The economic impact of the Russian import ban

The economic impact of the Russian import ban Zornitsa Kutlina-Dimitrova, Badri G. Narayanan Abstract: The aim of this paper is to provide an economic analysis of the Russian embargo from 7 August 2014 on certain agricultural food products from the EU, the US, Norway, Canada and Australia. For this purpose the paper will use a twofold approach. In the first place different modelling techniques will be used to estimate the impact of the import ban on key macroeconomic variables and across sectors. In addition, the paper will examine the most recent monthly trade statistics to see if the model predictions about aggregate and sectoral trade developments are in line with real trade data. The modelling techniques used in the papers are: general equilibrium modelling, general-partial equilibrium modelling and partial equilibrium closure of the standard GTAP-model. This approach aims at analyzing the economic impact by comparing the predictions of different models and specifications while using the same scenario so as to better underline and stress differences in results due to model calibration and partial versus general equilibrium effects. The modelling simulations are based on the latest available GTAP database 9 which reflects the world economy in 2011. Our preliminary results based on the standard GTAP model suggest that the Russian ban may lead to a marginal decrease in total Extra-EU exports of 0.12%; the sectors most negatively affected by the ban in relative terms are ‘vegetables and fruits’ (30%), ‘other meat’ (15%), ‘dairy products’ (11.5%) and ‘cattle meat’ (9.4%) sectors. These results suggest that although exports to Russia in the affected sectors decline sharply, European companies succeed in redirecting substantial part of their exports to third counties and to other European countries. Further, EU’s exports of manufacturing, other agricultural sectors and services rise slightly, due to an overall price decrease in the EU c...