trade liberalizations in latin america and eastern europe...

Trade Liberalizations in Latin America and Eastern Europe

The Cases of Ecuador and Slovenia

Stanley Cho and Julian P. DıazUniversity of Minnesota

November 10, 2004

Preliminary and Incomplete

Motivation

¤ Two trade liberalization episodes are under way:

- Ecuador is negotiating a Free Trade Agreement with

the United States.

- Slovenia joins the European Union.

¤ Although these are two small economies, the trade liber-

alizations occur with their largest trade partners.

¤ We want to analyze the impact of these trade liberaliza-

tions on the economies of Ecuador and Slovenia.

¤ We follow the tradition of Shoven and Whalley (1984)

and construct calibrated general equilibrium models for

Ecuador and Slovenia.

¤ The first step is to build a Social Accounting Matrix

(SAM) for each economy.

¤ A SAM is a record of all the transactions that take place

in an economy in a particular period of time, with a finer

level of disaggregation than an Input-Output Matrix.

¤ Examples of the use of SAMs for Applied General Equilib-

rium Models: Kehoe et.al. (1988) for the Spanish econ-

omy, etc.

EcuadorSocial Accounting Matrix (2001)

production consumption factors institutions capital exports total 1 2 3 4 5 6 7 8 9 10 prim text trans oman serv prim text trans oman serv labor capital households govt prim 682997 24662 0 2908505 192468 526186.5 0 0 0 0 0 144885 2987915 7467619 text 29924 373117 3012 65657 39225 0 849926.5 0 0 0 0 29303 86244 1476409

production trans 39273 35 216163 66647 193183 0 0 71901 0 0 0 591148 104705 1283055 oman 810655 86343 4013 2874587 2953055 0 0 3858666 0 0 2069055 1563682 14220056 serv 1170504 257348.5 82428 2054446 4531043 648898.5 213120.5 71024 1396656 5567827 2133707 2560303 870302 21557606 prim 1175085 1175085 text 1178044 1178044

consumption trans 272300 272300 oman 6143994 6143994 serv 5721724 5721724

L 1796738 264299.9 15424.22 454519.9 6942046 9473028 factors K 2683852 198003.1 7686.777 799053.1 5652908 9341503

households 9473028 9341503 18814531 government 19457 24513 109298 725954 43390 0 114997 129375 888673 153897 591660 2801214

institutions dir taxes 591660 591660 ind taxes 401 0 0 488958 43390 0 114997 129375 888673 153897 1819691 tariffs 19056 24513 109298 236996 0 389863 capital 3731724 667507 995463 5394694 imports 234219 248087 845030 4270687 1010288 6608311 total 7467619 1476409 1283055 14220056 21557606 1175085 1178044 272300 6143994 5721724 9473028 9341503 18814531 667507 5394694 6608311

Outline

- Background

- The Model

- Data, Calibration, Results

- Numerical Experiments

- Conclusion and Future Work

Ecuador

¤ A relatively very open economy.

¤ Weighted tariff rate implied by data: 5.89%

¤ US main trade partner.

¤ Member of the Andean Community of Nations (CAN), a

regional free trade agreement. Trade with CAN is impor-

tant.

Ecuador[Exports + Imports]/GDP

0.00

0.20

0.40

0.60

0.80

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

EcuadorComposition of Imports (2001)

Textiles4.36% Chemical

Products26.90%

Transportation Equipment

14.92%

Fuels 5.23%%

Cereals1.82%

Capital Goods14.34%

Other32.44%

EcuadorComposition of Exports (2001)

Other30.58 %

Banana19.11%

Flowers4.99%Shrimp

5.84%

Petroleum39.47%

EcuadorDestination of Exports (2001)

US 36.48%

Andean17.39%

EU 15 13.84%

Other 32.29%

EcuadorOrigin of Imports (2001)

Other 44.37%

EU 15 11.71%

Andean20.66% US

23.26%

EcuadorTariff Schedule

Sectors Tariff rate

Cereals 13.20%

Flowers 1.23%

Other primaries 4.45%

Shrimp 20.00%

Textile 9.88%

Chemicals 4.60%

Transports 12.93%

Other manufacturing 5.92%

Service 0.00%

Weighted Average 5.90%

Slovenia

� Slovenia is a very open economy.

