No. 2007-12-A

OFFICE OF ECONOMICS WORKING PAPER

U.S. INTERNATIONAL TRADE COMMISSION

Developed by Joseph Francois and Keith Hall 

U.S. International Trade Commission 

NOTE: This documentation describes the contents of the 

archive COMPAS_LL.ZIP 

December 2007 

The author is with the Office of Economics of the U.S. International Trade 

Commission. Office of Economics working papers are the result of the ongoing 

professional research of USITC Staff and are solely meant to represent the 

opinions and professional research of individual authors. These papers are not 

meant to represent in any way the views of the U.S. International Trade 

Commission or any of its individual Commissioners. Working papers are 

circulated to promote the active exchange of ideas between USITC Staff and 

recognized experts outside the USITC, and to promote professional 

development of Office staff by encouraging outside professional critique of 

staff research. 

Address correspondence to: 

Office of Economics 

U.S. International Trade Commission 

Washington, DC 20436 USA 

COMPAS—Commercial Policy Analysis System 

Documentation Version 1.4: May 1993
 COMPAS 

 Commercial Policy Analysis System 

 Version 1.4: May 1993 

 Developed by Joseph Francois and Keith Hall 

BACKGROUND: 

 COMPAS is a package of standardized spreadsheets developed 

 for trade policy analysis. The spreadsheets are specialized 

 for the analysis of trade-related injury (or gains) 

 to specific domestic industries and the overall domestic 

 economy as a result of industry-specific trade policy changes. 

 These include the following: 

 

 Unfair Trade Remedies 

 o dumping; 

 o subsidies; 

 Tariff Rate Changes 

 o general duty changes 

 o duty changes that target specific countries. 

SYSTEM REQUIREMENTS, SETUP, and OPERATION: 

 COMPAS requires QUATTRO or QUATTRO PRO, and is designed to run on 

 IBM-compatible machines that support MS-DOS. However, if you 

 work with a different operating system, we encourage you to 

 copy the structure of the spreadsheets. This COMPAS 

 spreadsheets constitute shareware. They can be freely distributed. 

 TO INSTALL: COMPAS is designed to operate from your C drive. 

 To install place the installation disk in drive A, and type INSTALL. 

 TO RUN, simply type "COMPAS" from the directory c:\compas 

 

!!!!!!!!! NOTE: Either QUATTRO, or QUATTRO PRO 

!!!!!!!!! must be on your path, as COMPAS calls on these 

!!!!!!!!! programs directly. 

SAVING FILES 

 To save specific spreadsheets, simply save files from the 

 basic QUATTRO or QUATTRO PRO menu. We suggest using the 

 subdirectory C:\COMPAS\SPREADS (which is created at 

 installation). These files can then be called up later from 

 the COMPAS menu. Try to avoid saving over the COMPAS templates. 

COMPAS MODEL STRUCTURE: 

 The COMPAS spreadsheets are specialized for the analysis of 

 specific trade policy changes. However, the spreadsheets are 

 all based on a common model structure. The underlying model 

 structure is a general imperfect substitutes model, 

 also known as an Armington model. Such models are relatively 

 standard in applied trade policy analysis, and are 

 used extensively for the analysis of trade policy 
 changes both in partial and general equilibrium. (For 

 references, see [5], [6], and [7]). Essentially, the model combines 

 general information about product similarity, industry demand 

 and supply conditions, and market shares, with information 

 specific to a given type of analysis. 

GENERAL INSTRUCTIONS: 

 Each spreadsheet requires certain user-provided data. This 

 data is a section of the spreadsheet titled "INPUTS." Once these data 

 have been provided, you can then view the results of the analysis in 

 the section of the spreadsheet titled "RESULTS." Each spreadsheet 

 accommodates up to eight different analyses. Users may find this 

 useful if they would like to consider the implications of 

 different parameter/elasticity estimates. 

 TO PRINT: simply follow the usual QUATTRO or QUATTRO PRO procedures 

 for printing data from a spreadsheet. 

