Yaghoob Jafari, Wolfgang Britz, Houssein Guimbard, Jayson Beckman.
Computable general equilibrium (CGE) models are generally used to conduct trade policy analysis; however,
given the complexity in data collection and modeling, tariff rate quotas (TRQs) are often simplified in these
models. However, TRQs are crucial for trade negotiations because they are rarely completely liberalized and often
the obstacles to negotiations. We propose an approach to model TRQs explicitly and at the product level within
CGE models and compare with previous approaches that considered an explicit (or implicit) representation at the
tariff line or sector level. Using the Canada–EU trade agreement as an example, we find significant aggregation
bias if TRQ shocks are implemented at the aggregate sectoral level. This bias is only partially eliminated if TRQs
are implicitly represented by ad-valorem equivalents at the tariff line. Our findings suggest the need to represent
TRQs explicitly at the relevant commodity detail in trade impact assessments.