� EU 15 by far the main trade partner. Other non-EU 15

trade partners: Croatia, Bosnia & Herzegovina, Russia,

Poland, US.

� Low tariff rates, little dispersion.

� By becoming an EU member, it will adopt EU’s tariff

schedule.

Slovenia[Exports + Imports]/GDP

1.00

1.10

1.20

1.30

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

SloveniaComposition of Exports (2001)

Other Manuf.62.98%

Primaries1.98%Food & Bev

2%Textiles7.57%Leather

1.16%Wood & Furn

11.29%

Transp. Equip.13%

SloveniaComposition of Imports (2001)

Other Manuf.61%

Primaries13%

Food & Bev3%

Textiles7%

Leather1%

Wood & Furn3%

Transp. Equip.13%

SloveniaOrigin of Imports (2001)

Other22.25%

EU 1567.47%

BIH0.61%

CRO3.98%

USA2.92%

SloveniaDestination of Exports (2001)

Other22.25%

EU 1562.19%

BIH4.30%

CRO8.63%

USA2.63%

ROW54.69%

EU 15 45.31%

EU 15 62.60%

ROW 37.40%

SloveniaDestination of Exports (2001)

Primaries Manufactures

SloveniaOrigin of Imports (2001)

EU 1544.62%

ROW55.38%

ROW29.25%

EU 1570.75%

Primaries Manufactures

Slovenia and EUTariff Rates

11.70%

19.50%

7.10%

2.80% 2.90% 3.40%3.00%

9.20%

1.50% 0.60%0.40% 0.60%2.30%3.00%

0%

5%

10%

15%

20%

25%

Primary Food & Bev Textiles Leather WoodProducts

TransportationEq.

OtherMaufactures

SloveniaEU

The Model

¤ A Static Applied General Equilibrium Model.

¤ Agents:

- Households

- Firms

- Government

- Foreign Trade Partners

Sectoral Disaggregation

¤ We disaggregate the economies in the sectors that might

exhibit the greatest impact due to elimination of tariffs.

Ecuador Slovenia

Banana PrimariesCereals Food & BeveragesFlowers LeatherOther Primaries Wood & FurnitureShrimp TextilesTextiles Transportation EquipmentChemical Products Other ManufacturesTransportation Equipment ServicesOther ManufacturesServices

Types of Goods: Ecuador

Production Goods (GP) Consumption Goods (GC)Banana BananaCereals CerealsFlowers FlowersOther Primaries Other PrimariesShrimp ShrimpTextiles TextilesChemical Products Chemical ProductsTransportation Equipment Transportation EquipmentOther Manufactures Other ManufacturesService Services

Investment Good Imported Good

Types of Goods: Slovenia

Production Goods (GP) Consumption Goods (GC)Primaries PrimariesFood & Beverage Food & BeverageLeather LeatherWood & Furniture Wood & FurnitureTextiles TextilesTransportation Equipment Transportation EquipmentOther Manufactures Other ManufacturesServices Services

Investment Good Imported Good

Trade Partners

Ecuador Slovenia

United States (us) EU 15 (eu)Andean Community (and) Rest of the World (row)Rest of the World (row)

Households

¤ Households derive utility from purchasing the consump-

tion goods:

max∑

i∈GC

θc,i log ci

s.t.∑

i∈GC

(1 + tc,i)pc,ici = (1− τd)(w¯+ rk)

Domestic Production Firms

¤ Use intermediate inputs from all the sectors in fixed pro-

portions and combine capital and labor to produce the

domestic good:

yj,d = min

{xd

ban,j

adban,j

,xd

cer,j

adcer,j

, ... ,xd

ser,j

adser,j

, βjkαjj `

(1−αj)j

}, j ∈ GP

¤ In equilibrium these firms make zero profits.

