrium-water-energy (CGE-WE) model. Using the GTAP database version 9, it examines how different sectors respond to these policies in South Asia. Besides, it argues that an improved irrigation system can reduce the output losses caused by the mitigation policies. In a nutshell, the cost of improving irrigation system is USD 159.7 million in Bangladesh, 224 million in India, 9.1 million in Nepal, 38.5 million in Pakistan and 10.4 million in Sri Lanka. The proposed adaptation strategy can save more than USD 76.43 billion in the region after fulfilling the region’s commitment toward the global mitigation efforts.

The impact of R&D and innovation on global supply chain transition: GTAP analysis on Japan's public R&D investment.

Policymaking for science, technology, and innovation (R&D) is stepping into a new era in the twenty-first century within a highly integrated production network, making it more challenging to capture the impact of R&D investment from an evidence-based approach. To unfold the paradox of the R&D spillover effect spared in the global supply chain, we use computable general equilibrium model with the GTAP database v10 to analyze the impact of Japan’s public R&D investment to the world focus on key sectors of global supply chain, namely chemical and pharmaceutical, electronic equipment, machinery, and transportation equipment to examine its output, external trades, and welfare. The productivity parameters triggered by public R&D investment are calibrated from the SciREX Policymaking Intelligent Assistance System—Economic Simulator (SPIAS-e). The simulation results show significant increase in Japan’s output and export for chemical and pharmaceutical, electronic equipment, and transportation equipment. The GDP growth was stimulated by 0.6% and substantial welfare improvement by USD 78,000 million, while other countries such as Malaysia and Taiwan by 0.4–0.6%. In contrast, the economic indicators of China reveal a negative impact, implying a structural change in the composition of the production network. It is notable to see a higher economic integration of Oceania within the region through its vibrant production and trades. The study provides comprehensive global analysis on production networks and insights for evaluating the R&D investment spillover effects.

INDIA–CHINA TRADE IN LIGHT AND HEAVY MANUFACTURING SECTOR: A COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS

The trade relations between India and China have been intensified since 2001. The aim of this paper is to examine the effects of tariff reduction by India and China on bilateral imports in light and heavy manufacturing sectors. The results are evaluated in terms of welfare, output, employment and the potential trade flows between India and China in CGE framework using the GTAP-model. GTAP database version 10, covering 141 countries/regions and 65 sectors, with a base year of 2014, have been used. Overall results show that India and China’s trade relation has improved in last two decades, but still there is a lot of untapped potential to bring the welfare gains for both trading partners. This study concludes that deeper integration by tariff reduction on imports of light manufacturing and heavy manufacturing sectors between India and China may not be welfare enhancing for India, however there are substantial welfare gain for China. The study suggests that a well calculated and strategically negotiated tariff reduction in light and heavy manufacturing sectors may create a win–win situation for both partners. The study argues that China should offer a preferential market access to India for mutually beneficial and welfare enhancing engagements for both countries.

Impact of India ASEAN FTA on employment in Indian manufacturing sector

Domestic production in Indian manufacturing sector failed to generate adequate employment opportunities but jobs supported by exports from the sector has been on the rise. The current study examines the employment effect of India-ASEAN Free Trade Agreement (IAFTA) on Indian manufacturing sector. Of the different FTAs signed by India, IAFTA involves one of the largest trade volumes. Using CGE modelling framework of GTAP database the study conducts simulations by calibrating the trade liberalisation scenario as of 2018 between India and the ASEAN countries. IAFTA fetches employment growth in manufacturing. But the beneficiaries of this gain are the unskilled labour who benefit both in terms of greater employment and higher wages. Higher usage of unskilled labour in conjunction with increased imported inputs also fetches productivity gains for the country. However, skilled labour employment is hit. Overall impact of IAFTA on manufacturing sector remains positive due to increased trade and employment gains.

Impact of India ASEAN FTA on employment in Indian manufacturing sector

Domestic production in Indian manufacturing sector failed to generate adequate employment opportunities but jobs supported by exports from the sector has been on the rise. The current study examines the employment effect of India-ASEAN Free Trade Agreement (IAFTA) on Indian manufacturing sector. Of the different FTAs signed by India, IAFTA involves one of the largest trade volumes. Using CGE modelling framework of GTAP database the study conducts simulations by calibrating the trade liberalisation scenario as of 2018 between India and the ASEAN countries. IAFTA fetches employment growth in manufacturing. But the beneficiaries of this gain are the unskilled labour who benefit both in terms of greater employment and higher wages. Higher usage of unskilled labour in conjunction with increased imported inputs also fetches productivity gains for the country. However, skilled labour employment is hit. Overall impact of IAFTA on manufacturing sector remains positive due to increased trade and employment gains.

Tarife Dışı Engellerin Türkiye’nin Tarım Ürünleri Dış Ticaretine Olan Etkisi

Uluslararası ticaretin gelişmesi ile ülkeler arasında dış ticareti etkileyen tarife önlemleri hızla azalmıştır. Buna karşın ülkeler iç piyasalarını korumak ve uluslararası pazarlarda ki çıkarlarını artırmak amacıyla tarife dışı engeller uygulamaya başlamışlardır. Uluslararası ticarette tarife dışı engellerin ne şekilde ve ne ölçüde etki ettiğini hesaplamak oldukça sıkıntılı olmakla birlikte ülkelerin uluslararası ticaret politikaları açısından büyük öneme sahiptir. Bu çalışmada, GTAP veri tabanında oluşturulan 72 ülke (bölge) ve 20 gıda ve tarım sektörüne indirgenmiş model yardımıyla Türkiye’ye uygulanan ve Türkiye’nin uyguladığı tarife dışı engellerin hesaplanması amaçlanmıştır. Analiz sonucuna göre, tütün ve tütün mamulleri, kanatlı eti ve yumurta ürünlerinin ağırlıkta olduğu ürün grubu ile diğer tahıl ürünlerinin, ülkeler ve bölgeler itibariyle en çok teknik engele maruz kalan ürünler ve sektörler olduğu belirlenmiştir.

The Effects of EU–Japan Economic Partnership Agreement for Poland’s Economy

The article analyzes the impact of the EU–Japan Economic Partnership Agreement (EPA) on Poland’s economy. The authors investigate the effects of a bilateral elimination of customs duties on the economy using the Computable General Equilibrium framework and the GTAP database. The impact of the bilateral elimination of customs duties on GDP, production, trade and social welfare in Poland is examined and compared with other countries and regions. According to the research results, the EPA will bring positive impact on many aspects of Polish economy, but the effects in some other areas may be negative. Positive production and trade results are expected in some sectors, such as meat and animal products, leather and processed food, but some other sectors, such as motor vehicles and transport equipment, electronics and machinery, may experience a drop in output and export volumes. Total export value gains for Poland are estimated to be about USD 135 million, but in most sectors production will decrease, which may cause a loss in the real GDP.