COST AND PRICE DUMPING: 

 USES: 

 Assessing the injury caused to a competing domestic industry 

 by dumped imports. 

 DESCRIPTION: 

 Spreadsheets for assessing the effect of dumped imports 

 on the domestic industry under partial and full passthrough 

 assumptions. The full passthrough analysis is appropriate for 

 cases of cost dumping, and can also be viewed as an upper 

 bound in price discrimination cases. The partial passthrough 

 analysis provides a more precise assessment in cases of 

 international price discrimination. The partial passthrough 

 analysis is based on Boltuck's analysis of the economic 

 effects of dumping. (See references [1] and [2]). They employ the 

 same model structure found in the CADIC model. 

SUBSIDIES: 

 USES: 

 Assessing the injury caused to a competing domestic industry 

 by subsidized imports. 

 DESCRIPTION: 

 A spreadsheet for assessing the effect of subsidized 

 imports on the domestic industry. It assesses, explicitly, 
 the increase in the supply of the subsidized import to the 

 importing market that results from production or export 

 subsidies. The analysis is based on Francois' analysis of the 

 trade effects of subsidized imports. (See references 

 [3] and [4]). 

GENERAL DUTY CHANGES 

 USES: 

 Assessing general duty changes or escape clause cases. 

 DESCRIPTION: 

 A spreadsheet for analysis of general duty changes. It assesses 

 the effect of such duty changes on the competing domestic 

 industry and on the overall economy. This includes downstream 

 consumer/producer effects and national income effects. The 

 analysis of downstream consumer/producer effects and national 

 income effects is based, in part, on Rousslang and Suomela 

 (See reference [6]). 

DUTY CHANGES THAT TARGET SPECIFIC COUNTRIES. 

 USES: 

 Assessing country-specific duty changes, as under GSP 

 treatment or duties imposed as retaliation. 

 DESCRIPTION: 

 A spreadsheet for analysis of duty changes that target 

 specific countries assesses the effect of such duty changes on 

 the competing domestic industry and on the overall economy. 

 This includes downstream consumer/producer effects and 

 national income effects. The analysis of downstream 

 consumer/producer effects and national income effects is 

 based, in part, on Rousslang and Suomela (See reference [7]). 

 Uses for this model include assessment of retaliation duties, 

 and the assessment of the effects of extending GSP treatment 

 to a product. 

REFERENCES 

[1] Boltuck, R., "An Economic Analysis of Dumping," SWISS REVIEW OF 

 INTERNATIONAL COMPETITION LAW, 1, 1987, reprinted in JOURNAL OF 

 WORLD TRADE LAW, 21(5), October 1987, 45-54. 

[2] Boltuck, R., "Assessing the Effects on the Domestic Industry of Price 

 Dumping," in P.K.M. Tharakan ed., POLICY IMPLICATIONS OF ANTIDUMPING 

 MEASURES, Elsevier Science Publishers (North Holland), 1991. 
[3] Francois, J.F., "Countervailing the Effects of Subsidies: An Economic 

 Analysis," JOURNAL OF WORLD TRADE, 26(1), February 1992, 5-13. 

[4] Francois, J.F., "Economic Analysis of the Effects of Subsidies," 

 U.S. International Trade Commission, Office of Economics, 

 Memorandum EC-P-038, from the Acting Director of Economics 

 to the Commission, June 23 1992. 

[5] Reinert, K.A. and Roland-Holst, D.W., "An Introduction to the ITC 

 Computable General Equilibrium Model," U.S. International Trade 

 Commission Publication 2423, September 1991. 

[6] Rousslang, D.J. and Suomela, J.W., "Calculating the Consumer and Net 

 Welfare Costs of Import Relief," U.S. International Trade 

 Commission Staff Research Study #15, 1985. 

[7] U.S. International Trade Commission, "The Economic Effects of 

 Significant U.S. Import Restraints, Phase I: Manufacturing," 

 U.S. International Trade Commission Publication 2222, October 1989. 

COMMENTS: 

 COMPAS has been developed by Joseph Francois and Keith Hall. 