Final Production Goods Firms

¤ Purchase domestic goods

(1 + tp,j)pj,dyj,d

and imported goods

eus(1 + τj,us)pj,usyj,us + eand(1 + τj,and)pj,andyj,and

+ erow(1 + τj,row)pj,rowyj,us

¤ Combine domestic output with imported goods to pro-

duce final goods:

yj = γj

[δj,dy

ρmj,d + δj,usy

ρmj,us + δj,andy

ρmj,and + δj,rowyρm

j,row

] 1ρm

¤ Note when ρm → 0, yj = γj

[y

δj,dj,d y

δj,usj,us y

δj,andj,and y

δj,rowj,row

]

Investment Good Firm

¤ The Investment Good Firm combines the final goods as

intermediate inputs in fixed proportions:

yinv = min

{xinv

ban,inv

ainvban,inv

,xinv

cer,inv

ainvcer,inv

, ... ,xinv

ser,inv

ainvser,inv

}

¤ Its output is purchased by the households, the govern-

ment, and by foreigners.

Consumption Goods Firms

¤ Produce goods to be consumed exclusively by households.

They combine final production goods as intermediate in-

puts in fixed proportions:

ycj = min

{xc

ban,j

acban,j

,xc

cer,j

accer,j

, ... ,xc

ser,j

acser,j

}, j ∈ GC

¤ We assume that xci,j = 0 for i 6= j, ser.

Government

¤ Derives utility from consuming services and the invest-

ment good:

θg,ser log cg,ser + θg,inv log cg,inv

¤ Government’s budget constraint:

τd(w¯+ rk) +∑

j∈GP

tp,jpj,dyj,d +∑

j∈GC

tc,jpc,jcj+

∑

j∈GP

τj,useuspj,usyj,us +∑

j∈GP

τj,andeandpj,andyj,and +

∑

j∈GP

τj,rowerowpj,rowyj,row = psercg,ser + pinvcg,inv

Trade Partners

� The representative agent in each foreign country f pur-

chases imported goods from the domestic economy, and

consumes a local good:

max

∑j∈GP

θf,j logxf,j

+ θf,inv logxf,inv + θf,f logxf,f

s.t.∑

j∈GP

(1 + τt,j)pjxf,j + pinvxf,inv + efxf,f = efIf

Equilibrium

¤ An equilibrium is a set of:

- prices for domestic goods (pj,d)j ∈GP

- prices for final goods (pj)j ∈GP , pinv

- prices for consumption goods (pc,j)j ∈Gc

- factor prices r, w

- real exchange rates (eus, eand, erow)

- foreign prices (pban,f , ... , pser,f)f=us,and,row

- consumption plan for the consumer (cban, ccer, ... , cser, cinv)

- production plan for domestic good firm j

(yj,d, xdban,j, ... , xd

ser,j, kj, `j)

- production plan for final good firm j

(yj, yj,d, yj,us , yj,and, yj,row)

- production plan for investment good firm j

(yinv, xinvban,inv, ... , xinv

ser,inv)

- production plan for consumption good firm j

(ycj, xc

ban,j, ... , xcser,j)

- consumption plan in country f

(xban,f , ... , xser,f , xinv,f , xf,f)

- consumption plan for the government (cg,ser, cg,inv)

such that, given taxes and tariffs:

(i) The consumption plan (cban, ccer, ... , cser, cinv) solves the

consumer’s problem.

(ii) The production plan (yj,d, xdban,j, ... , xd

ser,j, kj, `j) solves the

domestic good firm j problem, and generates zero profits.

(iii) The production plan (ycj, xc

ban,j, ... , xcser,j) solves the con-

sumption good firm j problem, and generates zero profits.

(iv) The production plan (yinv, xinvban,inv, ... , xc

ser,inv) solves the

investment firm problem, and generates zero profits.

(v) The production plan (yj, yj,d, yj,us , yj,and, yj,row) for final

good firm j minimizes cost and generates zero profit.

(vi) The market for final good j clears,

yj =∑

i∈GP

xdj,i +

∑

i∈GC

xcj,i + xj,inv + xus,j + xand,j + xrow,j

(vii) The market for consumption good j clears, ycj = cj.

