Essays on globalization : policies in trade, development, resources and climate change

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School of Business | Doctoral thesis (article-based) | Defence date: 2009-03-27
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178 s.
Acta Universitatis oeconomicae Helsingiensis. A, 342
This dissertation on globalization consists of an introduction on the methodology applied, a summary and four independent essays focussing on applied policy research in international trade. The study follows the CGE (Computable General Equilibrium) research tradition. The simulation environment is the publicly available GTAP model. The essays examine the specific topics of trade and aid policies, price liberalization of the Russian energy markets, trade preferences in the sugar sector of the EU and the role of carbon sinks in mitigating climate change. The introduction presents an overview of the GTAP model with a more detailed description, among others, of the welfare decomposition. Benefits and disadvantages of using these types of models are outlined, including a discussion related to the use of Armington nesting in international trade. The introduction also outlines the summaries of each essay. The first essay examines trade and aid policies in Mozambique. The essay analyses the impact of a number of alternative options available to Mozambique, including trade agreements, aid and trade facilitation. The results suggest that Mozambique has very little to gain from trade agreements or the Doha Round, although some agreements with the EU do yield some benefit. Trade facilitation and aid-for-trade programs on the other hand have the potential for larger benefits, but these need to be planned carefully. The case study for the aid-fortrade programs is focussed on the sugar sector. The second essay examines the impact of liberalizing Russia’s energy sector. Implementation with GTAP simulations is preceded by an analysis of implicit subsidies in the regulated prices of gas and electricity, which are then incorporated into the GTAP framework. The analysis focuses on the effect of different taxes and subsidies applied to the energy sector with respect to welfare and real GDP in Russia and abroad. The results are shown to be sensitive to the assumptions on foreign trade. The second part of the paper studies suggested increases in the prices of gas and electricity and indicates that they shift output from domestic markets to exports but the positive increase in efficiency is reliant on the underlying base data. The third essay investigates the impact of four alternative policy scenarios for liberalizing the EU’s sugar sector. The study commences with the explanation of the complexities of the EU sugar market, and continues with a presentation of the policy scenarios that range from the trade preferences granted to LDCs under the EBA and EPA agreements to full liberalization of the EU sugar sector. One of the alternatives is full liberalization in which differences in cost structures of the exporting economies are taken into account. This constraint in production has been implemented by adjusting the shocks in tariffs. The simulations are further analysed with a sensitivity analysis that considers alternative elasticities from the literature. The results highlight the winners and losers of the different scenarios. The fourth essay focuses on the effects of including carbon sinks into the analysis of the impacts of the Kyoto agreement. The impact of special treatment for Canada and Japan that allows them larger sinks is compared to the effects of the decision of the United States not to sign the Kyoto Protocol. The results indicate that larger sinks clearly benefit Canada and Japan, the role of sinks is also important in New Zealand and Sweden but the effect of the sinks on other countries is marginal. For the world economy and the emission reduction targets, the role of sinks is of minor importance, compared to the US withdrawal from the Kyoto Protocol.
Supervising professor
Haaparanta, Pertti, professor
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