rates (figure 13). Since increasing tariffs to bound rates produces small tariff increases in some cases, the simulation was developed as a 15 percentage point increase in applied tariffs across the board. This results in uneven tariff levels across countries, which plays a large part in explaining allocation results. The generalised increase in tariffs results in a large decrease in global trade (22 per cent) and the consequent declines in allocative efficiency add up to a 2.9 per cent decrease in global GDP. The global demand for capital falls, and assuming an adjustment in target rates of return of about 5 per cent, the equilibrium global capital stock declines about 5 per cent. These results are consistent with other modelling of global contagion scenarios (box 10). Figure 13 Average applied and bound tariffsa,b,c Per cent a aus — Australia; nzl — New Zealand; chn — hkg — Hong Kong; jpn — Japan; twn — Taiwan; idn — Indonesia; mys — Malaysia; phl — Philippines; sgp — Singapore; tha — Thailand; ind — India; roa — rest of Asia; can — Canada; usa — USA; mex — Mexico; bra — Brazil; rom — rest of Americas; eun — European Union nations; rus — Russia; roe — rest of Europe; zaf — South Africa; rof — rest of Africa. b Trade weighted. c Averages obscure zero and very low tariffs. Tariffs on a significant share of Mexico’s trade are well above the averages reported here, due to its membership of the North American Free Trade Agreement. Data sources: GTAP database (Aguiar, Narayanan and McDougall 2016), Comtrade (UN 2017), TAO database (WTO 2017). Box 10 Other modelling of global contagion McKibbin and Stoekel (2009) and (2017) report results for global contagion scenarios. Although there are many differences between the models and assumptions used, the main
a Estimates assumed to increases the cost of imports. See text for of estimates. b AUS – Australia; NZL – New Zealand; CHN – China; JPN – Japan; KOR – Korea; IDN – Indonesia; MYS – Malaysia; PHL – Philippines; SGP – Singapore; THA – Thailand; IND India. Data sources: Commission estimates based on Kee et al. (2009); Fontagné, Mitaritonna and Signoret (2016).
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