WORKING PAPER 05-13

Predicting Trade Expansion under FTAs and Multilateral Agreements

by Dean A. DeRosa, ADR International Ltd.
and John P. Gilbert, Utah State University

October 2005

How well do economic models predict trade and output expansion under bilateral and multilateral agreements? DeRosa and Gilbert investigate the predictive power of two popular quantitative world trade models--the single-equation gravity model and the multiequation computable general equilibrium (CGE) model--as applied to three major trade liberalization agreements: Mercosur, NAFTA, and the Uruguay Round. They explore both "naïve" and sophisticated variants of the models and find that the naïve gravity model tends to overpredict intrabloc trade expansion while the naïve CGE model tends to underpredict. Adding expansion of the factors of production and productivity growth to the CGE model improves its record.

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RELATED LINKS

Paper: Submission to the USTR in Support of a Trans-Pacific Partnership Agreement January 25, 2010

Speech: The Future of APEC and Its Core Agenda December 9, 2009

Policy Brief 09-16: Pacific Asia and the Asia Pacific: The Choices for APEC July 2009

Policy Brief 08-5: World Trade at Risk May 2008

Policy Brief 07-2: Toward a Free Trade Area of the Asia Pacific February 2007

Book: NAFTA Revisited: Achievements and Challenges October 2005

Working Paper 97-3: Open Regionalism

Article: Challenges to the Free Trade Area of the Americas October 2002

Working Paper 03-7: Labor Standards and the Free Trade Area of the Americas August 2003



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