INTERNATIONAL POLICY CENTER
Gerald R. Ford School of Public Policy
University of Michigan
IPC Policy Briefs Series Number 3
An Assessment of the Economic Effects of the Menu of U.S. Trade Policies
Kozo Kiyota
Robert M. Stern
Global Economy Journal
Volume 5, Issue 4
2005
Article 22
P ERSPECTIVES ON THE WTO D OHA D EVELOPMENT AGENDA
M ULTILATERAL T RADE N EGOTIATIONS
An Assessment of the Economic Effects of the
Menu of U.S. Trade Policies
Kozo Kiyota∗
∗
†
Robert M. Stern†
Yokohama National University, kiyota@ynu.ac.jp
University of Michigan, rmstern@umich.edu
c
Copyright 2005
by the authors. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written permission of the
publisher, bepress, which has been given certain exclusive rights by the author. Global Economy
Journal is produced by Berkeley Electronic Press (bepress). http://www.bepress.com/gej
An Assessment of the Economic Effects of the
Menu of U.S. Trade Policies
Kozo Kiyota and Robert M. Stern
Abstract
The Michigan Computable General Equilibrium (CGE) Model of World Production and Trade
is used to calculate the aggregate welfare and sectoral employment effects of the menu of U.S.
trade policies. The menu of policies encompasses the various preferential U.S. bilateral and regional free trade agreements (FTAs) negotiated and in process, unilateral removal of existing trade
barriers, and global (multilateral) free trade. The welfare impacts of the FTAs on the United States
are shown to be rather small in absolute and relative terms. The sectoral employment effects are
also generally small but vary across the individual sectors depending on the patterns of the bilateral liberalization. The welfare effects on the FTA partner countries are mostly positive though
generally small, but there are some indications of potentially disruptive employment shifts in some
partner countries. There are indications of trade diversion and detrimental welfare effects on nonmember countries for some of the FTAs analyzed. In comparison to the welfare gains from the
U.S. FTAs, the gains from both unilateral trade liberalization by the United States and the FTA
partners and from global (multilateral) free trade are shown to be rather substantial and more uniformly positive for all countries in the global trading system.
The U.S. FTAs are based on “hub” and “spoke” arrangements. It is shown that the spokes emanate out in different and often overlapping directions, suggesting that the complex of bilateral
FTAs may create distortions of the global trading system, which could be avoided if multilateral
liberalization in the context of the Doha Round were to be carried out.
Kozo Kiyota is Associate Professor of International Economics in the Faculty of Business Administration, Yokohama National University. He is also a Research Fellow at the Manufacturing
Management Research Center (MMRC), the University of Tokyo and a Faculty Fellow at the
Research Institute of Economy, Trade and Industry (RIETI). He received his Ph.D. from Keio
University, Tokyo, Japan. His research focuses on empirical microeconomics. He has published
articles in the International Journal of Industrial Organization, Journal of Economic Behavior and
Organization, and The World Economy.
Robert M. Stern is Professor of Economics and Public Policy (Emeritus) in the Department of
Economics and Gerald R. Ford School of Public Policy, University of Michigan.
KEYWORDS: WTO, Doha, trade policy
Kiyota and Stern: Economic Effects of U.S. Trade Policies
INTRODUCTION
In this article, we present a computational analysis of the economic effects
of the menu of U.S. trade policies. The menu encompasses the various U.S.
bilateral and regional free trade agreements (FTAs) that have been negotiated in
recent years and the negotiations currently in process, unilateral removal of
existing trade barriers by the United States and its FTA partner countries, and
global (multilateral) free trade. The analysis is based on the Michigan Model of
World Production and Trade. The Michigan Model is a multi-country/multisector computable general equilibrium (CGE) model of the global trading system
that has been used for over three decades to analyze the economic effects of
multilateral, regional, and bilateral trade negotiations and a variety of other
changes in trade and related policies.
In Section II following, we present a brief description of the main features
and data of the Michigan Model. The results of the computational analysis of the
U.S. FTAs are presented in Section III. In Section IV, we consider the crosscountry patterns of the welfare effects of the various FTAs. In Section V, we
provide a broader perspective on the FTAs that takes into account the effects of
the unilateral and multilateral removal of trade barriers by the United States and
its FTA partner countries, and other countries/regions in the global trading
system. Section VI provides a summary and concluding remarks.
THE MICHIGAN MODEL OF WORLD PRODUCTION AND TRADE
OVERVIEW OF THE MICHIGAN MODEL
The version of the Michigan Model that we use in this article covers 18
economic sectors, including agriculture, manufactures, and services, in each of 22
countries/regions. The distinguishing feature of the Michigan Model is that it
incorporates some aspects of trade with imperfect competition, including increasing
returns to scale, monopolistic competition, and product variety. A complete
description of the formal structure and equations of the model can be found on line
at www.Fordschool.umich.edu/rsie/model/.
INTERPRETING THE MODELING RESULTS
To help the reader interpret the modeling results, it is useful to review the
features of the model that serve to identify the various economic effects to be
reflected in the different applications of the model. Although the model includes
the aforementioned features of imperfect competition, it remains the case that
markets respond to trade liberalization in much the same way that they would
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Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
with perfect competition. That is, when tariffs or other trade barriers are reduced
in a sector, domestic buyers (both final and intermediate) substitute toward
imports and the domestic competing industry contracts production while foreign
exporters expand. Thus, in the case of multilateral liberalization that reduces
tariffs and other trade barriers simultaneously in most sectors and countries, each
country’s industries share in both of these effects, expanding or contracting
depending primarily on whether their protection is reduced more or less than in
other sectors and countries.
Worldwide, these changes cause increased international demand for all
sectors. World prices increase most for those sectors where trade barriers fall the
most. This in turn causes changes in countries’ terms of trade that can be positive
or negative. Those countries that are net exporters of goods with the greatest
degree of liberalization will experience increases in their terms of trade, as the
world prices of their exports rise relative to their imports. The reverse occurs for
net exporters in industries where liberalization is slight—perhaps because it may
already have taken place in previous trade rounds.
The effects on the welfare of countries arise from a mixture of these
terms-of-trade effects, together with the standard efficiency gains from trade and
also from additional benefits due to the realization of economies of scale. Thus,
we expect on average that the world will gain from multilateral liberalization, as
resources are reallocated to those sectors in each country where there is a
comparative advantage. In the absence of terms-of-trade effects, these efficiency
gains should raise national welfare measured by the equivalent variation for every
country,1 although some factor owners within a country may lose, as will be noted
below. However, it is possible for a particular country whose net imports are
concentrated in sectors with the greatest liberalization to lose overall, if the
worsening of its terms of trade swamps these efficiency gains.
On the other hand, although trade with imperfect competition is perhaps
best known for introducing reasons why countries may lose from trade, actually
its greatest contribution is to expand the list of reasons for gains from trade.
Thus, in the Michigan Model, trade liberalization permits all countries to expand
their export sectors at the same time that all sectors compete more closely with a
larger number of competing varieties from abroad. As a result, countries as a
whole gain from lower costs due to increasing returns to scale, lower monopoly
distortions due to greater competition, and reduced costs and/or increased utility
due to greater product variety. All of these effects make it more likely that
1
The equivalent variation is a measure of the amount of income that would have to be given or
taken away from an economy before a change in policy in order to leave the economy as well off
as it would be after the policy change has taken place. If the equivalent variation is positive, it is
indicative of an improvement in economic welfare resulting from the policy change.
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Kiyota and Stern: Economic Effects of U.S. Trade Policies
countries will gain from liberalization in ways that are shared across the entire
population.2
The various effects just described in the context of multilateral trade
liberalization will also take place when there is unilateral trade liberalization,
although these effects will depend on the magnitudes of the liberalization in
relation to the patterns of trade and the price and output responses involved
between the liberalizing country and its trading partners. Similarly, many of the
effects described will take place with the formation of bilateral or regional FTAs.
But in these cases, there may be trade creation and positive effects on the
economic welfare of FTA-member countries together with trade diversion and
negative effects on the economic welfare of non-member countries. The net
effects on economic welfare for individual countries and globally will thus
depend on the economic circumstances and policy changes implemented.
In the real world, all of the various effects occur over time, some of them
more quickly than others. However, the Michigan Model is static in the sense that
it is based upon a single set of equilibrium conditions rather than relationships
that vary over time. The model results therefore refer to a time horizon that
depends on the assumptions made about which variables do and do not adjust to
changing market conditions, and on the short- or long-run nature of these
adjustments. Because the supply and demand elasticities used in the model reflect
relatively long-run adjustments and it is assumed that markets for both labor and
capital clear within countries,3 the modeling results are appropriate for a relatively
long time horizon of several years—perhaps two or three at a minimum. On the
other hand, the model does not allow for the very long-run adjustments that could
occur through capital accumulation, population growth, and technological change.
The modeling results should therefore be interpreted as being superimposed upon
longer-run growth paths of the economies involved. To the extent that these
growth paths themselves may be influenced by trade liberalization, therefore, the
model does not capture such effects.
2
In perfectly competitive trade models such as the Heckscher-Ohlin Model, one expects countries
as a whole to gain from trade, but the owners of one factor—the “scarce factor”—to lose through
the mechanism first explored by Stolper and Samuelson (1941). The additional sources of gain
from trade due to increasing returns to scale, competition, and product variety, however, are
shared across factors, and we routinely find in our CGE modeling that both labor and capital gain
from multilateral trade liberalization.
3
The analysis in the model assumes throughout that the aggregate, economy-wide, level of
employment is held constant in each country. The effects of trade liberalization are therefore not
permitted to change any country's overall rates of employment or unemployment. This
assumption is made because overall employment is determined by macroeconomic forces and
policies that are not contained in the model and would not themselves be included in a negotiated
trade agreement. The focus instead is on the composition of employment across sectors as
determined by the microeconomic interactions of supply and demand resulting from the
liberalization of trade.
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Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
BENCHMARK DATA
Needless to say, the data needs of this model are immense. Apart from
numerous share parameters, the model requires various types of elasticity
measures. Like other CGE models, most of our data come from published
sources.
The main data source used in the model is “The GTAP-6.0 Database” of
the Purdue University Center for Global Trade Analysis Project, as adapted from
Dimaranan and McDougall (2005). The reference year for this GTAP database is
2001. From this source, we have extracted the following data, aggregated to our
sectors and countries/regions:4
• Bilateral trade flows among 22 countries/regions, decomposed into 18 sectors.
Trade with the rest-of-world (ROW) is included to close the model.