 We welcome comments, suggestions, and inquiries. Please 

 address correspondence regarding technical aspects of COMPAS to: 

 Office of Economics, U.S. International Trade Commission, 

 500 E Street S.W., 

 Washington DC 20436, USA. 

 UPDATES: To receive future updates of COMPAS, write to: 

 The Secretary, U.S. International Trade Commission 

 500 E Street S.W., 

 Washington DC 20436, USA. 

DISCLAIMER: 

The authors of this product are with the U.S. International Trade 

Commission (ITC), and are solely responsible for any errors of fact, 

judgment, or good taste. The ITC does not accept responsibility 

for the views expressed herein, which are those of the authors 

and should not be attributed to the ITC, its staff, or any individual 

Commissioner. Any findings, empirical or otherwise, reported herein 

or otherwise associated with this product should not be 

viewed as dispositive or otherwise indicative of the findings the ITC 

or its staff might make with regard to any investigation. 

Any findings, empirical or otherwise, developed by the ITC or 

ITC staff in a particular investigation would necessarily be 

dependent upon the facts developed in the particular investigation. 
SOME ADVICE: 

THE HENNING CONUNDRUM CONSTRAINT 

 In the COMPAS models, products are treated as gross complements. 

 This means, that, viewed in isolation, the products in a given 

 market are in effect substitutes for each other. The degree of 

 substitutability is measured by the elasticity of substitution. 

 When combined with information about market shares and the 

 composite demand elasticity for the entire product category, 

 the substitution elasticity can be used to determine cross- 

 price elasticities. 

 While products may be gross substitutes, this does not guarantee 

 that they are net substitutes. REMEMBER -- demand for the 

 competing domestic and imported products, as a group, depends on 

 the general level of prices within the category. A drop in the 

 price of an import thus has two effects (i) a direct negative 

 impact on demand for competing products in the category, and (ii) 

 an indirect positive impact through a lowered general price level, that 

 increases the total level of expenditures in the category. For 

 products to be net substitutes (i.e. for a fall in import prices 

 to hurt competing producers), the first of these effects must dominate. 

 This will be true if the following condition is met. 

 Substitution Elasticity > Composite Demand Elasticity 

 This condition is referred to, for reasons that shall remain cryptic, 

 as the Henning Conundrum Constraint Condition. The constraint is that, 

 if products are net substitutes, the substitution elasticity is 

 bounded from below by the composite demand elasticity. 

ADDITIONAL INFORMATION ON SUBSIDIES 

 The subsidy spreadsheet uses a generalization of the same approach used in 

 the original CADIC program (you may, in fact, use the program to imitate 

 CADIC estimations of the effects of unfair pricing of imports with the 

 proper parameter inputs describing the unfair imports production and 

 non-U.S. markets). Assuming a production subsidy, there are two additional 

 pieces of information needed for input beyond what is used in an 

 anti-dumping case. They are: 

 1) the proportion of the unfair product's output that is sold in the 

 U.S. market (as opposed to the home country and other export 

 markets). 

 2) the price elasticity of demand for the product in non-U.S. markets. 

 The program may also be used to estimate the effects of a subsidy targeting 

 the U.S. export market. Since only that output destined for the U.S. 

 market is subsidized, simply make 1) equal to 100%. 

ADDITIONAL PARAMETERS IN SOME OF THE SPREADSHEETS 

 Transportation Ratio 

 This input represents the cost of transportation of the subject product(s) 

 between the factory and U.S. port of entry as a percent of the Customs 
 Value of the subject products. This partially takes into account the 

 fact that the DOC margin is based on ex-factory import prices. 

 Domestic Content 

 In instances where the subject imports do not compete with U.S. like 

 products until some U.S. value is added, this represents the proportion 

 of the value of the product that is domestically produced (and therefore 

 not unfairly priced at the level of competition with FV and domestic 

 products). 

 Average U.S. Tariff Rate 

 This represents the average U.S. tariff rate applied to the subject 

 imports. This helps take into account the fact that the DOC margin is 

 based on ex-factory import prices.