(viii) The market for investment good clears,

yinv = cinv + cg,inv + xus,inv + xand,inv + xrow,inv

(ix) The factor markets clear, i.e.∑

j `j = ¯, and∑

j kj = k

(x) The Government balances its budget.

(xi) Trade is balanced:

ef

∑

j

pj,fyj,f =∑

j

pjxj,f + pinvxinv,f , f = us, and, row

(xii) The consumption plan (xban,f , xcer,f , ... , xser,f , xinv,f , xf,f)

solves country f representative consumer’s problem.

Data

¤ For Ecuador:

- Input-Output Matrix (2001)

- Foreign Trade Statistics

- Source: Central Bank of Ecuador

¤ We construct a 10-sector SAM.

¤ For Slovenia:

- Input-Output Matrix (2001)

- Foreign Trade Statistics

- Trade in Services Statistics

- Statistical Office of the Republic of Slovenia and Bank

of Slovenia

¤ We construct an 8-sector SAM.

Calibration

¤ We calibrate the values of the parameters of the model

economy so that, in equilibrium, the agents replicate the

transactions observed in the SAM.

¤ Also, we obtain:

Partners’ GDP IFS

Partners’ Tariff Rates WTO Trade Policy Reviews

ρm Sensitivity Analysis: ρLm = 0.0

ρHm = 0.9

Experiments – For Ecuador

� Experiment 1 – “Partial Liberalization”: Ecuador and the

US lower, but do not completely eliminate the tariffs they

impose on each other.

� Experiment 2 –“Free Trade Agreement”: Ecuador and

the US completely eliminate their tariffs.

� NOTE: In both cases, Ecuador does not alter its tariffs

with the Rest of the World.

Real Income Indices

¤ Consumer Real Income Index =[cθbanban × ...× cθser

ser × cθinvinv

]

¤ Government Real Income Index =[cθg,bang,ban × ...× c

θg,serg,ser × c

θg,invg,inv

]

¤ “Social” Real Income Index =[CΘban

ban × ...× CΘserser × CΘinv

inv

]

where Cj = cj + cg,j and Θj =cj + cg,j∑

j cj +∑

j cg,j

Dataσimp=1 σimp=10 σimp=1 σimp=10σexp=1 σexp=1 σexp=1 σexp=1

Banana 0.000 0.020 0.020 0.000 0.000Cereal 0.134 0.020 0.020 0.000 0.000Flower 0.013 0.020 0.020 0.000 0.000

Other primaries 0.094 0.020 0.020 0.000 0.000Shrimp 0.222 0.020 0.020 0.000 0.000Textile 0.161 0.020 0.020 0.000 0.000

Chemicals 0.061 0.020 0.020 0.000 0.000Transport 0.164 0.020 0.020 0.000 0.000

Other manufacture 0.070 0.020 0.020 0.000 0.000Service 0.000 0.000 0.000 0.000 0.000Banana 0.000 0.000 0.000 0.000 0.000Cereal 0.134 0.134 0.134 0.134 0.134Flower 0.013 0.013 0.013 0.013 0.013









Other manufacture 0.040 0.040 0.040 0.040 0.040Service 0.000 0.000 0.000 0.000 0.000

