AGRODEP is pleased to announce a training course on tools and methodologies for trade policy analysis. The four-part course covers:
Measuring Trade Integration with Trade Flow Indicators
Measuring Trade Integration with Gravity Models
Partial Equilibrium Models for Trade Analysis
Simulation Models for Assessing the AfCFTA: PE vs CGE, Aggregation Issue, and Public Revenue
The course is intended as a refresher training on trade analysis tools and methodologies for the members of the AGRODEP African Continental Free Trade Area (AfCFTA) Task Force, a group currently composed of several AGRODEP members who can readily be engaged in activities related to analysis of regional integration issues under the AfCFTA.
Part 1: Measuring Trade Integration with Trade Flows / Trade Indicators
From the analyses of trade integration in Africa based on trade costs (direct measurement), we conclude that these costs are relatively high in this continent, particularly import duties, transportation costs, documentary compliance costs, and border compliance costs. The indicators based on trading costs evaluate whether or not the necessary conditions for trade integration are met. Additional indicators are necessary to measure whether trade integration is actually effective, in particular indicators based on trade flows.
The four-hour training presents indicators based on trade flows, outlining their interpretation and raising criticisms: trade-to-GDP ratio, symmetric indicator of relative openness, corrected degree of openness, indicators from the network literature, diversification indexes, and indicators measuring regional integration like the simple trade-based regional indicator, the intraregional trade intensity index, the modified intra- and extra-regional intensity index and the regional trade introversion index. All these indicators will be applied to the most recent version of the BACI database with a special focus on Africa.
Part 2: Measuring Trade Integration with Gravity Models
Instructor: Luca Salvatici
Over time, the gravity model has been defined as the workhorse of international trade and its ability to correctly approximate bilateral trade flows makes it one of the most successful “empirical fact” in economics. With data increasingly available for developing, as well as developed countries, the gravity model has come to be the starting point for a wide variety of research questions with a policy component. The gravity model has more recently acquired a range of micro-founded theoretical bases, showing that the typical gravity equation should account for both “bilateral resistance” and the so-called “multilateral resistance” term (MTR). The recent literature emphasizes the importance of expressing trade policies through continuous variables since they vary widely across products, importers and exporters. Moreover, in the case of non-quantitative trade policies, such as non-tariff measures, the gravity model is widely used to provide an assessment of the policy intensity.
The four-hour training intends to provide African-based researchers with knowledge of the latest developments regarding both theoretical general equilibrium foundations for the gravity equation for trade and empirical strategies leading to more accurate estimation and interpretation of the policy impact. After a review of the theoretical foundation of gravity models, we will then turn to the discussion of advanced issues on gravity modelling such as how to handle zero-trade flows and how to account for intra-national trade flows. Finally, we will discuss possible extensions of the gravity model using different dependent variables, e.g. trade in value-added rather than gross terms, and its relationship with other econometric methods, such as matching.
Part 3: Partial Equilibrium Models for Trade Analysis
The main goal of simulation models is to perform ex-ante analysis of various economic policies (e.g. investment decision in agricultural R&D in different sectors, potential effects of a trade agreement) or to disentangle different effects of existing policies (e.g. interaction between export taxes and import duties in international trade relations). Simulation models include Partial Equilibrium models and Computable General Equilibrium models, both in deterministic and stochastic versions, working in a static or a dynamic framework.
Partial equilibrium (PE) models are based on a restricted range of data. They examine the effects of policy action in creating equilibrium only in that particular sector or market which is directly affected, ignoring its effect in any other market or industry. One example of a PE model is a supply and demand where market clearance for a specific product is obtained independently from prices and quantities in other markets; the prices of all other products (including substitutes and complements) and income levels of consumers are held fixed in the analysis.
The four-hour training provides an overview of four partial equilibrium models available in the AGRODEP model library. The partial equilibrium model for trade policy analysis (PE-TRADE) shows multiple examples of trade policy analyses scenarios with increasing level of complexity in each Excel worksheet. The Partial Equilibrium Trade Simulation (PETS) model is a multi-region, multi-sector, dynamically recursive, and partial equilibrium model. The AGRODEP Spatial Equilibrium model is a multi-region, partial equilibrium models which links producers and consumers from different locations. Different from many single-commodity partial equilibrium models, the Export Restrictions And import Tariffs Overall impacts (ERATO) model illustrates how a multi-market model can be used to analyze trade policy options in a context of a multi-product value chain.
