Download Evidence Based Trade policy Making: Using statistical tools for policy making

NATIONAL WORKSHOP ON TRADE POLICY CHOICES:
ACCESSION TO WTO AND APTA
8-10 DECEMBER 2014, Bhutan
Evidence Based Trade policy Making:
Using statistical tools for policy making
Witada Aunkoonwattaka (PhD)
Trade and Investment Division, ESCAP
[email protected]
Outline
• Introduction to Evidence-based policy making
(EBPM)
• EBPM Requirement conditions:
– Relevant Policy questions
– Understanding the tools
– Data availability
• Some online data sources
Policymaking approaches
Opinion-based Policy
Making
•
•
•
•
Anecdote
Experts
Seniors
Gut feeling
Evidence-based Policy (EBP) Making
• Best available research evidence
• Evidence from collected data (empirical
evidence)
– Theory
– Data
– Tools for data analysis
• Gains
– Transparency
– Accountability
Evidence-based policy making
• Tracking, monitoring and evaluation of the results of policies
that have been put in place
– Ex-post analysis
• Making decisions in public area (including on issues
recognition, policy choice and sequencing, or forecasting
future developments)
– Ex-ante analysis
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Components of EBPM
Policy questions:
Ex. What will be the potential effects of an FTA?
Tools:
1.
Making inferences from descriptive statistics and trade indicators
2.
Partial equilibrium approaches to estimate the potential effects on an individual
product
3.
General equilibrium approaches to estimate the potential effects on the whole
economy
4.
Approaches to estimate distribution effects
Data sources:
- Cross-country data, National data
- Secondary-data sources (online, published, unpublished), Primary-data surveys
EBPM requirement no. 1
POLICYMAKERS ASK RELEVANT
POLICY QUESTIONS
Policy questions at different stages of policymaking
• Before negotiation of an FTA: An analysis of potential costs and
benefits (ex-ante)
– What a country can supply to its FTA partners? What it can source from the
partners?
– What are expected impacts on production and employment level and
composition, welfare, fiscal balance, etc.
– What are the costs of necessary adjustment policies for the adversely
affected sectors?
• After its implementation: An impact assessment (ex-post)
– Whether the impacts are within the expected range?
– Whether the expected benefits are fully materialized?
– Whether further adjustment policies are necessary?
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EBPM requirement no. 2
RESEARCHERS UNDERSTAND THE
TOOL(S) AND THEIR LIMITATIONS
What will be the potential effects of an FTA?
1. Making inferences from trade indicators
2. Estimating the potential effects on an individual product
3. Estimating the potential effects on the whole economy
Available methodologies
• Simple indicators (descriptive statistics)
• (Sophisticated) econometric models (including gravity models,
etc.
• Simulation techniques
– A partial equilibrium model: sectoral analysis
– A general equilibrium model: economy-wide analysis
• They are complementary with different strength/weakness
and different (explicit and/or implicit)assumptions
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Context of the questions and availability of
resources dictate the choice of methodology
• Whether the focus is the impacts at macroeconomic level or
industry level ?
• Whether ex-post questions or ex-ante questions are being
asked?
• Whether the required data are available?
• How much time and resources (technology, human capital,
and money) are available?
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What will be the potential effects of an FTA?
1. Making inferences from descriptive statistics / trade
indicators
2. Estimating the potential effects on an individual product
3. Estimating the potential effects on the whole economy
What can be looking at ?
• How much of trade is intraregional?
– Will the proposed FTA promote trade between trading partners? Are they
then “natural” trading partners?
• What is the comparative advantage of each member?
– Which sectors are likely to have export (import) potential?
• Is export of a particular good regionally oriented?
– How strong is a regional bias (if there is one)?
• How complementary is trade between a given pair of FTA
members?
– To what extent the export pattern of a country matches the import pattern
of a region?
• What is a degree of similarity between partners’ exports?
– To what extent a country’s export profile overlaps with other FTA members?
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Descriptive statistics
• Growth and value of trade
• Product shares
• Market shares
…
Note: The list is not exhaustive.
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Source: ITC trademap
Complementary of Bhutan exports with APTA members
(2013)
Index (0 to 100)
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40
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Bangladesh
Rep. of
Korea
APTA
China
India
Importing countries
Calculation using data from WITS
Sri Lanka
Lao PDR
Ex. trade indicators
Note: The list is not exhaustive.
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Advantages
• Relatively easy to implement
– Data requirements are minimal
– Computation is straightforward
• Some of trade indicators may be found already computed. For
example,
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–
–
–
–
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WITS
International Trade Centre
World Bank
UNCTAD
APTIR
TRADESIFT
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Limitations
• They cannot provide precise numbers that quantify the effect
of an FTA on trade, production, consumption, or welfare
• They can be meaningless or misleading if data are unsuitably
classified
– Trade classifications do not match a country’s production structure
– Data are too aggregated
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What will be the potential effects of an FTA?
1. Making inferences from trade indicators
2. Estimating the potential effects on an individual product
3. Estimating the potential effects on the whole economy
Potential impacts on an individual product
• How an FTA will affect production, consumption, and trade flows
in the domestic market for a single commodity?
– What will be an import increase?
– What will be an export increase of FTA partners?
– What will be an export decrease of non-member countries?
– What will be a fall in tariff revenue?
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Potential impacts on an individual product
• How an FTA will affect production, consumption, and trade flows
in the domestic market for a single commodity?
• Reasons for focusing on an individual product:
–
–
–
–
–
–
Its trade is significant in the country’s trade balance
It generates substantial tariff revenue,
It employs a large share of the country’s workforce
Its output contributes significantly to GDP
Firms in the sector may be important political players
It may be located in an important region of a country
• The in-depth analysis at the level of individual industry or product
makes partial equilibrium (PE) approach more appropriate
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How does PE work?
