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Growth, globalization, and gains from the Uruguay Round

Author

Listed:
  • Hertel, Thomas W.
  • Bach, Christian F.
  • Dimaranan, Betina
  • Martin, Will

Abstract

Emphasizing the importance of evaluating the Uruguay Round in the context of a changing world economy, the authors base their projections on a model that incorporates certain economic shifts: 1) that the center of economic gravity will shift toward the South and toward Asia (a shift that is already under way and shows no signs of abating), and 2) that the pattern of comparative advantage will continue to change, with the East Asian economies gaining comparative advantage in the production of physical and human-capital-intensive products. The authors argue that these changes in the global economy significantly affect their analysis of the Uruguay round reforms, for two reasons. First, with the global distribution of trade and production shifting toward Asia, the deeper Uruguay Round cuts inthat region become more important, giving rise to a 17 percent increase in the proportionate welfare gain after implementation of tariff cuts. Second, without the Round, almost all of the bilateral quotas associated with the Multifibre Arrangement (MFA) would have become more binding and the resulting distortion would have been significantly greater. In this analysis, the global gain from MFA reform is 60 percent greater than it would have been without taking into account the effects of growth. Of course, procedures for implementation of the MFA reforms are more complex than they have conveyed for purposes of analysis. In practice, one must also consider the impact of accel quota growth under the Agreement on Textiles and Clothing. But even when the Agreement on Textiles and Clothing is implemented over the period for which projections were made, quota rents rise for many bilateral flows. This is a consequence both of shifts in comparative advantage toward the supplying countries and of simultaneous cuts in tariffs on textiles and clothing. The projections approach used here may be viewed as a logical extension of the growing econometric literature seeking to explain the determinants of economic growth through regression analysis. By offering a bridge between econometric evidence and computable general equilibrium modeling, the authors hope to combine the two approaches to help shed light on the interaction between trade reform and economic growth.

Suggested Citation

  • Hertel, Thomas W. & Bach, Christian F. & Dimaranan, Betina & Martin, Will, 1996. "Growth, globalization, and gains from the Uruguay Round," Policy Research Working Paper Series 1614, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1614
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    References listed on IDEAS

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    Cited by:

    1. Suwen Pan & Mark Welch & Samarendu Mohanty & Xiurong He, 2007. "Distortions of Sino‐US and Sino‐EU Safeguard Agreements: Effects on World Textile Markets," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(4), pages 78-88, July.
    2. Pan, Suwen & Welch, Mark & Mohanty, Samarendu & Fadiga, Mohamadou L., 2006. "Sino-U.S. and Sino-E.U. Textile Safeguard Agreements: Comparing the Effects to Free Market Conditions," 2006 Annual meeting, July 23-26, Long Beach, CA 21117, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Hofkes, M. W. & Gerlagh, R. & Lise, W. & Verbruggen, H., 2002. "Is Economic Growth Sustainable? A Trend Analysis for the Netherlands, 1990-1995," Conference papers 330984, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Pearson, Ken & Bach, Christian Friis, 1996. "Implementing Quotas In Gtap Using Gempack Or How To Linearize An Inequality," Technical Papers 28720, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Hertel, Thomas W. & Masters, William A. & Gehlhar, Mark J., 1997. "Regionalism in World Food Markets: Implications for Trade and Welfare," 1997 Conference, August 10-16, 1997, Sacramento, California 197046, International Association of Agricultural Economists.

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