ECUADOR NUMERICAL EXPERIMENTS II : FREE TRADE AGREEMENT WITH US

Tariffs

Partial Liberalization Total Liberalization

Benchmark

tarif

f rat

e on

US

tarif

f rat

e on

RO

WU

S ta

riff r

ate

RO

W ta

riff r

ate

EcuadorBanana Exports to US

1.0000

1.0513

1.1009

0.9

0.95

1

1.05

1.1

1.15

benchmark FTA low sigma FTA high sigma

EcuadorCereal Exports to US

1.0000

1.0407

1.0868

0.9

0.95

1

1.05

1.1

1.15


EcuadorFlower Exports to US

1.0000

1.0556

1.1062

0.9

0.95

1

1.05

1.1

1.15


EcuadorOther Primaries Exports to US

1.0000

1.0562

1.1064

0.9

0.95

1

1.05

1.1

1.15


ECUADOR - EXPORTS TO US

EcuadorShrimp Exports to US

1.0000

1.0653

1.1167

0.9

0.95

1

1.05

1.1

1.15


EcuadorTextile Exports to US

1.0000

1.17091.1183

0.9

0.95

1

1.051.1

1.15

1.2


EcuadorChemicals Exports to US

1.0000

1.0665

1.1117

0.9

0.95

1

1.05

1.1

1.15


EcuadorTransports Exports to US

1.0000

1.1179

1.0714

0.9

0.95

1

1.05

1.1

1.15


EcuadorOther Manufacturing Exports to US

1.0000

1.0605

1.1045

0.9

0.95

1

1.05

1.1

1.15


EcuadorService Exports to US

1.0000 1.0158

1.0636

0.9

0.95

1

1.05

1.1

1.15


Ecuador Goods Export share of US

0.39510.4060

0.3809

0.3

0.35

0.4

0.45

0.5


EcuadorCereal Imports from US

1.0000

1.7007

1.1008

0.8

1

1.2

1.4

1.6

1.8

2


EcuadorFlower Imports from US

1.0000 1.0219

0.6414

0.5

0.6

0.7

0.8

0.9

1

1.1


EcuadorOther Primaries Imports from US

1.0000

1.0860

1.3390

0.9

1

1.1

1.2

1.3

1.4


EcuadorShrimp Imports from US

4.2201

1.0000 1.2373

0.91.31.72.12.52.93.33.74.14.5


ECUADOR - IMPORTS FROM US

EcuadorTransports Imports from US

1.9143

1.11581.0000

0.9

1.1

1.3

1.5

1.7

1.9

2.1


EcuadorOther Manufacturing Imports from US

1.0000

1.0483 1.0336

0.9

0.95

1

1.05

1.1

1.15


EcuadorTextile Imports from US

1.0000

2.2578

1.1427

0.9

1.3

1.7

2.1

2.5


EcuadorChemicals Imports from US

1.0000

0.9337

1.0381

0.9

0.95

1

1.05

1.1

1.15


EcuadorService Imports from US

1.0000 0.9813

0.5359

0

0.3

0.6

0.9

1.2


EcuadorGoods Import share of US

0.24680.2680

0.2362

0.1

0.15

0.2

0.25

0.3


EcuadorBanana Exports to Rest of the World

1.0000 0.9927 0.9947

0.96

0.98

1

1.02

1.04

1.06


EcuadorCereal Exports to Rest of the World

1.0000 1.0056 1.0042

0.96

0.98

1

1.02

1.04

1.06


EcuadorFlower Exports to Rest of the World

1.0000 0.99380.9912

0.96

0.98

1

1.02

1.04

1.06


EcuadorOther Primaries Exports to Rest of the World

1.0000 0.99420.9921

0.96

0.98

1

1.02

1.04

1.06


ECUADOR - EXPORTS TO REST OF THE WORLD

EcuadorShrimp Exports to Rest of the World

1.0000 0.99360.9906

0.96

0.98

1

1.02

1.04

1.06


EcuadorTextile Exports to Rest of the World

1.0000 0.99970.9983

0.96

0.98

1

1.02

1.04

1.06


EcuadorChemicals Exports to Rest of the World

1.0000 1.0013 0.9982

0.96

0.98

1

1.02

1.04

1.06


EcuadorTransports Exports to Rest of the World

1.0000

1.01741.0193

0.96

0.98

1

1.02

1.04

1.06


EcuadorOther Manufacturing Exports to ROW

1.0000 1.0008 0.9971

0.96

0.98

1

1.02

1.04

1.06


EcuadorService Exports to Rest of the World

1.0000 0.99410.9925

0.96

0.98

1

1.02

1.04

1.06