• Input-output tables for the 22 countries/regions, excluding ROW
• Components of final demand along with sectoral contributions for the 22
countries/regions, excluding ROW
• Gross value of output and value added at the sectoral level for the 22
countries/regions, excluding ROW
• Bilateral import tariffs by sector among the 22 countries/regions
• Elasticity of substitution between capital and labor by sector
• Bilateral export-tax equivalents among the 22 countries/regions, decomposed
into 18 sectors
The monopolistically competitive market structure in the nonagricultural
sectors of the model imposes an additional data requirement of the numbers of
firms at the sectoral level, and there is need also for estimates of sectoral
employment.5 The employment data, which have been adapted from a variety of
published sources, will be noted in tables below.
The GTAP-6.0 database has been projected to the year 2005, which is
when the Uruguay Round liberalization will have been fully implemented. In this
connection, we extrapolated the labor availability in different countries/regions by
an average weighted population growth rate of 1.2 percent per annum. All other
major variables have been projected, using an average weighted growth rate of
GDP of 2.5 percent.6 The 2005 data have been adjusted to take into account two
major developments that have occurred in the global trading system since the
mid-1990s. These include: (1) implementation of the Uruguay Round
4
Details on the sectoral and country/region aggregation are available from the authors on request.
Notes on the construction of the data on the number of firms and for employment are available
from the authors on request.
6
The underlying data are drawn from World Bank sources and are available on request. For a
more elaborate and detailed procedure for calculating year 2005 projections, see Hertel and Martin
(2000) and Hertel (2000).
5
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Kiyota and Stern: Economic Effects of U.S. Trade Policies
negotiations that were completed in 1993-94 and were to be phased in over the
following decade; and (2) the accession of Mainland China and Taiwan to the
WTO in 2001.7 We have made allowance for the foregoing developments by
readjusting the 2005 scaled-up database for benchmarking purposes to obtain an
approximate picture of what the world may be expected to look like in 2005.8 In
the computational scenarios to be presented below, we use these re-adjusted data
as the starting point to carry out our liberalization scenarios for the U.S. bilateral
FTAs and for the accompanying unilateral and global free trade scenarios.
The GTAP 6.0 (2001) base data for tariffs and the estimated tariff
equivalents of services barriers are broken down by sector on a global basis and
bilaterally for existing and prospective FTA partners of the United States in Table
1. The post-Uruguay Round tariff rates on agriculture, mining, and manufactures
are applied rates and are calculated in GTAP by dividing tariff revenues by the
value of imports by sector.
The services barriers are based on financial data on average gross (pricecost) margins constructed initially by Hoekman (2000) and adapted for modeling
purposes in Brown, Deardorff, and Stern (2002). The gross operating margins are
calculated as the differences between total revenues and total operating costs.
Some of these differences are presumably attributable to fixed costs. Given that
the gross operating margins vary across countries, a portion of the margin can also
be attributed to barriers to FDI. For this purpose, a benchmark is set for each
sector in relation to the country with the smallest gross operating margin, on the
assumption that operations in the benchmark country can be considered to be
freely open to foreign firms. The excess in any other country above this lowest
benchmark is then taken to be due to barriers to establishment by foreign firms.
That is, the barrier is modeled as the cost-increase attributable to an increase in
fixed cost borne by multinational corporations attempting to establish an
enterprise locally in a host country. This abstracts from the possibility that fixed
costs may differ among firms because of variations in market size, distance from
headquarters, and other factors. It is further assumed that this cost increase can be
7
The tariff data for the WTO accession of China and Taiwan have been adapted from
Ianchovichina and Martin (2004). In addition to benchmarking the effects of the Uruguay Round
and China/Taiwan accession to the WTO, Francois et al. (2005) benchmark their GTAP dataset to
take into account the enlargement of the European Union (EU) in 2004 to include ten new member
countries from Central and Eastern Europe and some changes in the EU Common Agricultural
Policies that were introduced in 2000. Our EU and EFTA regional aggregate includes the 25member EU, but the benchmark data were not adjusted to take into account the adoption of the EU
common external tariffs by the new members. Because of data constraints, we have not made
allowance for the Information Technology Agreement and agreements for liberalization of
financial and telecommunication services following conclusion of the Uruguay Round.
8
See Anderson and Martin (2005), who use a model developed at the World Bank that
benchmarks their GTAP 6.0 data to 2015 for computational purposes.
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Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
interpreted as an ad valorem equivalent tariff on services transactions generally.
It can be seen in Table 1 that the constructed services barriers are considerably
higher than the import barriers on manufactures. While possibly subject to
overstatement, it is generally acknowledged that many services sectors are highly
regulated and thus restrain international services transactions.
For the United States, the highest import tariffs for manufactures are
recorded for textiles, wearing apparel, and leather products & footwear, both
globally and bilaterally. The values and shares of U.S. exports and imports are
broken down by sector according to origin and destination in Tables 2-3 on a
global basis as well as for FTA partners. Employment by sector is indicated for
the United States and its FTA partners in Table 4.
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Kiyota and Stern: Economic Effects of U.S. Trade Policies
Table 1. Post-Uruguay Round Tariff Rates by Sector for the United States
(Percent)
Global Singapore Australia Morocco SACU
Thailand
Korea
Canada
FTAA
Chile
South
America
Agriculture
0.9
0.1
1.2
0.1
1.2
0.4
0.4
0.0
0.4
0.9
0.0
2.2
Mining
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Food, Beverages & Tobacco
2.0
1.2
1.7
3.2
3.8
1.4
4.7
0.0
3.0
1.4
0.0
2.1
Textiles
5.5
9.3
6.6
7.1
6.3
8.7
10.6
0.0
6.8
11.4
0.0
7.7
Wearing Apparel
10.0
13.8
10.8
10.5
12.1
13.6
13.8
0.0
10.7
11.5
0.0
12.7
Leather Products & Footwear
7.3
5.6
4.1
3.6
0.2
7.7
8.4
0.0
4.1
6.7
0.0
6.6
Wood & Wood Products
0.2
0.2
0.4
0.2
0.0
0.0
0.4
0.0
0.0
0.2
0.0
0.3
Chemicals
1.6
3.2
1.0
0.0
0.2
1.1
3.0
0.0
0.8
0.1
0.0
0.9
Non-metallic Min. Products
3.1
5.2
2.9
0.9
0.0
1.4
2.1
0.0
0.0
0.6
0.0
2.6
Metal Products
1.0
1.9
0.3
0.7
0.1
0.5
1.9
0.0
0.0
0.5
0.0
0.6
Transportation Equipment
1.1
0.5
1.4
0.1
0.0
0.0
2.3
0.0
0.0
1.1
0.0
0.1
Machinery & Equipment
0.6
0.2
1.1
0.0
0.0
0.1
0.5
0.0
0.0
0.2
0.0
0.7
Other Manufactures
1.2
1.3
0.9
0.0
0.1
0.3
4.1
0.0
0.4
0.1
0.0
1.3
Elec., Gas & Water
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Construction
9.0
9.0
9.0
9.0
9.0
9.0
9.0
0.0
9.0
9.0
0.0
9.0
Trade & Transport
27.0
27.0
27.0
27.0
27.0
27.0
27.0
0.0
27.0
27.0
0.0
27.0
Other Private Services
31.0
31.0
31.0
31.0
31.0
31.0
31.0
0.0
31.0
31.0
0.0
31.0
Government Services
25.0
25.0
25.0
25.0
25.0
25.0
25.0
0.0
25.0
25.0
0.0
25.0
Note: Central America and Caribbean (CAC) members include Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua, and are to be
included in the FTAA.
Sources: Adapted from Francois and Strutt (1999); Brown, Deardorff and Stern (2002); and Diamaranan and McDougall (2005).
Published by Berkeley Electronic Press, 2005
CAC
Mexico
7
Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
COMPUTATIONAL ANALYSIS OF U.S. FREE TRADE AGREEMENTS
As already noted, the United States has signed or is currently in the
process of negotiating a number of bilateral FTAs. These include the agreements
with Chile and Singapore approved by the U.S. Congress in 2003, agreements
with Central America and the Dominican Republic (CAFTA), Australia,
Morocco, and Bahrain approved in 2005, and ongoing negotiations with the
Southern African Customs Union (SACU), Andean Countries (Bolivia, Colombia,
Ecuador, and Peru), Panama, Thailand, Korea, and the Free Trade Area of the
Americas (FTAA).9 As we note in Brown, Kiyota, and Stern (2004, 2005a,b), the
United States has a myriad of objectives in pursuing FTAs, including increased
market access and shaping the regulatory and political environment in FTA
partner countries to conform to U.S. principles and institutions. By the same
token, the FTA partners are attracted by the preferential margins for U.S. market
access and opportunities to improve their economic efficiency and to design and
implement more effective domestic institutions and policies.
We present below some results of the analysis of the following FTAs,
which are denoted as:
USCHFTA
U.S.-Chile FTA
USSGFTA
U.S.-Singapore FTA
USCAFTA
U.S.-Central America FTA
USAUSFTA
U.S.-Australia FTA
USMORFTA
U.S.-Morocco FTA
USSACUFTA
U.S.-Southern African Customs Union FTA
USTHFTA
U.S.-Thailand FTA
USKORFTA
U.S.-Korea FTA
FTAA
Free Trade Area of the Americas
9
See the USTR website [www.ustr.gov] for more information on the variety of U.S. FTAs
completed or in process.
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Kiyota and Stern: Economic Effects of U.S. Trade Policies
Table 2. Value of U.S. Sectoral Exports by Destination and Origin, 2001 (Millions of U.S. Dollars)
Global
Value
Agriculture
Mining
Food, Beverages & Tobacco
Textiles
Wearing Apparel
Leather Products & Footwear
Wood & Wood Products
Chemicals
Non-metallic Min. Products
Metal Products
Transportation Equipment
Machinery & Equipment
Other Manufactures
Elec., Gas & Water
Construction
Trade & Transport
Other Private Services
Government Services
Total
31,488
6,435
29,107
12,625
5,116
1,930
28,076
102,913
13,890
33,490
110,075
279,309
14,710
732
2,739
62,203
109,632
44,252
888,720
Global
Singapore
79
35
199
64
25
16
188
3,247
157
317
3,858
10,311
182
12
1
771
1,496
409
21,367
Singapore
Australia
85
35
266
94
27
14
458
2,109
322
219
1,888
4,628
236
6
2
1,145
1,063
571
13,167
Australia
Percent
Agriculture
100.0
0.3
0.3
Mining
100.0
0.5
0.5
Food, Beverages & Tobacco
100.0
0.7
0.9
Textiles
100.0
0.5
0.7
Wearing Apparel
100.0
0.5
0.5
Leather Products & Footwear
100.0
0.9
0.7
Wood & Wood Products
100.0
0.7
1.6
Chemicals
100.0
3.2
2.0
Non-metallic Min. Products
100.0
1.1
2.3
Metal Products
100.0
0.9
0.7
Transportation Equipment
100.0
3.5
1.7
Machinery & Equipment
100.0
3.7
1.7
Other Manufactures
100.0
1.2
1.6
Elec., Gas & Water
100.0
1.6
0.8
Construction
100.0
0.1
0.1
Trade & Transport
100.0
1.2
1.8
Other Private Services
100.0
1.4
1.0
Government Services
100.0
0.9
1.3
Total
100.0
2.4
1.5
Source: GTAP 6.0 adapted from Dimaranan and McDougall (2005).
