complexity of the policy and economic environment in which firms and governments are responding to COVID-19, a CGE model can be a useful tool. It provides an assessment of the impacts of COVID-19 and various policy changes on economic growth, sectoral trade flows, output, and employment.

Second, trade tensions have thrown up new challenges and uncertainties. These include recent US-China trade barriers and challenges to the legitimacy of the World Trade Organization (WTO). The unprecedented step back by the United States from the multilateral approach to trade governed by the WTO has seen significant bilateral trade restrictions imposed on U.S.-China trade. This in turn has led to swift changes to bilateral trade flows.

Third, new regulations on greenhouse gas (GHG) emissions to combat climate change are throwing up new complexities and competitive challenges for some industries changing the comparative advantage of countries. As part of attempts to limit climate change and meet obligations under the Paris Agreement, several countries are developing domestic regulations to reduce GHG emissions, that can dramatically alter comparative advantages of countries, as well as taxation of imported goods that could have significant effects on their trading partners. For example, the European Commission has announced that a carbon border adjustment mechanism (CBAM) will be part of the ambitious European Green Deal (European Commission 2019). This scheme will be the first in which a major border tax adjustment is to be used in climate policy.

The CGE tool can inform an understanding of the medium to long-term implications of the recalibration of GVCs. The analysis designs forward-looking scenarios to anticipate medium run impacts of COVID-19 and potential policy changes on trade in goods and services, employment and wages by sector, skill, and gender, as well as on poverty and income inequality. The analysis builds on a global dynamic CGE model i.e. the multi-regional input-output (MRIO) version of the ENVISAGE model, and the global microsimulation framework Global Income Distribution Dynamics (GIDD). The ENVISAGE-GIDD top-down assessment approach allows for the analysis of global development and structural transformation, incorporating the complex interactions of productivity differences at the country, sector, or factor level, shifts in demand as income changes, demographic and skill dynamics in factor markets, and changes in comparative advantage. This application includes an extension of the standard modeling framework by incorporating MRIO tables that distinguish between imports of intermediate, final, and investment goods to better capture the nature of trade typical for GVCs. The CGE model relies on the GTAP 10 Data Base with a 2014 reference year and runs until 2030. The analysis covers 27 sectors and 21 countries/regions.

The CGE tool goes hand-in-hand with the GIDD microsimulation tool which translates the CGE results into implications for poverty and income distribution. This includes impacts on employment and wages of female and male workers. The GIDD simulations are based on a Global Micro Database, which covers over 80 percent of the global population and GDP. It includes harmonized household surveys for 130 countries. This study presents scenarios of globalized or segmented worlds and analyzes the implications of various shocks, such as future trade policy changes, disruptions in production, and climate mitigation policies. Their impacts on patterns of international trade, including GVCs, along with their implications for poverty and distribution, are the key questions addressed.

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