Measuring Effects of Trade Policy Distortions: How Far Have We Come?

Abstract

After a brief review of the literature to the early 1970s, this Paper assesses the contributions by economists during the past three decades to measuring the distortionary effects of trade policies. It does not pretend to be a comprehensive survey, but draws on selections from the literature that give a sense of the distance the profession has traveled from a trade policy practitioner's viewpoint since Corden's first paper on the subject in 1957. Phenomenal though that progress has been, there is ample room for further improvement in computing the economic (and other) effects of trade-related policies and their reform. The Paper concludes with suggestions of where the priorities should be in global modeling of trade policy reform, as the world moves into the next round of multilateral trade negotiations.

Keywords: Trade policy distortions, effective protection, cost of protection, empirical modelling of effects of trade policies

JEL Classification: F13, Q17