Disaggregating the Vegetables, Fruits and Nuts Sector to the Tariff Line in the GTAP-HS Framework

Abstract

Computable general equilibrium (CGE) models provide valuable insights into economy-wide and aggregate sectoral impacts of trade policies. However, when it comes to the assessment of specific interventions, the level of aggregation in these models is often deemed too coarse to inform negotiations. For example, in the Global Trade Analysis Project (GTAP) Data Base, all vegetables, fruits and nuts - over hundred individual commodities - are represented under one sector. Analysis at the tariff line level is typically provided by partial equilibrium (PE) models, which cannot, however, capture economy-wide effects. In this paper, we contribute to the development of the GTAP-HS framework, which comprises disaggregated values of output, trade flows and domestic absorption with supporting model components nested within the standard GTAP GE model. We construct the GTAP-HS database with GTAP vegetables, fruits and nuts sector disaggregated into 79 commodities. We apply this modelling framework to the assessment of the ongoing trade frictions between the United States and its trading partners. We find that there are significant advantages to using this nested approach to trade policy analysis, including possibilities of the trade policies assessment at the tariff line, representation of the commodity-specific substitution and avoidance of the false competition' critique.