rent transfer, and (e) if the VER encourages inefficient foreign direct investment (FDI) in the importing country in lieu of exporting the product to that country, or FDI in another (highercost) exporting country.<sup>18</sup>

# **_Measuring other economic effects of protection_**

With the growth in computing power, the economics profession has been able to go well beyond measuring just the cost of protection. Single-commodity, single-country partialequilibrium studies have been supplemented and often superseded by the development of multi-commodity industry or sectoral models of world markets in partial equilibrium, and economy-wide single- or multi-country computable general equilibrium (CGE) models. Agricultural modelling in the 1980s is discussed below as a good example of the former, before attention turns to CGE developments.

# _a. Partial equilibrium global modelling: the case of agricultural markets_

The impetus to develop global models of agricultural markets came in the early 1980s as it became clear that agriculture was likely be included in a substantial way in the upcoming (Uruguay) round of multilateral trade negotiations – for the first time since the GATT began in the late 1940s. The first such model, by Valdes and Zietz (1980), was a direct application of the Corden/Harberger/Johnson partial equilibrium methodology for a large number of agricultural products.<sup>19</sup> However, each product market was considered independent of the others (zero cross-price elasticities). A model that took interdependence into account was developed by Tyers (1984) for grain and meat markets and applied initially to analyse the European Community’s Common Agricultural Policy (Anderson and Tyers 1984). That model was subsequently expanded to include the highly protected sugar and dairy sectors and became the basis for the empirical work reported in the World Bank’s 1986 _World Development Report_ in time for the launch of the Uruguay Round in September that year (Tyers and Anderson 1986) _._ Meanwhile, several international agencies and the US Department of Agriculture began building similar models,<sup>20</sup> but they were mostly comparative static and deterministic. By contrast, the Tyers/Anderson model was dynamic and stochastic, and it also included international-to-domestic price transmission elasticities to capture the effect of agricultural trade policies in insulating the economy from international price fluctuations, in addition to their protective effect.<sup>21</sup> Even though these models did not distinguish internationally traded products by country of origin, as proposed by Armington (1969), they were very influential in raising public awareness during the Uruguay Round of the impact of growth of agricultural protection levels in the 1980s on farm production, consumption and trade, on the mean and variance of domestic and international food prices, and on national and global economic welfare (as measured by equivalent variations in income).

The estimated costs of protection as captured by those models was probably a reasonable economic welfare measure for advanced industrial countries, because agriculture is a small part of those economies and the distortions to non-farm tradable sectors is small

> 18 On the relative inefficiency of quotas over tariffs, see Anderson (1988).

> 19 Earlier pioneering studies of a single commodity, sugar, were provided by Snape (1963, 1969).

> 20 They included the USDA’s SWOPSIM model (Roningen 1986), IIASA’s model (Parikh et al. 1988) and the OECD’s Trade Mandate Model (Huff and Moreddu 1989).

> 21 Full details of the model including the welfare calculus, and its database and protection estimates, are provided in Tyers and Anderson (1992). A survey of these models is provided in Tongeren, Meijl and Surry (2001).

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