Ecuador Goods Export share of Rest of the World

0.60490.6191

0.5940

0.5

0.55

0.6

0.65

0.7


EcuadorCereal Imports from Rest of the World

1.0000

0.9517

0.9939

0.9

0.95

1

1.05

1.1


EcuadorFlower Imports from Rest of the World

1.00001.0331

1.1127

0.9

0.95

1

1.05

1.1

1.15

1.2


EcuadorOther Primaries Imports from Rest of the World

1.00001.0155

1.0682

0.95

1

1.05

1.1


EcuadorShrimp Imports from Rest of the World

1.1098

1.00001.0353

0.9

0.95

1

1.05

1.1

1.15

1.2


ECUADOR - IMPORTS FROM REST OF THE WORLD

EcuadorTextile Imports from Rest of the World

1.0000 1.00021.0076

0.9

0.95

1

1.05

1.1


EcuadorChemicals Imports from Rest of the World

1.00001.0167

1.0016

0.9

0.95

1

1.05

1.1


EcuadorTransports Imports from Rest of the World

0.8253

0.98131.0000

0.8

0.85

0.9

0.95

1

1.05

1.1


EcuadorOther Manufacturing Imports from ROW

1.0000 1.0026

1.0303

0.95

1

1.05

1.1


EcuadorService Imports from Rest of the World

1.0000 1.0044

1.0537

0.9

0.95

1

1.05

1.1


EcuadorGoods Import share of Rest of the World

0.75320.7638

0.7320

0.6

0.65

0.7

0.75

0.8


EcuadorConsumer Welfare under Partial Liberalization

1.0037 1.00171.0000

0.9400

0.9600

0.9800

1.0000

1.0200

1.0400

benchmark low sigma high sigma

ECUADOR - WELFARE ANALYSIS

EcuadorGovernment Welfare under Partial Liberalization

0.9705 0.9669

1.0000

0.9400

0.9600

0.9800

1.0000

1.0200

1.0400


EcuadorSocial Welfare under Partial Liberalization

0.9992 0.99711.0000

0.9400

0.9600

0.9800

1.0000

1.0200

1.0400


EcuadorSocial Welfare under FTA

1.0002 0.99591.0000

0.94

0.96

0.98

1

1.02

1.04


EcuadorConsumer Welfare under FTA

1.0062 1.00231.0000

0.94

0.96

0.98

1

1.02

1.04


EcuadorGovernment Welfare under FTA

0.9611 0.9544

1.0000

0.94

0.96

0.98

1

1.02

1.04


Experiment 3

¤ We observe that Tariff Revenues are an important com-

ponent of the Ecuadorian Government Total Revenues.

¤ Losing these Tariff Revenues might be of particular in-

terest for the Ecuadorian Government.

¤ We ask the question: “By how much would the Value

Added Tax (VAT) rate have to be raised in order to com-

pensate the loss of Tariff Revenues?”


from US 111,333 29,186 31,604 0 0from ROW 278,530 290,700 272,470 289,440 271,360

Effective VAT rate 8.92%9.25% 9.39% 9.47% 9.64%

Tariff Revenue

Compensatory Effective VAT Rate

ECUADOR EXPERIMENTS III : FISCAL POLICY TO COMPENSATE TARIFF REVENUE

Tariffs

Partial Liberalization Total Liberalization

Benchmark

Experiment – For Slovenia

� Slovenia and EU 15 eliminate its tariffs on each others

imports.

� Note: In this case Slovenia’s tariffs with the ROW change:

Slovenia adopts EU 15’s tariff schedule


Primary 0.030 0.010 0.010 0.000 0.000Food & Beverage 0.092 0.010 0.010 0.000 0.000

Textile 0.015 0.010 0.010 0.000 0.000Leather 0.023 0.010 0.010 0.000 0.000

Wood Product 0.004 0.010 0.010 0.000 0.000Transport 0.006 0.010 0.010 0.000 0.000

Other manufacture 0.006 0.010 0.010 0.000 0.000Service 0.000 0.000 0.000 0.000 0.000Primary 0.030 0.030 0.030 0.117 0.117

Food & Beverage 0.092 0.092 0.092 0.195 0.195Textile 0.015 0.015 0.015 0.071 0.071Leather 0.023 0.023 0.023 0.030 0.030








