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Edited by William A. Kerr and James D. Gaisford
Chapter 18: Trade and Domestic Policy: Conduct and Modeling
18 Trade and domestic policy: conduct and modeling John Whalley Introduction It is widely acknowledged that the complexity of domestic policy interventions, which inﬂuence trade ﬂows and are now the subject of substantial international negotiation, are diﬀerent in their eﬀects from those of tariﬀs that are widely analyzed by trade theorists. This is especially the case in such areas as services, competition policy, environmental regulation, product standards, professional accreditation, movement of persons and transportation regulation. It also applies to those areas of agricultural policy where the trade impacts are often signiﬁcant, despite the commitments in the Uruguay Round to tariﬀy all border measures relating to agricultural trade. Despite such acknowledgments, however, it remains commonplace in numerical simulation exercises to analyze the impacts of potential changes in these policies using ad valorem equivalent tariﬀ treatment even though estimated impacts using explicit policy representation and ad valorem equivalent treatments will diﬀer. The diﬃculty for modelers is that the detail and subtlety embodied in this wide array of policy interventions means that some simpliﬁcation is appealing. In addition, no meaningful general propositions exist in the theoretical literature as to the sign or size of the diﬀerences in predicted eﬀects. All that can seemingly be done is to investigate the diﬀerences case by case, but even here the ﬁndings are sensitive both to the particular form of model used as well as the model parameterization employed. As a result, there is relatively...
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