Deep Trade Policy Options for Armenia: The Importance of Trade Facilitation, Services and Standards Liberalization

Abstract

In this paper the authors develop an innovative 21 sector computable general equilibrium model of Armenia to assess the impact on Armenia of a Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU, as well as further regional or multilateral trade policy commitments. They find that a DCFTA with the EU will likely result in substantial gains to Armenia, but they show that the gains derive from the deep aspects of the agreement. In order of importance, the sources of the gains are: (i) trade facilitation and reduction in border costs; (ii) services liberalization; and (iii) standards harmonization. A shallow agreement with the EU that focuses only on preferential tariff liberalization in goods will likely lead to small losses to Armenia primarily due to a loss of productivity from lost varieties of technologies from the Rest of the World region in manufactured products. Additional gains can be expected in the long run from an improvement in the investment climate. The authors estimate only small gains from a services agreement with the CIS countries, but significant gains from expanding services liberalization multilaterally.

How FDI influences the triangular trade pattern among China, East Asia and the U.S.? A CGE analysis of the sector of Electronics in China

“…As a consequence, capital will be reallocated across sectors much in the same way as would trade responding to the reduction of tariffs. The models of Jensen et al (2007), Jensen and Tarr (2012), Lakatos and Fukui (2013) use this approach. However, as some authors have argued (e.g., Brown and Stern, 2001), the estimation of ad valorem equivalents and its subsequent reductions are a complex task.…”

“…The number of regions can also be increased. Finally, regarding modeling assumptions introducing dynamics in the line of Hosoe (2014) would be of interest, as well as, the introduction of imperfect competition expanding the work of Jensen and Tarr (2012).…”

Deep Integration in the Eurasian Economic Union: What are the Benefits of Successful Implementation or Wider Liberalization?

“…Their model was applied to datasets and policy issues of real economies in small open economy models in all four of our focus countries, initially applied to the Russian Federation by Jensen, Rutherford and Tarr (2006;2007;2010), Rutherford and Tarr (2008;2010) and Bohringer, Rutherford, Tarr and Turdyeva (2015). It has also been applied to the other three focus countries of this study: in Kazakhstan by Jensen and Tarr (2008); in Armenia by Jensen and Tarr (2012); and in Belarus by Balistreri, Olekseyuk and Tarr (2017). The model was applied to Kenya by Balistreri, Rutherford and Tarr (2009) and to Tanzania by Jensen, Rutherford and Tarr (2010).…”

“…Except for Jensen and Tarr (2012), these models could not assess regional preferences in services. Balistreri, Jensen and Tarr (2015) and Jensen and Tarr (2012) incorporated most of the FDI features of our model in small open economy models and analyzed preferential liberalization of services in Kenya and Armenia, respectively.…”

“…Except for Jensen and Tarr (2012), these models could not assess regional preferences in services. Balistreri, Jensen and Tarr (2015) and Jensen and Tarr (2012) incorporated most of the FDI features of our model in small open economy models and analyzed preferential liberalization of services in Kenya and Armenia, respectively. Balistreri, Jensen and Tarr (2015) have shown that there is an analogy to trade diversion in goods whereby preferential commitments to foreign investors in services could be immiserizing.…”