scenarios.12 We then multiply the percent increase between each of the six hypothetical trade exposures
and the actual trade exposure by the OECD (2003) coefficient of 0.2. This arithmetic gives us a factor
that we multiply by actual US 2004 GDP per capita ($39,811) to determine an effect under
each scenario.
The estimated annual increases to GDP per capita under each scenario are as follows:
n 1 — Unilateral and preferential tariff liberalization since Uruguay Round: increase of $441 per
capita
n 2 — Multilateral, unilateral, and preferential tariff liberalization since 1980: increase of $759
per capita
n 3 — Declining transportation costs since 1980: increase of $114 per capita
n 4 — Preferential tariff liberalization since the start of the Canada-US FTA: increase of $205 per
capita
n 5 — Nontariff barrier liberalization: increase of $964 per capita
n 6 — Unilateral and preferential tariff liberalization since 1990: increase of $449 per capita
Using the same approach, Bradford, Grieco, and Hufbauer (2006) calculate the benefits of all US
trade expansion in excess of GDP growth since 1950 (the expansion induced by both technology and
policy) and arrive at a figure of $5,000 per capita in 2003.
COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS
CGE models are used to examine counterfactual scenarios—namely, what would an economy look like
if a certain economic shock occurred.13 Most CGE analyses are therefore conducted to determine the
impact of a potential event, like the conclusion of the Doha Development Round or the implementation
of the Kyoto Protocol. Other applications attempt to confirm the benefits of enacted policies through
ex post analysis (see DeRosa and Gilbert 2005, Kehoe 2005). Since many of these past works go to great
lengths to explain the methods of CGE analysis and the associated Global Trade Analysis Project (GTAP)
database,14 we do not repeat the explanations.
Our method represents a hybrid of forward- and backward-looking methods. We attempt to
confirm the benefits of policy reforms (or falling transportation costs) by considering the counterfactual
modern-day economy with a “policy or transportation cost reversion.” Once we determine what the
12. Trade exposure is measured by merchandise exports plus imports divided by GDP. The actual trade exposure in 2004
was 20.1 percent. The hypothetical trade exposures without each of the six scenarios are as follows: 1 — 19.0 percent; 2
— 18.3 percent; 3 — 19.8 percent; 4 — 19.5 percent; 5 — 17.9 percent; and 6 — 19.0 percent.
13. The CGE analysis was carried out by John P. Gilbert, associate professor, Department of Economics and Finance,
Huntsman School of Business, Utah State University.
14. The GTAP database is updated periodically by the Center for Global Trade Analysis at Purdue University. Gilbert used
GTAP database 7 with data for 2004.