WTO), and then to project the world economy forward a decade assuming no further trade policy reforms. This baseline for 2015 is then compared with how it would look after full adjustment following the phased removal of all countries’ trade barriers and agricultural subsidies from 2005. The economic welfare gain is estimated to be US$287 billion per year in 2001 dollars as of 2015 (and hence slightly more each year thereafter as the global economy expands). Of that, $86 billion p.a. is estimated to accrue to developing countries.

These AMV results are the lowest of the estimates summarized in Table 1, and so should be considered as very much lower-bound estimates of the current cost of global distortions to international trade. But they have been widely used in the WTO’s Doha Round as a measure of what is on the table for negotiation in the DDA’s agricultural and NAMA (non-agricultural market access) talks, in part because they have also been carefully decomposed in various ways to illuminate the relative importance of the various issues under discussion (see below).

The second study listed in Table 1, BKS, is by Brown, Kiyota and Stern (2005). It uses the Version 5 GTAP data base projected from its 1997 base to 2005, but they embed it in the authors’ static Michigan Model of World Production and Trade (www.ssp.umich.edu/rsie/model) to produce the highest of the surveyed estimates of global welfare gains from complete removal of trade barriers and agricultural subsidies: $2,616 billion p.a. when converted in 2001 US dollars. This much larger estimate is the result of several features of the BKS study: having China and Taiwan’s implementation of their WTO accession commitments in the experiment rather than in the baseline; the inclusion of increasing returns to scale and monopolistic competition (IRS/MC) for non-agricultural sectors and therefore product heterogeneity at the level of the firm rather than the national industry; liberalization of services in addition to goods trade (with IRS/MC assumed for the huge services sector); and the inclusion in services liberalization of the opening to foreign direct investment. The latter boosts substantially the gains from services liberalization, which account for nearly two-thirds of this study’s estimated total gains.

The other two estimates in Table 1 of the gains from complete trade liberalization are between these two extremes. The HRT study (Harrison, Rutherford and Tarr 2002) uses much larger trade elasticities than other models and so gets a considerable gain for goods trade reform ($514 billion compared with AMV’s $287 billion) even though it refers to 1995 when the world economy was somewhat smaller.

The WBGEP study (World Bank 2002) uses the World Bank’s Linkage model but the Version 5 GTAP protection levels as of 1997, before projecting the world economy to 2015. That WBGEP study differs from the AMV study not only in using an older protection database (as do the BKS and HRT studies) but also in assuming liberalization boosts factor productivity in each industry according to the extent of growth in the share of production exported by the industry. The case presented suggests the gains would be $901 billion p.a. when converted in 2001 US dollars. By way of comparison, AMV re-ran their more recent model with that same factor productivity multiplier, and it boosted their total global gains from $287 billion to $461 billion (Anderson, Martin and van der Mensbrugghe 2006a, Table 12.20). The fact that this is barely half as large as the number in the WBGEP study has been the subject of much discussion, and led to a detailed explanation being provided by van der Mensbrugghe (2006). The explanation involves a mixture of factors, including a new source of data on tariffs (which incorporated tariff preferences more comprehensively and hence lowered the average bilateral tariff) and on agricultural 12