Published by Berkeley Electronic Press, 2005
Morocco
103
22
43
18
4
0
17
30
16
5
31
79
2
0
0
59
90
255
777
Morocco
0.3
0.3
0.1
0.1
0.1
0.0
0.1
0.0
0.1
0.0
0.0
0.0
0.0
0.1
0.0
0.1
0.1
0.6
0.1
SACU
43
26
63
25
7
4
112
522
101
88
1,083
963
63
2
2
343
339
225
4,013
SACU
0.1
0.4
0.2
0.2
0.1
0.2
0.4
0.5
0.7
0.3
1.0
0.3
0.4
0.3
0.1
0.6
0.3
0.5
0.5
Thailand
390
30
185
53
11
30
146
779
88
166
1,095
1,918
134
4
12
403
701
276
6,421
Thailand
1.2
0.5
0.6
0.4
0.2
1.6
0.5
0.8
0.6
0.5
1.0
0.7
0.9
0.5
0.4
0.6
0.6
0.6
0.7
Korea
1,883
246
1,150
165
34
96
560
2,771
461
1,013
3,029
12,131
245
16
4
2,057
2,793
780
29,435
Korea
6.0
3.8
4.0
1.3
0.7
4.9
2.0
2.7
3.3
3.0
2.8
4.3
1.7
2.2
0.2
3.3
2.5
1.8
3.3
Canada
CAC
3,542
1,370
4,624
2,529
389
148
8,759
19,864
3,269
10,604
35,001
45,107
1,769
245
14
1,783
4,170
1,094
144,281
684
15
789
1,578
1,135
48
632
1,827
119
261
496
2,618
394
2
17
366
519
238
11,736
Canada
CAC
11.3
21.3
15.9
20.0
7.6
7.7
31.2
19.3
23.5
31.7
31.8
16.1
12.0
33.4
0.5
2.9
3.8
2.5
16.2
2.2
0.2
2.7
12.5
22.2
2.5
2.2
1.8
0.9
0.8
0.5
0.9
2.7
0.3
0.6
0.6
0.5
0.5
1.3
FTAA
Chile
23
10
94
45
12
5
93
486
78
69
372
1,408
59
1
0
350
188
141
3,435
FTAA
Chile
0.1
0.2
0.3
0.4
0.2
0.3
0.3
0.5
0.6
0.2
0.3
0.5
0.4
0.1
0.0
0.6
0.2
0.3
0.4
Mexico
4,032
281
3,518
3,724
1,290
342
4,365
14,607
1,349
6,239
12,154
34,627
1,028
16
1
756
1,147
715
90,191
Mexico
12.8
4.4
12.1
29.5
25.2
17.7
15.5
14.2
9.7
18.6
11.0
12.4
7.0
2.2
0.1
1.2
1.0
1.6
10.1
South
America
1,475
505
1,361
1,183
803
168
1,469
7,948
999
1,357
4,217
16,995
654
41
19
1,999
2,909
1,951
46,054
South
America
4.7
7.9
4.7
9.4
15.7
8.7
5.2
7.7
7.2
4.1
3.8
6.1
4.4
5.6
0.7
3.2
2.7
4.4
5.2
9
Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
Table 3. Value of U.S. Sectoral Imports by Destination and Origin, 1997 (Millions of U.S. Dollars)
Global
Value
Agriculture
Mining
Food, Beverages & Tobacco
Textiles
Wearing Apparel
Leather Products & Footwear
Wood & Wood Products
Chemicals
Non-metallic Min. Products
Metal Products
Transportation Equipment
Machinery & Equipment
Other Manufactures
Elec., Gas & Water
Construction
Trade & Transport
Other Private Services
Government Services
Total
20,644
69,789
34,790
30,961
50,788
22,480
63,362
108,578
20,054
64,781
191,656
373,201
57,287
2,104
764
82,987
69,873
20,736
1,284,834
Global
Singapore
35
0
58
154
213
8
185
1,192
3
75
183
13,336
67
2
2
791
1,761
196
18,261
Singapore
Australia
207
322
1,771
66
44
27
103
422
65
1,108
709
932
182
13
2
1,758
762
426
8,917
Australia
Percent
Agriculture
100.0
0.2
1.0
Mining
100.0
0.0
0.5
Food, Beverages & Tobacco
100.0
0.2
5.1
Textiles
100.0
0.5
0.2
Wearing Apparel
100.0
0.4
0.1
Leather Products & Footwear
100.0
0.0
0.1
Wood & Wood Products
100.0
0.3
0.2
Chemicals
100.0
1.1
0.4
Non-metallic Min. Products
100.0
0.0
0.3
Metal Products
100.0
0.1
1.7
Transportation Equipment
100.0
0.1
0.4
Machinery & Equipment
100.0
3.6
0.2
Other Manufactures
100.0
0.1
0.3
Elec., Gas & Water
100.0
0.1
0.6
Construction
100.0
0.2
0.3
Trade & Transport
100.0
1.0
2.1
Other Private Services
100.0
2.5
1.1
Government Services
100.0
0.9
2.1
Total
100.0
1.4
0.7
Source: GTAP 6.0 adapted from Dimaranan and McDougall (2005).
http://www.bepress.com/gej/vol5/iss4/22
DOI: 10.2202/1524-5861.1157
Morocco
32
81
29
5
104
7
6
36
3
5
2
95
5
1
3
365
102
256
1,136
Morocco
0.2
0.1
0.1
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.4
0.4
0.1
1.2
0.1
SACU
80
170
125
249
302
24
97
383
52
2,291
428
371
592
11
1
578
139
125
6,019
SACU
0.4
0.2
0.4
0.8
0.6
0.1
0.2
0.4
0.3
3.5
0.2
0.1
1.0
0.5
0.1
0.7
0.2
0.6
0.5
Thailand
432
28
2,185
874
1,689
770
609
992
461
490
173
5,881
1,491
4
6
1,427
492
77
18,080
Thailand
2.1
0.0
6.3
2.8
3.3
3.4
1.0
0.9
2.3
0.8
0.1
1.6
2.6
0.2
0.8
1.7
0.7
0.4
1.4
Korea
53
2
245
1,607
1,805
211
516
2,026
191
2,138
7,403
17,704
972
5
3
1,333
1,304
739
38,257
Korea
0.3
0.0
0.7
5.2
3.6
0.9
0.8
1.9
1.0
3.3
3.9
4.7
1.7
0.2
0.4
1.6
1.9
3.6
3.0
Canada
CAC
4,582
16,971
7,860
2,376
1,438
169
30,720
20,041
2,860
16,056
53,987
39,869
1,633
1,563
5
2,221
2,394
582
205,326
1,792
108
962
2,436
4,374
27
215
1,118
68
171
70
1,149
184
6
9
810
512
230
14,242
Canada
CAC
22.2
24.3
22.6
7.7
2.8
0.8
48.5
18.5
14.3
24.8
28.2
10.7
2.9
74.3
0.7
2.7
3.4
2.8
16.0
8.7
0.2
2.8
7.9
8.6
0.1
0.3
1.0
0.3
0.3
0.0
0.3
0.3
0.3
1.2
1.0
0.7
1.1
1.1
FTAA
Chile
887
196
828
6
17
2
698
317
22
949
17
29
9
1
0
261
137
44
4,420
FTAA
Chile
4.3
0.3
2.4
0.0
0.0
0.0
1.1
0.3
0.1
1.5
0.0
0.0
0.0
0.0
0.0
0.3
0.2
0.2
0.3
Mexico
3,750
8,285
2,841
3,932
6,122
526
4,513
3,719
2,012
4,841
23,094
65,698
1,802
17
4
1,086
602
120
132,964
Mexico
18.2
11.9
8.2
12.7
12.1
2.3
7.1
3.4
10.0
7.5
12.0
17.6
3.1
0.8
0.6
1.3
0.9
0.6
10.3
South
America
2,977
12,109
2,561
1,175
3,136
1,883
2,205
5,024
1,700
4,398
4,176
3,949
845
55
5
1,897
1,941
899
50,937
South
America
14.4
17.4
7.4
3.8
6.2
8.4
3.5
4.6
8.5
6.8
2.2
1.1
1.5
2.6
0.6
2.3
2.8
4.3
4.0
10
Kiyota and Stern: Economic Effects of U.S. Trade Policies
Table 4. Employment by Sector, 2001: United States and FTA Partners
(Number of Workers and Percent of Employment)
United Singapore Australia Morocco
SACU
Thailand
States
Workers (thousand)
Agriculture
3,559
0.1
478
5,228
5,011
19,659
Mining
616
1
73
63
329
46
Food, Beverages & Tobacco
2,155
21
219
309
215
118
Textiles
845
2
44
189
73
134
Wearing Apparel
616
12
47
372
126
235
Leather Products & Footwear
92
1
13
41
32
15
Wood & Wood Products
2,236
38
226
80
215
44
Chemicals
2,717
56
119
127
173
52
Non-metallic Min. Products
724
8
50
123
78
39
Metal Products
3,120
55
199
84
216
69
Transportation Equipment
2,246
52
102
55
90
26
Machinery & Equipment
5,335
221
158
74
187
58
Other Manufactures
519
4
17
1
26
23
Elec., Gas & Water
1,529
13
74
46
140
118
Construction
10,406
153
730
804
1,457
2,016
Trade & Transport
39,104
810
3,090
2,333
3,234
9,571
Other Private Services
18,105
431
1,557
143
1,448
948
Government Services
52,786
164
2,706
1,706
6,741
3,987
Total
146,711
2,043
9,901
11,779
19,791
37,157
United Singapore Australia Morocco
SACU
Thailand
States
Percent
Agriculture
2.4
0.0
4.8
44.4
25.3
52.9
Mining
0.4
0.0
0.7
0.5
1.7
0.1
Food, Beverages & Tobacco
1.5
1.0
2.2
2.6
1.1
0.3
Textiles
0.6
0.1
0.4
1.6
0.4
0.4
Wearing Apparel
0.4
0.6
0.5
3.2
0.6
0.6
Leather Products & Footwear
0.1
0.1
0.1
0.3
0.2
0.0
Wood & Wood Products
1.5
1.9
2.3
0.7
1.1
0.1
Chemicals
1.9
2.8
1.2
1.1
0.9
0.1
Non-metallic Min. Products
0.5
0.4
0.5
1.0
0.4
0.1
Metal Products
2.1
2.7
2.0
0.7
1.1
0.2
Transportation Equipment
1.5
2.5
1.0
0.5
0.5
0.1
Machinery & Equipment
3.6
10.8
1.6
0.6
0.9
0.2
Other Manufactures
0.4
0.2
0.2
0.0
0.1
0.1
Elec., Gas & Water
1.0
0.6
0.7
0.4
0.7
0.3
Construction
7.1
7.5
7.4
6.8
7.4
5.4
Trade & Transport
26.7
39.6
31.2
19.8
16.3
25.8
Other Private Services
12.3
21.1
15.7
1.2
7.3
2.6
Government Services
36.0
8.0
27.3
14.5
34.1
10.7
Total
100.0
100.0
100.0
100.0
100.0
100.0
Sources: ILO webiste (2005); Taiwan government website (2005); UNIDO (2005); and World Bank
Published by Berkeley Electronic Press, 2005
Korea
Canada
2,421
20
333
425
262
95
364
559
162
520
539
1,468
81
65
1,786
8,109
2,581
4,520
24,311
Korea
481
207
295
79
86
13
520
291
66
324
322
480
42
136
929
5,301
2,670
4,448
16,691
Canada
10.0
0.1
1.4
1.7
1.1
0.4
1.5
2.3
0.7
2.1
2.2
6.0
0.3
0.3
7.3
33.4
10.6
18.6
100.0
(2005).
