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GTAP Resource #3548

"Deep Trade Policy Options for Armenia: The Importance of Services, Trade Facilitation and Standards Liberalization"
by Jensen, Jesper and David G. Tarr

In this paper we develop a 21 sector small open economy comparative static computable general equilibrium model of Armenia that we believe is appropriate to evaluate the impact of an EU-Armenian DCFTA along with other trade policy options of Armenia.

We find that a DCFTA with the EU will likely result in substantial gains to Armenia, but we show that the gains derive from the deep aspects of the agreement. We estimate that a shallow free trade agreement with the EU that focuses only on preferential tariff liberalization in goods will likely lead to small losses to Armenia due to traditional trade diversion (tariff losses on displaced imports from the Rest of the World region) and, more importantly, due to a loss of productivity from lost varieties of technologies from the Rest of the World region in manufactured products. We estimate that the gains to Armenia from a DCFTA with the EU derive from further liberalization of barriers in services, harmonization of standards and most importantly, from trade facilitation and a reduction in border costs. Additional gains can be expected in the long run from an improvement in the investment climate.

We find that unilateral liberalization of services and trade barriers on non-discriminatory basis would yield gains that are about three times the gains from preferential liberalization of goods and services with the EU alone. This policy would assure that Armenia receives goods and services form the least cost supplier and would eliminate any trade diversion costs. Finally, we estimate that a reduction in non-discriminatory regulatory barriers (that is, barriers that raise the costs of Armenians as well as foreign services providers in Armenia) would provide significant additional benefits in Armenia.

Resource Details (Export Citation) GTAP Keywords
Category: 2011 Conference Paper
Status: Published
By/In: Presented at the 14th Annual Conference on Global Economic Analysis, Venice, Italy
Date: 2011
Version: 1
Created: Jensen, J. (4/13/2011)
Updated: Batta, G. (5/3/2011)
Visits: 2,400
- Preferential trading arrangements
- Trade in services
- Foreign direct investment
- European Union
- Commonwealth of Independent States

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