ECOW – ECOWAS World Net Trade Model
ECOW is a working world trade model which can estimate the impact of trade liberalization (including world free trade), common market formation, and the implementation of free trade agreements for 27 countries/regions including 15 ECOWAS (Economic Community of West African States) members. In addition, the user can specify the degree of non-competitiveness of markets and explore the added impact of trade liberalization on less than competitive markets. Information documents are listed below.
1-ECOWoverview.wmv – video overview of the ECOW model
2-ECOW.pdf – summary information about the ECOW model
3-ECOWdef.pdf – the model definition – countries/regions – product groups –variables
4-ECOWeqp.pdf – ECOW model equations for a country (EUUN)
5-ECOWseqCty.pdf – summary of a set of country equations (EUUN)
6-ECOWseqWld.pdf – summary of equations for world market clearing mechanism
7-ECOWseqCmk.pdf – summary of equations for any common market formed
8-ECOWseqFta.pdf – summary of equations for any free trade agreement formed
9-ECOWdetails.pdf – sector details of a scenario generated for a country with the model
10-ECOWcompare.pdf – a report page comparing the impact on all countries of three world free trade scenarios; a) basic free trade, b) basic free trade with associated productivity gains, and c) basic free trade moving from non-competitive to competitive markets
11-ECOWresults.pdf – a report page giving the aggregate welfare benefits for all countries
12-ECOWmod.pdf – View of the ECOW model
Export and import data come from United Nations’ data sets while applied tariff data comes from World Trade Organization and United Nations sources. Data is organized into 64 product groups using the two digit SITC (Standard International Trade Classification) classification. The model contains simple export supply and import demand equations with world prices clearing world product markets and exchange rates maintaining the balance of payments for each country/region in the model.
Supply and demand elasticities are set at values often used by the development workers but a user can supply their own elasticities and change them as desired. ECOW is a synthetic working model that solves complex scenarios. It uses the best international trade and tariff data available. As a tool, it allows a user to input their own assumptions about traded sectors in countries and then calculate the results of policy changes. Policy changes can include tariff changes for one or many or all countries, the imposition of a common tariff from the formation of a common market, and the formation of a free trade agreement among countries in the model. In addition, exogenous supply and demand shocks can be modeled as well as exogenous changes in capital flows. Parameters can be set to simulate non-competitive domestic markets as well as less than perfect transmission of world prices to domestic markets.
Considerable effort was required to prepare trade data for the ECOW model. Trade data comes from UN/WTO data starting with bilateral trade flows between 198 countries at the two digit SITC level. These matrices provide an initial estimate of world trade flows at a detailed product level for 2005. However, some countries are late in reporting their trade data to the United Nations and the World Trade Organization so further estimation techniques were used to “fill some of the blanks” in the trade matrices. The estimation process began with the insertion of a few years of import and export data for all reporting countries into a spreadsheet. Then a computer program created trade flow matrices (importers in columns, exporters in rows) which provided as complete a matrix as possible. First, import data (considered the most reliable) for 2005 was put into matrix cells. If 2005 import data was not available, then 2004 import data was used, if 2004 was not available, then 2003 etc. On the assumption that trade flows are relatively stable over time, this method provided 2005 data for most developed countries but filled in with data from earlier years for many developing countries. After all available import data was used, trading partner’s export data was used to fill in cells using 2005 or previous year’s export data. This meant that even countries which did not report trade data are included in the estimated bilateral trade flow matrices courtesy of data from their exporting partners. Finally when all import and export data have been entered, the matrices are balanced using a rest of the world (ROW) region. Data for this region are automatically adjusted so that for each product group, world exports equal world imports. So the matrices do not provide exact trade flows but 2005 import data is used whenever available and estimates are made for non-reporters as described above. All trade data is expressed in 1000 US $. Countries and products were then aggregated to ECOW model country/region detail levels. Information about the data is shown in the ECOWdef.xls workbook.