2.9
1.2
1.8
0.5
0.5
0.1
3.1
1.7
0.4
1.9
1.9
2.9
0.2
0.8
5.6
31.8
16.0
26.6
100.0
CAC
6,891
48
1,597
229
1,029
119
585
666
211
264
92
590
102
290
2,381
6,792
1,296
6,754
29,937
CAC
23.0
0.2
5.3
0.8
3.4
0.4
2.0
2.2
0.7
0.9
0.3
2.0
0.3
1.0
8.0
22.7
4.3
22.6
100.0
FTAA
Chile
863
83
299
39
29
25
144
150
34
109
27
47
3
38
491
1,700
480
1,785
6,347
FTAA
Chile
13.6
1.3
4.7
0.6
0.5
0.4
2.3
2.4
0.5
1.7
0.4
0.7
0.0
0.6
7.7
26.8
7.6
28.1
100.0
Mexico
7,518
135
1,923
603
207
195
710
1,269
398
607
824
1,030
70
207
2,547
13,389
1,599
8,070
41,301
Mexico
18.2
0.3
4.7
1.5
0.5
0.5
1.7
3.1
1.0
1.5
2.0
2.5
0.2
0.5
6.2
32.4
3.9
19.5
100.0
South
America
29,303
1,583
4,713
1,603
2,303
623
2,349
2,855
1,027
996
445
1,130
376
212
9,247
32,627
3,890
52,560
147,841
South
America
19.8
1.1
3.2
1.1
1.6
0.4
1.6
1.9
0.7
0.7
0.3
0.8
0.3
0.1
6.3
22.1
2.6
35.6
100.0
11
Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
Data constraints do not permit the analysis of the U.S. FTAs with the Andean
countries, Bahrain and other countries in the Middle East, and Panama.
Our reference point is the post-Uruguay Round 2005 database together
with the post-Uruguay Round tariff rates on agricultural products and
manufactures and the specially constructed measures of services barriers
described above. Four scenarios have been carried out for each FTA: (A)
removal of agricultural tariffs10; (M) removal of manufactures tariffs; (S) removal
of services barriers; and (C) combined removal of agricultural and manufactures
tariffs and services barriers. Because of space constraints, we report only the
results of the combined removal of agricultural and manufactures tariffs and
services barriers, denoted by USCHFTA-C, etc. The results for the separate
removal of the agricultural, manufactures, and services barriers and for the
sectoral effects on exports, imports, and gross output are available on request.
We should emphasize that our computational analysis does not take into
account other features of the various FTAs, which do not lend themselves readily
to quantification. These other features cover E-commerce, intellectual property,
labor and environmental standards, foreign direct investment, government
procurement, trade remedies, dispute settlement, and the development of new
institutional and cooperative measures. By the same token, because of data
constraints, we have not made allowance for rules of origin and special
preferences that may be negotiated as part of each FTA and that could be
designed for protectionist reasons to limit trade.
USCHFTA-C: U.S.-Chile Free Trade Agreement — The U.S.-Chile FTA
was approved by the U.S. Congress in 2003. The estimated global welfare effects
are indicated in Table 5. Global welfare increases by $7.6 billion, with U.S.
welfare increasing by $6.3 billion (0.1% of GNP) and Chile’s welfare by $1.4
billion (1.7% of GNP).11 The sectoral results for the United States are shown in
Table 6 and indicate small absolute and percent changes in employment across the
U.S. sectors. The sectoral employment effects for Chile are indicated in Table 7
and show relatively large employment increases in agriculture, wood & wood
products, metal products, trade & transport, and other private services, and
relatively large employment declines in machinery & equipment and government
services. These employment changes for Chile suggest the extent of labor market
adjustments that may occur as a result of the FTA.
10
The bilateral FTA scenarios in this section make no allowance for reductions in agricultural
export subsidies and agricultural production subsidies, which are excluded from bilateral
negotiations and fall within the scope of the multilateral negotiations.
11
The estimated effects on aggregate exports/imports, terms of trade, and real returns to capital
and labor for this and all other FTAs to be analyzed in what follows are available from the authors
on request. Changes in bilateral trade flows by country/region of origin and destination are also
available.
http://www.bepress.com/gej/vol5/iss4/22
DOI: 10.2202/1524-5861.1157
12
Kiyota and Stern: Economic Effects of U.S. Trade Policies
T a b le 5 . G lo b a l W e lfa r e E ff e c ts o f B ila te r a l N e g o tia tin g O p tio n s f o r th e U n ite d S ta te s
(B illio n s o f D o lla rs a n d P e rc e n t o f G N P )
U S -C h ile
USU S -C A C
USS in g a p o re
A u s tra lia
B illio n s o f D o lla rs
Japan
0 .0
0 .5
-0 .5
- 0 .6
U n ite d S ta te s
6 .3
1 7 .0
1 1 .8
1 8 .6
C anada
0 .0
0 .1
-0 .3
- 0 .1
A u s tra lia
-0 .0
0 .0
-0 .1
5 .1
N e w Z e a la n d
-0 .0
0 .0
- 0 .0
0 .0
E U and E F T A
-0 .1
1 .7
- 2 .5
- 0 .5
H ong K ong
-0 .0
-0 .0
- 0 .1
- 0 .0
C h in a
-0 .0
0 .1
- 0 .4
- 0 .2
K o rea
-0 .0
0 .1
- 0 .1
- 0 .2
S in g a p o re
0 .0
2 .5
- 0 .0
- 0 .0
T a iw a n
0 .0
-0 .0
- 0 .1
- 0 .1
In d o n e s ia
-0 .0
0 .0
- 0 .1
0 .0
M a la ysia
-0 .0
-0 .4
- 0 .0
- 0 .0
P h ilip p in e s
0 .0
-0 .0
- 0 .1
- 0 .0
T h a ila n d
-0 .0
-0 .1
- 0 .1
- 0 .0
R e s t o f A s ia
0 .0
0 .1
- 0 .5
- 0 .1
C h ile
1 .4
0 .0
- 0 .0
0 .0
M e x ic o
0 .0
0 .0
- 0 .2
- 0 .1
C e n tra l A m e ric a a n d th e C a rrib e a n (C A C )
0 .0
-0 .0
5 .1
- 0 .0
S o u th A m e ric a
-0 .1
0 .1
0 .3
- 0 .0
M o ro c c o
-0 .0
0 .0
- 0 .0
- 0 .0
S o u th e rn A fric a n C u s to m s U n io n (S A C U )
-0 .0
0 .0
- 0 .0
- 0 .0
T o ta l
7 .6
2 1 .6
1 2 .1
2 1 .8
U S -C h ile
USU S -C A C
USP erc e n t
S in g a p o re
A u s tra lia
Japan
0 .0
0 .0
-0 .0
-0 .0
U n ite d S ta te s
0 .1
0 .1
0 .1
0 .1
C anada
0 .0
0 .0
-0 .0
-0 .0
A u s tra lia
0 .0
0 .0
-0 .0
1 .1
N e w Z e a la n d
0 .0
0 .0
0 .0
0 .0
E U and E F T A
0 .0
0 .0
-0 .0
0 .0
H ong K ong
0 .0
- 0 .0
-0 .0
-0 .0
C h in a
0 .0
0 .0
-0 .0
-0 .0
K o rea
0 .0
0 .0
-0 .0
-0 .0
S in g a p o re
0 .0
2 .4
-0 .0
-0 .0
T a iw a n
0 .0
0 .0
-0 .0
-0 .0
In d o n e s ia
0 .0
0 .0
-0 .1
0 .0
M a la ysia
0 .0
- 0 .4
-0 .0
-0 .0
P h ilip p in e s
0 .0
- 0 .1
-0 .1
-0 .0
T h a ila n d
0 .0
- 0 .0
-0 .1
-0 .0
R e s t o f A s ia
0 .0
0 .0
-0 .1
-0 .0
C h ile
1 .7
0 .0
-0 .0
0 .0
M e x ic o
0 .0
0 .0
-0 .0
-0 .0
C e n tra l A m e ric a a n d th e C a rrib e a n (C A C )
0 .0
0 .0
3 .9
-0 .0
S o u th A m e ric a
0 .0
0 .0
0 .0
0 .0
M o ro c c o
0 .0
0 .0
-0 .0
0 .0
S o u th e rn A fric a n C u s to m s U n io n (S A C U )
0 .0
0 .0
-0 .0
0 .0
Published by Berkeley Electronic Press, 2005
USU S -S A C U
M o ro c co
0 .1
- 0 .0
8 .2
9 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .3
- 0 .1
0 .0
- 0 .0
0 .0
- 0 .0
0 .0
- 0 .0
0 .0
0 .0
0 .0
- 0 .0
0 .0
- 0 .0
0 .0
- 0 .0
0 .0
- 0 .0
0 .0
- 0 .0
0 .0
- 0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
- 0 .0
0 .0
0 .0
1 .2
- 0 .0
0 .0
1 .6
9 .9
1 0 .5
USU S -S A C U
M o ro c co
0 .0
0 .0
0 .1
0 .1
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
2 .8
0 .0
0 .0
1 .0
U SU S -K
T h a ila n d
- 0 .1
1 5 .2
0 .0
0 .0
0 .0
0 .2
- 0 .0
- 0 .2
- 0 .0
- 0 .0
- 0 .0
- 0 .1
- 0 .1
- 0 .0
5 .2
- 0 .1
0 .0
- 0 .0
- 0 .0
- 0 .0
0 .0
- 0 .0
1 9 .8
U SU S -K
T h a ila n d
0 .0
0 .1
0 .0
0 .0
0 .0
0 .0
- 0 .0
- 0 .0
- 0 .0
- 0 .0
- 0 .0
- 0 .0
- 0 .1
- 0 .0
3 .6
- 0 .0
0 .0
0 .0
- 0 .0
0 .0
0 .0
- 0 .0
o re a
FTA A
0 .5
2 9 .1
0 .4
0 .2
0 .0
1 .5
0 .1
1 .2
1 3 .1
0 .0
0 .0
0 .1
0 .1
0 .0
0 .0
0 .1
0 .0
0 .2
0 .1
0 .4
0 .0
0 .0
4 7 .3
o re a
- 1 .0
6 2 .4
5 .3
- 0 .1
-0 .0
-5 .3
-0 .0
-0 .3
-0 .3
-0 .0
-0 .2
-0 .2
-0 .1
-0 .1
-0 .1
-0 .6
3 .4
8 .4
7 .4
3 6 .2
-0 .0
-0 .1
1 1 4 .6
FTA A
