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The Welfare Effects of a New Round of WTO Trade Negotiations
Jan 29, 2001

World welfare is estimated to increase by $613.0 billion if tariffs on agriculture and industrial goods and all services barriers were lowered by 33% following a new round of WTO trade negotiations according to a new book edited by University of Michigan Emeritus Professor of Economics and Public Policy, Robert M. Stern. The book “Issues and Options for U.S.-Japan Trade Policies” uses the Michigan Computable General Equilibrium Model of World Production and Trade to simulate the different effects of multilateral and bilateral trade negotiations that involve the U.S. and Japan. New WTO trade negotiations would increase welfare by $177.3 billion for the U.S. and by $123.7 billion for Japan. If all post-Uruguay Round trade barriers were completely removed, the book estimates that world welfare would increase by $1.9 trillion, with gains of $537.2 billion or 5.9% of GNP for the US and $374.8 billion or 5.8% of GNP for Japan.

The elimination of APEC countries tariffs and trade barriers on goods and services would increase world welfare by $764.4 billion with gains of $294.7 billion for the U.S. and $283.1 billion for Japan and losses of $7.0 billion for the EU and $1 billion for South Asia. Several of the bilateral trade negotiations currently underway and on the agenda would have minor consequences in terms of welfare and the potential for negative employment shifts and trade diversion.

The book comes at a time when leaders of the EU and Japan have called on a new round of multilateral talks after the WTO Ministerial to take place in Qatar in November 2001. Concerns about a trade policy backlash following a slowdown of the world economy have renewed pressure on trade ministers to reach an agreement by the time of the Ministerial.

For those interested in purchasing the book published by the University of Michigan Press they may find a link to the publishers for online purchase in our New Books Section once the publishers make the book available. For those interested in looking at the Michigan Computable General Equilibrium model they may visit the University of Michigan website at http://www.spp.umich.edu/rsie/model/, and they may download several of Professor Stern’s and other colleagues working papers in our Articles Section located in the Library Section.

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