Methods to Aggregate Import Tariffs and their Impacts on Modeling Results

Abstract

When impacts of WTO market access proposals are analyzed with economic trade models, it is necessary to aggregate tariff data from the detailed tariff line level to the model level. In this article import tariffs and implemented import tariff cuts are aggregated from the HS6-digit tariff line level with the simple and trade weighted average, the Trade Restrictiveness Index (TRI) and the Mercantilist Trade Restrictiveness Index (MTRI) by considering bound and applied tariff rates.The resulting tariffs are substituted for the originally applied import tariffs of the GTAP data base. Multilateral trade liberalization scenarios are then implemented and the welfare effects are compared.• JEL classification: F13, F17, Q17•

Tariff Aggregation and Market Access: An Empirical Assessment for Canada and the EU

“…Anderson and Neary (2003) define the MTRI as an import volume equivalent index. In contrast Kee et al (2008a) and Pelikan and Brockmeier (2008) define an import value equivalent index 2…”

“…Thus, the weight of a tariff diminishes if a tariff increases, and, therefore the import demand decreases. Additionally, the import weights are high (low) for tariffs of products with inelastic (elastic) demand while prohibitive tariffs are assigned a weight of zero (Pelikan and Brockmeier 2008). In contrast a tariff influences the welfare and the import quantities or values more if a product has a relatively elastic import demand function than with a relatively inelastic import demand function.…”

“…Following Feenstra (1995) and Anderson and Neary (2005), the TRI is calculated from a linear import demand function. According to Kee et al (2008a) and Pelikan and Brockmeier (2008) we apply the following formula 3 : …”

“…According to Tokarick (2006) only a few studies have calculated these newly developed restrictiveness indices until now. These studies compute the TRI and MTRI indices either at the detailed 6‐ or 8‐digit tariff line level (e.g., Bureau et al 2000; Kee et al 2008a; Pelikan and Brockmeier 2008) or use a Computable General Equilibrium (CGE) model at higher aggregation levels where more additional data is available (e.g., Anderson and Neary 2005; Antimiani and Salvatici 2005). For example, in the CGE model of Anderson and Neary (2005) the tariff data has been aggregated to the 4‐digit tariff line level.…”

“…The first approach builds WTO‐scenarios from the detailed 6‐digit tariff line level. Based on Kee et al (2008a) and Pelikan and Brockmeier (2008) the welfare equivalent and an import equivalent index are calculated within a partial equilibrium framework. This approach comprehensively reflects sector detail, but misses the sector and regional linkages that can be captured by a CGE model.…”