A disaggregated model of world production and trade: An estimate of the impact of the Tokyo Round

Abstract

We present in this paper a computational model of world production, trade, and employment that is disaggregated by country and sector and report on the application of the model to the changes in tariffs and quantifiable nontariff barriers negotiated in the Tokyo Round that was concluded in 1979. The model incorporates supply and demand functions and market-clearing conditions for 22 tradable industries, plus markets for 7 nontradable industries, in each of the 18 major industrialized countries and 16 major developing countries. The equations of the model are presented in the text and the explicit functional forms in an appendix. The implementation of the model is discussed briefly.Application of the model to the Tokyo Round suggested that there will be small but beneficial effects on trade, domestic prices, and economic welfare in practically all the major industrialized countries and in some of the major developing countries. Because many of the NTB codes negotiated in the Tokyo Round were stated in advisory terms, their impact cannot be evaluated unambiguously at present. Further, many existing NTBs of importance were exempted altogether from the negotiations. The Tokyo Round must be viewed accordingly as having dealt with a somewhat limited part of all interferences with trade.