Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195777
Authors: 
Bekkers, Eddy
Teh, Robert
Year of Publication: 
2019
Series/Report no.: 
WTO Staff Working Paper No. ERSD-2019-04
Abstract: 
The WTO Global Trade Model is employed to project the medium-run economic effects of a global trade conflict. The trade conflict scenario is based on recent estimates in the literature of the difference between cooperative and non-cooperative tariffs. The study provides three main insights. First, the projected macroeconomic effects in the medium run are considerable. A global trade conflict started in 2019 would lead to a reduction in global GDP in 2022 of about 1.96% and a reduction in global trade of about 17% compared to the baseline. For context global GDP fell about 2.1% and global trade 12.4% in the global financial crisis of 2009. Second, behind the single-digit aggregate production effects there are much larger, double-digit sectoral production effects in many countries, leading to a painful adjustment process. In general, a global trade conflict leads to a reallocation of resources away from the most efficient allocation based on comparative advantage. Third, the large swings in sectoral production lead to substantial labour displacement. On average 1.15% and 1.74% of high-skilled and low-skilled workers respectively would leave their initial sector of employment.
Subjects: 
computable general equilibrium (CGE) model
Nash tariffs
revealed comparative advantage (RCA)
labour displacement
JEL: 
B41
C63
F13
F16
F51
F53
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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