Effects of Trade Liberalization on Taiwan: A Computable General Equilibrium Analysis

Abstract

Joining the GATT has been established as one of the most important economic and political targets of the Taiwan government. However, the effects of this action are difficult to establish. Because of the openness of Taiwan's domestic market there could be serious changes in the production structure and income distribution, especially in the relative status of the agricultural and nonagricultural sectors, of protected and unprotected sectors, and also of producers and consumers. The possible high cost of this move on society has caused its necessity to be questioned. In order to clear up the controversy surrounding this issue, this paper, uses a CGE model to analyse the possible effects of this policy change. Following proposals from the Final Draft of the Uruguay Round, we use tariff and nontariff barriers, aggregate measurement of support (AMS), and export quota in our model as policy tools. We omit liberalization in the service sector, because of quantification difficulties. Our analysis includes the impacts on resource allocation, production structure, income distribution and consumers' welfare.

Impact of tariff liberalization on economic and social benefits: Computable general equilibrium application to Kenya

“…Chou and others (1997) applied CGE simulations to assess the impact of tariff liberalization under trade agreements on the Taiwanese economy. Their findings suggested that such liberalization within trade agreements is beneficial, leading to increased real GDP, consumption, and welfare.…”

East Asia’s retail revolution: Diffusion of organized retailing and varieties of market development in Korea and Taiwan

“…Having undergone rapid export-led postwar development, both economies liberalized service FDI amid mounting pressures from the West during the 1980s to reduce trade surplus. Following the Uruguay round of the General Agreement on Tariffs and Trade negotiations, which covered trade in services 4 and the United States Trade Representative’s adoption of Super 301, a measure to improve U.S. trade worldwide, 5 Taiwan reduced its import duty from 10.49% in 1981 to 6.74% in 1992 and revised its tariff schedule eight times (Chou et al., 1997). Korea also reduced its operative import tariff to 5.6% by 1985 from 8% in 1970, in addition to drastically reducing categories of goods that were formally banned or regulated by import quotas (Nam, 1995).…”

Economic Liberalization and Development — The Case of Lifting Martial Law in Taiwan

“…In Taiwan, while there are some discussions on the impact of liberalization, few related specifically to the effects of martial law on the economy. Chou, et al (1997) applied single country computable general equilibrium model to assess the effects of trade liberalization (in their case, joining GATT) on Taiwan. They showed that, from 1971 to 1986, and to 1992, the average tariff rate in Taiwan was reduced from 12.25% to 6.96%, and to 4.87%; the import duty rate was also reduced from 13.51% to 9.31%, and to 6.74%.…”