An example from an analysis on tariff
Input:
• A change in trade policy (tariff)
• Parameters
Output:
• Effect on prices and quantities (volumes) traded
• Trade diversion effect
• Trade creation effect
Most PE software gives you only change in import and exports,
but these come from change in prices and quantities.
PE - various effects
Due to tariff liberalization of country A with a partner country B
Advantages of using PE Analysis
• PE models can be used to compute trade impacts of trade
policy at a very disaggregated level of statistical product
classification.
– This detailed level is very often the level at which trade liberalization
and rule of origin in trade agreements are negotiated.
• Easier to implement than general equilibrium
• Less of a black box than general equilibrium
• Less intensive on data requirements
• Easy to change parameters and check for robustness to
different assumptions
Limitations
• It ignores the inter-industry effects and the feedback effects
of a trade policy change
– One way to look at it is the short-run impacts of a policy change on a
particular industry
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What will be the potential effects of an FTA?
1. Making inferences from trade indicators
2. Estimating the potential effects on an individual product
3. Estimating the potential effects on the whole economy
Potential economy-wide impacts
• What are the macro-level impacts of an FTA (when interactions
between all markets are accounted for)?
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–
–
–
–
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real GDP
trade balance
terms of trade
import and export prices in a particular sector
output and trade in different sectors within the country
national welfare (and where will these welfare effects come from?)
• The multi-sectoral trade liberalization makes CGE (Computable
General Equilibrium) approach may be more appropriate
– The direct effects of tariff reductions in individual markets
– The indirect changes in related markets
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What is CGE?
• CGE models are based on the fact that the different markets in a
given economy are linked, and changes that take place in one
market affects other markets; these changes must be
accounted for as they can have back and forth impacts
• CGE models use Social Accounting Matrix (SAM) to capture
these various linkages
– SAM is built upon the circular flow conception of the economic system
where each expenditure must be matched by a corresponding receipt or
income.
• They take into account cross-sectoral reallocation of factors of
production
EBPM requirement no. 3
EVIDENCE (DATA) EXISTS
EBPM Basic Requirements
• Data on trade flows
– bilateral trade data at different levels of aggregation, for example,
• UN Commodity trade (so called Comtrade) statistics database (access through WITS : World
Integrated Trade Solution, International Trade Centre: (TRADEMAP)
• IMF Direction of Trade Statistics (DOTs)
• Data on trade policy
-
Tariff data
• WTO integrated database (IDB) and Consolidated Tariff Schedules database (CTS): MFN
applied tariffs and imports of WTO Members at the tariff-line level which often means 8
digits, sometimes even 10 digits, starting in 1996
• WTO Tariff Analysis Online (TAO)
• CEPII and IFPRI's MAcMap database: a set of files at the tariff line level of the bilateral
measurement of applied tariff duties, taking regional agreements and trade preferences
exhaustively into account.
• AMAD (Agricultural Market Access Database)
WITS and ITC provides integrated platform to access to databases on trade
and trade-policy measures
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EBPM Basic Requirements
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NTM data
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World Bank Temporary Trade Barriers Database
AMAD (also data on tariff-quotas)
TPP database
World Bank TBT database
Data on ad-valorem equivalents of NTMs from Kee at al. (2009)
WTO databases
• SPS
• TBT (and also this database on Specific Trade Concerns)
• Subsidies (Not publicly available)
WITS and ITC provides integrated platform to access to
databases on trade and trade-policy measures
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Data availability
SOME ONLINE DATA SOURCES
ITC
An integrated platform to access
trade and trade policy databases
WITS
An integrated platform to access
trade and trade policy databases
What does WITS offer?
• WITS gives access to trade and tariff related
statistical information
• WITS calculates some trade indices at for a country
• WITS includes a partial equilibrium simulation tool
and data analysis tools
Login to WITS
http://wits.worldbank.org
WITS Functionality
Data Retrieval and Analysis (3)
Data Retrieval and Analysis
I-TIP
The integrated platform to access
WTO database on trade policy
measures in goods (and services)
Integrated Trade Intelligence Portal (I-TIP)
• I-TIP provides a single entry point for information
compiled by the WTO on trade policy measures.
• Containing information on over 25,000 measures, ITIP covers both tariff and non-tariff measures
affecting trade in goods as well as information on
trade in services, regional trade agreements and the
accession commitments of WTO members.
Conclusions
• Keys for EBPM:
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Policy questions
Data availability
Technical capability of research institutes
Time and resources
• There is more than one approach to answer to a policy question. They are actually
complementary.
– Understanding underlying assumptions the tools is the key to properly
interpret the research results
• To get the research-based evidence relevant to policy decisions, policymakers
could play important roles:
– Communication between researchers and policymakers to make research more
relevant to policymakers’ needs
– Improve data accessibility
– Building technical capacity of local research institutes
Useful readings
• Andriamananjara, Cadot, and Grether (2013). Tools for Applied
Goods Trade Policy Analysis: An Introduction, in Arvid Lukauskas,
Robert M. Stern, and Gianni Zanini (eds), Handbook of Trade Policy
for Development. Oxford University Press.
• ESCAP (2009). Trade Statistics in Policymaking - A Handbook of
Commonly Used Trade Indices and Indicators.
• Plummer, Cheong, and Hamanaka (2010). Methodology for Impact
Assessment of Free Trade Agreements. Manila, ADB.
• World Bank (2011). User’s Manual-WITS.
• World Bank (2013). Online Trade Outcome Indicators- User’s
Manual. World Integrated Trade Solution (WITS).
• WTO-UNCTAD (2012), A Practical Guide to Trade Policy Analysis.
Thank you