0 .0
0 .2
0 .0
0 .0
0 .0
0 .0
0 .1
0 .1
2 .5
0 .1
0 .0
0 .1
0 .1
0 .0
0 .0
0 .0
0 .0
0 .0
0 .1
0 .0
0 .0
0 .0
- 0 .0
0 .5
0 .6
- 0 .0
- 0 .0
- 0 .1
- 0 .0
- 0 .0
- 0 .1
0 .0
- 0 .1
- 0 .1
- 0 .1
- 0 .1
- 0 .1
- 0 .1
4 .1
1 .1
5 .6
2 .3
- 0 .0
- 0 .1
13
Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
T a b le 6 . S e cto r al E m p lo ym en t E ffe cts o f B ila te ra l N eg o tiatin g O p tio n s fo r th e U n ited S ta tes
(N u m b er o f W o rk e rs an d P erc en t o f E m p lo ym en t)
U S -C h ile
USU S -C A C
USUSU S -S A C U
S in gap o re
A u stra lia
M o ro cc o
N u m be r o f W o rk ers
A g ric u ltu re
(28 7 )
531
6 ,0 23
(8 5 )
9 88
284
M inin g
(45 )
196
2 64
405
91
51
F o o d, B ev era ges & T o b ac co
(14 4 )
(7 7 )
6 64
(9 2 0)
1 27
45
T e x tiles
(15 )
(1 3 7 )
(6 ,91 7 )
403
1 18
(4 9 0)
W e arin g A p p are l
(5 7 )
(1 4 5)
(7 ,1 9 6 )
298
(3 3 )
(2 9 8)
L ea th er p ro d u cts & F o o tw e ar
(7 )
63
26 6
75
4
34
W o o d & W o o d P ro d u cts
(14 8 )
142
57 7
302
78
116
C h em ica ls
8
316
59 3
1 ,1 6 7
131
210
N o n -m etallic M in . P ro du c ts
29
145
21 7
370
96
84
M etal P ro du c ts
(27 7 )
1 ,0 1 5
1 ,07 7
1 ,1 5 8
87
467
T ran sp o rtation E q u ipm en t
14
914
61 9
1 ,6 1 6
77
915
M ac hin ery & E q u ipm en t
82 5
4 ,5 2 4
3 ,11 3
3 ,7 2 8
177
482
O th er M a n ufactu res
26
335
55 7
567
28
106
E lec ., G as & W a te r
(1 7 )
(2 5)
93
26
14
20
C o nstru ctio n
(3 9 )
(3 5 1)
(6 0 )
(1 6 6)
(1 7 )
36
T rad e & T ran spo rt
(23 7 )
(3 ,1 1 1)
(37 6 )
(8 ,4 7 2)
(1 ,7 1 1 )
(1 ,8 4 7)
O th er P riv ate S erv ice s
(10 0 )
(3 ,3 4 1)
79 2
(1 ,4 0 4)
(9 )
306
G o v ernm en t S e rv ic es
46 9
(9 9 4)
(30 5 )
931
(24 7 )
(5 2 0)
U S -C h ile
USU S -C A C
USUSU S -S A C U
P erc en t
S in gap o re
A u stra lia
M o ro cc o
A g ric u ltu re
-0 .0
0 .0
0 .2
0 .0
0 .0
0 .0
M inin g
-0 .0
0 .0
0 .0
0 .1
0 .0
0 .0
F o o d, B ev era ges & T o b ac co
-0 .0
0 .0
0 .0
-0 .0
0 .0
0 .0
T e x tiles
0 .0
-0 .0
-0 .8
0 .1
0 .0
-0 .1
W e arin g A p p are l
-0 .0
-0 .0
-1 .2
0 .1
-0 .0
-0 .1
L ea th er p ro d u cts & F o o tw e ar
-0 .0
0 .1
0 .3
0 .1
0 .0
0 .0
W o o d & W o o d P ro d u cts
-0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
C h em ica ls
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
N o n -m etallic M in . P ro du c ts
0 .0
0 .0
0 .0
0 .1
0 .0
0 .0
M etal P ro du c ts
-0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
T ran sp o rtation E q u ipm en t
0 .0
0 .0
0 .0
0 .1
0 .0
0 .0
M ac hin ery & E q u ipm en t
0 .0
0 .1
0 .1
0 .1
0 .0
0 .0
O th er M a n ufactu res
0 .0
0 .1
0 .1
0 .1
0 .0
0 .0
E lec ., G as & W a te r
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
C o nstru ctio n
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
T rad e & T ran spo rt
0 .0
-0 .0
0 .0
-0 .0
0 .0
0 .0
O th er P riv ate S erv ice s
0 .0
-0 .0
0 .0
-0 .0
0 .0
0 .0
G o v ernm en t S e rv ic es
0 .0
0 .0
0 .0
0 .0
0 .0
0 .0
http://www.bepress.com/gej/vol5/iss4/22
DOI: 10.2202/1524-5861.1157
USU S -K o re a
T h ailan d
3 2 ,7 8 2
2 ,1 91
1 70
(3 3 8)
2 ,2 4 3
1 28
(1 ,90 5 )
(4 ,2 6 4)
(2 ,0 8 9 )
(3 ,7 5 6)
(5 7 7 )
(2 3 2)
216
(6 6 4)
669
(6 9 8)
241
24
806
(2 ,5 3 7)
1 ,0 2 1
(3 ,1 9 5)
1 ,7 9 1
(4 ,1 8 0)
433
2 70
44
1 11
(5 4 )
(8 5 0)
(5 ,0 7 9 )
(7 ,5 9 6)
567
(8 9 9)
1 ,4 2 7
(6 ,2 1 8)
USU S -K o re a
T h ailan d
0 .1
0 .9
0 .0
-0 .1
0 .0
0 .1
-0 .2
-0 .5
-0 .3
-0 .6
-0 .7
-0 .3
0 .0
-0 .0
0 .0
-0 .0
0 .0
0 .0
0 .0
-0 .1
0 .1
-0 .1
0 .0
-0 .1
0 .1
0 .1
0 .0
0 .0
0 .0
-0 .0
-0 .0
-0 .0
0 .0
0 .0
0 .0
-0 .0
14
Kiyota and Stern: Economic Effects of U.S. Trade Policies
T a b le 7 . S e c to r a l E m p lo y m e n t E ff e c ts fo r th e U S F T A
(N u m b e r o f
U S -C h ile
N u m b e r o f W o rk ers
A g ric u ltu re
3 ,1 1 4
M in in g
315
F o o d , B e v e ra g e s & T o b a c c o
244
T e x tile s
20
W e a rin g A p p are l
112
L e ath e r p ro d u c ts & F o o tw e a r
(2 )
W o o d & W o o d P ro d u c ts
1 ,3 7 8
C h e m ic a ls
232
N o n -m e ta llic M in . P ro d u c ts
(3 4 )
M etal P ro d u c ts
959
T ra n sp o rta tio n E q u ip m en t
(1 2 7 )
M ac h in e ry & E q u ip m e n t
(1 ,4 2 1 )
O th er M a n u fac tu res
(1 4 )
E lec ., G a s & W a te r
147
C o n stru c tio n
413
T ra d e & T ran sp o rt
960
O th er P riv a te S erv ice s
1 ,2 1 2
G o v ern m e n t S e rv ice s
(7 ,5 0 8 )
U S -C h ile
P e rc e n t
A g ric u ltu re
0 .4
M in in g
0 .4
F o o d , B e v e ra g e s & T o b a c c o
0 .1
T e x tile s
0 .1
W e a rin g A p p are l
0 .4
L e ath e r p ro d u c ts & F o o tw e a r
-0 .0
W o o d & W o o d P ro d u c ts
1 .0
C h e m ic a ls
0 .2
N o n -m e ta llic M in . P ro d u c ts
-0 .1
M etal P ro d u c ts
0 .9
T ra n sp o rta tio n E q u ip m en t
-0 .5
M ac h in e ry & E q u ip m e n t
-3 .0
O th er M a n u fac tu res
-0 .5
E lec ., G a s & W a te r
0 .4
C o n stru c tio n
0 .1
T ra d e & T ran sp o rt
0 .1
O th er P riv a te S erv ice s
0 .3
G o v ern m e n t S e rv ice s
-0 .4
Published by Berkeley Electronic Press, 2005
P a rtn er C o u n tr ie s
W o rk e rs an d P e rc e n t o f E m p lo ym e n t)
USU S -C A C
U SU SU S -S A C U
S in g a p o re
A u stralia
M o ro c co
(1 ) (2 0 7 ,0 1 2 )
200
(2 8 ,6 1 0 )
(5 ,2 0 4 )
(2 2 )
(5 ,9 4 0 )
(1 ,2 1 1 )
(8 8 9 )
(1 ,4 0 6 )
(5 5 7 )
(3 6 ,9 7 7 )
1 ,6 7 7
(2 ,8 7 2 )
(9 0 4 )
112
9 7 ,6 4 4
(1 1 2 )
(4 ,1 8 5 )
3 ,3 0 3
1 ,7 5 8
3 9 2 ,2 1 3
(1 2 3 )
(2 ,6 8 6 )
2 5 ,8 2 3
(4 5 )
(3 ,0 1 1 )
(1 0 7 )
(7 4 7 )
(1 9 7 )
(8 8 0 )
(1 5 ,5 2 6 )
(7 6 7 )
(1 2 4 )
(9 0 7 )
(1 ,7 2 1 )
(1 5 ,7 2 6 )
(1 ,5 7 1 )
(6 3 9 )
(9 1 2 )
(2 4 7 )
(9 ,4 5 1 )
(5 1 6 )
(7 9 1 )
(5 4 6 )
(2 ,6 2 7 )
(1 9 ,9 2 3 )
(2 ,7 8 8 )
150
(2 ,4 7 1 )
(1 ,5 8 2 )
(8 ,1 4 3 )
(1 ,4 9 1 )
(1 9 5 )
(1 ,7 6 5 )
(1 0 ,1 3 4 )
(6 6 ,6 0 1 )
(2 ,9 9 5 )
(6 6 )
(2 ,1 7 2 )
(9 7 )
(5 ,5 3 9 )
(1 8 2 )
(3 )
(3 2 6 )
(1 6 )
1 ,7 6 7
(1 4 6 )
58
(5 1 0 )
64
(7 ,3 3 4 )
(5 0 3 )
482
(2 ,2 1 8 )
4 ,4 7 9
(4 8 ,4 9 2 )
9 ,9 8 8
4 0 ,6 1 3
382
1 1 ,9 9 8
(1 0 ,8 1 8 )
2 ,8 6 7
388
(5 ,0 7 4 )
(4 8 2 )
(3 1 ,1 3 2 )
(2 ,2 1 9 )
115
(4 ,8 9 7 )
USU S -C A C
U SU SU S -S A C U
S in g a p o re
A u stralia
M o ro c co
-1 .3
-3 .0
0 .0
-0 .6
-0 .1
-2 .9
-1 2 .2
-1 .7
-1 .4
-0 .4
-2 .9
-2 .3
0 .8
-1 .0
-0 .4
5 .5
4 3 .7
-0 .3
-2 .2
4 .7
1 5 .6
3 7 .8
-0 .3
-0 .7
2 1 .6
-3 .7
-2 .5
-0 .8
-1 .9
-0 .7
-2 .3
-2 .6
-0 .3
-0 .2
-0 .4
-3 .0
-2 .3
-1 .3
-0 .5
-0 .5
-2 .9
-4 .5
-1 .0
-0 .7
-0 .7
-4 .8
-7 .6
-1 .4
0 .2
-1 .1
-3 .0
-9 .2
-1 .5
-0 .4
-1 .9
-4 .6
-1 1 .4
-1 .9
-0 .1
-1 .2
-2 .4
-5 .3
-1 .1
-0 .2
-1 .2
-0 .1
0 .6
-0 .2
0 .1
-0 .4
0 .0
-0 .3
-0 .1
0 .1
-0 .2
0 .6
-0 .7
0 .3
1 .7
0 .0
2 .8
-0 .8
0 .2
0 .3
-0 .4
-0 .3
-0 .5
-0 .1
0 .0
-0 .1
U SU S -K o re a
T h a ila n d
(1 6 6 ,2 1 7 ) (1 0 5 ,5 6 8 )
(1 ,4 1 7 )
100
(1 ,6 0 1 )
(4 ,4 1 9 )
1 0 ,9 1 6
3 4 ,3 4 9
2 2 ,1 1 2
3 7 ,0 5 0
1 ,9 0 5
5 ,9 2 9
(7 7 8 )
868
(8 2 3 )
2 ,0 8 7
(8 1 0 )
(5 4 9 )
(2 ,2 7 8 )
3 ,7 9 8
(4 0 6 )
8 ,1 3 9
(1 ,1 5 4 )
3 ,4 1 5
(1 9 5 )
1 ,1 2 3
382
263
4 ,8 3 1
(3 9 4 )
1 6 1 ,1 3 5
1 0 ,5 8 6
(1 ,8 6 0 )
(2 ,3 0 4 )
(2 3 ,7 4 6 )
5 ,5 2 7
U SU S -K o re a
T h a ila n d
-0 .9
-4 .4
-3 .0
0 .5
-1 .4
-1 .3
8 .3
7 .6
9 .5
1 4 .1
1 2 .7
6 .1
-1 .7
0 .2
-1 .5
0 .4
-2 .1
-0 .3
-3 .3
0 .7
-1 .6
1 .5
-2 .0
0 .2
-0 .9
1 .4
0 .3
0 .4
0 .2
-0 .0
1 .7
0 .1
-0 .2
-0 .1
-0 .6
0 .1
15
Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
USSGFTA-C: U.S.-Singapore Free Trade Agreement — The welfare
effects of a U.S.-Singapore FTA, which was approved by the U.S. Congress in
