very little structural adjustment per year compared with the myriad other forces at work in the economy (Anderson et al. 1997, Dixon, Menon and Rimmer 2000).

- _b. Effects of trade reform in the presence of other domestic divergences_

In addition to services markets being distorted at the border (e.g., barriers to foreign direct investment and immigration), many other domestic markets are typically distorted by government policies (including myriad domestic taxes and price-cap regulations on privatized utilities), or arrangements between labour unions and management). Ideally those policy instruments and distortions should all be specified in each model, but that is a formidable task. In the meantime, in describing model outputs there should always be the caveat that the results are exaggerated to the extent that there are domestic impediments to actual market adjustments to reduced trade barriers.

As well, there may be divergences (to use Corden’s (1997) term) in the form of environmental or social concerns that the government has not optimally addressed. That too can lead to smaller actual social welfare gains than our economic models might suggest, or even to losses, from trade liberalization (e.g., if there is a sufficiently large and uncorrected negative environmental externality associated with producing more exportables). Proponents of the idea that agriculture is ‘multifunctional’, and for that reason deserves government support, try to make that claim (Anderson 1998). Distinguishing between genuine widespread environmental or social concerns, and the claims of self-serving vested interests, is not always easy in practice.

# _c. Imperfect competition and scale economies_

A more-widespread incorporation in CGE models of imperfect competition and scale economies (following the example set by modellers of the European Union’s Single Market in the 1990s) would accelerate if we had better empirical estimates of the mark-ups firms impose and the extent of economies of scale in different industries. These modifications are especially crucial for the services sector, as is the incorporation of foreign direct investment flows. Hence the more these models are going to be used to analyse services policy reforms, the more important are those inclusions. Also needed are better data on services trade and better specifications of services policy measures, particularly if the GTAP database (which many other non-GTAP global modellers also depend on) is to be disaggregated beyond the 15 services sectors in the current Version 6.

# _d. Asset values and dynamics of trade liberalization_

Including capital accumulation and thereby making global CGE models dynamic is a tall order (see, e.g., Grossman and Helpman 1991), but it would open up opportunities to address additional issues. One is the intergenerational transfers that could result from tariff reforms affecting asset values. Those effects would depend on any terms of trade changes and hence are affected by whether a small economy’s liberalization is unilateral or part of a multilateral reform package. Another issue such a model could handle better than present ones is selective temporary protection (of which anti-dumping is perhaps the most notorious). A third issue, and one that is important for poorer countries, is the greater scope there would be to assess ways of accommodating the revenue consequences of tariff changes, including via debt financing (Keuschnigg and Kohler 1997). And forth, estimates of the costs of adjustment over time could be more-easily incorporated.

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