Analytical Approaches to Evaluating Preferential Trade Agreements

John Gilbert

Department of Economics and Finance

Jon M. Huntsman School of Business

Utah State University

"Negotiating preferential trade agreements is a challenge for the least developed countries. Research and analysis are important components of any evidence-based policymaking. This publication presents our step-by-step approach that policymakers as well as researchers can follow in order to evaluate preferential trade agreements. It will also be a very valuable guide to negotiators as well as researchers associated with analytical work of preferential trade agreements."

Hartmut Janus, Project Director, RELATED Project, GIZ Laos

"The Lao People's Democratic Republic is currently facing several challenges in transforming its PTAs into achieving meaningful market access and developmental goals. Policymakers need to understand the complex mechanism for negotiating and successfully implementing PTAs in order to reap their benefits. We recognize the fact that this publication will provide the knowledge required by negotiators for undertaking important analytical studies of the impact of PTAs as well as gaining a better understanding of trade negotiations."

Saysana Sayakone, Deputy Director General, FTD-MOIC, Lao PDR

As is well-known, PTAs represent a 'second-best' approach to trade liberalization and as such have the potential to divert trade and investment and inflict economic welfare losses on member and non-member countries alike. Hence, it is essential to provide a framework of analysis for assessing PTA developments in order to provide stakeholders (government, researchers and policy analysts) with the tools necessary to analyze the development of PTAs and to make informed policy decisions. The objective of this resource book, which was developed with the support of the United Nations ESCAP and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), is to help develop capacity within the Asia-Pacific economies on the usage of analytical methods as a tool for providing timely and policy relevant information to the policy development process as it pertains to negotiating preferential trading agreements and more broadly. A copy of the resource book can be downloaded from the UNESCAP website. This website has links to copies of the codes described in the book.

Contents:

1. Introduction

2. Theoretical Framework

3. Preliminaries

4. Trade Indicators

5. Decomposing Changes in the Trade Pattern over Time

6. Partial Equilibrium Analysis

7. General Equilibrium Analysis

Codes:

Instructions: All of the codes in the book are written using the General Algebraic Modelling System (GAMS). A demonstration version of the system, which can handle all of the problems set out in the book, can be downloaded from the GAMS website, which also has detailed installation instructions. For each of the applications, all of the codes (usually a sample data file, drawn from COMTRADE, and a calculation file) should be downloaded into a common directory. Open a new GAMS project in that directory, and then open and run the relevant files. Many of the programs use the GAMS2TBL utility developed by Thomas Rutherford to write reports. This should be installed in the \inclib subdirectory of the GAMS installation before running the codes.

Chapter 4: Basic Trade Share (Data)

Chapter 4: Trade Share with Mirroring (Data)

Chapter 4: Trade Intensity (Data)

Chapter 4: Trade Introversion (Data)

Chapter 4: Revealed Comparative Advantage (Data)

Chapter 4: Complementarity and Similarity (Data)

Chapter 4: Regional Orientation (Data)

Chapter 5: Decomposition of Export Values (Data)

Chapter 5: Decomposition of Export Shares (Data)

Chapter 6: Basic Partial Equilibrium Model

Chapter 6: Advanced Partial Equilibrium Model

Chapter 7: Generic CGE Model

Chapter 7: CGE Model of Laos PDR*

* Note that this is the latest version of the model. It differs from the one in the resource book in that it has a more general specification of household demand, based on the LES system, and it accounts for a wider variety of taxes.