Part 4: Simulation Models for Assessing the AfCFTA
Instructors: David Laborde
Building on the refresher course on partial equilibrium models, the training course focuses on computable general equilibrium (CGE) models and issues related to CGE modelling. CGE models differ from PE models in that the analysis looks at the economy as a complete system of interdependent components, including households, firms, government, exporters, importers, etc. The analysis captures the ripple effects of an economic shock in one component throughout the system. The benefits of using CGE analysis include accounting and theoretical consistency, backward and forward linkages across sectors or industries, and welfare analysis.
The four-hour training covers a comparison of partial equilibrium versus computable general equilibrium modeling and other important issues to consider in the CGE modeling of regional integration initiatives such as the AfCFTA. These issues include the tariff aggregation issue and fiscal implications of regional integration.
Antoine Bouet is a Senior Research Fellow in the Markets, Trade and Institutions Division (MTID) of IFPRI. He conducts research on global trade modeling, trade policies, regional agreements, and multilateral trade negotiations. He is also Professor of Economics at University of Montesquieu Bordeaux IV (France). He was previously Scientific Advisor at the Centre d’Etudes Prospectives et d’Informations Internationales (CEPII), Paris where he participated in the development of the MIRAGE model of the world economy and the MAcMAP-HS6 database on market access. He has carried out research on market access, global trade modeling, the economics of trade retaliation, and the relationship between trade policy and Research and Development. He has been Director of the Centre d’Analyse et de Traitement des Donnees Economiques (CATT) in France (1996-2004), and Chairman of the European Research Network on International Economics and Finance (2002-2004). He was also editor of Revue Economique and Economie Internationale – International Economics. He is a French citizen and received a PhD in economics from the University of Bordeaux.
David Laborde is a Senior Research Fellow and leader of the “Globalization and Markets” research program in the Markets, Trade, and Institutions Division (MTID) of IFPRI. His research interests include international trade, measurement and modeling of protectionism, multilateral and regional trade liberalization as well as environmental issues (climate change, biofuels). He has developed the MAcMapHS6 and the TRAD databases on tariffs as well as the TASTE software. He is a contributor to the GTAP database and a GTAP research fellow since 2005. Prior to joining IFPRI, he was an Economist at the Centre d'Etudes Prospectives et d'Informations Internationales (CEPII), Paris between 2003 and 2007 and lecturer at the Université de Pau in France. He received his PhD from the University of Pau in 2008. He has also worked as consultant for the European Commission, the Economic Commission for West Africa, the World Bank, USAID, and various UN agencies.
Luca Salvatici, a Full Professor of Economic Policy, received his Master of Science and Ph.D. in Agricultural and Resource Economics from the University of California at Davis. From 1991 to 2003 he was a member of the Dipartimento di Economia Pubblica, University of Roma “La Sapienza”; from 2003 to 2010 he was a member of the Dipartimento di Scienze Economiche Gestionali e Sociali of the University of Molise; in 2011 he joined the Dipartimento di Economia of Roma Tre University. Luca Salvatici is currently member of the Editorial Board of the journal Economía Agraria y Recursos Naturales and coordinator of the PhD program in Economics at Roma Tre University. He is member of the International Agricultural Trade Research Consortium, and he has been involved in several research projects both at the European and national level. He has extensive consultancy experience, having completed work for The World Bank; the Food and Agriculture Organization of the United Nations; the International Food Policy Research Institute.
Fousseini Traore is a Research Fellow in the Markets, Trade, and Institutions Division (MTID) of IFPRI. He received a Ph.D. in Agricultural economics from the Centre for Studies and Research on International Development (CERDI), University of Clermont-Ferrand, France, in 2010. He also received a double M.A. in Development economics and in Projects appraisal from the University of Clermont-Ferrand. Prior to Joining IFPRI, he was a Research Fellow at the National Centre for Scientific Research (CNRS) in France. He has conducted research on various topics in agricultural trade, global cotton subsidies and access to energy in rural areas in Africa. He is also involved in capacity building actions in higher education in Africa through expatriate nationals.