2003, noted in Table 5, indicate an increase in global welfare of $21.6 billion,
with U.S. welfare rising by $17.0 billion (0.1% of GNP) and Singapore’s welfare
by $2.5 billion (2.4% of GNP). In Table 6, the sectoral employment effects for
the United States are relatively small, whereas in Table 7, for Singapore, there are
relatively large sectoral employment increases in textiles, wearing apparel, and
services, and declines in most other sectors. These sectoral changes suggest
sizable employment adjustments for Singapore that may occur in the FTA with
the United States.
USCAFTA-C: U.S.-Central America Free Trade Agreement — The U.S.CAFTA was approved by the U.S. Congress in 2005. The estimated global
welfare effects of the CAFTA shown in Table 5 indicate a rise of $12.1 billion,
U.S. welfare increases by $11.8 billion (0.1% of GNP) and the welfare of the
aggregate of Central American and the Caribbean (CAC) increases by $5.1 (3.9%
of GNP).12 It can also be seen that the CAFTA is apparently trade diverting for
most of the non-member countries/regions shown. The sectoral employment
effects for the United States, noted in Table 6, indicate that the employment
declines are concentrated in textiles and wearing apparel and are comparatively
small as a percent of employment in these sectors, -0.8% and -1.2%, respectively.
The sectoral employment changes for the CAC are shown in Table 7. The
increases are quite large in textiles and wearing apparel, and there are
employment declines in most of the other sectors, as the expansion of the
relatively labor-intensive industries attracts workers from the rest of the economy.
These results thus suggest that the CAFTA may result in significant worker
displacement in the process of adjustment brought about by elimination of the
import barriers.
USAUSFTA-C: U.S.-Australia FTA — The U.S.-Australia FTA was
approved in late 2004 and took effect at the beginning of 2005. It can be seen in
Table 5 that global welfare rises by $21.8 billion, U.S. welfare by $18.6 billion
(0.1% of GNP), and Australian welfare by 5.1 billion (1.1% of GNP). There are
many instances of trade diversion for non-partner countries. The sectoral effects
for the United States in Table 6 show small employment changes, while the
positive employment changes for Australia in Table 7 are concentrated in food,
beverages & tobacco, trade & transport, and other private services, and there are
negative effects across all the other sectors ranging from -0.3 to -1.9% of sectoral
employment.
12
The GTAP 6.0 data refer to a CAC aggregate and do not provide separate data for the five
Central American countries and the Dominican Republic that comprise the CAFTA. It is noted in
Brown, Kiyota, and Stern (2005b) that the CAFTA countries account for a substantial proportion
of CAC trade so that using CAC data may be a reasonable approximation for modeling purposes.
http://www.bepress.com/gej/vol5/iss4/22
DOI: 10.2202/1524-5861.1157
16
Kiyota and Stern: Economic Effects of U.S. Trade Policies
USMORFTA-C: U.S.-Morocco FTA — The U.S.-Morocco FTA was
approved in 2005. As noted in Tables 2-3 above, U.S. trade in goods and services
with Morocco is rather small. By far the largest proportions of Morocco’s trade
are with the EU and EFTA. The global welfare increase from the U.S.-Morocco
FTA indicated in Table 5 is $9.9 billion, Welfare increases by $8.2 billion (0.1%
of GNP) for the United States, and $1.2 billion (2.8% of GNP) for Morocco. The
U.S. sectoral employment changes noted in Table 6 are negligible. For Morocco,
in Table 7, the largest employment increases are in trade & transport, and the
largest declines in agriculture, food, beverages & tobacco, textiles, and apparel.
The welfare and employment effects of the U.S.-Morocco FTA are thus seen to be
fairly small.
USSACUFTA-C: U.S.-Southern African Customs Union — The effects of
the U.S.-SACU FTA, which is currently being negotiated, are indicated in Table
5, and show an increase of $10.5 billion in global welfare, $9.0 billion (0.1% of
GNP) for the United States, and $1.6 billion (1.0% of GNP) for the SACU
members combined. In Table 6, there are indications of negligible sectoral
employment impacts for the United States. In Table 7, the employment increases
for SACU are concentrated in textiles and wearing apparel and are negative across
the remaining sectors as labor is attracted towards the labor-intensive sectors.
US-THFTA-C: U.S.-Thailand FTA — The U.S.-Thailand FTA is
currently being negotiated. In Table 5, the global welfare increase is $19.8
billion, a $15.2 billion (0.1% of GNP) increase for the United States, and a $5.2
billion (3.6% of GNP) increase for Thailand. There is evidence of pervasive trade
diversion. The sectoral employment changes for the United States noted in Table
6 are negligible. For Thailand, in Table 7, the largest employment increases are
concentrated in textiles and wearing apparel, construction, and trade & transport,
and there are employment declines especially in agriculture, mining, food,
beverages & tobacco, several capital-intensive manufactures, other private
services, and government services. Some of the percentage employment effects
are relatively large.
US-KORFTA-C: U.S.-Korea FTA — The negotiation of a U.S.-Korea
FTA is currently in process. In Table 5, global welfare is shown to increase by
$47.3 billion, $29.1 billion (0.2% of GNP), U.S. welfare by $29.1 billion (0.2% of
GNP), and Korea’s welfare by $13.1 billion (2.5% of GNP) for Korea. The
sectoral employment effects on the United States are small, whereas some of the
employment effects are substantial in absolute terms although rather small in
percentage terms.
FTAA-C: Free Trade Area of the Americas — Discussions have been
ongoing for several years to create a Free Trade Area for the Americas (FTAA).13
13
For details on the FTAA negotiations, see the website of the Office of the United States Trade
Representative [www.ustr.gov].
Published by Berkeley Electronic Press, 2005
17
Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
Since the country detail in our model does not include the individual members of
the FTAA, we have chosen to approximate it by combining the United States,
Canada, Mexico, and Chile with an aggregate of Central American and Caribbean
(CAC) and an aggregate of other South American nations. The welfare effects of
the FTAA are indicated in Table 5 and amount to $114.6 billion globally, $62.4
billion (0.5% of GNP) for the United States, $5.3 billion (0.6% of GNP) for
Canada, $8.4 billion (1.1% of GNP) for Mexico, $3.4 billion (4.1% of GNP) for
Chile, $7.4 billion (5.6% of GNP) for the CAC, and $36.2 billion (2.3% of GNP)
for the aggregate of other South American countries. There is some evidence of
trade diversion, in particular for Japan and the EU/EFTA. The sectoral
employment effects for the United States, indicated in Table 8, show relatively
small employment declines in mining, textiles and wearing apparel, transportation
equipment, and trade & transport, and increases in all other sectors. The sectoral
employment effects for Canada are also small, whereas the employment changes
for Mexico, Chile, the CAC, and other South America are noteworthy. This
suggests that the developing countries covered in the FTAA would experience
more employment adjustments than the United States and Canada.
