A FREE TRADE AGREEMENT AMONG FORMER SOVIET REPUBLICS: A COMPUTABLE GENERAL EQUILIBRIUM MODEL
Abstract
What would happen to the economies of the former Soviet Union if they finally implemented a full-fledged free trade agreement? How would this change sector output, GDP, prices, international trade, and the economic welfare of the nation? How would it affect the economies of the FSU’s other trading partners? This paper attempts to address these and other issues through the use of a computable general equilibrium model (CGE). The model is a large, multi-regional, multi-sectoral, multi-factor system of simultaneous equations. It introduces the “shock” of zero tariffs between all FSU’s trading partners, and solves for a new economic equilibrium. There are some political and practical obstacles to the completion of such a trade agreement, so this mathematical model in some ways is just a hypothetical experiment. But an analysis of trade effects can nonetheless be useful to any policymaker in the former Soviet space.
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References
See: T. Hertel, R. Keeney, M. Ivanic, A. Winters, “Distributional Effects of WTO Agricultural Reforms in Rich and Poor Countries,” Economic Policy, April 2007, pp. 289-337.
See: Ibidem.
See: M. Brockmeier, “A Graphical Exposition of the GTAP Model,” GTAP Technical Paper, No. 8, October 1996,Minor Edits, January 2000, Revised, March 2001.
See: Global Trade Analysis Project (GTAP), Department of Agricultural Economics, Purdue University, 2008,available at [https://www.gtap.agecon.purdue.edu/about/consortium.asp].
See: M. Brockmeier, op. cit.
For more on economic efficiency and taxation, see: C.R. McConnell, S.L. Brue, Economics: Principles, Problems,and Policies, 16th Ed., McGraw Hill Publishing, 2006.
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