Other manufacture 0.040 0.040 0.040 0.040 0.040Service 0.000 0.000 0.000 0.000 0.000

EU ta

riff r

ate

RO

W ta

riff r

ate

Benchmark

Tarif

f rat

e on

EU

Tarif

f rat

e on

RO

W

SLOVENIA NUMERICAL EXPERIMENT : JOINING THE EU

Tariffs

Partial Liberalization with EU Joining The EU

SloveniaPrimary Goods Exports to EU

1.0000

1.09071.1232

0.9

0.95

1

1.05

1.1

1.15

benchmark Join EU low sigma Join EU high sigma

SloveniaFood & Beverage Exports to EU

1.0000

1.2183

1.1786

0.95

1

1.05

1.1

1.15

1.2

1.25


E

SloveniaTextile Exports to EU

1.0000

1.05901.0809

0.9

0.95

1

1.05

1.1

1.15


Slovenia Leather Product Exports to EU

1.0000

1.04951.0291

0.9

0.95

1

1.05

1.1

1.15


SLOVENIA - EXPORTS TO EU

SloveniaWoods Product Exports to EU

1.0000 1.01011.0375

0.9

0.95

1

1.05

1.1

1.15


Slovenia Transports Exports to EU

1.0000

1.03781.0232

0.9

0.95

1

1.05

1.1

1.15


SloveniaOther manufacturing goods Exports to EU

1.0000

1.04331.0217

0.9

0.95

1

1.05

1.1

1.15


SloveniaService Exports to EU

1.0000 1.01170.9782

0.85

0.9

0.951

1.05

1.1

1.15


SloveniaPrimary Goods Import from EU

1.0000

1.2585

1.0563

0.9

1

1.1

1.2

1.3


SloveniaFood & Beverage Import from EU

1.0000

1.9636

1.1147

0.8

1

1.2

1.4

1.6

1.8

2


SloveniaTextile Import from EU

1.0000

1.0452

1.0859

0.9

0.95

1

1.05

1.1

1.15


Slovenia Leather Product Imports from EU

1.0000

1.04901.0356

0.9

0.95

1

1.05

1.1

1.15


SLOVENIA - IMPORTS FROM EU

SloveniaWoods Product Imports from EU

1.00000.9587

1.0179

0.85

0.9

0.95

1

1.05

1.1

1.15


Slovenia Transports Imports from EU

1.0000 0.98991.0255

0.9

0.95

1

1.05

1.1

1.15


SloveniaOther manufacturing goods Imports from EU

1.0000 0.97591.0188

0.85

0.9

0.951

1.05

1.1

1.15


SloveniaService Imports from EU

1.0000

0.8900

1.0252

0.8

0.85

0.9

0.95

1

1.05

1.1


Slovenia Goods Export share of EU

0.6181 0.62340.6057

0.5

0.55

0.6

0.65

0.7


Slovenia Goods Import share of EU

0.6997 0.71190.6925

0.6

0.65

0.7

0.75

0.8


SloveniaPrimary Goods Exports to Rest of the World

1.00000.9627 0.9678

0.85

0.9

0.95

1

1.05

1.1

1.15


SloveniaFood & Beverage Exports to Rest of the World

1.0000 0.98100.9721

0.85

0.9

0.95

1

1.05

1.1

1.15


SloveniaTextile Exports to Rest of the World

1.0000 0.97130.9747

0.85

0.9

0.95

1

1.05

1.1

1.15


Slovenia Leather Product Exports to Rest of the World

1.0000 0.98040.9848

0.85

0.9

0.951

1.05

1.1

1.15


SLOVENIA - EXPORTS TO REST OF THE WORLD

SloveniaWoods Product Exports to Rest of the World

1.0000 0.97160.9689

0.85

0.9

0.95

1

1.05

1.1

1.15


Slovenia Transports Exports to Rest of the World

1.0000 0.97090.9805

0.85

0.9

0.951

1.05

1.1

1.15


SloveniaOther manufacturing goods Exports to ROW

1.0000 0.97120.9742

0.85

0.9

0.951

1.05

1.1

1.15


SloveniaService Exports to ROW

1.0000 0.97350.9642

0.85

0.9

0.95

1

1.05

1.1

1.15


SloveniaPrimary Goods Import from Rest of the World

1.0000

0.6136

0.9597

0.2

0.4

0.6

0.8

1

1.2


