bands and the elimination of the convoluted system of municipal border taxes. Finally, we propose a comprehensive reform that targets all of these challenges jointly.

We find that the revenue consequences of the first scenario may be substantial, and that an informed choice of an exclusion list for the agreement may not only significantly affect its revenue consequences, but may also markedly influence the relative vulnerability of different sectors. We show that a proper sequencing of the reform requires close attention to the fact that the Syrian import regime levies “nuisance tariffs” on almost 60% of tariff lines.<sup>2</sup> Naturally, the final liberalization step will have a revenue impact that is perhaps larger than expected.

Our analysis of the second scenario suggests that the number of tariff bands can be reduced to a lower number, while ensuring revenue neutrality. The driving factor behind the impact of such a reform is once again the decision how to deal with the high number of nuisance rates. Both an elimination of all these tariffs and an increase of all rates to 5% will trigger a revenue impact of a large magnitude. We further show that the elimination of additional import taxes is a realistic option. More specifically, revenue neutrality can be attained by implementing a VAT of sufficient but reasonable size.

Our policy simulations are implemented using the Tariff Reform Impact Simulation Tool (trist), developed by the World Bank’s International Trade Department. The model is based on a representative consumer with Armington (1969)-style preferences, who makes choices over traded goods in three consecutive steps: First, by substituting between different exporters following relative price changes between their respective products; second, by substituting between imports and domestically-produced goods following relative price changes between them; and third, by changing their demand for the good in question as a result of the change in the overall price of the product (Brenton, Saborowski, Staritz & von Uexkull 2009).<sup>3</sup> A similar setup has been widely adopted in applied trade models, such as single- or multi-country computable general equilibrium (CGE) models. TRIST has been designed with the specific task of providing policy makers with important insights into the short-term effects of trade reform. It has not been designed for making longer-term predictions about the economy wide impact of trade reform; TRIST only looks at the import side of the economy whereas trade reform will

> 2Nuisance tariffs are defined by the WTO as tariffs that are so low that the administrative costs of collecting them are higher than the revenue they generate. There is no definitive level at which a tariff becomes a nuisance. A small tariff on a good that is imported in regular quantities by a small number of importers may generate more revenue than it costs, as is the case for crude oil). For simplicity, this study refers to all tariffs below 5% as nuisance tariffs. This does not change the fact, however, that it is important to investigate each nuisance tariff on a case-by-case basis in order to be able to determine whether it should be eliminated or not.

> 3Due to data limitations, however, the model that we eventually apply does not admit this final effect; that is, the substitution between imports and domestically produced goods is perfectly inelastic.

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