Trade #
Trade in MIRAGE-e 2 consists in two different Armington-like demand trees : one for final goods, one for intermediate goods. The separation between final and intermediade goods is done using the BEC classification, and allows to diffentiate between end use :
- The value of trade flow
- The tariff rate (due to aggregation)
- The NTM ad-valorem equivalent (due to aggregation)
Trade and domestic demand #
TBA
Trade costs #
Trade costs are of three different types in MIRAGE-e:
- Tariffs
- Purchasing of international transportation services
- Non-tariff measures
Any trade cost is differentiated by end use (final versus intermediate consumption)
International transportation services #
See The Transport Sector.
Non-tariff measures #
Data #
MIRAGE-e only uses information on the trade-restrictiveness of NTMs (no benefit is considered), using ad-valorem equivalents from:
- [(:harvard:Font2016)] in Services sectors
- [(:harvard:Kee2009)] in Goods.
NTMs within the EU #
It is hard to quantify what are the differences in treatment between flows within the EU and flows crossing the EU single market border. So far, we rely on different estimates:
- In goods: We use estimates of the EU frontier effect from [(:harvard:Auss2011)]
- In services: We use estimates from [(:harvard:Berden2009)] that evaluated the share of NTMs that were “actionnable” (i.e. likely to be reduced if there exist a political will) in the case of an EU-US trade agreement. We assume that all actionnable measures are absent between EU countries.
This reduction in trade costs between EU member states is implemented at the time of calibration.
Modelling #
Non-tariff measures (NTMs) can either be modelled as:
- an iceberg trade cost
- an export-tax equivalent (rent-generating)
- an import-tax equivalent (rent-generating)
- any split between the three alternatives
By default, in absence of specific knowledge about the best modelling assumptions, NTMs are assumed to be 1/3 iceberg, 1/3 export-tax equivalent, 1/3 import-tax equivalent.
In every region, the rents created by import-tax equivalent NTMs on imports and export-tax equivalents on exports are allocated to the representative household by a lump-sum transfer.
Implementation through “generalized” costs #
The different trade costs remain separated but are aggregated using “generalized” tariffs ($GnTariff_{i,r,s,t}^C$ and $GnTariff_{i,r,s,t}^{IC}$), export taxes ($GnTaxEXP_{i,r,s,t}^{C}$ and $GnTaxEXP_{i,r,s,t}^{IC}$) and iceberg trade costs ($GnTC_{i,r,s,t}^{C}$ and $GnTC_{i,r,s,t}^{IC}$). With the example of final goods :
- $GnTC_{i,r,s,t}^C = 1 + tCost_{i,r,s,t} + shareNTM_{i,r,s}^{tCost}\left(taxSER_{i,r,s,t}^C + NTM_{i,r,s,t}^C\right)$
- $GnTariff_{i,r,s,t}^C = Tariff_{i,r,s,t}^C + shareNTM_{i,r,s}^{Tariff} NTM_{i,r,s,t}^C$
- $GnTaxEXP_{i,r,s,t}^C = taxEXP_{i,r,s,t}^C + taxMFA_{i,r,s,t}^C + shareNTM_{i,r,s}^{taxEXP} NTM_{i,r,s,t}^C$
Any trade policy scenario has therefore to be implemented directly on $Tariff_{i,r,s,t}^C$, $tCost_{i,r,s,t}$, $NTM_{i,r,s,t}^C$, $taxSER_{i,r,s,t}^C$ and $taxEXP_{i,r,s,t}^C$