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WDST - World Net Trade Model

WDST 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. 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.

Downloaded versus CD version of WDST: The downloaded version consists of the WDST model for installation; an overview and several pdf files can be viewed below. The CD includes an uncompressed version of all WDST files and all tutorials.

1-WDSToverview.wmv – video overview of the WDST model

2-WDST.pdf – summary of the WDST world (static) net trade model

3-WDSTdef.pdf – the model definition – countries/regions – product groups –variables

4-WDSTeqp.pdf – WDST model equations for a sample country (USA)

5-WDSTseqCty.pdf – summary of a set of country equations (USA)

6-WDSTseqWld.pdf – summary of world market clearing equations

7-WDSTseqCmk.pdf – summary of equations for a common market tariff and other measures

8-WDSTseqFta.pdf – summary of equations for a free trade agreement premium

9-WDSTdetails.pdf – a report page with sector results for a simulation with 3 model versions

10-WDSTcompare.pdf – a report page that compares the impact on all countries of three world free trade scenarios; a) a basic scenario, b) a basic scenario with productivity gains, and c) basic scenario where markets are non-competitive

11-WDSTresults.pdf – a report page showing country, sector consumer benefits of a scenario

12-WDSTmod.pdf – a partial presentation of the WDST model itself

The WDST model uses balanced world trade data centered on 2005 for 44 countries and the rest of the world. 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 10 product groups using the one 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 all set at 1 and -1, respectively but a user can supply their own elasticities and change them as desired. WDST is a synthetic model that works and 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 WDST 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 WDST model country/region and product detail levels.