Parameterization
Data from two different sources are combined to yield a consistent benchmark data set
for 1995. The main data source underlying the model is the GTAP version 4 database that
represents global production and trade data for 45 countries and regions, 50 commodities and
5 primary factors (McDougall, Elbehri and Truong 1998). In addition we use OECD/IEA
energy statistics (IEA 1996) for 1995. Reconciliation of these data sources yields the
benchmark data of our model (see Babiker and Rutherford 1997). For this application the data
set has been aggregated as shown in Table 4. The given set of benchmark quantities and
prices together with the substitution elasticities given in the Appendix completely specify the
benchmark equilibrium.
5. Interpretation of the results
The literature provides several available estimates of the costs and benefits of the EU
enlargement process using CGE models. Baldwin, Francois and Portes (1997) provide two
sets of result. In the so-called “conservative” scenario they capture only the allocation and
accumulation effects of the trade liberalization between the EU and CEEC. All the regions
seem to gain from it, the CEEC, however, gain much more than the EU in relative terms due
to the positive income effects and a reduction of previously higher previous distortions.
Furthermore, the improved access to the EU markets leads to a fast increase of CEEC exports.
In the less conservative scenario the CEECs are allowed to join the EU. This has clear
implications on the decrease of the uncertainty followed by a decrease of the risk premiums.
The results are in the same fashion as in the former scenario, however the gains increase due
to the risk premium effect.
Keuschnigg and Kohler (1999) and Keuschnigg, Keuschnigg and Kohler (2000)
consider the impacts of the EU enlargement on Austria and Germany. In their first scenario
they assess a bilateral tariff removal. Their full accession scenario contains all main issues of
the EU enlargement process (e.g. trade liberalization, budgetary implications and common
agriculture policy). The study concludes, that there are positive welfare benefits for Austria as
well as for Germany from the closer integration of commodity markets. The model however
captures also the adjustment pressure from the increased import competition and the loss of
some of the external protection from the previous trade regime. In addition to this, all the
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