HUB AND SPOKE EFFECTS OF THE U.S. FTAS
In the discussion of the U.S. bilateral FTAs in the preceding section, it was
noted that there were indications of negative welfare effects for a number of nonmember countries/regions. It is well known theoretically that preferential trading
arrangements may result in both trade creation, which is welfare enhancing, and
trade diversion, which will reduce welfare as trade is shifted from lower to higher
cost sources of supply. But there is another consideration, which is that bilateral
FTAs are based on the “hub-and-spoke” arrangement, with the United States
representing the hub and with separate spokes connecting the bilateral FTA
partners to the hub. In negotiating these bilateral FTAs, no account is taken of the
effects that they may have on non-members, even though there may be a bilateral
FTA with one or more of the non-members. As more and more bilateral FTAs are
negotiated, the spokes of the FTAs may thus emanate out in many different and
overlapping directions, with resulting distortions of global trade patterns. That is,
this combination of varying preferences among different and overlapping FTAs
may lead to greatly increased transactions costs for firms and the undermining of
the most-favored-nation (MFN) principle of non-discrimination that is at the heart
of the multilateral trading system. These effects of the proliferation of FTAs are
what Bhagwati and Panagariya (2002) refer to as “spaghetti-bowl” effects.
An indication of the trade diversion associated with the U.S. FTAs and the
overlapping of the spokes involved is shown in the left-hand side of Table 9,
which has shaded cells indicating cases of positive welfare effects and white cells
http://www.bepress.com/gej/vol5/iss4/22
DOI: 10.2202/1524-5861.1157
18
Kiyota and Stern: Economic Effects of U.S. Trade Policies
T a b le 8 . S e c to r a l E m p lo y m e n t E ffe c ts f o r th e F T A A M e m b e r C o u n tr ie s
(N u m b e r o f W o rk e rs a n d P e rc e n t o f E m p lo ym e n t)
U n ite d
C anada
C h ile
M e x ic o
CAC
S ta te s
N u m b e r o f W o rk e rs
A g ric u ltu re
9 ,6 7 5
2 ,7 1 7
1 2 ,2 6 4
(1 8 ,3 9 5 ) (2 4 1 ,5 5 4 )
M in in g
(9 7 9 )
(6 6 4 )
(2 ,8 1 9 )
(1 1 6 )
(5 ,7 5 3 )
F o o d , B e v e ra g e s & T o b a c c o
10
441
720
(4 ,4 0 1 )
(4 9 ,2 3 1 )
T e x tile s
(1 0 ,0 5 6 )
(1 ,2 9 9 )
359
(1 ,5 1 3 )
1 0 2 ,3 3 4
W e a rin g A p p a re l
(9 ,3 4 3 )
(8 1 5 )
(8 6 )
(1 ,9 9 5 )
4 1 0 ,4 9 1
L e a th e r p ro d u c ts & F o o tw e a r
(4 8 6 )
(1 3 0 )
(3 3 )
(1 ,7 3 8 )
1 ,3 8 8
W o o d & W o o d P ro d u c ts
1 ,2 9 2
653
2 ,7 7 9
968
(1 9 ,1 6 9 )
C h e m ic a ls
2 ,8 5 7
(4 0 1 )
196
6 ,9 8 8
(1 1 ,3 6 4 )
N o n -m e ta llic M in . P ro d u c ts
788
(8 9 )
(2 0 6 )
778
(1 2 ,3 4 1 )
M e ta l P ro d u c ts
26
(8 0 7 )
1 ,7 6 9
2 ,0 7 7
(2 1 ,1 5 1 )
T ra n s p o rta tio n E q u ip m e n t
(1 ,6 6 7 )
(3 9 7 )
(7 5 )
7 ,3 0 7
(9 ,8 8 5 )
M a c h in e ry & E q u ip m e n t
9 ,9 1 6
(4 2 6 )
2 ,4 5 2
3 ,5 8 0
(5 6 ,6 5 2 )
O th e r M a n u fa c tu re s
2 ,0 7 3
(6 7 )
35
(3 2 )
(3 ,3 5 0 )
E le c ., G a s & W a te r
52
(4 7 )
303
127
1 ,9 6 8
C o n s tru c tio n
(3 7 2 )
(5 9 )
(1 6 5 )
267
(7 ,7 2 9 )
T ra d e & T ra n s p o rt
(5 ,3 6 8 )
2 ,2 1 7
(7 ,6 0 0 )
9 ,1 1 7
(3 3 ,8 2 6 )
O th e r P riv a te S e rv ic e s
739
(5 5 6 )
716
(8 1 1 )
(6 ,8 5 5 )
G o v e rn m e n t S e rv ic e s
842
(2 7 2 )
(1 0 ,6 0 9 )
(2 ,2 0 9 )
(3 7 ,3 2 0 )
U n ite d
C anada
C h ile
M e x ic o
CAC
P e rc e n t
S ta te s
A g ric u ltu re
0 .3
0 .6
1 .4
-0 .3
-3 .5
M in in g
-0 .2
-0 .3
-3 .4
-0 .1
-1 1 .8
F o o d , B e v e ra g e s & T o b a c c o
0 .0
0 .2
0 .2
-0 .2
-3 .1
T e x tile s
-1 .2
-1 .7
0 .9
-0 .3
4 5 .8
W e a rin g A p p a re l
-1 .5
-1 .0
-0 .3
-1 .0
3 9 .6
L e a th e r p ro d u c ts & F o o tw e a r
-0 .6
-1 .0
-0 .1
-0 .9
1 .2
W o o d & W o o d P ro d u c ts
0 .1
0 .1
1 .9
0 .1
-3 .3
C h e m ic a ls
0 .1
-0 .1
0 .1
0 .6
-1 .7
N o n -m e ta llic M in . P ro d u c ts
0 .1
-0 .1
-0 .6
0 .2
-5 .8
M e ta l P ro d u c ts
0 .0
-0 .3
1 .6
0 .3
-8 .0
T ra n s p o rta tio n E q u ip m e n t
-0 .1
-0 .1
-0 .3
0 .9
-1 1 .2
M a c h in e ry & E q u ip m e n t
0 .2
-0 .1
5 .2
0 .3
-9 .7
O th e r M a n u fa c tu re s
0 .4
-0 .2
1 .2
-0 .1
-3 .2
E le c ., G a s & W a te r
0 .0
-0 .0
0 .8
0 .1
0 .7
C o n s tru c tio n
0 .0
-0 .0
-0 .0
0 .0
-0 .3
T ra d e & T ra n s p o rt
-0 .0
0 .0
-0 .5
0 .1
-0 .5
O th e r P riv a te S e rv ic e s
0 .0
-0 .0
0 .2
-0 .1
-0 .5
G o v e rn m e n t S e rv ic e s
0 .0
-0 .0
-0 .6
-0 .0
-0 .6
Published by Berkeley Electronic Press, 2005
S o u th
A m e ric a
1 5 8 ,7 3 4
2 5 ,8 3 6
8 ,7 6 5
4 8 ,3 9 7
6 6 ,4 7 1
3 2 ,3 1 4
(2 2 ,6 2 6 )
(1 8 ,6 8 5 )
(2 ,3 1 5 )
3 ,3 9 5
7 ,2 8 2
(1 4 ,8 7 5 )
(3 ,1 7 3 )
264
(2 2 ,1 5 1 )
(4 8 ,2 7 5 )
(5 ,0 6 0 )
(2 1 4 ,2 9 9 )
S o u th
A m e ric a
0 .5
1 .6
0 .2
3 .0
2 .9
5 .3
-1 .0
-0 .7
-0 .2
0 .3
1 .6
-1 .3
-0 .9
0 .1
-0 .2
-0 .2
-0 .1
-0 .4
19
Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
Table 9. Welfare Effects of Bilateral FTAs and Unilateral and Global Free Trade
Bilateral FTAs
1
USCHL
2
USSGP
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
3
USCAC
4
5
6
7
8
9
US- US- US- US- US- FTAA
AUS MOR SACU THA KOR
Unilateral Free Trade
10
US
11
SGP
12
13
14
15
16
AUS MCC SACU THA KOR
Japan
US
X
X
X
X
X
X
X
X
X
X
Canada
X
Australia
X
X
New Zealand
EU and EFTA
Hong Kong
China
Korea
X
Singapore
X
X
Taiwan
Indonesia
Malaysia
Philippines
Thailand
X
Rest of Asia
Chile
X
X
Mexico
X
CAC
X
X
South America
X
Morocco
X
X
SACU
X
X
No. of Positive Effects
10
16
3
5
22
9
8
22
6
20
22
22
22
22
Notes: 1) Shaded cells indicate countries with positive welfare effects while white cells indicate countries with negative welfare effects.
2) "X" indicates unilateral free trade countries.
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DOI: 10.2202/1524-5861.1157
Global
FT
17
CHL
18
CAC
X
X
X
X
22
21
22
22
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
22
20
Kiyota and Stern: Economic Effects of U.S. Trade Policies
indicating cases of negative welfare effects. Altogether, 9 FTAs are shown,
although there is some double counting insofar as the U.S.-CAC and U.S.-Chile
bilateral FTAs are encompassed in the FTAA. In any event, it seems evident
from Table 9 that trade diversion and negative welfare effects are pervasive.
Thus, while partner-FTA countries may gain directly from their FTAs, as
indicated by “X” in the table, they may be adversely affected by other FTAs that
have been negotiated.
The global results of the bilateral FTAs in Table 5 suggest that the
negative welfare effects on non-members may be rather small in both absolute
terms and as a percent of GNP. But, as mentioned in our earlier discussion,
because of data limitations, our results do not reflect the potential welfare declines
due to rules of origin and other discriminatory arrangements built into the bilateral
FTAs. On the other hand, we do not allow for increased inflows of foreign direct
investment into the partner countries or the effects of improvements in
productivity and increased capital formation. Unfortunately, we are not in a
position to assess these potential benefits. But it seems clear from our
computational results that the welfare increases from the FTA removal of trade
barriers are fairly small on the whole. Pending further analysis, we therefore
conclude that there is reason to be concerned about the trade diversion and
overlapping spoke effects of bilateral FTAs.