SloveniaFood & Beverage Import from Rest of the World

1.0000

0.4861

0.9464

0.2

0.4

0.6

0.8

1

1.2


SloveniaTextile Import from Rest of the World

1.0000 0.9903

0.8055

0.6

0.7

0.8

0.9

1

1.1


Slovenia Leather Product Imports from Rest of the World

1.0000

1.1475

1.0201

0.95

1

1.05

1.1

1.15

1.2


SLOVENIA - IMPORTS FROM REST OF THE WORLD

SloveniaWoods Product Imports from Rest of the World

1.0000

1.0745

1.0051

0.9

0.95

1

1.05

1.1

1.15


Slovenia Transports Imports from Rest of the World

1.0000

1.0988

1.0116

0.9

0.95

1

1.05

1.1

1.15


SloveniaOther manufacturing goods Imports from ROW

1.00001.0300

1.0000

0.9

0.95

1

1.05

1.1

1.15


SloveniaService Imports from EU

1.0000

1.3085

1.0401

0.9

1

1.1

1.2

1.3

1.4


Slovenia Goods Export share of Rest of the World

0.37660.3943

0.3819

0.3

0.35

0.4

0.45

0.5


Slovenia Goods Import share of Rest of the World

0.3003 0.28810.3075

0.2

0.25

0.3

0.35

0.4


SLOVENIA - WELFARE ANALYSIS

SloveniaConsumer Welfare under Partial Liberalization

1.0072 1.00101.0000

0.94

0.96

0.98

1

1.02

1.04


SloveniaGovernment Welfare under Partial Liberalization

1.0000 0.99541.0000

0.94

0.96

0.98

1

1.02

1.04


SloveniaSocial Welfare under Partial Liberalization

1.0057 0.99981.0000

0.94

0.96

0.98

1

1.02

1.04


SloveniaConsumer Welfare under EU membership

1.00051.0000 1.0105

0.94

0.96

0.98

1

1.02

1.04


SloveniaGovernment Welfare under EU membership

1.00111.0000 1.0116

0.94

0.96

0.98

1

1.02

1.04


SloveniaSocial Welfare under EU membership

1.00071.0000 1.0107

0.94

0.96

0.98

1

1.02

1.04


Summary of Results – Ecuador

¤ Fraction of Ecuador’s exports to US increases.

¤ Imports of textiles and transport equipment from US

show explosive growth.

¤ Small, but positive, gains in welfare for the consumer.

¤ Big losses in welfare for the government. This drives

down Social Welfare.

Summary of Results – Slovenia

� Fraction of Slovenia’s exports to EU increases.

� Imports of primary goods, food & beverage and textile

from EU show huge increase.

� Slovenia’s trade with non-EU countries basically shuts

down in many sectors (particularly Primaries, Food &

Beverage, Textiles).

� Positive gains in welfare for both the consumer and the

government. Social welfare improves by upto 1.1%.

Future Work

¤ Introduce substitution in foreign trade partners, i.e. a

utility function of the form:

[logx

ρxban,f + ... + logx

ρxser,f + logx

ρxinv,f + logx

ρxf,f

]/ρx

¤ Elasticity of substitution differentiated by sector, i.e.

ρban,m 6= ρcer,m 6= ... 6= ρser,m

¤ Better estimates for foreign tariffs.

¤ Ultimate goal: a dynamic model. A static model misses

the dynamic aspects (capital flows, foreign direct invest-

ment, productivity gains) that trade liberalizations of the

types studied here imply.

¤ Also: think about the differences that an FTA and a

customs union imply for free trade. Which one promotes

more free trade?

trade liberalizations in latin america and eastern europe...

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