WELFARE EFFECTS OF UNILATERAL FREE TRADE
AND GLOBAL FREE TRADE
In this section, we ask how the welfare of the United States, its FTA
partners, and other countries/regions in the global trading system would be
affected if it were feasible to adopt unilateral free trade or global free trade on a
non-discriminatory (MFN) basis as compared to the adoption of discriminatory
bilateral FTAs. The detailed results by country/region are indicated in Table 10,
and the results for the U.S. bilateral FTAs and the FTAA, unilateral liberalization,
and global free trade are summarized for the United States and its FTA partner
countries/regions in Table 11. Unilateral free trade adopted by the United States
would increase U.S. welfare by $368.8 billion (2.9% of GNP), which is more than
three times greater than the U.S. welfare gains from the bilateral FTAs combined.
If there were global (multilateral) free trade, U.S. welfare would be increased by
$591.0 billion (4.6% of GNP). There are also clear indications that, except for
Singapore and Australia, the FTA partner countries would generally gain more
from the adoption of unilateral free trade by the United States as compared to the
partner-country gains from their bilateral FTAs. Furthermore, the FTA partner
countries would generally gain even more if they adopted unilateral free trade and
especially if there were global free trade. These benefits are clearly reflected in
Published by Berkeley Electronic Press, 2005
21
Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
T able 10. W elfare E ffects of U nilateral an d G lobal Free T rade
B illions of D ollars
Japan
U nited States
C anada
A ustralia
N ew Zealand
EU and EFTA
H ong K ong
C hina
K orea
Singapore
Taiw an
Indonesia
M alaysia
Philippines
Thailand
R est of A sia
C hile
M exico
C entral A m erica and the C arribean (C A C )
South A m erica
M orocco
Southern A frican C ustom s U nion (SA C U )
Total
U nited States Singapore
11.0
0.7
368.8
1.6
-9.8
0.2
4.5
0.1
1.1
0.0
133.5
3.4
9.3
0.2
3.0
0.2
4.3
0.1
2.1
1.1
3.9
0.1
2.3
0.1
4.3
0.7
0.8
0.1
2.0
0.2
8.9
0.2
0.8
0.0
-8.5
0.1
3.4
0.0
5.2
0.3
0.7
0.0
0.8
0.0
552.3
9.5
A ustralia
4.6
1.8
0.2
4.3
0.7
3.6
0.1
1.1
1.0
0.1
0.4
0.4
0.3
0.1
0.3
0.7
0.0
0.1
0.0
0.1
0.0
0.1
20.1
Percent
Japan
U nited States
C anada
A ustralia
N ew Zealand
EU and EFTA
H ong K ong
C hina
K orea
Singapore
Taiw an
Indonesia
M alaysia
Philippines
Thailand
R est of A sia
C hile
M exico
C entral A m erica and the C arribean (C A C )
South A m erica
M orocco
Southern A frican C ustom s U nion (SA C U )
U nited States Singapore
0.2
0.0
2.9
0.0
-1.1
0.0
1.0
0.0
1.7
0.0
1.2
0.0
4.7
0.1
0.2
0.0
0.8
0.0
2.1
1.1
1.1
0.0
1.3
0.1
4.0
0.6
0.9
0.1
1.3
0.1
0.9
0.0
1.0
0.0
-1.1
0.0
2.6
0.0
0.3
0.0
1.7
0.0
0.5
0.0
A ustralia
0.1
0.0
0.0
0.9
1.1
0.0
0.0
0.1
0.2
0.1
0.1
0.2
0.3
0.1
0.2
0.1
0.0
0.0
0.0
0.0
0.0
0.1
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DOI: 10.2202/1524-5861.1157
U nilateral Free T rade
M orocco
SA C U
T hailand
1.1
1.2
6.7
2.8
2.5
6.3
0.3
0.2
0.6
0.2
0.1
0.7
0.0
0.0
0.1
7.6
6.5
10.9
0.1
0.1
0.9
0.2
0.4
1.4
0.2
0.3
0.8
0.1
0.1
0.9
0.1
0.3
1.0
0.0
0.1
0.5
0.1
0.1
1.9
0.0
0.0
0.4
0.1
0.2
14.3
0.1
0.4
0.9
0.0
0.0
0.1
0.2
0.2
0.3
0.0
0.0
0.1
0.5
0.4
1.0
2.4
0.0
0.0
0.2
8.9
0.2
16.3
22.2
50.1
U nilateral Free T rade
M orocco
SA C U
T hailand
0.0
0.0
0.1
0.0
0.0
0.1
0.0
0.0
0.1
0.0
0.0
0.2
0.1
0.1
0.2
0.1
0.1
0.1
0.0
0.1
0.4
0.0
0.0
0.1
0.0
0.1
0.2
0.1
0.1
0.9
0.0
0.1
0.3
0.0
0.1
0.3
0.1
0.1
1.8
0.0
0.1
0.5
0.1
0.1
9.8
0.0
0.0
0.1
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.1
5.4
0.1
0.1
0.1
5.7
0.1
K orea
6.0
12.1
1.4
1.3
0.2
22.4
1.3
-2.3
37.1
0.7
0.7
0.9
1.2
0.3
0.3
1.4
0.3
0.9
0.6
1.7
0.1
0.2
88.5
C hile
K orea
0.1
0.1
0.2
0.3
0.3
0.2
0.6
-0.2
7.0
0.7
0.2
0.5
1.1
0.3
0.2
0.2
0.3
0.1
0.4
0.1
0.2
0.1
C hile
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.1
0.0
0.0
0.0
0.1
0.0
0.0
0.0
5.5
0.0
0.0
0.1
0.0
0.0
1.0
1.5
0.2
0.0
0.0
2.5
0.1
0.2
0.3
0.0
0.1
0.0
0.1
0.0
0.0
0.1
4.6
0.1
0.1
1.0
0.0
0.0
12.1
CAC
3.0
4.5
0.4
0.2
0.1
6.7
0.3
0.5
0.9
0.1
0.1
0.1
0.2
0.0
0.1
0.2
0.1
0.4
6.3
0.8
0.0
0.1
25.1
CAC
0.1
0.0
0.1
0.1
0.2
0.1
0.1
0.0
0.2
0.1
0.0
0.1
0.2
0.0
0.1
0.0
0.1
0.1
4.8
0.1
0.1
0.1
G lobal
Free Trade
312.0
591.0
46.8
28.5
8.6
840.0
47.7
145.6
78.4
17.6
56.3
25.0
38.0
11.4
25.8
66.7
9.0
54.4
16.4
106.7
5.0
11.3
2,542.1
G lobal
Free Trade
5.9
4.6
5.1
6.3
13.5
7.6
24.0
9.9
14.8
17.3
15.7
13.5
34.8
12.6
17.7
6.8
10.9
6.9
12.3
6.9
11.6
7.2
22
Kiyota and Stern: Economic Effects of U.S. Trade Policies
Table 11. Summary Results: Welfare Effects
Bilateral FTA
US Hub
Bill. $
% of GNP
Bilateral FTA/Unilateral free trade
United States
Chile
Singapore
Australia
CAC
Morocco
SACU
Thailand
Korea
Regional free trade
FTAA
Global free trade
United States
Chile
Singapore
Australia
CAC
Morocco
SACU
Thailand
Korea
Published by Berkeley Electronic Press, 2005
Spokes
Bill. $
115.30
6.3
17.0
11.8
18.6
8.2
9.0
15.2
29.1
0.89
0.05
0.13
0.09
0.14
0.06
0.07
0.12
0.23
1.4
2.5
5.1
5.1
1.2
1.6
5.2
13.1
62.4
0.48
60.7
World
% of GNP Bill. $
1.7
2.4
1.1
3.9
2.8
1.0
3.6
2.5
7.6
21.6
12.1
21.8
9.9
10.5
19.8
47.3
Unilateral/Global free trade
Country
World
Bill. $
% of GNP Bill. $
368.8
4.6
1.1
4.3
6.3
2.4
8.9
14.3
37.1
2.9
5.5
1.1
0.9
4.8
5.4
5.7
9.8
7.0
552.3
12.1
9.5
20.1
25.1
16.3
22.2
50.1
88.5
591.0
9.0
17.6
28.5
16.4
5.0
11.3
25.8
78.4
4.6
10.9
17.3
6.3
12.3
11.6
7.2
17.7
14.8
2542.1
114.6
23
Global Economy Journal, Vol. 5 [2005], Iss. 4, Art. 22
the predominance of the shaded cells in the right-hand side of Table 9.
SUMMARY AND CONCLUSIONS
In this article, we have used the Michigan Model of World Production and
Trade to calculate the aggregate welfare and sectoral employment effects of the
menu of U.S. trade policies. The menu of policies encompasses the various
preferential U.S. bilateral and regional FTAs negotiated and in process, unilateral
removal of existing trade barriers by the United States, its FTA partner countries,
and global (multilateral) free trade. The welfare impacts of the FTAs on the
United States are shown to be rather small in absolute and relative terms. The
sectoral employment effects are also generally small, but vary across the
individual sectors depending on the patterns of bilateral liberalization.
The welfare effects on the FTA partner countries are shown to be mostly
positive though generally small, but there are some indications of potentially
disruptive employment shifts in some partner countries. The results further
suggest that there would be trade diversion and detrimental welfare effects in
some non-member countries/regions. It also appears that, while FTA partners
may gain from the bilateral FTAs, they may be adversely affected because of
overlapping “hub-and-spoke” arrangements due to other discriminatory FTAs that
have been negotiated.
The welfare gains from both unilateral trade liberalization by the United
States and from global (multilateral) trade liberalization are shown to be rather
substantial and more uniformly positive for all countries/regions in the global
trading system as compared to the welfare gains from the bilateral FTAs
analyzed.14 The issue then is whether the WTO member countries will be able to
overcome their divisiveness and indecisions and bring the Doha Round
multilateral negotiations to a successful conclusion. Our computational results
suggest that the menu choice of policy options is clearly in favor of multilateral
liberalization.
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Anderson, K., Martin, W. 2005. Agricultural Trade Reform and the Doha
Development Agenda. The World Economy. 28(9):1301-1328.
Bhagwati, J., Panagariya, A. 1996. Preferential Trading Areas and
Multilateralism—Strangers, Friends, or Foes? in The Economics of Preferential
14
See Brown, Kiyota, and Stern (2005b) for sensitivity analysis of introducing alternative
parameters in the model and the resulting welfare impacts of global free trade.
http://www.bepress.com/gej/vol5/iss4/22
DOI: 10.2202/1524-5861.1157
24
Kiyota and Stern: Economic Effects of U.S. Trade Policies
Trade Agreements, ed. J. Bhagwati and A. Panagariya.
American Enterprise Institute.
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DOI: 10.2202/1524-5861.1157
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